Chancellor Rachel Reeves has rejected calls to align capital gains tax (CGT) with income tax rates ahead of her first Budget on 28 October, resisting pressure from within the Labour Party and union groups to target wealth taxes.
The intervention comes after Transport Secretary Louise Haigh argued in a recent article that raising CGT would “shift the taxation burden away from punishing work, and towards unproductive capital accumulation which does little to grow the everyday economy.” Haigh suggested the move could be designed to protect “genuine investment returns.”
Health Secretary Wes Streeting had similarly called for a “wealth tax that works” earlier this year, contending that equalising the rates would address a system “penalising work.”
However, the Chancellor has reportedly ruled out such a move, according to a Financial Times report last week. Asked about the speculation on BBC Breakfast, Deputy Prime Minister Angela Rayner declined to speculate on Budget specifics but insisted the government had already acted to give households “breathing space” amid cost-of-living pressures.
The decision leaves Reeves with limited fiscal headroom. Labour’s manifesto pledged not to raise income tax, national insurance, or VAT—the three largest revenue sources—while self-imposed borrowing rules constrain debt issuance.
Meanwhile, senior banking executives have signalled they expect the sector to face higher taxes, following a period of bumper profits that has prompted union demands for a windfall levy.
The Chancellor must also accommodate increased defence spending commitments at next year’s spending review, all against a backdrop of global instability driving up prices.
Conservative leader Kemi Badenoch used a pre-Budget speech to urge spending cuts and reduced borrowing, arguing the government must “live within our means” and accusing Labour of lacking the courage to reduce expenditure. She highlighted her party’s proposal to find £70bn in savings, including cuts to welfare and overseas aid.
The Liberal Democrats have countered that a windfall tax on bank profits could raise £14bn, which Deputy Leader Daisy Cooper said could fund cuts to fuel duty, public transport fares, and VAT for hospitality businesses.
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