Andy Burnham has been urged by a senior ally not to proceed with a "stupid" raid on Capital Gains Tax (CGT) that would target three specific assets. The warning comes ahead of the first Budget from the new Labour Prime Minister and Chancellor John Healey, due to be delivered on October 28.
Lord O'Neill of Gatley, a former Treasury minister and venture capital investor, told the Times newspaper on Saturday August 29 that increasing taxes on wealth would encourage entrepreneurs to leave the country and damage economic growth. He said such a move would demonstrate that Mr Burnham and Mr Healey were not "thinking about growth as sincerely as they claim they are".
Three Assets Under Threat in CGT Changes
Reports suggest Mr Burnham is being urged by allies to hike capital gains tax on three things: the sale of second homes, the sale of shares, and the sale of "other assets". Lord O'Neill described the rumoured changes as "stupid", adding: "At a time where a lot of business still struggles from Brexit and struggles from the changes in national insurance and the Labour market changes to zero hours — to have that and inheritance tax, it’s just like it would be yet more, and obviously at a time where the country’s growth rate has been so weak."
He added that there is evidence that pushing CGT too high would backfire: "I think there is some evidence that if you push it up too much you end up losing money. Because it’s such a deterrent to ongoing activities of business owners that they just don’t sell anything. So the revenues go down."
Lord O'Neill Urges Focus on DWP Benefits and Pension Triple Lock
Instead of raising CGT, Lord O'Neill said Mr Burnham must confront the "sacred cows" of Department for Work and Pensions (DWP) benefits and the state pension triple lock. He argued that the government should be willing to make difficult decisions on welfare spending rather than targeting wealth creation.
Drawing on his own experience, Lord O'Neill said: "I am myself somebody that’s now had close to 20 years’ experience as a venture capital investor and it’s hugely risky. The thing that Andy’s done so well is create this spirit of ‘I’m going to be a happier kind of positive person’. It’s against that."
Growth Concerns Dominate Pre-Budget Debate
Lord O'Neill was blunt in his assessment of the government's approach: "I don’t get why they would raise tax," he said. "Because all that’s telling you is that they’re not thinking about growth as sincerely as they claim they are. They’re just being scared and lazy and constrained in dealing with the sacred cows."
Mr Burnham succeeded Sir Keir Starmer as Prime Minister last month, appointing John Healey, the former Defence Secretary, as Chancellor in his first Cabinet. The pair will deliver their first Budget on October 28, with speculation mounting over tax changes. The outcome of the Budget will determine whether the government heeds Lord O'Neill's warning or proceeds with the rumoured CGT increases on second homes, shares, and other assets.
