Chancellor John Healey has ruled out raising Capital Gains Tax in next week's Budget, rejecting pressure from some Labour MPs and cabinet ministers to increase the levy on profits from asset sales.
Healey cited concerns that higher CGT would trigger an investor exodus from the UK or prompt wealthy people to delay selling assets, potentially costing the government money rather than raising it. The Times reported that these warnings informed his decision.
Cabinet ministers Wes Streeting and Louise Haigh both previously supported raising CGT before Andy Burnham became prime minister in July. Haigh, now Burnham's secretary of state, had suggested capital gains should move closer to income tax rates, which are generally higher. Streeting called for a "wealth tax that works" in May after resigning from the previous government.
Healey has already ruled out equalizing the two tax rates, according to the Financial Times.
The chancellor has signaled he wants the UK positioned as a country of wealth creation, with government policies aimed at lifting confidence, investment and profit. Burnham received warnings against CGT increases from figures including Lord Jim O'Neill, Goldman Sachs Chief Economist and former adviser, who suggested the move would send "the wrong message to business."
Healey's rejection of the tax increase comes as the government prepares to present its first full Budget next week. Tory leader Kemi Badenoch is expected to use a speech on Tuesday to urge the government to abandon spending plans and reduce borrowing.
Banks are also expected to face higher taxes in the Budget.