How Britain faces the biggest tax rises in the G7 – even before Rachel Reeves announces a set of punishing tax hikes in the Budget-Nhy
Britain faces the biggest tax rises of any major rich nation – even before Rachel Reeves announces a slew of punishing hikes in next week’s Budget.
Amid fears that tax rises will lead to an exodus of wealth creators, Sir Keir Starmer yesterday insisted entrepreneurs will have ‘no reason’ to flee Britain.
But forecasts from the International Monetary Fund show the UK tax burden rising to 39.3 per cent of gross domestic product by 2029. That is up from a pre-pandemic share of 36.6 per cent and represents a larger increase than anywhere else in G7, including the United States, Japan and Germany.
The burden looks set to rise by even more as the Chancellor prepares to unveil tax hikes and spending cuts worth £40 billion on Wednesday.
Ms Reeves has warned that the Budget will mean financial ‘pain’ for many, with capital gains tax, inheritance tax, employer National Insurance, private sector pensions and fuel duty all in her sights.
Britain faces the biggest tax rises of any major rich nation – even before Rachel Reeves announces a slew of punishing hikes in next week’s Budget.
Amid fears that tax rises will lead to an exodus of wealth creators, Sir Keir Starmer yesterday insisted entrepreneurs will have ‘no reason’ to flee Britain
Yesterday the Prime Minister tried to assuage fears, saying: ‘My evidence that what we are saying is attractive to investors is last Monday’s investment summit that was hugely successful. All the feedback back to us has been that it was very well received by a significant number of global investors.’
Insisting that entrepreneurs will have ‘no reason’ to leave, Sir Keir said people were investing in Britain ‘because of what this government is bringing to the table’.
Downing Street later said investors ‘shouldn’t be worried about this Budget’, despite some rushing to sell assets due to expected hikes in capital gains tax (CGT).
A report by the Centre for Policy Studies (CPS) today warns tax hikes in the Budget ‘could stunt growth and lead to an exodus of investors’. The report found 80 per cent of revenue raised by CGT comes from just 38,000 individuals – meaning huge sums could disappear if they quit Britain.
‘Even small behavioural changes from this group in response to the Budget could have major revenue impacts, the opposite of those the Chancellor envisions, as people move assets overseas to more competitive tax environments or hold on to assets for longer to avoid being liable for taxable gains,’ it said. ‘Such a move would reduce revenue, drive away investment and damage economic growth.’
CPS tax expert Daniel Herring, who wrote the report, added: ‘As with many of its other mooted tax increases, it is clear that Labour is playing a dangerous game with capital gains tax. The tax rises Labour appears to be planning would not just be bad for growth but could make the fiscal situation even worse.’
Ms Reeves has warned that the Budget will mean financial ‘pain’ for many, with capital gains tax, inheritance tax, employer National Insurance, private sector pensions and fuel duty all in her sights
A separate report from the Adam Smith Institute said abolishing CGT could boost the economy by £25 billion by making the UK a more attractive place to invest and do business. Peter Young, head of research at the institute, said: ‘Our economy is on the wane, growth is anaemic at best, our capital markets are dying, and productivity is sharply declining in global terms.
‘Scrapping CGT is a key part of the radical action required to attract investment and jump-start economic growth.’
Sir Keir insisted Labour’s first Budget for 15 years will aim to ‘fix the foundations’ and ‘rebuild’ the country, adding that the ‘£22 billion black hole’ must be dealt with.
The PM said he was ‘not prepared’ to put off the pain for another year, adding that while there would be more budgets to come, he wanted to ‘tackle the inheritance in this Budget’.
In a bid to lessen the Budget’s impact on the elderly, the Mail understands that pensioner benefits – such as free prescriptions and bus passes – will be protected.
