A key ally of the new UK Prime Minister, Andy Burnham, is advocating for the introduction of a 2% wealth tax in his upcoming Autumn Budget. The proposal comes from Compass, a Labour-aligned group headed by Neal Lawson, which suggests a levy on net wealth exceeding £10 million. The group claims this tax could generate £24 billion per year and would affect approximately 22,000 individuals.
Compass also recommends aligning capital gains tax with income tax rates, a move they predict would generate an additional £11 billion. However, critics warn that such policies could signal that Britain is not conducive to aspiration, investment, or success. Sir Mel Stride, the shadow chancellor, stated that the push for a wealth tax indicates a "will cost taxpayers billions of pounds" and criticized Labour's "tax-more, borrow-more, spend-more agenda."
Robert Jenrick, Reform's economic spokesperson, expressed skepticism about the effectiveness of wealth taxes, asserting that they "simply do not work." He suggested that individuals targeted by such taxes might relocate their businesses and assets, leading to a loss of tax revenue. Jenrick advised the government to focus on reducing government waste and growing the economy instead.
Daniel Herring, head of Fiscal and Economic Policy at the Centre for Policy Studies (CPS), echoed these concerns, describing wealth taxes as "unfair, unworkable, and send the signal that Britain is not a place for aspiration, investment or success." He advised Prime Minister Burnham to disregard these calls to foster economic growth.
The report comes as the number of millionaires in Britain has reportedly decreased by 7% since 2024, following a previous tax-raising budget. Labour MPs, including Andy McDonald and Jon Trickett, have publicly supported the idea of a wealth tax, with Trickett arguing it could fund progressive policies and address inequality.
John Healey, appointed as Burnham's Chancellor, is scheduled to deliver the Autumn Budget on October 28.