Labour remains ambiguous about higher taxes for the wealthiest
Downing Street has not ruled out raising taxes on the wealthy as the Treasury prepares for what is expected to be a challenging autumn Budget aimed at addressing the UK’s growing fiscal gap.
Calls for a new wealth tax have been renewed by figures including former Labour leader Lord Neil Kinnock, who suggested a 2% levy on assets over £10 million could raise more than £10 billion annually.
Chancellor Rachel Reeves is under increasing pressure from within Labour to target higher earners, following the government’s recent decision to drop planned welfare reforms worth £5 billion. Although Reeves has previously ruled out introducing a wealth tax — reaffirming in April that she had “no plans for a wealth tax” — allies acknowledge her options for plugging the budget shortfall are becoming more limited.
A spokesperson for Prime Minister Sir Keir Starmer said, “The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”
Last year’s Budget included measures that increased taxes on non-domiciled residents, private jets, capital gains, and private schools. However, government officials say there is little appetite for a brand-new wealth tax, though raising rates on existing taxes that mainly affect wealthier individuals remains an option.
The Treasury, responding to questions on Monday, stated: “Tax decisions are taken at the Budget and, as you expect, we are not going to comment on tax speculation. We have made our manifesto promises to protect working people and we took the decision last autumn to deliver the change the British people voted for.”
Some experts have warned that further tightening taxes on high-net-worth individuals could prompt more wealthy people to leave the UK. Lord Nick Macpherson, a former permanent secretary to the Treasury, said a wealth tax risked reducing overall revenue if it drove wealthy taxpayers abroad – “Why would a government which has almost certainly lost revenue on its non-dom reforms open up a new front on footloose billionaires? It would lose revenue, and is no substitute for taxing income or consumption.”
Economists estimate Reeves could face a fiscal gap of £20 billion or more at the autumn Budget, partly due to the reversal of welfare and pension reforms and potential downward revisions to growth forecasts. Reeves has so far ruled out relaxing borrowing rules or introducing significant spending cuts, leaving tax rises as a likely option to balance the books.
Tax specialists have suggested alternatives to a new wealth tax, such as reforms to capital gains and inheritance tax, or expanding national insurance contributions to landlords and investors — measures that could also raise billions each year.
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