The Tony Blair Institute for Global Change has issued a warning against proposals to increase capital gains tax, cautioning that such a move could hinder economic growth. The think tank’s statement comes amid ongoing discussions about tax reform as Andy Burnham prepares to succeed Sir Keir Starmer as leader of the Labour Party and potentially become prime minister later this month.

Burnham has encountered pressure from some quarters to equalize the capital gains tax rate with the income tax rate as a means to raise additional government revenue. Supporters of this approach argue that it would address perceived inequities in the current tax system and help fund public services. However, the Blair Institute contends that raising capital gains tax to income tax levels would constitute “terrible policy.” It warns that increasing the tax rate in this area risks undermining investment incentives, thereby potentially stifling economic activity and innovation.

The think tank’s critique highlights concerns that higher capital gains tax rates could discourage entrepreneurship and capital formation, factors seen as vital to economic expansion. It emphasizes the importance of creating a tax environment that supports growth rather than imposing measures that might deter investment.

While the debate over capital gains taxation remains contentious, the Blair Institute’s intervention signals significant resistance within influential policy circles to tax hikes seen as potentially detrimental to the economy. As Andy Burnham prepares to assume leadership, the issue is likely to remain a focal point in discussions on the government’s fiscal strategy and its approach to balancing equitable taxation with sustainable economic development.