by The Labor party is drawing up options on how to raise money through additional wealth taxes to help rebuild Britain’s public services if it wins the general election, according to sources who spoke to the Guardian.
The proposals being considered include increases in capital gains tax (CGT), first revealed by the Guardian two weeks ago, which could raise £8bn.
Another option being discussed could lead to significant changes to inheritance tax. The measure would make it more difficult to “gift” money and assets, such as farmland, tax-free. Together with CGT increases it could raise up to £10bn in revenue, according to one document seen by the Guardian.
A senior Labor source said: “We are starting from scratch with our public services and infrastructure. We need to show that we are serious about borrowing and raising tax revenue if investors are going to match us. These measures are part of releasing wealth and putting it to work.”
Another senior party source said: “We need to show that we are credible in changing the country. Fiscal credibility means tax reform as well as prudent lending.”
Before any decision is made, Labor plans to submit a range of options to the Office for Budget Responsibility (OBR) for analysis, after collecting the costs of individual measures from HMRC.
Labor is under pressure to explain how it will fund its plans for government, and sources admit there is frustration among some senior party members at the cautious approach it took during the election campaign.
So far, Labor has said it will not raise income tax, national insurance or VAT – and has ruled out applying CGT to primary residences. He denied that he had reached any final decisions on any other measures.
A Labor spokesman said: “Keir and Rachel have made it clear that our priority is to grow the economy, not raise taxes. We have laid out fully costed, fully funded plans, and there are very specific tax loopholes that we would close. Nothing in our plans calls for any additional tax increases.”
In an interview with the Guardian this week, the shadow chancellor denied there were any plans for a new revenue increase in a budget due next autumn. Rachel Reeves said she was focusing on efforts to drive growth rather than “talking about taxes”.
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However, sources have indicated that work is already underway to find new ways to raise money if Keir Starmer becomes Prime Minister.
They said a series of draft documents and expert analyzes had been worked on during the election campaign and circulated among senior officials and shadow ministers.
One Labor memo, seen by the Guardian, was a briefing note that an increase in CGT rates alone could generate £8bn for the Exchequer in the long term.
There are also proposals to reform inheritance tax, and there are plans for a consultation which could be launched in the autumn. These could include radical changes, such as removing or updating the rules on agricultural land and business relief.
HMRC could be instructed to prepare figures on a range of options next month, sources said. They would then go to the OBR, which would need 10 weeks to crunch the numbers and share its findings with the Treasury.
The preparatory work suggests that a budget could come as early as October, once the party conferences are over.
Under the current CGT system, profits from the sale of second homes or shares in businesses are taxed at a much lower rate than wages.
Some senior figures believe more openness about plans to raise wealth taxes to overhaul public services would improve traditional Labor voter turnout.
The tax options being considered come amid growing criticism from experts of a “conspiracy of silence” over how the two main parties can afford to fund public services.
The Institute for Fiscal Studies (IFS) said Labor and the Conservatives were not clear on how they planned to address the “extremely difficult fiscal situation” facing the next government.
The inheritance tax option being looked at involves changes to the rules for the tax on agricultural land and other family businesses, which industry experts consider to be “very significant”.
Currently, a person can claim up to 100% relief on the inheritance of agricultural land if it is actively farmed. This is causing concern that rich people are trying to avoid inheritance taxes on farmland, and this is driving up prices and closing down small businesses and farmers.
Some in Labor want to scrap this along with business relief, which allows someone to pass on a company or shares if it is unlisted with 100% tax relief.
Among the plans being considered is a transitional scale of options to assess the likely gain to the exchequer, including a £500,000 cap for each person benefiting from agricultural and business relief, rather than ending it. In some cases, both types of relief could be claimed, effectively allowing a cap of £1m for each person.
This would still raise around £2.3bn by 2029-30, which would be the end of the OBR’s forecast period if introduced in March next year, according to a paper published by the IFS in 2023. the same figure appears in one. of the internal Labor documents seen by the Guardian.
Sources said wider changes to gift and inheritance tax were also being considered. Currently, no inheritance tax is due on gifts if they are given by someone who lives for more than seven years after the gifts were made.
