Sir Tony Blair's think tank, the Tony Blair Institute for Global Change, has issued a warning to Andy Burnham over proposals to hike capital gains tax (CGT). The institute described the potential policy as 'terrible' and warned it would 'send entirely the wrong signal' to entrepreneurs, who are vital for innovation and economic growth.
Background on the proposed tax change
Andy Burnham, widely seen as Sir Keir Starmer's likely successor as Labour leader, is reportedly considering aligning capital gains tax rates with income tax rates. Currently, profits from selling assets such as second homes or shares are taxed at rates between 18% and 24%, with the first £3,000 of profit tax-free. If aligned with income tax, these rates would rise to 20%, 40%, or 45%, depending on the taxpayer's income bracket.
Guy Ward-Jackson, a senior analyst at the Tony Blair Institute, warned that such a move would give the UK the highest top capital gains tax rate in Europe at 45%. Writing in The Telegraph, he argued: 'While everyone else is racing to attract entrepreneurial talent, we would be punishing them and making ourselves poorer as a result.'
Impact on entrepreneurship and investment
Ward-Jackson emphasised that the UK's economic challenges stem from a 'risk-aversion crisis'. He stated that capital gains tax relief is 'one of the few mechanisms that helps correct' the disadvantage UK founders face compared to their American counterparts, by acknowledging that 'investing or building a start-up means taking a huge risk and waiting years for a return'.
He added: 'To be a prosperous country, Britain sorely needs long-term investment and the willingness to back new businesses, technologies and ideas. We must be a place where entrepreneurs feel they can take risks, build companies, and be rewarded for it – all the while contributing to jobs and growth. Increasing capital gains tax to the level of income tax would undermine those incentives and send entirely the wrong signal.'
Political context
Last week, Burnham stated that there was room for movement on tax, despite pledging to keep Labour's 2024 manifesto commitments not to increase workers' income tax, National Insurance, or VAT rates. The proposal to hike CGT has sparked debate, with critics arguing it could deter investment and harm economic growth.
The warning from Blair's think tank adds to growing opposition to the plan, which could affect up to 150,000 UK households, according to reports. The institute's intervention highlights concerns that higher CGT could undermine the UK's competitiveness in attracting entrepreneurial talent and investment.
