Leading economists have warned that raising the capital gains tax (CGT) in the upcoming UK budget could undermine investor confidence and harm economic growth. A recent survey of more than 100 economists, researchers, and policymakers from the UK and abroad found that most respondents viewed an increase in CGT, particularly if combined with an exit tax to deter asset relocation overseas, as counterproductive and likely to yield limited fiscal benefits.

The survey, conducted by the Centre for British Progress think tank, comes amid growing speculation that Chancellor John Healey may seek to raise CGT rates and possibly align them more closely with income tax rates. These discussions are unfolding against a backdrop of elevated borrowing costs and tightened public finances.

Among those expressing skepticism, John Fingleton, former head of the Competition and Markets Authority, cautioned that attempts to target small segments of wealth might fail to generate the expected revenue and could necessitate further tax hikes in subsequent years. Simon French, chief economist at Panmure Liberum, highlighted the potential for significant behavioral responses to tax changes, noting that investors might either delay asset sales or accelerate them to avoid higher taxation.

Supporting these concerns, a separate survey commissioned by professional services group S&W found that about 60% of UK business owners would be discouraged from starting new companies if CGT rates increased.

Despite these reservations, some think tanks aligned with the government argue that reforming capital gains taxation is necessary to address regional economic disparities. The Institute for Public Policy Research contends that the current system disproportionately benefits a fortunate minority whose income is derived mainly from wealth rather than labor.

When approached for comment, the Treasury emphasized that tax decisions are the prerogative of the chancellor and are typically announced during official fiscal events, declining to engage with ongoing speculation.