The wealth tax options Reeves could take to ease her fiscal bind

Published

3 months ago

July 22, 2025

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Faced with a challenging set of numbers, the chancellor is having to make difficult choices with political consequences.

Tax rises and spending cuts are a hard sell.

Now, some in her party are calling for a different approach: target the wealthy.

Is there a way out of all of this for the chancellor?

Economic growth is disappointing and spending pressures are mounting. The government was already examining ways to raise revenue when, earlier this month, Labour backbenchers forced the government to abandon welfare cuts and reinstate winter fuel payments – blowing a £6bn hole in the budget.

The numbers are not adding up for Rachel Reeves, who is steadfastly committed to her fiscal rules. Short of more spending cuts, her only option is to raise taxes – taxes that are already at a generational high.

For some in her party – including Lord Kinnock, the former Labour leader, the solution is simple: introduce a new tax.
They say a flat wealth tax, targeting those with assets above £10m, could raise £12bn for the public purse.

Yet, the government is reportedly reluctant to pursue such a path. It is not convinced that wealth taxes will work. The evidence base is shaky and the debate over the efficacy of these types of taxes has divided the economics community.

Why are we talking about wealth?

Wealth taxes are in the headlines but calls for this type of reform have been growing for some time. Proponents of the change point to shifts in our economy that will be obvious to most people living in Britain: work does not pay in the way it used to.

At the same time wealth inequality has risen. The stock of wealth – that is the total value of everything owned – is much larger than our income, that is the total amount of money earned in a year. That disparity has been growing, especially during that era of low interest rates after 2008 that fuelled asset prices, while wages stagnated.

It means the average worker will have to work for more years to buy assets, say a house, for example.

Left-wing politicians and economists argue that instead of putting more pressure on workers – marginal income tax rates are as high as 70% for some workers – the government should instead target some of this accumulated wealth in order to balance the books.

The Inheritocracy

At the heart of it all is a very straightforward argument about fairness. Few will argue that there aren’t problems with the way our economy is functioning: that it is unfair that young people are struggling to buy homes and raise families.

Proponents of a wealth tax say that it would not only raise revenue but create a fairer tax system.

They argue that the wealth distortions are creating a divided society, where people’s outcomes are determined by their inheritances.

The gap is large. A typical 50-year old born to the poorest 20% of parents in the UK is already worth just a quarter of what someone born to the richest 20% of parents is worth at that age. This is before they inherit anything when their parents die.

A lot of money is passed on earlier; for example, people may have had help buying their first home. That gap widens when the inheritance is passed on. This is when inheritance tax, one of the existing wealth taxes we have in the UK, kicks in.

However, its impact in addressing that imbalance is negligible. Most people don’t meet the threshold to pay it. The government could bring more people into the tax but it is already a deeply unpopular policy.

Alternatives

So what other options could they explore?

Lord Kinnock recently suggested a new tax on the stock of wealth – one to two percent on assets over £10m. That could raise between £12bn and £24bn.

When making the case for the tax, Lord Kinnock told Sky News: “That kind of levy does two things. One is to secure resources, which is very important in revenues.

“But the second thing it does is to say to the country, ‘we are the government of equity’. This is a country which is very substantially fed up with the fact that whatever happens in the world, whatever happens in the UK, the same interests come out on top unscathed all the time while everybody else is paying more for getting services.”

However, there is a lot of scepticism about some of these numbers.

Wealthier people tend to be more mobile and adept at arranging their tax affairs. Determining the value of their assets can be a challenge.

In Downing Street, the fear is that they will simply leave, rendering the policy a failure. Policymakers are already fretting that a recent crackdown on non-doms will do the same.

Critics point to countries where wealth taxes have been tried and repealed. Proponents say we should learn from their mistakes and design something better.

Some say the government could start by improving existing taxes, such as capital gains tax – which people pay when they sell a second property or shares, for example.

The Labour government has already raised capital gains tax rates but bringing them in line with income tax could raise £12bn.

Then there is the potential for National Insurance contributions on investment income – such as rent from property or dividends. Estimates suggest that could bring in another £11bn.

