A government minister has reopened the door to a wealth tax, just days after the business secretary dismissed the idea as “daft”.
Asked about a wealth tax, policing minister Dame Diana Johnson said it is “important… that all these issues are looked at and discussed and we look at the evidence about what will work and what won’t work”.
But last week, business secretary Jonathan Reynolds slapped down the concept, urging his colleagues to stop calling for a “magic wealth tax” that does not exist and dismissing it as “daft”.
It comes amid mounting questions over how the government will raise the money to fill the black hole in the public finances left by a series of major U-turns and spending commitments.
Ministers have already squeezed significant savings out of their departments in cuts that were unveiled at last month’s spending review, meaning there is now a mounting expectation that the chancellor, Rachel Reeves, will be forced to raise taxes instead.
But Labour’s manifesto pledge not to raise taxes on “working people” leaves the chancellor with a limited number of workable options.
Dame Diana’s remarks came after former Labour minister and ex-shadow chancellor Anneliese Dodds urged the government to consider a wealth tax.
Asked about Ms Dodds’ remarks, the policing minister told Sky News: “I think the Labour Party and the Labour government welcome contributions from everybody. Ultimately it is down to the chancellor to make decisions about what she is going to announce in the budget later this year.”
She added: “I think whatever decision that the chancellor makes it will be based on our values as a Labour government and we have made very clear commitments around tax.
“I think it is important though that all these issues are looked at and discussed and we look at the evidence about what will work and what won’t work.”
Speaking to GB News just days before, Mr Reynolds had said: “This Labour government has increased taxes on wealth as opposed to income – the taxes on private jets, private schools, changes through inheritance tax, capital gains tax.
“But the idea there’s a magic wealth tax, some sort of levy … that doesn’t exist anywhere in the world.
“Switzerland has a levy, but they don’t have capital gains or inheritance tax. There’s no kind of magic … We’re not going to do anything daft like that.
“And I say to people: ‘Be serious about this.’ The idea you can just levy everyone … What if your wealth was not in your bank account, what if it was in fine wine or art? How would we tax that? This is why this doesn’t exist.”
Amid growing calls for the government to introduce a wealth tax from Labour backbenchers, Ms Dodds warned that spending cuts alone would not “deliver the kind of fiscal room that is necessary”.
Speaking to Sky News’s Electoral Dysfunction podcast, Ms Dodds pointed to work undertaken by the Commission on Wealth Tax.
“They looked at the operation of lots of different wealth tax. They looked at all of that evidence and set out how it would be possible to deliver something like that in a UK context”, she said.
“I would hope that the Treasury is considering that kind of evidence as well as other changes that have been put forward.
“We’ve seen the deputy leader of the Labour Party, for example, put forward suggestions. I think it’s important for all of those to be considered now.”
It comes after a memo leaked earlier this year showed Angela Rayner suggesting eight wealth taxes on the super-rich and corporations in a move supporters described as the “progressive alternative”.
Ms Dodds also urged the government to take a “longer-term approach” to the public finances, after the prime minister was bounced into a £5bn U-turn on welfare cuts by his own MPs.
Downing Street has so far failed to rule out a wealth tax, but the prime minister has previously said that “we can’t just tax our way to growth” when pressed on the subject at PMQs last month.
Rachael Maskell, the leader of the rebel Labour MPs who forced Sir Keir to abandon his welfare reforms, called for a wealth tax to meet the cost of the U-turn, suggesting that as much as £24bn a year could be raised by increases in capital gains tax and other measures.
