Rachel Reeves should increase taxes on landlords and homes worth more than £2 million and force wealthy investors who relocate from the UK to pay a levy on profits made while they lived in the country, a cross-party think tank has urged.
The chancellor could raise £21 billion with eight reforms to the tax system, including introducing an “exit tax” on investors that leave the UK, subjecting landlords’ rental income to national insurance and forcing people who inherit assets to pay capital gains tax on the change in value since they were bought rather than since the date of death.
The recommendations, put forward by Demos, would enable Reeves to avoid breaking a Labour manifesto pledge of not raising the main rates of VAT, income tax and individual national insurance contributions while still generating substantial income for the Treasury.
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Demos argued that the changes would make the tax system fairer by reducing the tax burden on people working salaried jobs, remove tax advantages for people earning income via capital gains and stop people receiving tax reliefs when they sell inherited assets, such as homes.
Polling by Opinium carried out on behalf of Demos in April found that supporters of all the main political parties were strongly supportive of the tax reforms, particularly after they were explained the details of their implementation.
A net support rate of 39 per cent of Reform UK voters would back an exit tax and about 40 per cent favoured an additional council tax levy on homes valued at more than £2 million.
The polling also found that Reeves could face a public backlash if she tried to balance the books at the budget on November 26 with spending cuts, indicated by a net disapproval rating for cuts to investment, the NHS and welfare expenditure.
Demos said Reeves could yield more than £3 billion by increasing taxes on gambling companies, a proposal also urged by the Institute for Public Policy Research, a left-leaning think-tank close to the government.
Increasing the general betting duty to 25 per cent from 15 per cent, excluding horse racing bets, and the remote gaming duty and machine games duty to 50 per cent would “discourage gambling, reducing associated health problems, social issues and crime”, Demos claimed.
It said the tax system would be much more reliable at generating revenues were its suite of policy recommendations enacted by the chancellor.
Dan Goss, lead researcher at Demos and author of the report, said: “The public can get behind tax rises if designed with their priorities in mind. The pursuit of a fairer tax system is a vital step towards fixing the fraying social contract between citizen and state.”
Reeves is expected to announce tens of billions of pounds of tax rises at the budget because her fiscal headroom has been eradicated by a rise in government borrowing costs since the spring statement in March.
Officials at the Office for Budget Responsibility, the UK’s official forecaster, have also signalled to the chancellor that they will mark down their projection for the country’s productivity and economic growth in the coming years.
This month the chancellor said: “People who seem to know what is in the budget before we have made those decisions are just wrong. A lot of them are talking rubbish and frankly a lot of what they’re saying is irresponsible. I will make the decisions.”