Chancellor Rachel Reeves has been urged to rule out a “wealth tax” immediately to avoid killing business confidence and accelerating an “exodus” of investors from the UK. Labour Left-wingers are pushing the Government to get behind proposals for a tax they say could raise £24billion a year.
This comes as Government borrowing has surged and fears mount Ms Reeves will announce tax rises in the autumn Budget. Shadow Chancellor Sir Mel Stride called on Ms Reeves to halt a “wealth exodus” before it becomes “irreversible”. He claimed between 10,000 and 15,000 “high-net-worth individuals” have quit the UK since Labour took power.
But so far 15 Labour MPs have given their backing to proposals for an annual 2% tax on wealth above £10million. Tax Justice UK says around 20,000 people would affected and claims “just 0.01% of the richest households relocated after wealth tax reforms were introduced in Norway, Sweden and Denmark”.
Sir Mel warned those who have already quit the UK have left a “gaping hole in our tax base” which is a “growing crisis for public services”.
He accused Ms Reeves of “driving away prosperity by “piling taxes onto the very people who create jobs”. A wealth tax, he claimed, would punish aspiration and send out the message people should “go elsewhere”.
Sir Mel said: “I urge the Chancellor to rule out such a tax immediately. Every day she refuses to do so, confidence drains further from our economy.”
There is scepticism within the Treasury about claims of wealthy people fleeing the UK.
But Tom Clougherty of the Institute of Economic Affairs warned a wealth tax would be “disaster for Britain” which would trigger “capital flight”.
He said: “It would also paint a terrible picture of the kind of economy we are turning into – and risk undermining investment and growth for years to come. I imagine the speculation alone is already having a negative effect.
“I understand the politics of the situation, but there’s a strong case for the Government ruling the idea out altogether right now.”
The push for a wealth tax comes as Government borrowing rose to £20.7billion in June – an increase of £6.6billion on the same month last year.
Daniel Herring of the Centre for Policy Studies, said: “The UK already taxes wealth extensively through capital gains, council tax, dividends, stamp duty, and inheritance tax. Adding another layer would crush investment, slash growth, and worsen Government finances.
‘The policy fails on every level. It would demand a massive bureaucratic machine to value assets annually, taking years to build. Meanwhile, it would raise little revenue while devastating our economy and international standing.”
