Rachel Reeves doesn’t want a wealth tax but other options including a tax raid on pensioners are still being mulled, according to reports. The Chancellor will reportedly reject calls from some Labour MPs calling for a wealth tax, arguing that doing so would just lead to wealthier people leaving Britain.
Former Labour leader, Lord Kinnock, recently suggested a wealth tax could “commend” the Government to the general public and help bolster the public finances while not breaking its existing pledges not to increase income tax, VAT and National Insurance for “working people”. Union leaders, including Sharon Graham of Unite, are also pressuring ministers to consider the move.
But Cabinet ministers have told The Times a wealth tax is a “non-starter” while a senior Government source has said Ms Reeves is reluctant to rule out wealth taxes in public, but other options which could be described as such are being considered.
These include a tax raid on pensioners and hiking capital gains tax, according to the source cited by the same publication.
Ms Reeves has refused to rule out tax rises at the Budget after Labour MPs forced ministers to make a U-turn on welfare reforms, which the Government had hoped would save up to £5billion a year. The Government also U-turned on the scrapping of winter fuel payments for millions of pensioners, adding to pressure on the public finances.
The Chancellor and Chief Secretary to the Treasury, Darren Jones, have both said any decisions on tax would be laid out at the Budget in the autumn.
During an urgent question on the Government’s fiscal rules earlier this month, Conservative MP Neil O’Brien claimed speculation of a wealth tax would be enough to “drive investment away”.
Mr Jones said the Chancellor would lay out any decisions on tax at the Budget and business leaders were grateful the Government had brought back long-term, multi-year budgets as well as fiscal rules in place.
Lord Kinnock has said imposing 2% on assets valued above £10million would collect £10bn to £11bn.
A number of countries have introduced wealth taxes, but gone on to scrap them, including Germany, Sweden and France.
Spain and Switzerland are among the few countries to have retained wealth taxes, which accounted for 0.19% and 1.19% of gross domestic product in those countries respectively in 2022, according to the Tax Foundation.
Critics of wealth taxes argue such levies lead to high-net-worth individuals leaving a country and to capital flight.