Wes Streeting, the former health secretary, has proposed a 'wealth tax that works' by equalising tax on assets and income, as part of his leadership pitch for the Labour party. Speaking on the BBC's Political Thinking podcast, Streeting argued that the current system, where capital gains tax is generally much lower than income tax, is unfair and penalises work.
Streeting's Critique of the Current System
'The wealth gap in this country has widened, the opportunity gap in the country is widening and the gap between earned income and unearned income has also widened,' Streeting told host Nick Robinson. He highlighted the example of a woman in Lancashire who pays a higher rate of tax on her salary than her landlord pays on the growing value of the house she rents. 'She slogs her guts out, he puts in far less effort, yet the state rewards him more than her. And we wonder why people are angry,' Streeting said. 'The system is penalising work. It's not fair and it's bad for our economy. We need a wealth tax that works. A pound made from simply owning assets should not be taxed less than a pound made from a hard day's work.'
Proposed Tax Changes
Under current rules, higher or additional rate taxpayers pay 24% on capital gains in the current financial year. Streeting's proposals would align capital gains tax rates with the three income tax bands of 20%, 40%, and 45%, calculated by combining income and profits from assets. The plan could raise up to £12bn annually, according to Streeting. A 2024 report by the Centre for the Analysis of Taxation estimated that similar changes could raise £14bn.
Streeting acknowledged criticisms that raising capital gains tax could lead to capital flight, discourage investment, or encourage investors to hold onto assets. However, he argued there is 'a good pro-business, pro-growth, pro-productivity argument' for his proposals, as the current system incentivises investment in less productive businesses. He suggested including measures to protect genuine entrepreneurs, with lower rates for those taking risks building companies.
Leadership Context
Streeting, who resigned from the cabinet last week and called for Keir Starmer to step down, warned that Labour must change course or risk handing power to Reform UK. He revealed he had the support of 81 MPs needed to trigger a leadership challenge but decided not to proceed after learning that Greater Manchester mayor Andy Burnham had found a seat to stand in. 'It was clear that if we had 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 said. 'And if there's one thing that we need to do coming out of a change in leadership, it is to bring the tribes of the Labour party together, to unite around one leader as one team, drawing on Labour's different political traditions to unite progressives and beat Reform.'
