Money
Where will Labour find £22bn?
As the UK government grapples with a £22bn fiscal deficit, chancellor Rachel Reeves is faced with the daunting task of filling this financial void without resorting to increases in VAT, income tax or National Insurance (NI).
With these traditional tools now off the table, the government will be considering a range of less conventional and potentially controversial measures to raise the revenue, with reforms to capital gains tax (CGT), pension tax relief, inheritance tax (IHT) and a wealth tax all reportedly under consideration.
CGT reform
CGT is currently levied at a lower rate than income tax, leading to calls for alignment between the two.
Proponents argue taxing capital gains at the same rate as income would create a fairer tax system. However, this approach has its challenges. Since capital gains accumulate over several years, a sudden hike to the tax rate will be seen as punitive, particularly for those who have held assets for a long time.
A possible solution could involve reintroducing a tapered relief system, where the effective tax rate on capital gains decreases the longer an asset is held, balancing fairness with the encouragement of long-term investment.
Pension tax relief reform
Another potential revenue-raising measure is the introduction of a flat rate of pension tax relief.
Currently, pension tax relief is tied to an individual’s marginal income tax rate, with higher earners benefiting more. A flat rate, perhaps set at 25-30%, would standardise the relief across all income groups, raising revenue and promoting equity.
However, this proposal is fraught with complexities, especially for members of defined benefit schemes common in the public sector. Calculating the value of benefits accrued annually in these schemes is complex and would lead to higher taxes for many public sector workers, including doctors and teachers.
Quite simply, anyone with a marginal tax rate higher than the flat rate for relief purposes will end up getting an annual tax bill to cover the difference. The administrative burden and potential backlash from affected groups make this proposal politically risky and difficult to implement.
It may be that NI relief on employer contributions is viewed as an easier target, although this would load extra costs on the firms the government needs to help drive its growth agenda.
A wealth tax
A wealth tax is another idea being floated as a solution to the fiscal gap. Wealth taxes are not uncommon in Europe, but introducing one in the UK would be a significant challenge.
The primary difficulties lie in defining taxable wealth and the risk of capital flight, as wealthy individuals might relocate to avoid the tax.
Additionally, enforcing a wealth tax would require robust systems to track and value diverse assets, with property and private equity holdings posing obvious challenges.
IHT adjustments
Lastly, increasing IHT is said to be under consideration, but this too is a contentious option.
IHT is deeply unpopular, often seen as double taxation on wealth that has already been taxed as income or capital gains. Raising IHT could also lead to capital flight, with wealthy individuals moving assets offshore to avoid the tax.
Moreover, the revenue potential from IHT is relatively limited due to various exemptions and reliefs.
Politically, increasing IHT could alienate voters, particularly in middle-class constituencies where property values push more families above the threshold. Tinkering with the reliefs available to farmland, private companies and AIM shares would all provoke a vocal reaction from those affected.
In summary, while the UK government will be exploring several avenues to address its significant fiscal shortfall, each comes with its own set of challenges.
CGT reform, pension tax relief changes, a wealth tax and IHT increases all have potential as revenue-generating measures but they also risk political backlash, administrative complexity and economic repercussions.
As the government weighs these options up, the need for careful consideration and balanced policy design is paramount to avoid unintended consequences and ensure any measures implemented are both effective and fair.
And all this needs to be achieved at the same time as the government attempts to promote wealth creation, boost long-term saving and drive long-term economic growth. Squaring that circle will be no easy task.
Andy Bell is co-founder of AJ Bell
CryptoCurrency
Coinbase’s cbBTC surges to third-largest wrapped BTC token in just one week
According to data from CryptoQuant, cbBTC circulation supply has outpaced long-established players seven days after launch.
CryptoCurrency
Bitcoin options markets reduce risk hedges — Are new range highs in sight?
Bitcoin options market positioning shifted as BTC price shot through the $60,000 to $63,000 level.
CryptoCurrency
Ethereum is a 'contrarian bet' into 2025, says Bitwise exec
Ether price could be on track for another correction into a triple-bottom, marking the beginning of a big rally into 2025.
CryptoCurrency
Blockdaemon mulls 2026 IPO: Report
CryptoCurrency
SEC asks court for four months to produce documents for Coinbase
The financial regulator requested an extension until February 2025 to review “at least 133,582 unique documents” as part of discovery motions with Coinbase.
CryptoCurrency
‘Silly’ to shade Ethereum, the ‘Microsoft of blockchains’ — Bitwise exec
Ethereum is still home to the most active crypto developers and is the most attractive chain to build applications on top of for big companies, argues Bitwise’s Matt Hougan.
