The FTSE is being betrayed by Labour’s high taxes – it’s time for radical reform, says
Sympathy for British American wealth manager BlueCrest Capital Management is likely to be in short supply after the High Court rejected a claim that its traders are partners.
Instead of qualifying for an advantageous tax treatment they, like the rest of us, should be on PAYE.
The outcome of what is likely to be a landmark case for money managers caused BlueCrest to go hostile, arguing that London is ‘no longer a serious contender to do business’.
The idea that traders in fund management firms should be given special tax treatment is bonkers.
Ordinary citizens working in companies have no escape from HMRC.
So why should rich traders, who are coining fat-cat incomes in Britain, be treated more leniently?
Chancellor Rachel Reeves wants to force pension funds to invest up to 10% of funds under management into stocks and alternative investment
The same applies to private equity barons sheltered from the taxman by the ‘carried interest’ loophole, which substitutes lower-rate capital tax for income tax.
Yet, BlueCrest does have a point. Taxation in the City, among the largest and most valuable sectors of the economy, is doing the country a terrible disservice. Spiteful levies, such as VAT on independent schools, are destructive enough.
Similarly, the way that taxes are levied on stocks and share investment needs radical reform if the London Stock Exchange and the indexes its supports are to have relevance.
There is a mistaken belief in Whitehall that the steady erosion of British-listed companies by overseas buyers must be a good thing because it shows the UK is open to business.
A heady Reuters headline extols the fact that bids and deals in the UK in the first half of the year were 210 per cent up from last year, at £174billion.
It could not be more wrong. That may be wonderful for fees earned by big overseas -controlled investment banks and legal and communications advisers.
But it is a disaster for UK plc. As Labour’s internecine struggles sort themselves out British corporate life and innovation is being gutted before our eyes.
A fightback is being orchestrated by second-tier investment bank and broker Peel Hunt. It notes that since 2023 there have been no less than 154 bids for UK-quoted firms, with a value of £165billion.
It wouldn’t be so bad if there were a flood of newcomers to the listings, showing the vibrancy of the Square Mile as a place to market shares.
Instead, there have been a measly 11 initial public offerings, with a value of £6billion. The FTSE 350, it argues, is suffering a rapid depopulation.
Chancellor Rachel Reeves, whose job is in dire jeopardy, has been poorly advised by the Treasury that the problem can be solved by edict.
She seeks to force pension funds to invest up to 10 per cent of funds under management into stocks and alternative investments such as infrastructure.
She believes, by punishing citizens who hold in cash Isas, she can invigorate London shares. Andy Haldane, an adviser to prime minister-in-waiting Andy Burnham, argues the tax incentives for saving should be confined to domestic investment.
At present, much of the cash heads off into funds exposed to the Magnificent Seven tech firms, SpaceX and artificial intelligence trailblazers such as Anthropic.
A creative, growth-seeking finance ministry, instead of the dead hand of the Treasury, would demand UK weighting in Isas in exchange for the £10bn of forgone tax revenues.
The prospects for more equity investment in the UK would be dramatically altered if there were a level playing field with the UK’s G7 competitors.
Ending stamp duty on shares would go a long way. Reeves opened the door to reform when she offered a three-year break for new listings. The case for total, permanent abolition is overwhelming.
BlueCrest is right about the tax regime being unfit for purpose. If Burnham and his Labour cronies have their way and capital gains tax is equalised with income tax, the exodus of wealth seen since Labour arrived in office two years ago will become a torrent.
Tax encouragement for investment in the UK – Europe’s hub for tech and pharma unicorns – would stop the rot.
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