Tax rises on working people will hit the UK economy, businesses warn

Business leaders warned Labour yesterday that hampering Britain with tax rises would put it at a disadvantage against international rivals.

The head of insurance market Lloyd’s of London has urged the new Labour government to be “sensible” amid speculation about possible increases in capital gains tax, inheritance tax and employer-paid national insurance, and an assault on pension savings.

The same concern was shared by the head of buyout giant CVC, who said higher taxes could prompt his executives to pack their bags and leave London.

Business leaders are concerned that the Prime Minister and Chancellor’s stark warnings on the economy will herald tax rises.

The intervention by the head of Lloyd’s of London – a key pillar of the City of London for more than 300 years and a linchpin of the UK’s status as a global financial centre – is sure to have politicians and officials in Whitehall sitting up and taking notice.

The insurance market’s chief executive, John Neal, said Britain’s financial services sector was seen as a “gateway to the rest of the world” for other countries and the government must protect it by being “sensible” about taxation.

“We’re not asking for tax cuts or anything crazy like that,” Neal said.

‘We are saying that taxes at both corporate and personal level should be kept at relative levels, so that they do not create a disadvantage for trade within or from the UK.’

And Neal said insurance companies had no confidence in coming to Britain.

‘They would be thinking about alternative locations, and we just don’t want that to be the case.’

The comments came as Lloyd’s, which underwrites the shipping risks of footballers’ legs, reported a 26 per cent rise in half-year profits to £4.9bn.

It benefited from a relatively quiet period in terms of natural disasters, although it took a £500m hit from the collapse of the Baltimore bridge in the US in March.

Meanwhile, bosses at buyout firm CVC Capital Partners raised the alarm over taxes.

Private equity executives face the loss of the long-standing arrangement under which their so-called “carried interest” income is taxed at the 28 percent capital gains tax rate, rather than the top income tax bracket of 45 percent.

Chief executive Rob Lucas said yesterday: “Will[the tax changes]influence where some people want to settle? Probably, actually.”

This would not hurt CVC, whose “very flexible” workforce could easily move between its 25 offices on five continents, Lucas added.

But it could prove to be a disadvantage for the UK, he suggested.

He argued that London’s position as an international financial centre was a major benefit to the country.

And CVC’s chief financial officer Fred Watt added: ‘I assume the Government doesn’t want the UK to lose competitiveness in the future, and I assume they don’t want to provide any disincentive to investment, whether it’s private equity or business creators generally.

“I’m sure the Government will take all this into account to ensure that Britain does not become less competitive or a place where people do not want to invest.”

Amsterdam-listed CVC, whose assets include the Six Nations rugby tournament and Breitling watches, reported a 16 percent rise in half-year profit to 287 million pounds.