We cannot 'tax our way to prosperity' says Blair in warning to Burnham over raising capital gains tax
Bringing capital gains tax in line with the three bands of income tax rate would raise £12 billion a year, according to the Centre for the Analysis of Taxation.
Sir Tony Blair’s think tank has warned Andy Burnham against increasing capital gains tax (CGT), warning that the UK cannot “tax our way to prosperity”.
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Mr Burnham, who is expected to take over the mantle of prime minister from Keir Starmer in the coming weeks, is understood to be considering bringing CGT in line with income tax in order to boost public revenue.
CGT is a levy on the profits made after selling investments or assets like second homes or shares.
Currently, the amount of profit taxpayers can make is £3,000 annually - anything above this taxed between 18 per cent and 24 per cent.
Should the Makerfield MP bring CGT in line with the three bands of income tax rate – 20 per cent, 40 per cent for higher rate taxpayers and 45 per cent for additional rate taxpayers – it would reportedly raise £12 billion a year, according to the Centre for the Analysis of Taxation.
But the Tony Blair Institute for Global Change has told the former Manchester mayor that doing so would send “precisely the wrong message at precisely the wrong time”.
Guy Ward-Jackson, a senior analyst at the institute, said: “Taxing our way to prosperity is both bad policy and bad politics.
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"In a world of rapid technological change, Britain’s prosperity is not guaranteed. We have to optimise for it.
"Britain’s next leader has the potential to set out a new stall for growth and security – they must not squander it.”
Mr Ward-Jackson argued that Britain was desperate for long-term investment in businesses and technologies, and entrepreneurs needed an economy that rewarded them for taking risks and building business in Britain.
He stress that increasing capital gains tax to the level of income tax would "undermine those incentives" and would "send entirely the wrong signal".
Equalising CGT with income tax would almost double the rate, from 24 per cent to as much as 45 per cent, with Mr Ward-Jackson warning it would become the highest rate in Europe.
Sir Tony is understood to support the arguments made by the think tank, which are in line with the institute’s general outlook.
In his first interview since Sir Keir announced his resignation, Mr Burnham told LBC there was room for movement on tax - despite pledging to keep to Labour’s 2024 manifesto commitments not to increase workers’ income tax, national insurance or VAT rates.
He explained there was room within the manifesto’s restrictions to increase taxes on warehouses to help high street businesses such as pubs.
Mr Burnham's top allies appear to support the sentiment - Louise Haigh has led calls for a sharp increase in CGT, and former health secretary has said it should be brought in line with income tax.
Both are expected to be handed senior roles in Mr Burnham’s Cabinet.