Liam Byrne has sounded a strong alarm to the Chancellor, insisting that imposing additional taxes on the wealthy is crucial to counter the growing appeal of the populist right. In a recent interview, the former Labour cabinet minister and current chair of the Commons Business and Trade Committee expressed his concern regarding Rachel Reeves’ lack of support for a “windfall of wealth taxes” in her upcoming budget.

Byrne pointed out that the recent surge in support for Reform UK, which garnered over 4 million votes and secured five seats in the last election, underscores the urgent need for the Chancellor and Keir Starmer to tackle the escalating inequality. He highlighted this issue while outlining potential strategies for generating revenue to fund necessary public investments.

As Reeves considers innovative ways to enhance revenue, Byrne proposed several reforms, including raising capital gains tax (CGT) rates to match those of income tax, closing loopholes in inheritance tax, curtailing tax benefits for affluent pensioners, and extending national insurance contributions to investment income.

New research commissioned by Byrne reveals a concerning trend: since 2010, the wealth of the top 1% has skyrocketed by £2.2 million, a staggering amount nearly 41 times greater than what the average citizen has seen. He emphasized that wealth inequality is closely linked to the rise of populist movements, cautioning that if the current situation persists, disillusionment with politics could foster further support for Reform UK.

Describing himself as a “card-carrying member of New Labour,” Byrne argued that implementing a series of wealth taxes has become imperative. “To finance the rebuilding of Britain, we need to restore fairness to our tax system,” he remarked. “If we fail to act, we risk amplifying the attraction of the deceptive allure of populism.”

The data also indicate that Reform UK enjoys weaker support in areas with high property values, while regions where the party performs well tend to have house prices about a third lower than the national average. In these areas, deprivation rates are approximately 8% higher than the national average.

Byrne criticized the lower tax rates available to capital income earners, noting that nearly 60% of the UK’s investment income is concentrated among the wealthiest 10% of households. “It’s clear: we need to increase taxes on capital income. Done wisely, these funds could help mitigate the stark wealth inequality that divides our nation,” he said.

Reeves has reiterated her commitment to creating a budget focused on investment, with plans to refine fiscal rules to allow for greater borrowing. While some tax increases and welfare cuts are expected, frustration is brewing within Whitehall as the government has constrained itself by ruling out any increases in income tax, national insurance contributions, and VAT.

With the forthcoming budget announcement scheduled for October 30, Reeves plans to encourage the Office for Budget Responsibility to thoroughly assess the implications of public investment. This approach could improve economic forecasts and enhance projected revenues. Although she has dismissed the notion of introducing a new wealth tax on the richest—amid calls from major financial supporters like the Unite union—she is reportedly considering increasing CGT to align with income tax rates, a move that could generate between £8 billion and £16 billion.

However, such a change might trigger warnings about potential capital flight, as critics argue that aligning CGT with income tax rates could result in significant tax increases for higher earners. A recent report from the Institute for Fiscal Studies pointed to the substantial disparity between income tax and CGT, advocating for comprehensive tax reform that would standardize rates across all income types.