‘Economically reckless’ – Streeting calls for wealth tax ‘that works’ in pitch for leadership

Wes Streeting has called for a “wealth tax that works” as the former health secretary sets out his stall ahead of an expected Labour leadership contest later this year.

Streeting resigned from the cabinet earlier this month and has confirmed that he would stand in a contest to oust Sir Keir Starmer, though he has not yet triggered a challenge.

He said he would equalise capital gains tax with income tax, and in a reform he claims would raise £12bn per year.

The current tax regime is “penalising work,” Streeting told the BBC’s Political Thinking Podcast, and his system would encourage investment by offering lower capital gains tax to “genuine” entrepreneurs.

Streeting said capital gains tax rates should mirror the three income tax bands, set at 20, 40 and 45 per cent.

Under the proposal, a person’s capital gains tax band would be calculated by adding up their income and profits from assets.

Streeting said he would close loopholes that allow people to disguise income from work as capital gains.

His proposal is largely based on a report by the Centre for the Analysis of Taxation (Centax), published in 2024, that called for reform on allowances, increasing the “generosity” for the treatment of losses and introducing an investment allowance.

The report calls for the “investment allowance” to operate in the same way as an indexation framework set by Nigel Lawson during the Margaret Thatcher years, ensuring the original purchase price is adjusted to account for inflation over time.

The investment allowance would deduct the risk-free rate of return from the taxable gain.

Andy Summers, the Centax director who authored the report, told Morning Wire there would be “little if any revenue” to be raised from an increase in rates without wider reforms.

He added: “The capital gains tax system needs a fundamental overhaul and then there’s scope both to raise significant revenue and improve economic efficiency at the same time, as we argued in our report.”

Tax expert Dan Neidle said Streeting’s policy was a “good proposal”.

Based on Streeting’s BBC interview, Miles Dean, partner and head of international tax at Andersen LLP, said: “Aligning capital gains tax with income tax would risk one of the highest headline capital gains regimes in the developed world, while almost certainly encouraging investors to defer disposals, hold assets until death, or leave the UK before realising gains.

“While Wes Streeting’s proposals are politically eye-catching, they are economically reckless. Dressing CGT reform up as a ‘wealth tax’ is clever positioning, but it is not a wealth tax in any technical sense.”

Starmer ‘lacks direction and vision’

Streeting told the BBC that he informed Starmer he would directly challenge the Prime Minister during their 16-minute meeting the day before he resigned.

He said: “As I said to the Prime Minister in my letter and privately, this is a government that lacks definition, direction and vision.

“When people don’t know who you are, and what you stand for, they don’t vote for you.”

Streeting will likely be rivalled by Manchester Mayor Andy Burnham – providing he wins a by-election in Makerfield – and polling suggests the former health secretary would lose out in a leadership contest.

Last week, Streeting shocked Westminster by declaring that Britain must rejoin the European Union. 

“We need a new special relationship with the EU, because Britain’s future lies with Europe – and one day back in the European Union,” he told the Progress conference.

Burnham’s supporters attacked Streeting’s EU stance as a “transparent” bid to derail the Manchester Mayor’s pitch for No10.

Wes waiting for Andy

One of Burnham’s allies told The Times: “Wes’s only hope at becoming the next leader is for Andy to lose the by-election. [Streeting’s] comments … are counterproductive to Labour winning this by-election. It’s very transparent.”

Burnham has since said he would not push for the UK to return to the EU, claiming the country would be stuck in “a permanent rut if we’re just constantly arguing”.

The Manchester Mayor had long been considered a potential leadership challenger and his path to No10 was cleared last week when former Starmer ally Josh Simons resigned from his Makerfield seat, triggering a by-election in which Burnham was selected as Labour’s candidate. 

Streeting told the BBC he has deliberately not triggered a leadership challenge to honour Burnham’s apparent attempt to run, despite speculation that the former health secretary lacks the necessary support.

“It was clear that if we’d been plunged straight into a leadership contest by me or for that matter anyone else, I think it would have been seen as a deliberate attempt to get ahead of Andy Burnham’s potential return,” he said.