Rachel Reeves has been accused of running “the economy like Baldrick” and risking rising rents amid reports that the Treasury is considering hiking tax for landlords.
The Chancellor’s officials are said to be looking at imposing national insurance on rental income ahead of the autumn budget.
The plan would reportedly involve increasing the levy on property earnings in the hope of raising £2 billion as Ms Reeves searches for ways to raise cash amid dire warnings about the state of the public finances.
Property expert Kirstie Allsopp on Thursday compared the Chancellor to the Blackadder character Baldrick, known for his doomed to fail “cunning plans”.
Ms Allsopp told Times Radio: “This is economically destabilising. It's literally like having the economy run by Baldrick.
“She keeps on coming up with the cunning plans and she needs to go and sit in a corner and think about how to save money and improve the economy, not constantly be taking money from people because this will impact tenants.”
The landlord tax is backed by some Labour MPs and Government aides, with some proponents saying that landlords were seen as a way of targeting “unearned revenue”, The Times reported.
However, the proposals have also sparked fears that they will result in rents being increased as landlords seeks to push the additional costs onto tenants.
Ben Beadle, chief executive of the National Residential Landlords Association, said: “Further punitive tax hikes on the rental sector will lead only to rents going up, hitting the very households the Government wants to protect.
“It would come on top of last year’s increase to stamp duty on homes purchased to rent and proposals expecting landlords to pay up to £15,000 on energy efficiency improvements to properties.”
He pointed to analysis by estate agent Savills, which shows that up to one million new rental homes will be needed by 2031 to meet demand for housing.
“Given this, the Chancellor should be using the tax system to encourage long term investment in new good quality rental housing,” Mr Beadle added.
Tom Bill, head of UK residential research at real estate consultancy Knight Frank, said: “Targeting landlords won’t lose the government many votes but such moves invariably end up hurting tenants.
“With landlords already selling up ahead of the Renters’ Rights Bill and tougher green regulations, another disincentive would reduce supply further and put upwards pressure on rents. Those that stay may pass on the extra costs in other ways.”
Employee national insurance contributions (NICs) on other earnings stand at 8%, but drop to 2% above a £50,270 threshold.
Ms Reeves’ allies are said to have argued the landlord tax proposals avoid breaking the Labour pledge not to raise VAT, income tax or NICs because they mark an expansion of the income to which this levy is applied, rather than an increase in its rate.
Treasury officials are seeking to explore ways to raise revenue without crossing these three “red lines,” which limit Ms Reeves’ options when it comes to balancing the books.
The extra tax on landlords could generate around £2 billion for the Treasury, it is understood.
The scale of the challenge facing the Chancellor in her autumn budget was illustrated by the NIESR economic think tank warning this month that Ms Reeves is set for a £41 billion shortfall on her self-imposed rule of balancing day-to-day spending with tax receipts in 2029-30.
On Thursday morning, government minister Stephen Morgan refused to be drawn on the reports.
The education minister instead said he wanted the budget to be rooted in "Labour values".
He told Times Radio: "Obviously taxation policies are a matter for the Chancellor of the Exchequer, and she will set out more detail in the budget later this year.”
A Treasury spokesperson said the best way to strengthen the public finances was by growing the economy, adding: “Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8 billion and cut borrowing by £3.4 billion.
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance, or VAT.”
