Treasury officials admitted yesterday that they had not consulted businesses over the sweeping and controversial changes to capital gains tax announced in the PreBudget Report.

In a confrontation with the cross-party Commons Treasury Committee, Alistair Darling’s top civil servants faced charges that the plans to scrap taper relief were rushed and would hit millions of business owners.

Nicholas Macpherson, Permanent Secretary to the Treasury, and Mark Neale, managing director of budget, tax and welfare, conceded that they did not “formally consult” with business over the planned reforms.

Mr Neale said that the Treasury does not consult on proposed tax changes, but argued that there had been “a debate in the country” over taper relief. He also said that the measure was not primarily aimed at the private equity industry, despite the two issues being linked in the Report.

George Mudie, a Labour member of the committee, said: “You never bothered to ask what [businesses] would think of the withdrawal of taper relief . . . Do you not see that you have handed industry something to hit you over the head with? To deal with one problem you have actually created some real anger and real problems for people running small businesses.”

Mr Neale said: “Our analysis, which is also shared by outside experts, is that the regime as we shall reform it will remain very favourable.”

Andy Love, another Labour MP, asked if the Treasury had a “credibility problem” following the announcement. He said: “Just at the time when small businesses are beginning to understand that there’s such a thing as taper relief, we abolish it. Is that a sensible way forward?”

Michael Fallon, a Conservative MP, asked whether Labour’s reforms to inheritance tax were only added to the Report after similar proposals were unveiled by the Conservatives. Mr Macpherson said that decisions were made right up to the Report’s release, but he added: “The tax system continually evolves and the Treasury always looks at options. This is an option I can recall seeing over a long period.”

On the wider economy, he repeated that the Government expects to see a slowdown in 2008 give way to stronger growth the following year as the United States’ economy recovers.

Asked if he expected credit markets to recover, Dave Ramsden, managing director for macroeconomic and fiscal policy, said: “Yes we do. The fact that [the system] has in the past does count as evidence although the shocks are different. But the resilience and responsiveness that the financial sector has shown has been quite similar.”