Senior members of the Labour Party have thrown their support behind a future wealth tax.
Labour agree that now is not the time for tax rises and the Government’s priority has to be towards maintaining the current tax base and supporting economic recovery. However, it could be said that Labour and the Chancellor, Rishi Sunak, agree that future tax rises are inevitable.
Rishi Sunak tested the water in the late summer with leaked reports on potential tax rises at the now-cancelled Autumn Budget, but he quickly backtracked following public backlash; the focus, rightly so, had to be on supporting jobs and protecting the fragile UK economy.
Labour proposed that the top 5% of earners must pay more, which confirms their repeated desire to re-introduce the 50% Income Tax rate. However, it must be remembered that the 50% Income Tax rate, which took effect between 2010-2013, was broadly neutral in terms of revenue generation.
The greater focus from Labour was how to find the right balance between the taxation of income and wealth. The Shadow Chancellor, Anneliese Dodds commented that: “When it comes to wealth taxation… I think the Government does need to look at this area. For the very best-off people, quite a bit of their money coming in is derived from wealth, so I think we do need that new settlement.”
It’s quite possible that Rishi Sunak does not disagree, and Labour’s comments will not have gone unnoticed. The Coronavirus pandemic has once again highlighted the issue of wealth disparity as well as the present tax system not being fit for purpose.
Sunak is having a close look at Capital Gains Tax and recent reviews of Inheritance Tax will be on his radar.
A future wealth tax has to be coupled with an overhaul of capital taxes. It certainly cannot be ruled out but would prove unpopular amongst the traditional Tory electorate.
The Labour Party’s virtual conference didn’t give away too much on the Party’s tax proposals. Unlike the previous year where the former Shadow Chancellor John McDonnell promised 45% Income Tax for those earning more than £80,000, on the issue of the re-introduction of the 50% Income Tax rate and alignment of Capital Gains Tax to Income Tax, Sir Keir Starmer and Anneliese Dodds remained firmly on the fence.