Brown sparked B2L boom, says Lord Lawson

7 June 2010 | By Robert Thickett

Former chancellor Lord Nigel Lawson has blamed former Prime Minister Gordon Brown’s cutting of Capital Gains Tax in 1997 for the subsequent boom in buy-to-let.

Lawson, who was chancellor from 1984 to 1990, made the com-ment in an interview with the BBC last week, in which he criticised Brown for lowering the CGT level he had previously set.

In 1988 Lawson brought CGT into line with Income Tax at 40% for higher rate taxpayers and 25% for basic rate taxpayers.

At the time he argued that taxing capital gains at Income Tax rates made for greater neutrality in the tax system.

But 10 years later in 1998 then chancellor Brown introduced taper relief, which was again replaced by Entrepreneurs Relief in April 2008.

The coalition government is now rumoured to be looking at increasing CGT on the sale of shares or second homes from the current rate of 18% to either 40% or 50%.

Speaking on BBC Radio 4, Lawson argued that Brown’s 1998 reforms damaged the tax system and that rumoured increases to CGT in the upcoming Budget would be the right way to go.

He describes Brown’s CGT alterations as a complication with which he did great damage to a large part of the tax system.

Lawson adds: “The changes also contributed to the buy-to-let boom which caused the housing bubble - part of the reason for the mess that banks, the economy and the public are now in.”

But some in the housing industry are outraged at the government’s rumoured plans.

LSL Property Services says that its research shows that nine in 10 landlords are opposed to raising CGT and 26% plan to leave the sector if thishappens.

Simon Embley, chief executive officer of LSL, says: “This potential new tax regime will discourage institutional investors as much as it will private landlords from entering the market.

“I would like to see the government encouraging investment from trusts and property funds by abolishing Stamp Duty for property investment vehicles such as real estate investment trusts and waiving the 2% fee these trusts face when entering the market.”

But Peter Williams, director-general of the Intermediary Mortgage Lenders Association, says reaction to the proposed changes has been mixed among professionals in the buy-to-let market because many landlords are in the sector for the long term and do not rely on trading.

He says: “Given the sensitivity about taxation and housing it’s remarkable that the government has already embarked on a foray into housing policy, not only with dumping Home Information Packs but also with possibly raising CGT.”

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