Brown ally critical of tax reform

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A close ally of Gordon Brown has joined criticism of plans unveiled by Chancellor Alistair Darling to reform capital gains tax (CGT).

Private equity boss Sir Ronald Cohen, who has donated £1.8m to Labour, said the move had sent out "an unfortunate signal" to budding UK entrepreneurs.

Mr Darling announced the abolition of CGT taper relief in favour of a flat 18% rate in his Pre-Budget Report.

This was amid demands for a crackdown on private equity profits.

But Mr Darling's plans have been criticised by the CBI, small businesses and unions, who say the rise from 10% could stifle long-term investment.

Sir Ronald's criticism came after he was asked on BBC Two's Newsnight if he agreed with CGT being raised to 18%. "I do for private equity because I think the incentive remains a very attractive one relative to other countries, although there are other countries which have lower incentives," he said.

"I believe that raising it for all entrepreneurs sends an unfortunate signal."

Sir Ronald, who has an estimated personal fortune of £260 million and bankrolled Gordon Brown's leadership campaign, added that if CGT had been "fiddled around with" 20 years ago, "nobody would have uttered a cry".

He said: "And here you have the CBI, and the Institute of Directors, and the Chambers of Commerce, and Federation of Small Businesses all joining hands and saying 'we want an entrepreneurial society; let people take risk, let them create businesses'."

Mr Darling has said the measure will ensure private equity firms pay fairer taxes.