-
Sport7 hours ago
Joshua vs Dubois: Chris Eubank Jr says ‘AJ’ could beat Tyson Fury and any other heavyweight in the world
-
News1 day ago
You’re a Hypocrite, And So Am I
-
Technology6 hours ago
iPhone 15 Pro Max Camera Review: Depth and Reach
-
CryptoCurrency7 hours ago
Bitcoin miners steamrolled after electricity thefts, exchange ‘closure’ scam: Asia Express
-
News8 hours ago
Israel strikes Lebanese targets as Hizbollah chief warns of ‘red lines’ crossed
-
Sport7 hours ago
UFC Edmonton fight card revealed, including Brandon Moreno vs. Amir Albazi headliner
-
CryptoCurrency6 hours ago
Ethereum is a 'contrarian bet' into 2025, says Bitwise exec
-
CryptoCurrency7 hours ago
SEC settles with Rari Capital over DeFi pools, unregistered broker activity
-
News5 hours ago
Brian Tyree Henry on voicing young Megatron, his love for villain roles
-
CryptoCurrency7 hours ago
2 auditors miss $27M Penpie flaw, Pythia’s ‘claim rewards’ bug: Crypto-Sec
-
CryptoCurrency7 hours ago
Arthur Hayes’ ‘sub $50K’ Bitcoin call, Mt. Gox CEO’s new exchange, and more: Hodler’s Digest, Sept. 1 – 7
-
CryptoCurrency7 hours ago
Treason in Taiwan paid in Tether, East’s crypto exchange resurgence: Asia Express
-
CryptoCurrency7 hours ago
Leaked Chainalysis video suggests Monero transactions may be traceable
-
CryptoCurrency7 hours ago
Journeys: Robby Yung on Animoca’s Web3 investments, TON and the Mocaverse
-
CryptoCurrency7 hours ago
Louisiana takes first crypto payment over Bitcoin Lightning
-
CryptoCurrency7 hours ago
Are there ‘too many’ blockchains for gaming? Sui’s randomness feature: Web3 Gamer
-
CryptoCurrency7 hours ago
Crypto whales like Humpy are gaming DAO votes — but there are solutions
-
CryptoCurrency7 hours ago
Help! My parents are addicted to Pi Network crypto tapper
-
CryptoCurrency7 hours ago
Five crypto market predictions that haven’t come true — yet
-
CryptoCurrency7 hours ago
$12.1M fraud suspect with ‘new face’ arrested, crypto scam boiler rooms busted: Asia Express
-
CryptoCurrency7 hours ago
‘Everything feels like it’s going to shit’: Peter McCormack reveals new podcast
-
CryptoCurrency7 hours ago
SEC sues ‘fake’ crypto exchanges in first action on pig butchering scams
-
CryptoCurrency7 hours ago
Fed rate cut may be politically motivated, will increase inflation: Arthur Hayes
-
CryptoCurrency7 hours ago
Decentraland X account hacked, phishing scam targets MANA airdrop
-
CryptoCurrency7 hours ago
Binance CEO says task force is working ‘across the clock’ to free exec in Nigeria
-
CryptoCurrency7 hours ago
Bitcoin price hits $62.6K as Fed 'crisis' move sparks US stocks warning
-
CryptoCurrency7 hours ago
CZ and Binance face new lawsuit, RFK Jr suspends campaign, and more: Hodler’s Digest Aug. 18 – 24
-
CryptoCurrency7 hours ago
Cardano founder to meet Argentina president Javier Milei
-
CryptoCurrency7 hours ago
CertiK Ventures discloses $45M investment plan to boost Web3
-
CryptoCurrency7 hours ago
Memecoins not the ‘right move’ for celebs, but DApps might be — Skale Labs CMO
-
CryptoCurrency7 hours ago
Dorsey’s ‘marketplace of algorithms’ could fix social media… so why hasn’t it?
-
CryptoCurrency7 hours ago
Telegram bot Banana Gun’s users drained of over $1.9M
-
CryptoCurrency7 hours ago
Low users, sex predators kill Korean metaverses, 3AC sues Terra: Asia Express
-
CryptoCurrency7 hours ago
SEC asks court for four months to produce documents for Coinbase
-
CryptoCurrency7 hours ago
Blockdaemon mulls 2026 IPO: Report
-
News5 hours ago
“Beast Games” contestants sue MrBeast’s production company over “chronic mistreatment”
-
Technology3 days ago
YouTube restricts teenager access to fitness videos
-
Science & Environment10 hours ago
‘Running of the bulls’ festival crowds move like charged particles
-
Politics21 hours ago
What is the House of Lords, how does it work and how is it changing?
