Chancellor John Healey has rejected calls to raise capital gains tax in next week’s Autumn Budget, resisting pressure from senior allies of Prime Minister Andy Burnham who want the levy increased to repair the public finances.
Several cabinet ministers had pressed for CGT on second homes, shares and other assets to be brought “closer to income tax rates.” But Healey ruled it out after warnings it could drive wealthy individuals abroad or deter asset sales — ultimately costing the Treasury money. CGT is currently charged at 24% for higher-rate taxpayers, versus up to 45% for income tax.
A “steady as she goes” Budget
Healey has promised a “steady as she goes” Budget on October 28 rather than the huge tax-and-spend packages of his predecessor Rachel Reeves. The biggest revenue raiser is expected to be a tax raid on banks, funding a targeted, temporary cost-of-living support package. He will also cut the government’s fiscal headroom — its buffer against shocks — from £23 billion to around £15 billion.
The manifesto pledge not to raise income tax, VAT or National Insurance for “working people” remains intact. But Burnham has conceded meeting the fiscal rules might mean “having to ask for a little more” on tax: “I won’t be unrealistic and people really need to understand that. We are in a challenging position.”
Business nerves and the IMF
Burnham hosted “speed-dating style” meetings with tech entrepreneurs, venture capitalists and FTSE 100 executives at 10 Downing Street this week to calm fears of business tax rises, while Healey held a breakfast roundtable for retail and hospitality leaders. The IMF has advised Healey to cut spending rather than raise bank taxes, and business groups warn sector-specific taxes would damage competitiveness.
With energy bills expected to top £2,000 a year from January and borrowing costs elevated by Middle East tensions, the October 28 Budget — Burnham’s first — will define whether his young premiership can deliver the “breathing space” it has promised.
The Budget will be the defining test of Burnham’s young premiership. Having replaced Keir Starmer earlier this year, the former Manchester mayor has promised voters ‘breathing space’ — but with borrowing costs high and growth weak, the Treasury’s room for maneuver is the tightest any chancellor has faced in decades.
