A former Conservative Treasury minister has cautioned Andy Burnham against increasing capital gains tax, labelling it a “stupid” decision.
Lord O’Neill of Gatley, who served as a Treasury minister under Cameron and May, now sits as a crossbencher in the House of Lords.
In an interview with The Times, Lord O’Neill said raising taxes in the Budget on October 28 would demonstrate ministers are not “thinking about growth as sincerely as they claim they are”.
He added: “They’re just being scared and lazy and constrained in dealing with the sacred cows.”
Lord O’Neill, who also said he declined a role as the Prime Minister’s economic adviser, asserted that raising capital gains tax would end up costing the Treasury more because business owners would defer selling their companies or move their money abroad to avoid the tax.
He said: “I do think it would be stupid.
“At a time where a lot business still struggles from Brexit and struggles from the changes in national insurance and the labour market changes to zero hours – to have that and inheritance tax, it’s just like it would be yet more, and obviously at a time where the country’s growth rate as been so weak.”
He added: “I think there is some evidence that if you push it up too much you end up losing money.
“Because it’s such a deterrent to ongoing activities of business owners that they just don’t sell anything. So the revenues go down.
“I am myself somebody that’s now had close to 20 years’ experience as a venture capital investor and it’s hugely risky.
“The thing that Andy’s done so well is create this spirit of, ‘I’m going to be a happier kind of positive person’. It’s against that.”
Lord O’Neill said Mr Burnham had done a “great job so far” as Prime Minister in creating a more positive atmosphere and setting out his vision for the country, but that there are “hard choices” to make when Parliament returns from the summer recess next week.
Mr O’Neill also warned that Burnham’s promise to deliver “growth in every postcode” would need to be reconsidered, and urged him to “focus on London” and other areas that can deliver economic growth like the West Midlands and the Northern Powerhouse region of Manchester, Liverpool, Sheffield and Leeds.
He said: “You’ve got to focus on London. London is still as big as the next eight most important urban places put together. So if London were to continue showing trend-softening you can’t get the GDP numbers to rise.”
He said the Northern Powerhouse could be a “national game-changer”, adding: “No doubt Cornwall and a lot of other places will moan.
“That’s going to be tricky for them politically, not least because Andy said we want to have growth in every postcode. He’s got to think about the reality and hard choices.”
Lord O’Neill said he declined to join the government as either a minister or an adviser because as a crossbench peer he was unwilling to take the Labour whip.
He also did not want to put his business interests into a blind trust, meaning that they would have to be managed by someone else to avoid conflicts of interest in an official role.