This is nothing to sniff at for a chancellor who needs to find tens of billions of pounds in order to balance her books.

By the same token, she is operating on such fine margins that she can’t afford to get the calculation wrong. There is no easy way out of this fiscal bind for Rachel Reeves.

Whether wealth taxes are the solution or not, hers is a government that has promised reform and creative thinking. The tax system would be a good place to start.

Business

Heathrow puts Jansen on runway as next chairman

Published

8 hours ago

October 18, 2025

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Heathrow puts Jansen on runway as next chairman

The former BT Group chief Philip Jansen is being lined up as the next chairman of Heathrow Airport as Britain’s biggest aviation hub prepares to deliver an expansion costing close to £50bn.

Sky News has learnt that Mr Jansen, who chairs the FTSE-100 marketing services group WPP, is in advanced talks with Heathrow’s board and shareholders about taking on the role.

If the discussions reach a successful conclusion, sources said an announcement could come within weeks.

Mr Jansen is said to have emerged as the frontrunner from a shortlist of candidates compiled by headhunters at Russell Reynolds Associates.

His experience as the boss of BT, a regulated utility, is said to have been key to his selection as the preferred candidate.

Mr Jansen has also run companies including MyTravel and Worldpay.

The appointment of a successor to Lord Deighton, who has held the post for nine years, comes at a critical time for Heathrow.

In August, the airport submitted a revised expansion plan consisting of a third runway costing £21bn, £12bn for a new terminal and stand capacity, and £15bn to modernise the current airport through the expansion of Terminal 2.

The existing Terminal 3 would ultimately be closed.

Heathrow handled a record 83.9 million passengers in 2024 and is adamant that a third runway is essential to the growth of Britain’s economy, given the volume of exports which pass through the site.

“It has never been more important or urgent to expand Heathrow,” the airport’s chief executive, Thomas Woldbye, said in August.

“We are effectively operating at capacity to the detriment of trade and connectivity.

“With a green light from government and the correct policy support underpinned by a fit for purpose regulatory model, we are ready to mobilise and start investing this year in our supply chain across the country.

“We are uniquely placed to do this for the country; it is time to clear the way for take-off.”

The expansion remains opposed by many airlines alarmed by the prospective increase in charges to use the airport, as well

It has, however, been backed by the government, with Rachel Reeves, the chancellor, saying that a third runway “would unlock further growth, boost investment, increase exports, and make the UK more open and more connected as part of our Plan for Change”.

Heathrow’s next chairman will lead a board dominated by representatives of the airport’s principal shareholders.

Mr Woldbye apologised in May for being asleep during the power outage in March which forced Heathrow’s temporary closure.

The airport said it would implement the recommendations of a review conducted by former transport secretary Ruth Kelly.

Heathrow’s search for a new chairman comes months after the most significant changes to its ownership structure in years.

Ardian, a French investment group, now owns 32.6% of the company following a series of transactions over the last 12 months.

Saudi Arabia’s Public Investment Fund has also become an investor.

Heathrow has never formally announced Lord Deighton’s intention to step down, other than a disclosure in its annual report in which he wrote:

“In light of the recent changes to the HAHL [Heathrow Airport Holdings Limited] board…the nominations committee…has asked me to extend my appointment for a limited period to help ensure a smooth transition whilst new non-executive shareholder directors become familiar with the business and a new chair is appointed.

“I have therefore agreed to extend my role as chair for a limited period to ensure continuity and stability on the HAHL Board during this period of transition.”

A Heathrow spokesperson declined to comment, while Mr Jansen could not be reached for comment.

Business

Major milestone in Post Office scandal as first Capture conviction referred to Court of Appeal

Published

2 days ago

October 16, 2025

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Major milestone in Post Office scandal as first Capture conviction referred to Court of Appeal

The first Post Office Capture conviction has now been formally referred to the Court of Appeal, marking a major milestone in the IT scandal.

The Criminal Cases Review Commission (CCRC) made the decision to refer the case of sub-postmistress Patricia Owen back in July.

Mrs Owen was convicted of theft by a jury in 1998, based on evidence from the faulty IT software Capture.

