Paul Nowak, the general secretary of the Trades Union Congress (TUC), has proposed an increase in capital gains tax, adding to the ongoing debate about fiscal policy in the United Kingdom. This suggestion comes as the Labour Party, currently in opposition, explores methods to address the budget deficit left by the previous Conservative administration.
The TUC, founded in 1868, represents approximately 5.5 million workers across 48 member unions. Nowak's comments were made in anticipation of the annual TUC conference, which typically takes place in September.
Nowak advocates for aligning capital gains tax rates, which can reach up to 28%, with income tax rates, which peak at 45%. He argues that this adjustment would create a fairer tax system. To illustrate his point, Nowak referenced Spain's recent implementation of a temporary "solidarity tax" on wealth exceeding €3 million, noting that it did not result in an exodus of wealthy individuals.
"I just think it's crazy that the people who go out to work in a warehouse or a supermarket can pay a higher effective tax rate than someone who makes their income through shares or property. That to me just feels fundamentally unfair."
It's worth noting that capital gains tax in the UK was introduced in 1965, with the current rates established in 2016. The tax-free allowance for capital gains stands at £12,300 as of 2023.
In addition to tax reform, Nowak has expressed support for above-inflation pay increases for public sector workers. He argues that these raises are "entirely legitimate" to compensate for a decade of real-terms salary reductions, despite the challenging economic climate. The UK's public sector employs approximately 5.7 million people, and the Bank of England's inflation target is set at 2%.
The Labour Party, led by Sir Keir Starmer since April 2020, with Rachel Reeves as Shadow Chancellor since May 2021, is considering various options to address the financial challenges faced by the country. While they have ruled out increases in income tax, National Insurance (established in 1911), and capital gains tax, they have not dismissed the possibility of wealth tax increases.
In response to these proposals, Kevin Hollinrake, the shadow Conservative business secretary, criticized Labour's approach. He warned of a potential "doom loop" of increased strike action and higher payouts, urging Rachel Reeves to "get a grip" on the situation.
The ongoing debate highlights the complex interplay between tax policy, public sector compensation, and economic stability. As the UK grapples with these issues, the outcome of this discussion could have significant implications for the country's fiscal future and the well-being of its workforce.