Darling rocked again, as MPs attack PBR

Alistair Darling's hopes of putting last week's disastrous events behind him will be dashed today by damning criticism of his pre-Budget report from an influential cross-party group of MPs.

The Treasury Select Committee's review of the PBR questioned the Chancellor's assumptions about the health of the UK economy and criticised him over the controversial reforms he proposes for capital gains tax.

In last month's PBR, Mr Darling announced that, from April next year, he would introduce a new flat rate of 18 per cent for CGT, which would mean lower bills for some taxpayers, but an increase for those who until now have qualified for a discount based on how long they have held assets – so called "taper relief".

However, MPs joined business leader in criticising the Chancellor over the abolition of taper relief. The committee's report said: "We are concerned that the Treasury appears not to have consulted explicitly on the withdrawal of taper relief", and called on the Government to explain how it "proposes to mitigate the effects of the withdrawal of taper relief".

The committee's chairman, the senior Labour MP John McFall, added: "The reforms of CGT will have an immediate impact on many individuals and businesses that have sought to plan ahead. There is a window of opportunity for meaningful consultation between now and the 2008 Budget and the Treasury needs to establish clearly the terms for such consultation."

The committee also said it believes the changes to CGT were "clearly linked" to expensive reforms of inheritance tax also announced in the PBR, "although the Government has denied that this was the primary motivations for the reforms".

Mr McFall called for clarification on the proposed changes to inheritance tax and the treatment of non-domiciled taxpayers, including further information on how the Treasury came to the conclusion that just 4,000 "non-doms" would pay anticipated additional tax revenues of £800m in a few years, the equivalent of £200,000 a year each.

On the wider economy, the committee said it was sceptical about the Chancellor's claims that economic growth will return swiftly to a healthy trend in 2009, and thus cast doubt on Mr Darling's projections for tax receipts and the public finances.

The MPs said that the Treasury's optimism was "not adequately explained" and that they remained concerned that "the credit crunch will have a greater macroeconomic effect than expected".