The business secretary has said the idea of a “magic wealth tax” to raise funds is “daft” amid speculation that the Chancellor could turn to such a measure to plug holes in the public finances.
The government’s U-turns over welfare reform and winter fuel payments have left the chancellor with a multibillion-pound black hole to fill, fuelling speculation she might target the assets of the wealthy in the next budget.
Rachel Reeves has not ruled out the possibility of a new wealth tax but has been eager to highlight that she will stick to her commitment not to hike tax for “working people”.
Some in the Labour Party, including former leader Lord Neil Kinnock and Wales’s first minister Baroness Eluned Morgan, have called for a wealth tax.
However, business secretary Jonathan Reynolds dismissed the idea.
“This Labour government has increased taxes on wealth as opposed to income – the taxes on private jets, private schools, changes through inheritance tax, capital gains tax,” he told GB News.
“But the idea there’s a magic wealth tax, some sort of levy… that doesn’t exist anywhere in the world.
“Switzerland has a levy but they don’t have capital gains or inheritance tax.
“There’s no kind of magic (tax). We’re not going to do anything daft like that.
“And I say to people: ‘Be serious about this.’ The idea you can just levy everyone… What if your wealth was not in your bank account, (what if it was) in fine wine or art?
“How would we tax that? This is why this doesn’t exist.”
Earlier this month transport secretary Heidi Alexander said cabinet ministers did not “directly” talk about the idea of a wealth tax – of the kind being pushed by unions and former Lord Kinnock – during an away day at the prime minister’s Chequers country estate.
The prime minister also failed to rule out extending “stealth taxes” and the introduction of a wealth tax as his government struggles to balance the books.
Sir Keir reiterated only that Labour would stick to its manifesto pledge and ruled out increases to income tax, VAT and national insurance.
Lord Kinnock has suggested a wealth tax would bolster the public finances without breaking Labour’s pledges.
Union leaders, including Sharon Graham of Unite, are also pressuring ministers to consider the move.
The chancellor has refused to rule out tax rises at the Budget since Labour MPs forced ministers to make a U-turn on welfare reforms, losing the government an estimated £5bn a year in savings.
She was already under pressure over the public finances.
On Friday she was warned she would have to raise taxes, charge for the NHS or ditch pensions triple lock.
The International Monetary Fund praised her overall strategy but warned that her lack of fiscal headroom will leave her with hard choices ahead.
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