One of Andy Burnham’s top allies has called for an increase in Capital Gains Tax (CGT) and to loosen the government’s fiscal rules to allow for more borrowing.
Louise Haigh, who has been tipped to take up a top job in Mr Burnham’s cabinet, outlined her ideas as the former Manchester mayor prepares to set out his economic agenda next week.
The former transport secretary called for a series of reforms to what she described as Britain’s ‘imperial’ Treasury in an essay on Saturday.
Backing a “fundamental redesign” of the tax system, Ms Haigh said in the article published in the Renewal journal on Saturday that CGT, a levy on the profit made from the sale of an asset that has increased in value, “should be brought closer to income tax rates”.
The proposal would mean CGT could be taxed at a 45 per cent rate, rather than the 18 to 24 per cent rate currently in place.
“This reform is central to restoring confidence that the system does not favour those able to structure their income over those earning through work,” Ms Haigh wrote.
“It would shift the taxation burden away from punishing work, and towards unproductive capital accumulation, which does little to grow the everyday economy.”
She also calls on government to look tackle questions of “intergenerational fairness” in the tax system, which she says is “characterised by numerous exemptions and reliefs”.
“At a minimum, reforms should address specific loopholes, such as the Capital Gains Tax uplift at death, which allows unrealised gains to escape taxation entirely,” she said.
In another essay in the same journal, Ms Haigh suggests easing the government’s fiscal rules to allow certain public finance institutions, such as the National Wealth Fund, to borrow more.
“We should enable the newly established National Wealth Fund to borrow against their existing balance sheet outside of the fiscal rules,” she wrote.
“This would separate long term investments in areas like renewable energy from day-to-day government spending, and would alleviate the fiscal pressures experienced by the Exchequer.”
She also proposed removing the “growth mandate” from the “imperial” Treasury, writing: “There is a reason why no other country in the world has such an imperial finance department as we do.
“On the other hand, despite ever more presidential politics, we have an underpowered Downing Street, in which the Prime Minister needs the agreement of the Chancellor to push ahead with the priorities on which they were elected.”
With Sir Keir Starmer making way for Mr Burnham in No 10, Ms Haigh is expected to land a top job in his team after playing a key role in his electoral success in Makerfield as his campaign manager.
Rachel Reeves appears to have conceded she will no longer be staying on as Chancellor, with several senior ministers including home secretary Shabana Mahmood and energy secretary Ed Miliband reportedly in the running to succeed her.
An unlikely alliance of some trade unionists and city traders have reportedly urged Mr Burnham against appointing Mr Miliband as chancellor, because they believe his net zero policies to be damaging.
But on Sunday, Labour deputy leader Lucy Powell said backed Mr Miliband as a good chancellor.
Asked whether she thought he would be good at running the Treasury, she told the BBC’s Sunday With Laura Kuenssberg: “Yes I do actually, but actually I think this is a slightly distracting conversation, because I think we’ve all got a really important job to do.”
She added that the cost of living should be the focus and not “tittle-tattle” about cabinet positions.
