Rachel Reeves is under pressure to drop Labour’s blanket opposition to higher taxes on wealth, amid growing alarm within the party over extreme levels of inequality and the battered state of Britain’s public finances.
After a conference in Liverpool designed to showcase party unity and economic credibility, trade union leaders and senior figures on the shadow chancellor’s left said they would keep “banging the drum” for a Labour government to raise billions of pounds more in tax from the very richest.
Paul Nowak, the general secretary of the Trades Union Congress, said the union movement would maintain pressure on Reeves. He said: “I’ve got a huge amount of respect for Rachel and want her to be the next chancellor. But on this issue, I think it’s fair to say I disagree. I think we do need to raise the question around wealth taxes.
“I’m a trade unionist – so you don’t give up at the first word. If you ask for things and someone says no, you don’t just give up and wave a white flag. We’re going to carry on banging the drum.”
Andy Burnham, the mayor of Greater Manchester, told a conference fringe meeting that more needed to be done to tackle wealth inequality. “I think we overtax work and undertax capital and assets,” he said, suggesting a levy on land values or reforms to council taxes could be considered.
“We need to look at assets, land and capital because that is how society has changed and then you could take some of the burden off labour.”
Reeves confirmed in August that she would not bring in a mansion tax on expensive properties or hike the rates charged on capital gains from shareholdings and property. However, the shadow chancellor faced repeated questions on her stance in Liverpool amid disquiet from grassroots members and leftwing MPs.
The Fire Brigades Union’s general secretary, Matt Wrack, said a Labour government “must introduce a tax on the assets, land and wealth of the super-rich” to help fund public services. “This would be a hugely popular measure with voters.”
Beth Winter, a Labour MP from the leftwing Socialist Campaign group, said ensuring wealthy households paid a “fair level of tax” was vital for the proper funding of public services. “It’s outrageous that the huge wealth, assets and land of the richest is taxed at a lower rate than on incomes from work.”
Reeves ruled out a rise in the tax rates charged on capital gains, which are lower than those charged on income from salaries, telling a fringe event sponsored by the Tony Blair Institute that a “wholesale equalisation” could hit investment in Britain.
While leaving some wriggle room for a more modest rise, she said: “We think it is important to create the incentives to invest in UK businesses – to help create businesses, to help grow businesses, and to have preferential tax treatment in doing that.”
Charging tax on incomes and capital gains at the same rate was a policy introduced during the 1980s by Margaret Thatcher’s chancellor, Nigel Lawson, but it was later dropped. Rishi Sunak considered reviving it after the pandemic and it has been promoted by Joe Biden in the US.
A government review commissioned by Sunak found in 2020 that up to £14bn a year could be raised by increasing the 28% rate charged on capital gains to match rates of income tax, which is levied at 20% for basic-rate taxpayers, and 40% and 45% for higher and additional rate earners in England and Wales.
Sharon Graham, the general secretary of the Unite trade union, said another option could be to launch an entirely new levy. “As a starter, a 1.5% annual tax on wealth over £10m would bring in about £17bn a year. There’s a choice I think most people could get behind,” she said.
Despite refusing to move on wealth taxes, Labour has several other measures aimed at raising more revenue from wealthy individuals and businesses, including scrapping non-dom status, charging VAT on private school fees, and a more extensive windfall tax on energy company profits. Reeves also argues that spurring faster economic growth will bring in more for the exchequer.
However, Nowak said an incoming Labour government would inherit a devastating outlook for the public finances from the Conservatives. “If you’re serious about rebuilding the NHS, repairing and renewing services … we’re going to have to find the money from somewhere.”
