(Bloomberg) -- Prime Minister Keir Starmer rejected the suggestion that the UK government was considering raising capital gains tax as high as 39%, as he tried to reassure investors that he’s leading a pro-business government.
“A lot of speculation is getting pretty wide of the mark,” Starmer told Bloomberg Television in answer to a question about a report in the Guardian that Reeves could hike capital gains tax to 39% from a top rate of 28% currently. “That’s getting to an area which is wide of the mark,” he said. Decisions in the budget on Oct. 30 “will be determined by whether they help growth or not,” he added.
The remarks, in an interview with Bloomberg’s Head of Economics and Government Stephanie Flanders at the International Investment Summit in London on Monday, appeared to be an attempt to calm City of London jitters ahead of the budget. Usually the premier does not comment on which measures Chancellor of the Exchequer Rachel Reeves is considering.
Starmer is trying to reset the narrative of his administration after a shaky first 100 days in office during which he and Reeves have been accused by businesses and political opponents of talking Britain down with their warnings about the state of the nation’s finances. That’s weighed on both consumer and business confidence, and sparked speculation about potential tax rises on companies and wealth at the end of the month.
The chancellor is still expected to raise capital gains tax by some degree in order to help fill what she’s said is a £22 billion ($29 billion) gap in day-to-day government spending this year. That’s in part because Labour’s election manifesto ruled out any increases to value added tax, income tax and national insurance, the Treasury’s three main revenue-raisers.
Capital gains on assets are currently taxed at between 10% and 28%, lower than the range on income tax. Investors have warned that raising it too far would harm entrepreneurship. In the last tax year, capital gains tax raised some £14.5 billion for the Treasury, according to His Majesty’s Revenue and Customs, the UK tax authority.
Transcript: Keir Starmer Interviewed on Bloomberg Television
The premier said he’d stick to Labour’s manifesto pledge not to raise national insurance for workers, leaving open the possibility of hiking business contributions to the levy. “I’m afraid you’ll have to wait for the budget for the details,” he said when asked if he was considering that.
He argued that most business leaders who he’d spoken to at the event were more concerned by Britain’s planning and regulatory frameworks than the prospect of tax rises. “Contrary to perhaps what people might think, tax is not the first thing that businesses and investors are raising with me,” he said.
Those comments were buttressed by remarks from chief executives of some of the country’s largest lenders, who said international investors won’t be deterred by talk of raising taxes on private equity investors or scrapping a preferential tax regime for wealthy foreigners living in the UK.
“The kind of investors we’re talking about are the big international pension funds, the big international sovereign wealth funds, the private credit funds,” Lloyds Banking Group Plc’s Charlie Nunn told Bloomberg in an earlier interview. “They’re going to be looking for good projects with a good return with a government and a country that’s getting behind making those investments successful — that’s what will matter.”
Starmer pointed to the presence of scores of international executives who have descended on London for Monday’s event as proof that his government is in tune with investors. “I think quite a lot of the inward investment decisions we’ve seen running into tens of billions are a vindication, if you like, of the approach that we’re taking,” he said.
Elsewhere in the interview, the prime minister also:
- Said the government has “got to get the balance right” on the the potential London listing of the Chinese-founded fast fashion company Shein, with concerns that some of its clothes have been made with forced Labour. “Standards and high standards do matter to us,” Starmer said.
- Declined to be drawn about the Chinese army holding drills around democratically-governed Taiwan this week, just as Foreign Secretary David Lammy is preparing to visit Beijing, saying “national security has to come first” in the UK’s wider relationship with China. “We’re also pragmatic and we want our country to move forward and to succeed,” he added.
- Emphasized he thinks the UK had “amazing assets” that could herald a positive economic future, as he sought to move past his government’s gloomy messaging in recent months. He listed “our skills, our people, our universities, our cutting edge when it comes to technologies like AI.”
The event has brought together global investors in an effort to demonstrate the Labour administration’s commitment to wealth creation and to cooperating with businesses. It was attended by top executives from companies including Alphabet Inc., Brookfield Asset Management and BlackRock Inc.
Earlier in the day, Starmer delivered a speech to the summit in which he promised to revive Britain’s economy “through the shock and awe of investment,” pledging to “rip out the bureaucracy that blocks investment” and make the country’s regulatory regime “fit for the modern age.”
--With assistance from Francine Lacqua, Jenny Surane, Irina Anghel and Andrew Atkinson.
(Updates with comment from investors, Starmer, starting in ninth paragraph.)
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