The Labour leader, Keir Starmer, is under pressure from campaigners, unions and his own MPs to set out plans for “wealth taxes” on the richest in society in order to support public services and help the poorest through the cost of living crisis.
As the government prepares to cut spending to fill an estimated £35bn black hole in the nation’s finances, calls are growing for higher taxes on the super-rich, many of whom have seen their fortunes soar during the pandemic.
Richard Burgon, the Labour MP for Leeds East, said: “While living standards are plummeting for most people, it’s been boom time for the super-rich, whose wealth has soared to record highs in recent years.”
Starmer, who is trying to position his party in the centre ground, has avoided committing to higher taxes on private incomes as Labour seeks to woo the City and businesspeople angry at the damage caused by the Conservatives’ mini-budget. But that approach is causing concern on his backbenches and more widely, with the Greens calling Labour “timid” on wealth.
“Whoever is in government over the next few years will have to decide whether to cut services and hike taxes on ordinary people or to instead tax the wealth of the very richest,” Burgon, who served as shadow lord chancellor in Jeremy Corbyn’s shadow cabinet, told the Guardian.
“Even modest wealth taxes could raise tens of billions and prevent the need for yet more austerity. Taxing wealth should be the fairer way forward that the whole labour movement unites around.”
The ranks of the global “ultra high net worth” (UHNW) individuals – those with assets of more than $50m (£43m) – swelled by 46,000 last year to a record 218,200 as rich people benefited from “almost an explosion of wealth” during the recovery from the pandemic, according to the investment bank Credit Suisse.
The only policies that Labour has announced so far are promises to scrap the non-dom loophole and impose higher tax rates for private equity bosses.
Rebecca Long-Bailey, the Labour MP for Salford and Eccles, who also served in Corbyn’s shadow cabinet, said it was “simply staggering that income from wealth continues to be taxed at a lower rate than income from work, and this unfairness must end now”.
Last month a coalition of 40 charities and campaign groups called for change, saying Britain’s tax system was broken and the richest needed to pay more. Tax Justice UK claims up to £37bn could be raised by introducing a string of wealth taxes, including equalising capital gains tax with income tax and introducing a 1% tax on assets over £10m.
Under the current system, capital gains from the sale of shares, for example, are taxed at 20%, while income tax on wages ranges from 20% at the lower end to 45% for the highest earners. Aligning the rates could raise £14bn, Tax Justice says. National insurance is not levied on income from investments – a policy change here could raise £8.6bn.
Long-Bailey called for the introduction of “a wealth tax on the super-rich as part of a wider redistribution of wealth to fund our public services” as well as increased windfall taxes on “the super-profits of oil and gas companies”.
Jon Trickett, the Labour MP for Hemsworth in West Yorkshire, said it was “a scandal that the wealth and assets of the super-rich are not taxed in the way that income is”, and that the introduction of a wealth tax was “long overdue”.
He said: “With the Tories planning another age of austerity, it’s time to promote a tax on the shares, stock, property and capital of the super-rich.”
Frances O’Grady, the general secretary of the TUC, the unions’ umbrella body, said it was the right time to be looking at wealth taxes. “In the last decade the richest have enjoyed huge increases in their wealth. The government should now look at how they can contribute more to rebuilding an economy that works for everyone, with world class public services at its heart,” she said.
“There is a particularly clear case for equalising capital gains tax with income tax. It’s not fair that workers are taxed at a higher rate than people who are getting richer from the income generated by their wealth. And it would help create the right kind of economic progress – reducing inequality and spreading opportunity more widely.”
Molly Scott Cato, the Green party’s spokesperson on finance, said: “The Tories have created a big hole the public finances but there is an obvious place to look to fill it: taxing the super-rich. Not only do they have the broadest shoulders but they also increased their wealth during the pandemic because of enforced savings.
“What is more surprising is to find Labour being so timid on wealth taxes. Their proposal to abolish non-dom status will only bring in a few billion while a proper wealth tax could yield tens of billions. We’ve now got two weeks for Labour to remember their egalitarian roots and support loud and growing calls for a wealth tax. Otherwise they will be colluding in the devastating cuts to public services that are being cooked up by the millionaires in Nos 10 and 11 Downing Street.”
Dr Phil White, a member of Patriotic Millionaires, a group of super-rich people calling for the introduction of a permanent wealth tax on the richest in society, said: “It seems to us that political parties are taking an awfully long time to catch up with what many millionaires and the general public want when it comes to taxes on wealth. Sixty-nine per cent of the UK public support a wealth tax of 1% on over £10m and only 7% oppose it.”
• This article was amended on 4 November 2022. An earlier version included the sale of property as an example where the current capital gains tax rate is 20%, when CGT on residential property is 28%.
