Reeves being lobbied to hike capital gains tax by Labour party
Rachel Reeves is being pressured by members of her shadow cabinet to raise capital gains tax in her first autumn budget if Labour is elected on July 4.
Front bench Labour MPs want the shadow chancellor to bring capital gains tax (CGT) rates up closer to the rate of income tax to help pay for public services at a time when Reeves is said to be mulling up to twelve new revenue-raising measures.
The move reflects a growing consensus on the left that CGT, which applies to the profits made on the sale of major assets like shares and property, should be lifted, given it tends to be levied at a lower rate than income tax. Sources quoted by The Guardian claim it would raise billions.
But a hike would be anathema to many in the City and could jeopardise the success of Reeves’ protracted love bombing of the business and investment community.
One source told The Guardian that the shadow chancellor was looking to take a “kitchen sink” approach to raising tax receipts and pursuing fund investment in public services. The same person admitted, “That is not what they are presenting the public with right now.”
“Kitchen-sinking”, whereby a new boss decides to release all a company’s bad news at once, is a common approach in the business community. It was most famously adopted by Dave Lewis after he took over as CEO of Tesco in 2015 after its profits tumbled by nearly £1.5bn in a year.
The fiscal revelations come as attention mounts on Labour to demonstrate how it will fund a number of its plans for the economy without raising any headline taxes or making multiple departments endure hefty cuts.
Several non-partisan think tanks, including the Institute for Fiscal Studies, have accused both Labour and the Conservatives of being dishonest with the public about their plans for tax and spend, as the two parties vie for the nation’s votes. And Labour, having committed to the same fiscal rules as the Conservatives, face a fiscal black hole, having promised not to rise headline rates of key taxes while also avoiding austerity.
A report published on Tuesday by the Resolution Foundation thinktank said that on current projections, the next government will have to make £19bn of annual cuts in the budgets of protected departments like justice, local government and the Home Office.
A spokesperson for Labour told The Guardian: “A Labour spokesperson said: “We have fully costed, fully funded plans, and have set out the specific tax loopholes we would close to bring in an immediate injection of cash into our public services. Nothing in our plans requires any additional tax to be increased and there will be no return to austerity if Labour are elected on 4 July.”
Labour is expected to publish its manifesto next week.