U.K. Labour Party Promises Tax Hikes For Hedge Funds

Sep 26 2013 | 10:25am ET

The U.K.'s next general election is still more than a year-and-a-half away, but the opposition Labour Party is already taking aim at hedge funds.

Labour leader Ed Miliband said this weekend that he'd close tax loopholes for hedge funds and the wealthy to pay for doing away with the so-called "bedroom tax." That policy, instituted last year, cuts welfare benefits for recipients who are deemed to have too much space in their home.

Calling the bedroom tax "a symbol of an out of touch, uncaring Tory government," Miliband said a Labour government would "scrap" it "by abolishing the shady schemes of tax loophooles for the privileged few which the Tories keep inventing."

"Tax cuts for hedge funds, the billion-pound black hole created with a scheme for workers to sell their rights for shares, and by tackling scams which cheat the taxpayer in construction," Miliband continued.

The next British election is scheduled for May 2015. Labour has held a consistent lead in the polls since the beginning of last year; those same polls also show that the ruling Conservative Party's coalition partner, the Liberal Democrats, who won 23% of the vote in 2010, are on course to earn less than half that at the next election.

Labour's shadow chancellor of the exchequer, Ed Balls, also announced that his party would increase taxes on bank balance sheets and repeat their 2009-10 tax on bankers' bonuses to finance childcare and job guarantee programs.

Labour's plans were challenged both by the Conservatives and by investment and pension groups, which blasted the party's plan to reintroduce the stamp duty reserve tax, which Labour called a "loophole for hedge funds."

"In fact, this tax was paid by U.K. authorized funds, not hedge funds," the Investment Management Association, National Association of Pension Funds and Association of British Insurers wrote in a letter to the Financial Times. "Its reintroduction would impose a £145 million annual cost on the ordinary savers, investors and pensioners, who are the beneficiaries of its abolition."

"It's bad enough Ed Balls doesn’t know the difference between a hedge fund and a pension fund," Savjid Javid, a Tory Treasury minister, said. "It's outrageous that he will clobber hard-working people as a result."

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