Labour split over capital gains tax

·3-min read
Rachel Reeves at the launch of Labour’s local election campaign in Swindon on Thursday - Stefan Rousseau/Getty Images Europe
Rachel Reeves at the launch of Labour’s local election campaign in Swindon on Thursday - Stefan Rousseau/Getty Images Europe

Labour is facing a split over capital gains tax after Rachel Reeves insisted she had “no plans” to increase the current rate.

Angela Rayner, the Labour deputy leader, last week suggested raising taxes on savings and investments and criticised Rishi Sunak, the Prime Minister, for paying a lower rate than most working people.

But Ms Reeves, Labour’s shadow chancellor, told BBC Radio 4’s Today programme: “Look, we will set out all those plans, but I don’t have any plans to raise capital gains tax.

“There are people who have built up their own businesses, who maybe at retirement want to sell that business. They may not have had huge income through their life if they’ve reinvested in their business, but this is their retirement pot of money.

“And we also have said we want Britain to be the best place to start and grow a business.”

Ms Reeves said the “biggest challenge” facing the economy was low levels of growth, noting that the average French family was around 10 per cent richer than the average British family.

While the shadow chancellor did not categorically rule out a capital gains tax increase, her comments risk angering prominent backbenchers who are calling for one, including John McDonnell, Jeremy Corbyn’s shadow chancellor, and Richard Burgon.

The backbenchers have demanded that the capital gains levy is doubled on most assets to align it with the 40 per cent income tax rate.

Ms Rayner had said a summary of Mr Sunak’s tax return, which showed he earned nearly £5 million in three years but paid an effective rate of just 22 per cent, “reveals a Tory tax system where the PM pays a far lower tax rate than working people”.

However, Sir Keir Starmer, the Labour leader, refused to be drawn on his deputy’s remarks and told broadcasters: “In relation to tax, obviously we will set out our position as we go into an election.”

Yvette Cooper, the shadow home secretary, said Ms Rayner was making a “broader” point about taxes under the Conservatives.

A Labour spokesman told The Telegraph last week that the party had “no plans to raise capital gains tax”.

Senior Tories including Lord Hammond, the former chancellor, have warned that a capital gains tax raid would stifle enterprise and prove “catastrophic” for businesses.

On Thursday morning, Sir Keir was joined by Ms Reeves and Ms Rayner as he launched Labour’s local election campaign in Swindon, Wiltshire.

The Labour leader said his party would freeze council tax for a year, funded by an expansion of the windfall levy, if it was in government.

Ms Reeves accused the Conservatives of a “legacy of failure" and said Labour would provide “the change that our country desperately needs”.

“We want to do more to help ordinary families struggling with the cost of living," she said. “And we want to ask more from those who are making huge profits, from the big energy giants making more money than they have ever done before and they’re not paying their fair share of taxes.”