Louise Haigh, a key ally of Labour leadership hopeful Andy Burnham, has called for a significant overhaul of the UK tax system, including raising Capital Gains Tax (CGT) to 45%. In an essay published in the Renewal journal on Saturday, Haigh described the Treasury as 'imperial' and advocated for a 'fundamental redesign' of tax policy.
Capital Gains Tax Could Rise to 45%
Haigh proposed that CGT, currently levied at rates between 18% and 24% on profits from asset sales, should be 'brought closer to income tax rates.' This would effectively mean a top rate of 45%, aligning with the highest income tax band. The reform aims to ensure that those who generate income through investments pay a similar rate to those earning through employment.
'This reform is central to restoring confidence that the system does not favour those able to structure their income over those earning through work,' Haigh wrote. 'It would shift the taxation burden away from punishing work, and towards unproductive capital accumulation, which does little to grow the everyday economy.'
Criticism from Conservatives
Shadow Chancellor Sir Mel Stride warned that the proposals signal 'what a real Left-wing Labour government looks like.' He cautioned that financial markets are already reacting negatively, with borrowing costs rising due to concerns over fiscal responsibility. 'Burnham could bankrupt Britain,' Stride said, adding that the leadership candidate appears to 'ignore fiscal realities.'
Haigh also called for addressing 'intergenerational fairness' in the tax system, highlighting loopholes such as the CGT uplift at death, which allows unrealised gains to escape taxation entirely. 'At a minimum, reforms should address specific loopholes,' she stated.
National Wealth Fund and Treasury Reform
In addition to tax changes, Haigh proposed allowing the newly established National Wealth Fund to borrow against its balance sheet outside of fiscal rules. This would separate long-term investments in renewable energy from day-to-day government spending, alleviating pressure on the Exchequer.
She also suggested removing the 'growth mandate' from the Treasury, arguing that the UK's finance department is uniquely powerful compared to other countries. 'There is a reason why no other country in the world has such an imperial finance department as we do,' Haigh wrote, noting that the Prime Minister often requires the Chancellor's agreement to implement key priorities.
The proposals have sparked debate ahead of the Labour leadership contest, with Burnham's camp positioning these reforms as central to his economic agenda.
