SINCE the election, speculation has been rife about which taxes Chancellor Rachel Reeves will increase in the forthcoming Budget.

Having accepted the idiotic Tory fiscal rules, raising income tax, VAT, and corporation tax isn’t an option for her, and so attention has been focused on other possible ways of acquiring much-needed resources to fund our public services.
 
Increasing National Insurance contributions from employers is clearly on the cards, but it has the disadvantage of hitting small businesses like local pubs, shops and restaurants, many of which are already in danger of going under.

Along with a new wealth tax, which sadly seems to have been given the thumbs down by Reeves, and closing all the loopholes around inheritance tax, paid by only 6 per cent of the country’s population, the most sensible option is to concentrate on capital gains tax.

This is the tax you pay if you make profits by selling assets, a tax which is only paid by around 0.5 per cent of British taxpayers in any given year.

It is frequently and accurately called a tax on unearned income, as opposed to income tax and National Insurance, which can rightly be described as taxes on earned income.

The most common capital gains are made from the sale of stocks, bonds, precious metals, real estate and property, so unsurprisingly, the vast majority of people paying the tax are rich and are higher or additional rate taxpayers.

At the moment, they pay 24 per cent on profits made from residential property other than first homes, 28 per cent on gains made from carried interest if they manage an investment fund, and 20 per cent on profits made from other chargeable assets.

It is noticeable that all of these rates are well below the 40 per cent and 45 per cent higher and additional income tax rates paid by Britain’s better-paid workers. Is that fair?
 
Raising capital gains tax to 39 per cent, which is being widely described in the mainstream press as the limit of Reeves’s Budget intention, simply does not go far enough.

The most sensible and just change would be to make it equal to income tax, a move which would raise, according to Tax Justice UK, around £16.7 billion a year.

Not only would it make economic sense, helping to fill what Reeves calls the “black hole” left behind by the Tories, it is the moral thing to do — and makes political sense, too. How can anyone justify lower taxes on money that has not been “earned?”
 
Even Thatcher’s chancellor in 1988, Nigel Lawson, said before he instigated the equalisation of capital gains and income tax that it would “benefit the economy and eradicate a major injustice.”

If Thatcher’s chancellor could see a “major injustice,” surely a Labour chancellor can. Lawson added that it was “by no means clear why one should be taxed more heavily than the other” (Hansard, Budget Statement, March 15 1988). Why, then, is it not clear now, especially when there are so many examples to make the case quite obvious?

What is clear is that having such low capital gains tax rates encourages the greedy rich to divert earnings, create companies and do all the other tax-avoiding tricks encouraged by unscrupulous accounting firms. Tackling the problem is politically sensible.
 
How many British voters are pleased when they hear about millionaires like the previous prime minister paying only 23 per cent tax on his vast earnings, or about the former chancellor, Nadhim Zahawi, only paying £3.7 million taxes on income of £27m, a rate of 14 per cent, lower than the rate paid by someone working full-time on the minimum wage?

Let us not forget that the majority of workers in this country pay 30 per cent on their earnings of less than £50,000 a year (20 per cent income tax and 10 per cent National Insurance).
 
Add in the fact that only about 350,000 people a year pay capital gains tax anyway and that they are the richest in the country, and the conclusion becomes clear.

The equalisation of income and capital gains tax is a no-brainer for a Labour government, especially one that is short of cash and supposedly keen to make this country a fairer one.

After all, Britain is where the richest 1 per cent own 36.5 per cent of all financial assets with a value of £1.8 trillion — and yet we hear decent public services are unaffordable!