The Shadow Chancellor, Rachel Reeves, is under increasing pressure to raise capital gains tax (CGT) as a means of funding public services. With major tax increases on income, VAT, and national insurance off the table, Labour is exploring various fiscal strategies to meet their budgetary needs.
With increases in income tax, national insurance, and VAT ruled out, Reeves is investigating other ways to raise revenue. Labour insiders suggest that she is examining up to twelve different fiscal strategies. A source close to the discussions revealed, “Rachel is considering a range of measures, each designed to contribute modestly to the overall budget, cumulatively generating significant funds.”
The proposed plans have sparked a heated debate with the Conservative Party, which has pledged not to raise property taxes. Prime Minister Rishi Sunak has accused Labour leader Keir Starmer of planning extensive tax hikes, a claim Labour has dismissed as misleading.
The Resolution Foundation warned that without additional revenue, the next government could face £19 billion in cuts to unprotected departments by 2028-29.
Alternatively, Labour could revert to the pre-2023 budget CGT rate on second homes, raising it from 24% to 28%. However, the Office for Budget Responsibility predicts minimal fiscal gain from this adjustment.
Despite support from figures like Sir Nicholas Macpherson, insiders suggest Reeves is unlikely to reintroduce it to avoid breaking her pledge against national insurance hikes.
Labour remains committed to identifying specific tax loopholes to close for immediate revenue without increasing taxes.
Rachel Reeves faces a complex challenge in balancing fiscal responsibility with the need for significant public service investment. As Labour continues to explore various revenue-raising measures, the outcome will significantly shape the party’s policy landscape and its ability to fund critical public services in the coming years.
