Top Burnham ally calls for increase in Capital Gains Tax and relaxation of fiscal rules

Key Burnham Backer Advocates for Higher Capital Gains Tax and Fiscal Rule Adjustments

Top Burnham ally calls for increase - As Andy Burnham prepares to unveil his economic vision, a high-profile figure within his inner circle has urged the government to reconsider its approach to taxation and fiscal management. Louise Haigh, a potential cabinet minister in Burnham’s upcoming administration, has proposed significant changes to the Capital Gains Tax (CGT) and the broader fiscal framework, emphasizing the need for equity and long-term financial flexibility.

Reforms to Modernize the Tax System

Haigh, previously a transport secretary, outlined her arguments in an article published in the Renewal journal. She criticized the current tax system, describing it as “imperial” and overly complex, and called for a fundamental shift in how profits from asset sales are taxed. In her view, CGT should be adjusted to reflect the income tax rates, potentially reaching 45% instead of the existing range of 18 to 24%.

“This reform is central to restoring confidence that the system does not favour those able to structure their income over those earning through work,” Haigh wrote.

Her reasoning centers on redistributing the tax burden from productive work to capital accumulation. “It would shift the taxation burden away from punishing work, and towards unproductive capital accumulation, which does little to grow the everyday economy,” she added. Haigh also highlighted concerns about intergenerational fairness, noting that the current system is riddled with exemptions and reliefs that benefit certain groups disproportionately.

One specific target of her criticism is the Capital Gains Tax uplift at death. This provision allows unrealised gains to bypass taxation entirely when assets are passed to heirs, a policy Haigh believes exacerbates inequality. “Reforms should address specific loopholes, such as the Capital Gains Tax uplift at death,” she stated, “which allows unrealised gains to escape taxation entirely.”

Loosening Fiscal Constraints for Strategic Borrowing

Haigh’s proposals extend beyond tax adjustments to include a relaxation of fiscal rules. In another essay for the Renewal journal, she suggested enabling the National Wealth Fund to borrow outside of existing constraints. “We should allow 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.”

By easing these rules, Haigh argues the government can better allocate resources to critical areas without compromising its fiscal stability. Her vision aligns with a broader goal of creating a more balanced approach to public finance, where strategic borrowing supports future growth rather than being stifled by rigid short-term mandates.

Political Shifts and Leadership Dynamics

With Sir Keir Starmer stepping down as Labour leader, the political landscape is shifting rapidly. Haigh, who played a pivotal role in Burnham’s electoral victory in Makerfield as his campaign manager, is anticipated to take a senior position in his new team. The transition has sparked speculation about the future of key roles, including the Chancellor of the Exchequer.

Rachel Reeves, the current Chancellor, appears to be considering a move away from her position. Potential successors include home secretary Shabana Mahmood and energy secretary Ed Miliband, both of whom have been widely discussed as possible replacements. However, an unusual coalition of trade unionists and city traders has reportedly advised Burnham to avoid appointing Miliband, citing concerns about his net zero policies and their potential impact on economic stability.

“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,” said Labour deputy leader Lucy Powell, who endorsed Miliband’s candidacy for Chancellor.

Powell emphasized that the focus should remain on addressing the cost of living crisis, rather than debating internal cabinet dynamics. “The cost of living should be the focus and not ‘tittle-tattle’ about cabinet positions,” she added, underscoring the urgency of practical policy over partisan politics.

Haigh’s proposals, while ambitious, are framed as essential to modernizing the Treasury’s role in the UK economy. Her critique of the “imperial” finance department contrasts sharply with the underpowered Downing Street, where the Prime Minister must negotiate priorities with the Chancellor. “There is a reason why no other country in the world has such an imperial finance department as we do,” Haigh noted, “while 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.”

The debate over fiscal policy and taxation reform reflects broader tensions within Labour about balancing immediate economic needs with long-term structural changes. As Burnham sets his agenda, Haigh’s influence is likely to shape key decisions, particularly in how the party approaches wealth distribution and public spending. Her call for higher CGT rates and more flexible borrowing mechanisms signals a shift towards policies that prioritize fairness and sustainable growth, even as political challenges remain in the spotlight.