Wes Streeting, the former health secretary, has proposed equalising capital gains tax with income tax rates as part of his pitch for the Labour leadership. He described the current system, where capital gains are taxed at lower rates than income, as unfair and penalising work.
Speaking on the BBC's Political Thinking podcast, Streeting argued that the gap between earned and unearned income has widened. He cited the example of a woman in Lancashire paying higher tax on her salary than her landlord paid on the rising value of her rented home, calling it a system that 'penalises work'.
Under his plan, capital gains tax would mirror income tax bands of 20%, 40%, and 45%, potentially raising up to £12bn annually. A 2024 report by the Centre for the Analysis of Taxation estimated a similar change could raise £14bn. Streeting said allowances would protect genuine entrepreneurs taking risks to build companies.
Critics warn that higher capital gains tax could lead to capital flight and discourage investment. However, Streeting argued it would boost productivity by redirecting investment away from less productive businesses. He also called for closing loopholes that allow income to be disguised as capital gains.
Streeting, who resigned from the cabinet last week and urged Keir Starmer to step down, said he had the support of 81 MPs but chose not to trigger a leadership challenge after learning Andy Burnham might return to Parliament. He stressed the need to unite Labour's factions to defeat Reform UK.
