The Resolution Foundation describes the current CGT regime as a “source of unfairness in our tax system” and Dan Neidle of Tax Policy Associates wrote that “it’s inequitable that a type of income received mainly by the wealthy is taxed less than other types of income”.
These arguments are persuasive on the left of centre and frankly quite compelling to the general public. A number of high profile, new Labour MPs such as Torsten Bell, previously head of the Resolution Foundation, have been making them for years and I assume would continue to do so.
With enough outriders and third-party advocates making the case, and a tiny proportion of the population actually directly impacted by the change, I can see this fairness argument carrying Labour quite far.
But to definitively land this policy, they do need an answer to the critics who will argue it would be detrimental to growth.
It is important to think about who those critics will be. Probably not big business and their representative organisations. They have enough on their hands battling new employment regulations to also fight too strongly about a tax policy that won’t directly affect them.
They will also no doubt think it is better that capital gains tax goes up than business rates or corporation tax.
That leaves small businesses, entrepreneurs, investors in start-ups and high-growth companies, plus a few City figures and most of the Conservative Party.
To try to counter those groups Rachel Reeves could turn to an unlikely source of inspiration for a Labour Chancellor: Nigel Lawson. When he equalised capital gains with income tax in his 1988 Budget he argued that “taxing them [capital gains and income] at different rates distorts investment decisions”.