Louise Haigh, a prominent ally of potential Prime Minister Andy Burnham, has called for significant reforms to the UK's tax system, including increased taxation on inherited wealth. Haigh, who is expected to hold a senior Cabinet position if Burnham becomes prime minister, argued that the current system unfairly benefits grieving families by allowing them to 'escape taxation' on unrealized gains.
In an article for the journal Renewal, Haigh criticized the Capital Gains Tax (CGT) system, stating it is stacked against individuals who earn their income through labor. She specifically targeted the CGT 'uplift at death,' a mechanism that allows inherited assets to be revalued to their market price at the time of death, effectively wiping out any capital gains tax liability on the appreciation of the asset during the deceased's lifetime. Haigh asserts that removing this provision would address 'specific loopholes' and enhance the perceived legitimacy of the tax system.
"The taxation of inherited wealth raises important questions of intergenerational fairness," Haigh wrote. "The current system is characterised by numerous exemptions and reliefs, limiting its effectiveness and perceived legitimacy in the eyes of the public. At a minimum, reforms should address specific loopholes, such as the Capital Gains Tax uplift at death, which allows unrealised gains to escape taxation entirely."
This call for tax reform comes as Housing Secretary Steve Reed suggested that under a potential Burnham premiership, while there would be 'changes of emphasis,' the 'fundamentals' of economic policy, including existing fiscal rules, would remain. Reed indicated to Sky News that the transition to a new leader could be orderly, with the public seeking practical governance.
Haigh also advocated for aligning CGT rates with income tax to disincentivize individuals from shifting income into lower-taxed forms. She further repeated past proposals to reduce council tax and abolish stamp duty, replacing it with a property and land tax, a move that critics suggest could lead to higher taxes for larger homes. Additionally, she suggested changes to VAT thresholds, which she believes hinder business growth.
The Office of Tax Simplification, an independent body, has previously highlighted the 'incoherent and distortionary' interaction between CGT and inheritance tax, recommending that the government address these complexities.