Capital gains tax could be brought closer to income tax rates under new proposals put forward by a close ally of Andy Burnham.
The suggested overhaul would mean people who make money from selling assets could face higher tax bills if the plans were adopted.
Louise Haigh, who managed Mr Burnham’s Makerfield by-election campaign and is expected to secure a senior Cabinet role, said capital gains tax should be “brought closer” to income tax rates.
Writing in the left-wing publication Renewal, Ms Haigh argued the changes should form part of a “fundamental redesign” of the tax system.
The proposals come just one day before Mr Burnham is due to deliver a major speech setting out his economic vision.
The address will be his first significant policy announcement since Sir Keir Starmer’s resignation as Prime Minister cleared his path to Downing Street next month.
Ms Haigh said aligning the two tax rates more closely would restore confidence that the system does not favour people who can structure their income over those who earn through employment.
“It would shift the taxation burden away from punishing work, and towards unproductive capital accumulation, which does little to grow the everyday economy,” she wrote.
She also proposed introducing inflation indexation so investors are not taxed on gains caused solely by rising prices.
In addition, Ms Haigh called for families to face a new capital gains tax charge on inherited estates, arguing it would improve fairness between generations.
She specifically targeted what she described as a loophole allowing unrealised gains to avoid taxation entirely when assets pass on death.
The proposals come just one day before Mr Burnham is due to deliver a major speech setting out his economic vision
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“At a minimum, reforms should address specific loopholes, such as the capital gains tax uplift at death, which allows unrealised gains to escape taxation entirely,” Ms Haigh stated.
Beyond Capital Gains Tax (CGT) changes, Ms Haigh proposed scrapping stamp duty in favour of a new annual national property and land tax, with council tax reductions for certain homes.
She also called for loosening fiscal rules to permit the £27.8billion National Wealth Fund to borrow against its existing balance sheet, arguing this would ease pressure on the Chancellor while boosting investment in clean energy, advanced manufacturing and critical infrastructure.
Ms Haigh further suggested splitting the Treasury into two separate departments, with one handling day-to-day spending and another driving the Government’s growth agenda.
Bringing capital gains tax closer to income tax rates would reduce advantages for people who earn money from investments
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Under her plan, the public budgeting function would transfer from the Treasury to Downing Street, effectively reducing the Chancellor’s power.
Government sources and Burnham allies are understood to back these proposals.
Sir Mel Stride, the shadow chancellor, warned that Britain was about to witness “what a real Left-wing Labour government looks like.”
He accused Mr Burnham of planning to repeat the errors made by Sir Keir and Rachel Reeves, offering nothing beyond increased borrowing, taxation and spending.
Capital gains tax could be brought closer to income tax rates
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“We are paying a penalty on our borrowing costs because markets can see an incoming prime minister who wants to ignore fiscal realities and does not understand how to grow an economy,” Sir Mel said.
“Burnham could bankrupt Britain.”
Robert Jenrick, Reform UK’s economic spokesman, insisted Mr Burnham lacked any mandate to raise taxes further and should call a general election if he wished to pursue what Mr Jenrick termed a “hard-Left agenda.”
A spokesman for Mr Burnham declined to comment on Ms Haigh’s proposals.