Keir Starmer leaves door open to capital gains tax on family homes

Labour’s tax position was in chaos on Friday night after Sir Keir Starmer left the door open to introducing capital gains tax on family homes despite a party spokesman ruling it out.

The Tories had spent Friday pressuring Labour to deny it could bring in the policy if it wins the general election, after Angela Rayner failed to do so when challenged by Penny Mordaunt in an ITV debate on Thursday.

Currently, people who sell their main home do not pay capital gains tax because of the private residence relief. The Tories have vowed not to change the rules and urged Labour to match them.

Pushed during Thursday’s debate to rule out a change by Ms Mordaunt, the Commons Leader, Ms Rayner, Labour’s deputy leader, failed to do so.

On Friday afternoon, following more than a week of declining to explicitly deny the possibility, the Labour Party altered its position, promising no change was coming if it won office.

A Labour spokesman said: “No. Labour will not introduce capital gains taxes on primary residences. It’s a bad idea.

“The Conservatives are lying. It’s a sign of utter desperation that the Tories are talking about things they have imagined, and that Labour isn’t doing.”

But in an interview with Nick Robinson for BBC Panorama, broadcast later that evening, Sir Keir confused matters by again refusing to rule out wider increases in capital gains tax. He said more broadly he rejected the past Labour argument to always “put up tax”.

Party sources insisted on Thursday that Labour would not impose the tax on family homes. The Panorama interview appeared to have taken place on Friday, but before Labour changed its position that afternoon.

But the Tories claimed Sir Keir had “chaotically contradicted” his party’s own policy.

Jeremy Hunt, the Chancellor, said: “This is a serious moment showing the danger Labour’s tax rises pose to families and to the economy.

“Keir Starmer makes clear that for Labour, taxing the family home is firmly on the cards for a Labour government, the latest in their plans to deliver the highest tax burden in our country’s history.

“Tax rises are in Labour’s DNA. Be in no doubt that their £2,094 tax rise for working families is only the tip of the iceberg.”

The change of position raises the possibility that the Tory tax attacks, including claiming that Labour could increase property taxes in office, are cutting through with some voters.

The rapid change in position was underscored by a BBC interview with Sir Keir Starmer that aired on Friday night, in which he declined to rule out introducing capital gains taxes on a primary residence. The interview appeared to have taken place on Friday, but before Labour changed its position that afternoon.

During the interview, with the BBC’s Nick Robinson, Sir Keir did not rule out wider increases in capital gains tax. He said more broadly he rejected the past Labour argument to always “put up tax”.

Previously, Sir Keir was slow to deny a claim by Rishi Sunak that taxes would rise £2,000 for each working family under Labour during the first head-to-head TV debate of the campaign.

The next day, Labour figures rushed out to declare the claim a “lie”, disputing its assumptions. Some Labour sources believe Sir Keir should have been quicker to rebut the attack in the debate.

This is not the first time Labour has clarified its tax position after scrutiny from the Tories during the election campaign.

Near the start of the race the Tories challenged Labour to rule out rises in VAT. Rachel Reeves, the shadow chancellor, did so within hours of the demand.

The Labour manifesto, unveiled on Friday, promised not to increase income tax, National Insurance, VAT or corporation tax. The promise is understood to refer to rates rather than thresholds.

But on a host of other potential tax rises, such as fuel duty and creating new council tax bands, the Labour leadership has been careful not to rule changes out when pressed.

Ms Trott drew attention to Ms Rayner’s failure to rule out ending the private residence relief on Thursday’s ITV debate when she held a press conference on Friday.

She said: “Angela Rayner last night explicitly and deliberately failed to rule out. For the first time ever people’s family homes would be dragged into capital gains tax.

“Can we be clear what this means? It would mean it would freeze the housing market, because many people would no longer have the incentive to sell their home, and that would make it harder for young people to buy a family home if fewer people are selling.

“And most importantly of all it would make millions of homeowners in our country poorer. It’s the kind of disastrous tax rise that makes handing Keir Starmer a blank cheque to do whatever he wants so risky for our country’s future.”

After Labour’s change in position, Ms Trott said: “Labour are in chaos on tax. Forty-eight hours ago, Keir Starmer said he would not make any further tax commitments beyond his manifesto, but now that claim is in tatters.

“There are still 17 new taxes on families that Labour are failing to rule out. Given that Keir Starmer has confirmed his policy on capital gains tax and family homes, the public need to know about the rest.

“Re-writing major tax policy on the hoof shows why you cannot trust the promises Keir Starmer is making on tax.”

Critics of the Tories have pointed out that despite their attacks on tax, the tax burden has risen to its highest level in 70 years under the party.

Mr Sunak and Jeremy Hunt, the Chancellor, argue that the impact of the Covid pandemic, which necessitated vast public spending, and the Ukraine war made tax rises inevitable.

The Conservative manifesto unveiled this week pledged £17 billion of tax cuts. The Labour manifesto proposed £8 billion worth of tax rises, including applying VAT to private school fees.