NINE years ago, when Gordon Brown introduced the system of taper relief for capital-gains tax (CGT) in his March 1998 budget, he was in no doubt about the significance of the step he was taking, and how much it would establish Labour as the party of enterprise.

“We must do more to increase the quantity and quality of long-term investment,” he told the House of Commons. “The capital-gains tax regime we inherited rewards the short-term speculator as much as the committed long-term investor. So it is time also for a fundamental reform of capital-gains tax.”

Brown’s new system would be simpler – low inflation meant the complex system of indexation characteristic of CGT would no longer be needed. But it was also intended to “explicitly reward long-term investment”.

Brown in 1998 had no doubt who his new system was aimed at. “For those who build businesses or stake their own, hard-earned money in them, the long-term rate will be reduced even more from 40p to 10p, the lowest rate ever achieved,” he said.

The chancellor was not finished. Four years later, in 2002, he presented a budget that many in business found hard to swallow. It increased the National Insurance employers had to pay by £4 billion a year. But the pill was sweetened by further moves to encourage entrepreneurs in Britain’s growing businesses, the lifeblood of the economy.

“To send out the strongest signal about the importance we attach to small businesses and the creation of wealth, I propose to reduce the starting rate of corporation tax – also with immediate effect – from 10p to zero,” he said. “Small companies with taxable profits of less than £10,000 will pay no corporation tax.”

There was more. Entrepreneurs who held on to businesses for a year before selling them would pay a reduced rate of CGT of 20%. Those who held on to business assets for just two years paid only 10%. The Treasury claimed it was one of the most enterprise-friendly CGT regimes in the world. Few disagreed.

As Brown put it: “In 1997 all transactions were subject to a 40p rate. From this year, three-quarters of taxpayers with business assets will pay only a 10p rate, rewarding entrepreneurship and giving Britain overall a capital-gains tax regime more favourable to enterprise than that of the United States.”

Small firms should have sensed the writing was on the wall when Brown began clawing back some components of his enterprise-friendly tax regime before he left the Treasury. The zero rate of corporation tax was soon scrapped, as was a reduced rate of 10%. Too many self-employed people were converting themselves into companies in response to the tax change, and the Revenue was alarmed.

Then, in his final budget in March, Brown announced that he was raising the small companies’ corporation tax rate from 19% to 22%, at the same time as the rate for big companies would be cut from 30% to 28%. The denouement for taper relief came last week.

Many believe Alistair Darling’s move was driven by the headlines, and the need to outflank the Tories with other tax changes, leaving business to pick up the bill.

The result is that Brown’s system is no more and, as far as the Labour government is concerned, the distinction between the short-term speculator and the long-term committed investor no longer matters.

Those who build businesses, it seems, no longer matter.

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