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

Published

1 month 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

Coca-Cola brews up sale of high street coffee giant Costa

Published

15 hours ago

August 23, 2025

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Coca-Cola brews up sale of high street coffee giant Costa

The Coca-Cola Company is brewing up a sale of Costa, Britain’s biggest high street coffee chain, more than six years after acquiring the business in a move aimed at helping it reduce its reliance on sugary soft drinks.

Sky News can exclusively reveal that Coca-Cola is working with bankers to hold exploratory talks about a sale of Costa.

Initial talks have already been held with a small number of potential bidders, including private equity firms, City sources said on Saturday.

Lazard, the investment bank, is understood to have been engaged by Coca-Cola to review options for the business and gauge interest from prospective buyers.

Indicative offers are said to be due in the early part of the autumn, although one source cautioned that Coca-Cola could yet decide not to proceed with a sale.

Costa trades from more than 2,000 stores in the UK, and well over 3,000 globally, according to the latest available figures.

It has been reported to have a global workforce numbering 35,000, although Coca-Cola did not respond to several attempts to establish the precise number of outlets currently in operation, or its employee numbers.

This weekend, analysts said that a sale could crystallise a multibillion pound loss on the £3.9bn sum Coca-Cola agreed to pay to buy Costa from Whitbread, the London-listed owner of the Premier Inn hotel chain, in 2018.

One suggested that Costa might now command a price tag of just £2bn in a sale process.

The disposal proceeds would, in any case, not be material to the Atlanta-based company, which had a market capitalisation at Friday’s closing share price of $304.2bn (£224.9bn).

At the time of the acquisition, Coca-Cola’s chief executive, James Quincey, said: “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide.

“Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand.

“Costa gives us access to this market with a strong coffee platform.”

However, accounts filed at Companies House for Costa show that in 2023 – the last year for which standalone results are available – the coffee chain recorded revenues of £1.22bn.

While this represented a 9% increase on the previous year, it was below the £1.3bn recorded in 2018, the final year before Coca-Cola took control of the business.

Coca-Cola has been grappling with the weak performance of Costa for some time, with Mr Quincey saying on an earnings call last month: “We’re in the mode of reflecting on what we’ve learned, thinking about how we might want to find new avenues to grow in the coffee category while continuing to run the Costa business successfully.”

“It’s still a lot of money we put down, and we wanted that money to work as hard as possible.”

Costa’s 2022 accounts referred to the financial pressures it faced from “the economic environment and inflationary pressures”, resulting in it launching “a restructuring programme to address the scale of overheads and invest for growth”.

Filings show that despite its lacklustre performance, Costa has paid more than £250m in dividends to its owner since the acquisition.

The deal was intended to provide Coca-Cola with a global platform in a growing area of the beverages market.

Costa trades in dozens of countries, including India, Japan, Mexico and Poland, and operates a network of thousands of coffee vending machines internationally under the Costa Express brand.

The chain was founded in 1971 by Italian brothers Sergio and Bruno Costa.

It was sold to Whitbread for £19m in 1995, when it traded from fewer than 40 stores.

The business is now one of Britain’s biggest private sector employers, and has become a ubiquitous presence on high streets across the country.

Its main rivals include Starbucks, Caffe Nero and Pret a Manger – the last of which is being prepared for a stake sale and possible public market flotation.

It has also faced growing competition from more upmarket chains such as Gail’s, the bakeries group, which has also been exploring a sale.

Coca-Cola communications executives in the US and UK did not respond to a series of emails and calls from Sky News seeking comment on its plans for Costa.

A Lazard spokesperson declined to comment.

Business

TikTok puts hundreds of UK jobs at risk

Published

2 days ago

August 22, 2025

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TikTok is putting hundreds of jobs at risk in the UK, as it turns to artificial intelligence to assess problematic content.

The video-sharing app said a global restructuring is taking place that means it is “concentrating operations in fewer locations”.

Layoffs are set to affect those working in its trust and safety departments, who focus on content moderation.

Unions have reacted angrily to the move – and claim “it will put TikTok’s millions of British users at risk”.

Figures from the tech giant, obtained by Sky News, suggest more than 85% of the videos removed for violating its community guidelines are now flagged by automated tools.

Meanwhile, it is claimed 99% of problematic content is proactively removed before being reported by users.

