Labour considers watering down plans for a private equity tax raid
Labour could be preparing to water down plans for a private equity tax raid over fears it may put off potential investors.
Party insiders have discussed the possibility of weakening proposals to charge income tax of 45p on deal profits earned by private equity bosses, the Financial Times has reported.
Speaking at Labour’s business conference at the Kia Oval on Thursday, shadow Chancellor Rachel Reeves vowed she would push forward with the plans, despite investment concerns.
“We will close the private equity loophole where bonuses are not taxed properly,” she said.
So-called ‘carried interest’ payments are currently taxed at the 28 per cent capital gains rate.
But the FT say some Labour figures are worried about disincentivising inward international investment in the UK, and that a middle ground could be found between 28p and 45p.
One Labour source told the paper there was “genuine fear” the top rate could prove too high.
It follows the day-long conference with C-suite executives, FTSE100 bosses and investors where Reeves confirmed Labour would cap corporation tax throughout the next Parliament, in a move intended to offer increased certainty to business on what to expect.
Efforts by Reeves, Labour leader Sir Keir Starmer and shadow business secretary Jonathan Reynolds to charm the Square Mile and usurp the Conservatives as the party of business have been a major theme of the party’s bid to transform their electoral fortunes.
They are also eager to seduce venture funding, unlock pension capital and attract state-owned investment as a means of paying for the UK’s green energy transition.
However, the party has attracted criticism for vacillating on its headline £28bn green investment policy, with increasing hints the target could be reduced or dropped entirely.
Rishi Sunak must call an election before January 2025, likely to be later this year, and Labour have averaged a 20-point poll lead over the past two years.