How Labour may be forced to raise tax on the wealthy...

Keir Starmer

The Labour Party have promised not to increase income tax, national insurance, corporation tax or VAT

PA
Hannah Ross

By Hannah Ross


Published: 22/06/2024

- 08:27

A Labour government may need to raise Capital Gains Tax and reduce pension tax relief

A Labour government may be forced to raise taxes on the wealthiest in Britain to reduce national debt, according to economists.

Sir Keir Starmer has repeatedly promised not to increase two-thirds of the tax base including income tax, national insurance, corporation tax or VAT.


However, a weak growth outlook makes the Labour manifesto promise to stabilise debt look unmanageable unless they look across the tax base, according to experts.

Economists have said the strategy might win it more support but it significantly reduces the party’s options for dealing with the fiscal challenge that awaits it if it comes to power.

Keir StarmerStarmer has not ruled out potential capital gains tax (CGT) increases PA

The Labour government may need to increase Capital Gains Tax (CGT) if they should come to power in July.

The Conservatives have accused the Labour Party of planning to raise capital gains tax on businesses, which Labour has not rejected.

During an interview with the BBC last week, Starmer did not rule out wider increases in capital gains tax, but more broadly rejected the past Labour argument to always "put up tax."

Labour's deputy leader, Angela Rayner previously suggested equalising the two rates meaning that capital gains would double.

Changing CGT could bring between £7.5 billion and £17 billion, although Bloomberg Economics suggest the "mobile nature" of those affected means the increase could end up costing the government instead.

Angela Rayner

Labour's deputy leader, Angela Rayner previously suggested equalising the two rates meaning that capital gains would double

PA

Another Labour target could include reducing the generosity of pensions-tax relief for high earners.

This could raise as much as £13 billion for the treasury but would face backlash from voters.

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There was speculation whether Labour would target council tax, however, earlier this week the party promised not to change council tax bands if they won.

Labour minister Jonathon Ashworth said: "No increase in income tax, no increase in national insurance, no increase in VAT or corporation tax.

"We're not doing council tax re-banding."

He added: "We have outlined that all our policies are fully funded, they do not require additional tax increases."

The Labour Party have been approached for comment.

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