Rachel Reeves could impose a “one-off” wealth tax in her upcoming Budget, leading economists have said. The Chancellor is under pressure to balance the books ahead of November’s autumn statement as she faces a black hole in the public finances of up to £50billion.
The Institute for Fiscal Studies has published a report with options for Ms Reeves to raise billions without breaking Labour’s manifesto pledge not to hike taxes for working people. Among the options is a “one-off” tax on wealth, rather than the annual levy called for by Left-wing MPs.
The report says: “While there are serious drawbacks to a recurring wealth tax, a tax based on an unexpected and credibly one-off assessment of existing wealth could in principle be an economically efficient way to raise revenue.”
But Shadow Chancellor Sir Mel Stride said: “Keir Starmer and Rachel Reeves have no backbone.
“They are too weak to take difficult decisions and face down the Left of their party – and that means yet more tax rises are coming.
“A wealth tax would drive investors and wealth creators away from the UK, when thousands have already left thanks to Labour’s self-defeating tax raids.”
The report says that a permanent wealth tax would “incentivise” the rich to flee the UK.
It adds: “International experience of annual wealth taxes is not encouraging.
“They have been abandoned in most of the developed countries that previously had them.”
Other suggestions floated by the IFS include ending capital gains tax relief on death, which allows for assets to be inherited without paying the levy on the increase in value over the deceased person’s lifetime, and reforming death duties to abolish the additional £175,000 tax-free allowance that can be used when passing on a primary residence to a direct descendant.
A Treasury spokesman said the Budget “will strike the right balance”.