Executives also argue that AI systems can help reduce the amount of distressing content that moderation teams are exposed to – with the number of graphic videos viewed by staff falling 60% since this technology was implemented.

It comes weeks after the Online Safety Act came into force, which means social networks can face huge fines if they fail to stop the spread of harmful material.

The Communication Workers Union has claimed the redundancy announcement “looks likely to be a significant reduction of the platform’s vital moderation teams”.

In a statement, it warned: “Alongside concerns ranging from workplace stress to a lack of clarity over questions such as pay scales and office attendance policy, workers have also raised concerns over the quality of AI in content moderation, believing such ‘alternatives’ to human work to be too vulnerable and ineffective to maintain TikTok user safety.”

John Chadfield, the union’s national officer for tech, said many of its members believe the AI alternatives being used are “hastily developed and immature”.

He also alleged that the layoffs come a week before staff were due to vote on union recognition.

“That TikTok management have announced these cuts just as the company’s workers are about to vote on having their union recognised stinks of union-busting and putting corporate greed over the safety of workers and the public,” he added.

Under the proposed plans, affected employees would see their roles reallocated elsewhere in Europe or handled by third-party providers, with a smaller number of trust and safety roles remaining on British soil.

The tech giant currently employs more than 2,500 people in the UK, and is due to open a new office in central London next year

A TikTok spokesperson said: “We are continuing a reorganisation that we started last year to strengthen our global operating model for Trust and Safety, which includes concentrating our operations in fewer locations globally to ensure that we maximize effectiveness and speed as we evolve this critical function for the company with the benefit of technological advancements.”

Business

‘Today is payday’: Union warns wages for workers at liquidated steel company must be a priority

Published

2 days ago

August 22, 2025

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'Today is payday': Union warns wages for workers at liquidated steel company must be a priority

A union has welcomed the government taking over a troubled steel company, but is warning that payment for workers must be a top priority.

Speciality Steels UK – which employs almost 1,500 people – was pushed into compulsory liquidation on Thursday, and is the third-largest producer in the country.

It is part of the Liberty Steel empire owned by metals tycoon Sanjeev Gupta, and operates from sites in Rotherham and several other locations across South Yorkshire.

The government has stressed it will cover staff wages and the running costs of the plants until a buyer is found.

Speaking to Sky’s Anna Jones, Community Union National Secretary Alun Davies said workers are “concerned” about the developments.

He added: “Today is payday – but because the bank accounts were closed, I think the special managers and the HR team now are working with the unions to get that pay in today or as soon as they can.”

With a bank holiday weekend fast approaching, workers may only receive their wages on Tuesday unless payments are made as a matter of urgency.

Mr Davies said he is confident that the plants have a future, telling Sky News: “If we use British-made steel for British infrastructure projects, it creates jobs, it grows economies and it gets our economy back on track, which is what this Labour government is trying to do.”

While he said government investment is valuable, the union official cautioned: “If we can find a decent buyer – a reputable steel company that knows what they’re doing – we’re open to all options.

“We’re not going to just say nationalise or part-nationalise, it’s what’s best for the business and gets the business up and running as soon as possible … if the government takes ownership, that is a significant cost to the taxpayer.”

Mr Davies explained that many workers have been staying at home and on 85% pay, which is having a big impact on their mental health and wellbeing.

In a statement, Community’s General Secretary Roy Rickhuss described it as an “extremely worrying time” for the union’s members – and said jobs must be protected in the event of restructuring or a transition to new ownership.

Calling for 12 months of pension contributions to be secured alongside this month’s paychecks, he added: “Steelworkers at Liberty Steel are highly skilled and hugely experienced; they are quite frankly irreplaceable and will be critical to delivering future success for the businesses.”

Mr Rickhuss said the union has received “firm assurances” that efforts to address pay and pensions are under way – and welcomed the government’s intervention.

“However, in taking control of the business the government has assumed responsibility for our livelihoods and our communities, and we will of course be holding them to account,” he added.

Bosses at Speciality Steels have said the move to wind up the business is “irrational” as a plan had been presented to courts that would have led to new investment in the UK steel sector.

“Instead, liquidation will now impose prolonged uncertainty and significant costs on UK taxpayers for settlements and related expenses, despite the availability of a commercial solution,” chief transformation officer Jeffrey Kabel added.

On Thursday, a government spokesperson said ministers “remain committed to a bright and sustainable future for steelmaking and steelmaking jobs in the UK”.