The Chancellor was bold in redefining public debt - but she needed to be more courageous in taxing the wealthiest

30 October 2024, 17:12 | Updated: 30 October 2024, 17:28

The chancellor took the bold and correct decision of redefining public debt to enable her to spend on vital public infrastructure.

This creates a massive investment opportunity and represents one of the biggest shake-ups of the fiscal framework which has been holding us back.

But I wish she had been courageous enough to make sure the wealthiest pay their fair share of tax, so we can support the poorest in society, and rebuild our vandalised public services.

Making vital investments in physical assets, without seriously investing in people and public services, is like trying to drive a car with the accelerator down and the handbrake on - it's just not going to get us where we need to go. A new school building won't stop kids coming to class too hungry to concentrate.

For too long, the income some people get for simply owning things - like stocks and shares - has been taxed less than the income most of us get from work.

Today's changes to capital gains missed the chance to make sure income from work and from wealth are taxed the same, and failed to close the loopholes that mean the wealthiest get away without paying what they owe.

Tax is a tool. It pays for the care workers who look after us, the buses we ride, and the teachers who educate our kids. But it is also an important mechanism for putting the brakes on runaway inequality.

There is simply too big a gap between the richest and poorest in the UK today and it hurts us all. Having the lowest capital gains rate in the G7 is nothing to brag about.

Taxing income from wealth the same as from work is just common sense. The chancellor should go further in the future: equalising capital gains tax with income tax could raise up to £14bn a year.

It would enable this government to raise billions of pounds for public services while making sure everyone pays their fair share.

Another significant missed opportunity is to continue paying for the losses accrued by the Bank of England from selling the assets it purchased during the pandemic.

Amounting to over £5bn a year on average, it could have easily paid for the unnecessary cuts to the bus fare cap, the winter fuel payments and much more.

Chaitanya Kumar is the head of environment and economy at the New Economics Foundation.

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