I have consulted widely on venture capital trusts and the response has been very positive. I have accepted suggestions for change on some details and I propose to implement the scheme in full. I want to go further by making investment in risk capital even more attractive than I originally contemplated when I announced the consultation period. Investment up to £100,000 a year in new shares in a venture capital trust will offer 20 per cent. up-front income tax relief and capital gains tax reinvestment relief, in addition to tax-free dividends and capital gains. I believe that venture capital trusts will make a successful contribution to filling a gap in our enterprise economy by encouraging more people to become venture capitalists.
The cost of the new scheme is expected to be £150 million next year, rising to £290 million in 1996–97. Of course, those costs have to be based on an estimate of the take-up, but we expect considerable take-up. It could mean that funds of £21/2 billion might be raised over the next three years, providing much more investment where it is most needed in our small, growing, technologically advanced and innovative companies.
My proposals go significantly beyond what I first set out 12 months ago. They now put in place an effective and imaginative set of measures aimed at generating equity investment in dynamic, innovative growing businesses. They should be widely welcomed by everyone who understands how a modern free market economy works and how new jobs are created in the modern world. Unlike some hon Members, I do not describe tax reliefs of this kind to stimulate investment in business and enterprise as tax loopholes, which they are usually identified as by the Opposition.