Lord Jim O'Neill, a senior ally of Andy Burnham, has cautioned against raising capital gains tax and other wealth taxes in the upcoming budget, arguing that such measures could damage economic growth and lead entrepreneurs to leave the country. O'Neill, who turned down a government role shortly before issuing his remarks, described the idea of increasing wealth taxes as "stupid" and suggested that failing to address welfare reform would be "scared, lazy and constrained."
O'Neill, formerly the chief economic adviser at Goldman Sachs and a key figure in the Greater Manchester Local Enterprise Partnership, expressed concern that tax increases like inheritance tax and capital gains tax could ultimately result in lost revenue for the Treasury. He believes business owners might defer company sales or move assets offshore to avoid higher taxes.
"I don't get why they would raise tax," O'Neill told The Times. "All that's telling you is that they're not thinking about growth as sincerely as they claim they are. They're just being scared and lazy and constrained in dealing with the sacred cows."
His comments come as ministers are reportedly facing pressure to increase taxes like capital gains tax, which applies to profits from assets such as shares, second homes, and investment properties. This is in contrast to O'Neill's view, which emphasizes tackling welfare spending to reduce national debt. He advocates for a "sensible, realistic approach to welfare spending."
Capital gains tax rates have traditionally been lower than income tax rates, reflecting the risks taken by investors and entrepreneurs. The recent budget saw a significant increase in capital gains tax receipts, with the Treasury collecting £24.2 billion in the 2024-2025 tax year, an 89% rise from the previous year. This surge followed tax hikes implemented mid-year, increasing rates for basic-rate taxpayers from 10% to 18% and for higher-rate taxpayers from 20% to 24%.
However, experts caution that this increase may be a short-term effect. Elizabeth Bradley, a partner at law firm BCLP, suggested that the "exceptional spike" might reflect individuals selling assets in anticipation of potential tax rate changes, a phenomenon known as forestalling. She warned that "the behavioural response to potential CGT rate changes may now shift."
Pete Fairchild, National Head of Private Clients at tax firm Crowe, echoed these concerns, stating that rising capital gains tax rates have likely prompted many to accelerate asset sales. He also noted that "the trend of wealthy people leaving the UK continues because of these measures, not helped with further concerns about the potential of an exit tax being brought in."
O'Neill also advised Burnham to focus on growth-generating regions like London, the West Midlands, and the northern powerhouse areas, rather than attempting a "growth in every postcode" pledge. He suggested that Burnham would need to make "hard choices" upon parliament's return from recess.