Labour condemns '£150m tax cut'

George Osborne
George Osborne

Chancellor George Osborne has given a £150 million tax cut to privileged and wealthy investment managers in the City, Labour said.

Shadow Treasury Minister Chris Leslie claimed the abolition of the Stamp Duty Reserve Tax had gone largely unnoticed when the Budget was announced last March, telling MPs only investment managers would benefit from the cut.

The tax, which differs from the Stamp Duty on share transactions, is a 0.5% levy introduced in 1999 on the return of units in unit trusts back to investment managers, Mr Leslie said. An amendment to the Finance Bill, tabled by Mr Leslie shortly before the legislation which enacts this year's Budget goes to the Lords for further scrutiny, would force the Government to review who the main beneficiaries are from the tax cut.

Mr Leslie said while the cut would be "small change" for many investment managers, it was the same amount saved when Mr Osborne axed the Health in Pregnancy grant, designed to help young mothers, in his first Budget.
Mr Leslie said: "Times are tough and for most people in the country life is getting harder. I have to confess that I haven't seen those poor, unfortunate City investment managers come knocking at my door, coming to my surgeries, writing emails saying 'please, the one thing we need is the abolition of the Stamp Duty Reserve Tax because there is massive hardship'.

"Quite frankly, I think the investment management community is doing reasonably well compared to the rest of the country."

He added: "(The Government) will have to forgive me when we see hardship in terms of the cuts to tax credits, we see some decisions in terms of the increases in VAT, in terms of the introduction of the bedroom tax for example - when it comes to those particular individuals, well of course they have to feel the pain, says the Chancellor, they have to feel the squeeze.

"But when it comes to the City, when it comes to the investment management community, I don't see how they are all in it together. I don't see how they are sharing in this particular anxiety. This is a change that doesn't have justification."

But Treasury Minister Greg Clark said the Government's Stamp Duty Reserve Tax plan would provide a "very significant boost" to the competitiveness of the UK's financial industry. Mr Clark said to Mr Leslie: "I find this an astonishing debate to respond to because I've a lot of time for you but you've been pretty dozy in recent months to think this is a measure in the Budget that somehow has come out by stealth and has been hidden from view.

"In fact it was very prominent in the Chancellor's Budget speech. He raised it in the chamber from this dispatch box. He said, 'I also want Britain to be the place where people raise money and invest. Financial services are about much more than banking, in places like Edinburgh and London we have a world-beating asset management industry but they are losing business to other places in Europe. We act now with a package of measures to reverse this decline. We will abolish schedule 19 tax which is only payable by UK domicile funds'."