It says everything about the state of the modern Labour Party that its new Prime Minister is now taking his marching orders from a man who last won a general election never, Lord Neil Kinnock, twice defeated by Margaret Thatcher, is once again playing kingmaker, and Andy Burnham appears only too happy to bend the knee.
The demand
Lord Kinnock has called on his protégé to use his first Budget, scheduled for October 28, to align capital gains tax with income tax rates. At present, CGT sits at 18 per cent for basic-rate taxpayers and 24 per cent for higher earners, well below the 20, 40 and 45 per cent bands charged on income. Kinnock argues that closing this gap would hand the Treasury an extra £12 billion a year.
It is, of course, the same old Labour instinct: when in doubt, reach for other people’s money.
The numbers don’t add up
Even by Labour’s own generous standards of arithmetic, Kinnock’s figure looks shaky. Independent analysis from investment platform IG, working from HMRC’s own published assumptions, suggests the policy would actually cost the Treasury roughly £7.8 billion a year rather than raising anything at all. In other words, the flagship “fairness” measure being pushed on Burnham by his old mentor may leave the public finances worse off, not better.
This is precisely the trap former Conservative Chancellor Jeremy Hunt warned about. Treasury officials, he has revealed, long regarded 24 per cent as the revenue-maximising rate for CGT — push beyond it, and investors simply sit on their assets rather than sell them, starving the Exchequer of receipts altogether. It is basic Laffer Curve economics, a concept apparently still unfamiliar to a party more interested in slogans than spreadsheets.
Investors have already been squeezed hard in recent years, with the CGT annual allowance slashed in stages from £12,300 down to a mere £3,000. Joshua Raymond of trading platform XTB has pointed out that CGT has traditionally sat below income tax precisely because investment carries the risk of loss — align the two, and you strip out any incentive to take that risk in the first place.
The Burnham-Kinnock axis
That Burnham should be taking his cues from Kinnock is hardly a surprise. The new Prime Minister has openly credited the veteran Welsh grandee as an inspiration, framing Britain’s economic direction since the 1980s as a series of “wrong turns.” One might have thought a party desperate to prove its economic credibility would look for guidance from somewhere other than a man whose own electoral record reads two defeats to Thatcher and a subsequent, extremely comfortable career on the EU payroll.
Senior figures around the Cabinet table, including Louise Haigh and Wes Streeting, have already thrown their weight behind aligning CGT with income tax, suggesting this isn’t merely Kinnock freelancing from the Lords but a genuine trial balloon for the Budget itself. Chancellor John Healey has been widely tipped to raise taxes this autumn, having already conceded taxpayers will likely be asked to contribute “a little more.”
The Treasury, for its part, offered only the customary non-answer, insisting decisions on tax remain a matter for fiscal events rather than “routinely commenting on proposals.”
Public mood turning ugly
Judging by the reaction beneath the original reporting, the public is in no mood to be lectured by Lord Kinnock on fairness. Comment threads have been thick with accusations that a man who has spent decades drawing a public pension, EU emoluments and Lords’ allowances has little standing to demand more from ordinary savers and investors. Others pointed to behavioural economics rather than ideology, warning that higher-earning taxpayers facing a CGT raid will simply delay selling assets, precisely the outcome Hunt predicted, while some readers described already restructuring their finances, or retiring early, specifically to avoid further tax rises under this government.
The bottom line
Labour promised the “party of working people” would not come after ordinary taxpayers. It is now being steered by a Brussels-pensioned peer towards a tax raid that independent analysts say could actually cost the country money. If this is the calibre of advice shaping Andy Burnham’s first Budget, taxpayers should brace themselves, and perhaps start reading up on the Laffer Curve themselves.
