The Treasury has refused to deny rumours it is planning to hike capital gains tax today as Rachel Reeves prepares for a landmark speech in which she will warn of the “broken” state of the UK’s public finances.
The Chancellor asked Treasury officials to prepare an assessment of the “spending inheritance” left for the new government by the Conservatives when she entered office, an early assessment of which is believed to have revealed £19bn of “excess pressures”, according to reports.
Reeves will unveil the audit’s findings in a speech to parliament on Monday, where she is expected to compare the government’s finances to a household budget, saying: “People up and down our country will understand that when household budgets are stretched, families have to make difficult choices. And government needs to do the same.”
Reeves is also expected to announce the date of the next Budget during the speech, which cannot be any earlier than October 20, due to the 12 weeks it takes the Office for Budget Responsibility (OBR) to assess the government’s spending plans.
The audit and Reeves’ expected comments on the so-called “black hole” in the country’s finances has triggered fresh rumours about the tax rises or spending expected at the Budget.
According to The Sunday Telegraph, the Treasury has been drawing up plans to bring Capital Gains Tax (CGT) to parity with income tax; a move that the Institute for Fiscal studies has claimed would raise £2.7bn.
The prospect of a CGT hike was a running theme of the recent general election campaign, with senior City figures warning at the time that a rise in the tax – which is levied on profits made from investments in assets like equities and property – would be “the death of entrepreneurship” in the UK.
Another option on the table is said to be restricting the reliefs on higher earners’ pensions relief, and, to cut expenditure. The Guardian revealed Reeves will delay a number of “unfunded” upgrades to hospitals and roads.
The fiscal shortfall will not be helped by the Chancellor’s long-trailed plan to give public sector workers an above inflation 5.5 per cent pay rise, in a move expected to could cost the exchequer north of £8bn.
Asked about the touted CGT rise, a Treasury spokesman said: “We have set out the need for economic stability and we have begun fixing the foundations so we can grow our economy and keep taxes, inflation and mortgages as low as possible.”