Labour’s position on higher taxes for the wealthy is putting pressure on Rachel Reeves, as the party grapples with the issue of inequality and the state of Britain’s finances.
Following a conference in Liverpool focusing on party unity and economic credibility, trade union leaders and left-leaning figures within the party are advocating for Labour to push for increased taxation on the richest individuals.
Paul Nowak, General Secretary of the Trades Union Congress, expressed his disagreement with Reeves on the issue, but maintained respect for her. He emphasized that pressure from the union movement will persist, stating, “We’re going to carry on banging the drum.”
Andy Burnham, Mayor of Greater Manchester, also highlighted the need to address wealth inequality. He suggested considering a levy on land values or reforms to council taxes as potential solutions.
In August, Reeves confirmed that she would not support a mansion tax or increased capital gains tax rates. However, her stance faced scrutiny at the conference from grassroots members and left-wing MPs.
The Fire Brigades Union’s General Secretary, Matt Wrack, stressed the importance of taxing the assets, land, and wealth of the super-rich to fund public services. He believed such a measure would be popular among voters.
Beth Winter, a left-wing Labour MP, also emphasized the need for wealthy households to pay a fair level of tax to properly fund public services. Winter criticized the lower tax rates on wealth compared to income, stating it was outrageous.
Reeves ruled out an equalization of tax rates on capital gains and income, citing potential negative impacts on investment in the UK. While she left room for a more modest increase, she emphasized the importance of incentivizing investment in British businesses.
Charging tax on incomes and capital gains at the same rate was previously introduced by Nigel Lawson, Margaret Thatcher’s chancellor, but was later abandoned. Rishi Sunak considered reviving the policy after the pandemic, and it has been supported by Joe Biden in the US.
A government review in 2020 found that increasing the rate on capital gains could yield up to £14bn annually. Sharon Graham, General Secretary of the Unite trade union, proposed a new levy of 1.5% on wealth over £10m, which could generate about £17bn per year.
Labour has other measures to raise revenue from the wealthy, such as eliminating non-dom status, implementing VAT on private school fees, and imposing a windfall tax on energy company profits. Reeves also argues that stimulating economic growth will result in more revenue for the treasury.
However, Nowak warned that an incoming Labour government would face a dire financial situation inherited from the Conservatives, necessitating finding funds to rebuild the NHS and repair and renew services.
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