She was given a suspended prison sentence and fought to clear her name afterwards – but died in 2003.

Capture software was used in 2,500 branches between 1992 and 1999.

It is the first time a conviction based on Capture – the predecessor to the Horizon system at the centre of the wider Post Office scandal – has reached the Court of Appeal.

It comes after Sky News revealed that a damning report into Capture, which could help overturn convictions, had been unearthed after nearly 30 years.

An investigation found the Post Office knew about the report at the time and continued to prosecute sub-postmasters based on Capture evidence.

Mrs Owen’s family submitted an application to the CCRC in January 2024 – her case has now been referred on the grounds that her prosecution was an “abuse of process”.

A ‘touchstone case’ for victims

Lawyers have said that if Mrs Owen is exonerated posthumously in the Court of Appeal, it may “speed up” the handling of others.

The CCRC is also continuing to investigate more than 30 other “pre-Horizon” convictions.

CCRC chair, Dame Vera Baird, also told Sky News in the summer it could be a “touchstone case” for other victims.

Juliet Shardlow, Mrs Owen’s daughter, has been fighting to clear her mother’s name for years.

She told Sky News the family were “so pleased” her case had finally been referred.

“This has been a very long journey for us as a family and we can now see the light at the end of the tunnel,” she said.

“It’s just sad that mum isn’t here to see it.

“The good news is that once mum’s case is heard in the High Court, it will pave the way for all the other Capture victims.”

The Post Office has previously said it is “determined that past wrongs are put right and continue to support the government’s work in this area as well as fully co-operate with the Criminal Cases Review Commission”.

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UK suffers blow in bid to become minerals superpower – as it’s snubbed by its own leading firm

Published

3 days ago

October 16, 2025

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UK suffers blow in bid to become minerals superpower - as it's snubbed by its own leading firm

Britain’s hopes of becoming a critical minerals superpower have been dealt a severe blow after one of its leading companies abandoned its plans to build a rare earths refinery near Hull.

Pensana had pledged to build a £250m refinery on the banks of the Humber, to process rare earths that would have then been used to make magnets for electric cars and wind turbines.

The plant promised to create 126 jobs and was due to receive millions of pounds of government funding.

However, Sky News has learnt that Pensana has decided to scrap the Hull plant and will instead move its refining operations to the US.

Pensana’s chairman, Paul Atherley, said the company had taken the decision after the Trump administration committed to buying rare earths from an American mine, Mountain Pass, at a guaranteed price – something no government in Europe had done.

“That’s repriced the market – and Washington is looking to do more of these deals, moving at an absolute rate of knots,” he said.

“Europe and the UK have been talking about critical minerals for ages. But when the Americans do it, they go big and hard, and make it happen. We don’t; we mostly just talk about it.”

The decision comes at a crucial juncture in critical minerals and geopolitics. China produces roughly 90% of all finished rare earth metals – exotic elements essential for the manufacture of many technology, energy and military products.

Last week, Beijing imposed restrictions on the exports of rare earths, prompting Donald Trump to threaten further 100% tariffs on China.

Pensana had been seen as Britain’s answer to the periodic panics about the availability of rare earths. The site at Saltend Chemicals Park was chosen by the government to launch its critical minerals strategy in 2022.

Visiting for the official groundbreaking, the then business and energy secretary Kwasi Kwarteng said: “This incredible facility will be the only one of its kind in Europe and will help secure the resilience of Britain’s supplies into the future.”

He pledged a government grant to support the scheme. That grant was never received because Pensana never built its plant.

Mr Atherley said he is optimistic about another project he’s involved with, to bring lithium refining to Teesside through another company, Tees Valley Lithium.

But, he said, rare earth processing is far more complex, energy-intensive and expensive, making it unviable in the UK, for the time being.

The decision is a further blow for Britain’s chemicals industry, which has faced a series of closures in recent months, including that of Vivergo, a biofuels refiner based in the same chemicals park where Pensana planned to locate its refinery.

Producers warn that Britain’s record energy costs – higher than most other leading economies – are stifling its economy and triggering an outflow of businesses.