Former health secretary Wes Streeting has outlined plans for a 'wealth tax that works' by equalising tax on assets and income, as part of his pitch for the Labour leadership. He argued the current system, where capital gains tax is generally lower than income tax, is unfair and penalises work.
Speaking on the BBC's Political Thinking podcast, Streeting said the wealth gap in the UK has widened, as has the gap between earned and unearned income. He estimated his plan could raise up to £12bn a year, citing the example of a woman in Lancashire paying higher tax on her salary than her landlord paid on the growing value of her rented house.
Under existing rules, higher-rate taxpayers pay 24% on capital gains. Streeting proposes aligning capital gains tax rates with income tax bands of 20%, 40%, and 45%, calculated by adding income and asset profits. A 2024 report by the Centre for the Analysis of Taxation suggested a similar plan could raise £14bn.
Critics warn raising capital gains tax could cause capital flight, discourage investment, or encourage investors to hold assets longer. However, Streeting argued his proposals are 'pro-business, pro-growth, and pro-productivity,' as the current system favours less productive investments. He suggested lower rates for genuine entrepreneurs taking risks to build companies.
Streeting also called for closing loopholes that allow income to be disguised as capital gains, such as through personal service companies or share-based pay. He resigned from the cabinet last week and urged Keir Starmer to step down, warning Labour must change course or risk handing power to Reform UK.
