Rachel Reeves, Labour's shadow chancellor, is under mounting pressure from colleagues to consider increasing capital gains tax (CGT) as part of an ambitious Autumn Budget designed to fund public services.
With income tax, National Insurance and VAT increasing, Reeves is exploring alternative measures to raise revenue.
Business insiders reveal that Reeves is evaluating up to a dozen potential financial strategies to shore up the public purse. A source close to the discussions commented: “Rachel is considering a range of measures, each designed to contribute modestly to the overall budget, and generate significant funds cumulatively.”
The push to increase CGT comes as part of a wider strategy described by one Labor figure as a “kitchen sink” approach, which aims to secure the funds needed for investment and radical reform in the public service. This strategy involves disclosing all potential financial measures in advance to justify substantive interventions.
Despite these deliberations, a Labor spokesman reiterated the party's commitment to cost-effective and fully funded plans, stressing: “We have identified specific tax loopholes to close to obtain immediate revenue without raising taxes.”
The proposed plans appear amid a heated debate with the Conservative Party over tax policies. The Conservatives have pledged not to increase property taxes, challenging Labor to match the “tax guarantee on family homes”. Prime Minister Rishi Sunak has accused Labor leader Keir Starmer of planning large-scale tax rises, a claim Labor rejected as misleading.
Reeves has already ruled out major tax rises, including almost all major taxes, but acknowledges the urgent need for new revenue sources to avoid deep cuts to public services in the next parliamentary session.
Labour's current fiscal proposals include increasing windfall taxes on oil and gas companies, eliminating tax breaks for private schools, and tightening regulations on non-residents. However, these measures alone may not be enough to close the financing gap.
The Resolution Foundation recently warned that without additional revenue, the next government could face £19 billion in cuts to unprotected departments by 2028-29, affecting sectors such as local government, the Home Office and the courts.
Some Labor members are calling for CGT rates to be aligned with income tax, which could increase the top rate from 24% to 40% or 45%, and is estimated to raise £8bn. This approach reflects a move made by former Conservative Chancellor Nigel Lawson in 1988, which was subsequently reversed by subsequent Labor budgets.
Alternatively, Labor could return to the pre-2023 Budget general income tax rate on second homes, raising it from 24% to 28%. However, the Office for Budget Responsibility expects minimal financial gain from this amendment.
Another option being considered is to reintroduce the Health and Social Care Levy, a 1.25 percentage point increase in national insurance introduced by Boris Johnson and later scrapped by Kwasi Kwarteng. This tax, which was to be extended to pensioners, was partly intended to finance improved health services. Despite support from senior figures such as Sir Nicholas Macpherson, the former Treasury chief, insiders suggest Reeves is unlikely to reintroduce it to avoid breaching her pledge against increasing National Insurance.
As Labor officials prepare to finalize the party's manifesto, due to be released next week, the focus remains on finding workable financial solutions to ensure strong and sustainable public services under a potential Labor government.