Chancellor Rachel Reeves has been urged to launch an £18billion tax raid on wealthy residents in the South of England to help rebalance the UK economy and reduce the disparity between the North and South.
The Institute for Public Policy Research (IPPR), a think tank, suggests that increasing Capital Gains Tax (CGT) rates to match those of income tax could significantly boost revenue, particularly from affluent areas like London and the South East.
According to Dr George Dibb, associate director for economic policy at IPPR, such a move would not only provide much-needed funds for less affluent regions but also address growing inequality.
Dr Dibb said: “Taxes don’t just raise revenue, they also shape our economy. But right now, the UK’s tax system is skewed, holding back attempts to reduce regional economic inequalities and benefiting a lucky few who largely get their income from wealth, not work.”
“At the moment our tax system is driving regional inequalities – it’s time to take our foot off the accelerator. We propose a number of reforms, including equalising capital gains tax with income tax.”
“By taxing wealth in a fairer way, Government can help regionally rebalance our economy, correcting widening inequalities in wealth, and consequently in health, opportunity and living standards.”
The IPPR highlighted that 60 percent of private wealth in the UK is inherited, not earned, creating significant barriers for those without inherited wealth.
According to the IPPR, by 2030, a person in the North of England will have, on average, £210,000 less wealth than someone in the South East. It said the disparity is exacerbated by lower taxes on wealth compared to income.
Currently, capital gains tax is levied on profits from asset sales, with rates ranging from 10 percent to 28 percent, depending on the asset and the individual’s income bracket.
The IPPR proposes aligning CGT rates with income tax rates, potentially raising them to 45 percent.
This adjustment could more than double the Treasury’s CGT revenue, which is currently expected to exceed £15billion this year.
To date, Reeves has not ruled out alterations to CGT in the upcoming budget, leaving open the possibility for significant fiscal changes aimed at addressing regional economic imbalances.
Market analysts predict this area of taxation to be a key target for the Government in the upcoming Autumn Budget.
