An industrialist brought into the Government by Gordon Brown admitted yesterday that some companies regarded the new capital gains tax changes as “terrible”.

And Lord Jones of Birmingham, the Minister for Trade and Industry, who as Sir Digby Jones was Director-General of the Confederation of British Industry, promised to raise their concerns privately with Alistair Darling, the Chancellor.

Lord Jones’s remarks are the latest embarrassment to the Government as it resists an increasingly vocal campaign for changes in the plan outlined in the PreBudget Report – even though the peer made clear that he backed the overall package.

Mr Darling announced a single rate of capital gains tax at 18 per cent from April 1 and the scrapping of the taper that allows the tax to fall to 10 per cent in respect of the sale of assets held for two years. The plan, which was aimed at penalising private equity companies, has been denounced for its impact on small firms.

Speaking to businessmen in Bolton, Lord Jones said that the decision to bring in a single rate at 18 per cent was revolutionary.

This week Mr Darling met leaders of Britain’s biggest business organisations, who had cautioned that the tax change would hit small business and entrepreneurs rather than the intended private equity firms.

But Lord Jones said: “This headline rate doesn’t exist in any other developed economy in the world. Because of the way private equity firms were doing their investments, the system was wrong and unfair so it had to be changed. None of these big guys are going to leave Britain for 8 per cent, so you keep the moneymakers in the country while ensuring that the public sees a fair system.”

But he then added: “However, I have learnt that medium-sized businesses, in particular, think this is a terrible thing. I want to understand your questions and concerns and I promise I will relay what you have said to the Chancellor in private.”

Last night George Osborne, the Shadow Chancellor, said that Mr Brown had been proud of appointing Lord Jones to the Government. “So now he must pay attention to what his loose-tongued minister has said about the way businesses feel about the 80 per cent increase in capital gains tax.”

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