Andy Burnham has been issued a stark warning over a potential tax raid that could drive entrepreneurs out of Britain and damage the country’s economic growth.
One of the Prime Minister’s senior allies has branded the prospect of raising Capital Gains Tax “stupid” as the Government prepares for its first Budget next month.
Lord O’Neill of Gatley warned Mr Burnham against increasing the tax in the October 28 Budget, arguing that higher rates could discourage entrepreneurs from doing business in Britain, The Times reported.
The Labour peer said pressing ahead with such a move would suggest the Prime Minister and Chancellor John Healey were not “thinking about growth as sincerely as they claim they are.”
Capital Gains Tax is charged on the profit people make when they sell or dispose of certain assets that have increased in value.
Mr Burnham is reportedly facing pressure from allies to increase the tax on the sale of second homes, shares and other assets.
However, the prospect has raised concerns among figures close to the Government who fear higher taxes could damage business confidence and undermine Labour’s attempts to boost economic growth.
Mr Burnham became Labour leader and Prime Minister last month, replacing Sir Keir Starmer after previously serving as Greater Manchester Mayor and Makerfield MP.
One of his first moves in Downing Street was to appoint former Defence Secretary John Healey as Chancellor of the Exchequer.
The pair are now preparing to deliver their first Budget on October 28, which will offer one of the clearest indications yet of the new Government’s approach to tax and the economy.
Lord O’Neill of Gatley warned Mr Burnham against increasing the tax in the October 28 Budget
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GETTYLord O’Neill’s intervention comes as speculation grows over what tax changes could be announced, with the Labour peer warning against measures that could make Britain less attractive to entrepreneurs and investors.
Lord O’Neill, who has nearly two decades of experience as a venture capital investor, said businesses were already under significant strain.
“At a time where a lot of business still struggles from Brexit and struggles from the changes in national insurance and the Labour market changes to zero hours to have that and inheritance tax, it’s just like it would be yet more, and obviously at a time where the country’s growth rate has been so weak.”
He also warned that pushing CGT too high could prove counterproductive for the Treasury.
Andy Burnham refuses to rule out tax rises in first Budget as he admits he ‘won’t be unrealistic’ | PA
“I think there is some evidence that if you push it up too much you end up losing money,” he said.
“Because it’s such a deterrent to ongoing activities of business owners that they just don’t sell anything. So the revenues go down.”
Lord O’Neill urged Mr Burnham to look elsewhere for savings, pointing to what he described as the “sacred cows” of the welfare system.
He said the government should instead focus on reforming Department for Work and Pensions benefits and the state pension triple lock.
Lord O’Neill’s intervention comes as speculation grows over what tax changes could be announced
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GETTYThe peer suggested that a reluctance to tackle these politically sensitive areas was behind the turn towards wealth taxes.
“They’re just being scared and lazy and constrained in dealing with the sacred cows,” he said.
Lord O’Neill also expressed frustration that a CGT raid would undermine the optimistic tone Mr Burnham had set since entering Downing Street.
“The thing that Andy’s done so well is create this spirit of ‘I’m going to be a happier kind of positive person’. It’s against that,” he said.