Wes Streeting proposes 'wealth tax that works' by equalising CGT with income tax

Former Health Secretary Wes Streeting has proposed introducing a "wealth tax that works" as part of his Labour leadership pitch, by equalising capital gains tax (CGT) with income tax.

Streeting told the BBC the change would address an unfair system that was "penalising work" and would encourage investment by offering lower rates of CGT to "genuine" entrepreneurs.

Tax experts say CGT needs reform and offered a mixed response to the proposals, which Streeting estimated could raise £12bn a year.

Streeting resigned from government after saying he had lost confidence in Sir Keir Starmer's leadership, although the prime minister has defied calls from his MPs to step down after poor election results.

Streeting's decision to quit the cabinet helped fuel intense speculation that he was planning a bid to replace Sir Keir as party leader, but no candidate has launched a formal challenge against the PM at this stage.

Streeting has since said he would seek to enter any potential Labour leadership contest.

The focus of his first major policy proposal is CGT, which is a levy on the profit made after selling an asset, such as property.

A report by Centre for the Analysis of Taxation in 2024 estimated reforming CGT could raise £14bn.

The annual tax-free allowance for the levy is £3,000 and anything above this is taxed at rates that depend on a person's income band.

For example, higher or additional rate taxpayers have to pay 24% on gains in the current financial year.

Streeting is suggesting CGT rates should mirror the three bands of income tax - 20%, 40%, 45%.

Under the proposal, a person's CGT band would be calculated by adding up their income and profits from assets.

Streeting is also proposing closing loopholes that allow people to disguise income from work as capital gains.

On top of this, lower rates of CGT would be offered to entrepreneurs who take risks building companies.

'Devil in detail'

Helen Miller, director of the Institute for Fiscal Studies, said CGT is "in desperate need of reform" and noted "the devil will be in the detail" of Streeting's proposal.

She added: "We should be wary of any proposals to 'reward genuine entrepreneurship, with lower CGT rates' – that approach has been tried and has failed because it's not possible to identify in advance who 'genuine entrepreneurs' are."

PKF Littlejohn's Adam Jefferies said: "This is not a wealth tax; it is an increase in the capital gains tax rate on non-business assets. It is also not a new idea."

Tax Policy Associates founder Dan Neidle said Streeting has put forward a "good proposal".

Writing on X, he went on to suggest half of the money raised could be used to cut the basic rate of income tax and described this as the "right thing at this moment."

He wrote: "Spend the rest on e.g. defence. I think most people would agree."

Streeting's policy is different to the wealth tax proposed by the Green Party of England and Wales, which has suggested an annual tax of 1% on assets above £10m and 2% on assets above £1bn.

Asked about Streeting's proposal, Chief Secretary to the Treasury Lucy Rigby told BBC Radio 4's Today programme that "we already tax wealth in this country".

Rigby added measures have been introduced to "try and make sure that tax is as progressive and fair as possible".

Appearing on the BBC's Political Thinking podcast, Streeting also addressed the circumstances around his departure from the government.

Streeting said when he met Sir Keir in Downing Street the day before he resigned from the cabinet, he told the prime minister directly he would be challenging him for the Labour leadership.

"As I said to the prime minister in my letter and privately, this is a government that lacks definition and also direction and vision," Streeting said. "When people don't know who you are, and what you stand for, they don't vote for you."

Streeting would need the support of 81 Labour MPs to trigger a leadership contest under the party's rules.

He said he had decided against that a few days before he resigned, after he had learned Greater Manchester Mayor and potential Labour leadership rival Andy Burnham had "found a seat".

Josh Simons announced he was standing down as the MP for Makerfield on Thursday last week, paving the way for Burnham to stand as Labour's candidate in the forthcoming by-election.

Streeting said: "It was clear that if we'd been plunged straight into a leadership contest by me or for that matter anyone else, I think it would have been seen as a deliberate attempt to get ahead of Andy Burnham's potential return."

Streeting was also asked about his position on Brexit, which was a focal point of a speech he gave last weekend.

You can listen to the full interview on the Political Thinking podcast, which is available on BBC Sounds.

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