Chancellor Healey rules out Capital Gains Tax rise in first Budget

Chancellor of the Exchequer John Healey has ruled out raising Capital Gains Tax in his first Budget, rejecting calls from senior Labour figures to align the levy with income tax rates.

Healey's decision lands ahead of next week's Budget. It follows warnings that a CGT hike could actually cost the government money if wealthy individuals leave the UK or defer selling assets, the Times reported.

Why did the chancellor say no?

CGT applies to the profit people make when they sell an asset that has risen in value — shares in a company, or properties that aren't primary residences. It generally attracts a lower tax rate than income tax, and that gap has become a political battleground inside Labour.

Influential party figures had pushed to equalise CGT and income tax. Louise Haigh, a key ally of the prime minister, suggested capital gains should rise closer to income tax levels before she became Andy Burnham's first secretary of state. Cabinet minister Wes Streeting, now defence secretary, called for a "wealth tax that works" in May, shortly after resigning as a minister in former Prime Minister Sir Keir Starmer's government.

Healey had already ruled out levelling the two rates, according to the Financial Times.

What warnings shaped the decision?

Prime Minister Andy Burnham, in office since July, faced direct pressure against the move from his own former adviser. Lord Jim O'Neill, Burnham's one-time adviser and Goldman Sachs chief economist, warned that raising CGT would send "the wrong message to business."

The Times reporting added a fiscal dimension: wealthy people leaving the country or deferring asset sales could shrink, not grow, the tax take.

The chancellor has previously signalled he wants the UK to be a country of wealth creation. He's argued government policies should lift confidence, investment and profit.

What happens next week?

The Budget isn't the only fiscal event on the calendar. In a pre-Budget speech on Tuesday, Tory leader Kemi Badenoch is expected to urge the government to drop its spending plans and reduce borrowing.

Streeting and Haigh, both of whom backed a CGT rise before Burnham took office in July, now sit in a cabinet that has formally closed the door on it. The question for next week is where Healey finds revenue instead — without breaking his wealth-creation pitch.