Chancellor John Healey will not raise capital gains tax in the next budget, according to Treasury sources. The decision was first reported by the Financial Times and The Times ahead of the budget scheduled for 28 October. Healey reportedly concluded that a higher rate could ultimately cost the Treasury, because wealthy individuals might defer asset sales or move assets abroad.
The chancellor’s main revenue raiser is now likely to be a tax on banks’ profits. HSBC, NatWest, Barclays and Lloyds Banking Group generated pre-tax profits of about 200 billion pounds combined over the past five years.
Pressure on the fiscal cushion
Rachel Reeves built a fiscal headroom cushion of 24 billion pounds at the time of the last spring forecast. Analysts have suggested that rising UK borrowing costs could halve that figure.
Political reaction
Wes Streeting, now defence secretary, had called a rise in capital gains tax a wealth tax that works. He argued that the current system widens the gap between earned and unearned income.
Kemi Badenoch, the Conservative leader, said the government should cut spending now rather than borrow more. She argued that cuts are easier to defend when they are based on fairness, and that under the golden economic rule half of savings would go to reducing the deficit.
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Healey’s growth argument
Healey said the cost of business has grown since Covid, citing energy bills, regulation, planning constraints and labour costs. He said he wants to draw a line under those pressures. In his view, the only long-term way to deal with the cost of business or the cost of living is growth.
Source: Treasury
