The Labour leadership contest has intensified as candidates Andy Burnham and Wes Streeting outline proposals that involve increased taxation, stirring debate over their potential impact on the middle class and the broader economy. Both politicians have suggested measures that critics argue could add to the existing high tax burden in the UK, which is currently at a record peacetime level.

Analysts and commentators have raised concerns that additional taxes on individuals and businesses might hinder economic growth. The International Monetary Fund recently warned that the UK could be approaching a peak in taxation, which could complicate government borrowing in financial markets. Despite this, neither Burnham nor Streeting has prioritized reductions in public spending, including welfare expenses, in their platforms.

Wes Streeting’s proposals include aligning capital gains tax (CGT) with income tax rates, which would nearly double the CGT rate for higher-rate taxpayers from 24% to 45%. Some experts, including Helen Miller of the Institute for Fiscal Studies, have cautioned that simply raising tax rates may not significantly increase revenue and could deter investment. Streeting has been described by some as trying to match Burnham’s more ambitious tax plans amid the leadership contest, although polling suggests he may have less chance of becoming prime minister.

Andy Burnham, who is also contesting the Makerfield by-election with an eye on the Labour leadership, has put forward two key tax proposals that have attracted considerable scrutiny. The first is a so-called land value tax, which Burnham argues would address the perceived under-taxation of land and discourage speculation. However, the practical challenges of valuing land have been noted, and there are questions about whether this tax would replace or supplement existing property taxes such as stamp duty and council tax. Critics warn that adding this tax on top of existing levies could increase financial pressure on middle-class homeowners.

Burnham’s second proposal involves replacing inheritance tax (IHT) with a “death tax” aimed at funding social care costs, which are projected to reach £39 billion by the end of the decade. The current IHT threshold has remained at £325,000 since 2009, and more people have come under its reach over time. While the idea of a death tax has been criticized for potentially expanding the tax burden to a broader segment of the population with modest assets, Burnham’s plans lack detailed explanation, leaving their full implications unclear.

Supporters suggest Burnham’s proposals may be designed to appeal to Labour’s left-leaning membership base, who typically influence the leadership contest outcome. However, some observers point to Burnham’s privileged background as contrasting with his working-class political persona.

Burnham has acknowledged that neither the land tax nor the death tax featured in Labour’s 2024 election manifesto but has not ruled out pursuing such policies if he becomes prime minister. His political stance has been described as reminiscent of Labour’s pre-Blairite era, favoring higher taxes, increased state control, nationalization, and rejoining the European Union.

The outcome of the Makerfield by-election is seen as pivotal. A victory for Burnham could solidify his bid to challenge Sir Keir Starmer for Labour leadership, while a loss may leave Starmer, the current party leader and prime minister, in a stronger position heading into the next general election. Observers note that despite frustrations with his leadership, Starmer remains a key figure in the party’s future direction amid the ongoing leadership contest.