-
MMA7 hours ago
UFC’s Cory Sandhagen says Deiveson Figueiredo turned down fight offer
-
MMA7 hours ago
Diego Lopes declines Movsar Evloev’s request to step in at UFC 307
-
Football6 hours ago
Niamh Charles: Chelsea defender has successful shoulder surgery
-
Football6 hours ago
Slot's midfield tweak key to Liverpool victory in Milan
-
Fashion Models6 hours ago
Miranda Kerr nude
-
Politics5 hours ago
Labour MP urges UK government to nationalise Grangemouth refinery
-
Science & Environment10 hours ago
Rethinking space and time could let us do away with dark matter
-
Science & Environment10 hours ago
How one theory ties together everything we know about the universe
-
Entertainment5 hours ago
“Jimmy Carter 100” concert celebrates former president’s 100th birthday
-
Science & Environment18 hours ago
Sunlight-trapping device can generate temperatures over 1000°C
-
News5 hours ago
Joe Posnanski revisits iconic football moments in new book, “Why We Love Football”
-
Science & Environment20 hours ago
Quantum to cosmos: Why scale is vital to our understanding of reality
-
Technology3 days ago
Trump says Musk could head ‘government efficiency’ force
-
Science & Environment21 hours ago
Quantum time travel: The experiment to ‘send a particle into the past’
-
Science & Environment18 hours ago
Doughnut-shaped swirls of laser light can be used to transmit images
-
Science & Environment16 hours ago
Black holes scramble information – but may not be the best at it
-
Science & Environment16 hours ago
The galactic anomalies hinting dark matter is weirder than we thought
-
Science & Environment7 hours ago
We may have spotted a parallel universe going backwards in time
-
CryptoCurrency7 hours ago
Telegram CEO cannot leave France, OpenSea receives Wells notice, and more: Hodler’s Digest, Aug. 25 – 31
-
CryptoCurrency7 hours ago
Solana unveils new Seeker device, says it’s not just a ‘memecoin phone’
-
CryptoCurrency7 hours ago
Crypto scammers orchestrate massive hack on X but barely made $8K
-
CryptoCurrency7 hours ago
Bitcoiners are ‘all in’ on Trump since Bitcoin ’24, but it’s getting risky
-
CryptoCurrency7 hours ago
Real-world asset tokenization is the crypto killer app — Polygon exec
-
Science & Environment10 hours ago
Jupiter’s stormy surface replicated in lab
-
Science & Environment10 hours ago
Future of fusion: How the UK’s JET reactor paved the way for ITER
-
Politics10 hours ago
Owen Paterson loses ECHR appeal against report that preceded downfall | Owen Paterson
-
CryptoCurrency7 hours ago
Bitcoin bull rally far from over, MetaMask partners with Mastercard, and more: Hodler’s Digest Aug 11 – 17
-
CryptoCurrency7 hours ago
VonMises bought 60 CryptoPunks in a month before the price spiked: NFT Collector
-
CryptoCurrency7 hours ago
Vitalik tells Ethereum L2s ‘Stage 1 or GTFO’ — Who makes the cut?
-
CryptoCurrency7 hours ago
Ethereum falls to new 42-month low vs. Bitcoin — Bottom or more pain ahead?
-
Business6 hours ago
Thames Water seeks extension on debt terms to avoid renationalisation
-
Business6 hours ago
How Labour donor’s largesse tarnished government’s squeaky clean image
-
Business5 hours ago
UK hospitals with potentially dangerous concrete to be redeveloped
-
Business5 hours ago
Axel Springer top team close to making eight times their money in KKR deal
-
News5 hours ago
Sean “Diddy” Combs denied bail again in federal sex trafficking case
-
News5 hours ago
Sean “Diddy” Combs denied bail again in federal sex trafficking case in New York
-
News5 hours ago
Brian Tyree Henry on his love for playing villains ahead of “Transformers One” release
-
News5 hours ago
Brian Tyree Henry on voicing young Megatron, his love for villain roles
-
News9 hours ago
Police chief says Daniel Greenwood 'used rank to pursue junior officer'
-
News9 hours ago
Church same-sex split affecting bishop appointments
-
Technology2 days ago
Is carbon capture an efficient way to tackle CO2?
-
Politics2 days ago
Trump says he will meet with Indian Prime Minister Narendra Modi next week
-
Science & Environment10 hours ago
Physicists have worked out how to melt any material
-
Politics22 hours ago
Keir Starmer facing flashpoints with the trade unions
-
CryptoCurrency2 days ago
Bitcoin reclaims $60K and ‘this time is different,’ says analyst
-
Health & fitness2 days ago
Why you should take a cheat day from your diet, and how many calories to eat
-
Technology8 hours ago
Fivetran targets data security by adding Hybrid Deployment
-
News2 days ago
Why is XRP price up today?
-
Science & Environment1 day ago
Elon Musk’s SpaceX contracted to destroy retired space station
-
Science & Environment2 days ago
Our reality seems to be compatible with a quantum multiverse
-
News7 hours ago
Freed Between the Lines: Banned Books Week
-
Technology3 days ago
Musician charged with using bots to boost streaming revenue
-
Technology2 days ago
NYC using drones to warn residents of floods
-
Sport7 hours ago
UFC’s Dan Ige feels confident after Diego Lopes dominates Brian Ortega
-
Business2 days ago
Music mogul Sean Combs charged with racketeering and sex trafficking
-
MMA6 hours ago
Conor McGregor denies allegation he sexually assaulted woman at NBA Finals
-
News2 days ago
Story Behind Ryan Murphy’s FX Show About Aaron Hernandez
-
Science & Environment10 hours ago
The physicist searching for quantum gravity in gravitational rainbows
-
Technology1 day ago
Tech Life: The tech that refuses to die
-
Football6 hours ago
Football Daily
-
Science & Environment10 hours ago
How to wrap your head around the most mind-bending theories of reality
You must be logged in to post a comment Login