Former Labour leader Neil Kinnock has called on Sir Keir Starmer to introduce a two per cent wealth tax on assets worth more than £10 million as Chancellor Rachel Reeves scrambles to find billions following the government’s recent U-turns on welfare cuts and winter fuel payments.
Lord Kinnock, who led Labour from 1983 to 1992, told Sky News this morning that such a levy could raise up to £11 billion annually and would be popular with the “great majority of the general public” while providing a “pathway” out of the Government’s fiscal difficulties.
The intervention comes as Reeves faces growing pressure to fill a £6.25 billion hole in public finances created by Labour’s reversals on disability benefit reforms and the partial restoration of winter fuel payments. The Chancellor has committed to maintaining her strict fiscal rules on borrowing despite the mounting challenges.
“There are ways around that, ways out of it, pathways that I think people are willing to explore and actually, would commend themselves to the great majority of the general public,” Lord Kinnock said, as Sir Keir marks one year in office this weekend.
The former Labour leader suggested the Government was creating an appearance of being “bogged down by their own imposed limitations” and displaying “stiffness or stagnation” after just 12 months in power.
Wealth Tax Proposal Details
Lord Kinnock outlined his proposal for a two per cent levy on assets valued above £10 million, emphasizing that it would not affect most property owners. “You wouldn’t have to touch assets of under £6 million or £7 million. So people’s houses would be secure obviously,” he explained.
The 83-year-old peer argued such a tax would achieve two objectives: securing vital resources and demonstrating the government’s commitment to equity. “It does two things. One is to secure resources, which is very important. But the second thing it does is to say to the country, we are the government of equity,” he said.
His comments reflect growing calls within Labour for wealth taxes, with polling showing broad public support. A 2023 YouGov survey found that 78 per cent of Britons would support a one per cent wealth tax on assets over £10 million, including 77 per cent of Conservative voters.
“This is a country which is very substantially fed up with the fact that whatever happens in the world, whatever happens in the UK, the same interests come out on top. Unscathed all the time while everybody else is paying more for getting services,” Lord Kinnock added.
Conservative Opposition
The proposal drew immediate condemnation from the Conservatives, with shadow chancellor Sir Mel Stride calling it “the worst thing to do” and warning of a potential exodus of wealth creators from Britain.
Sir Mel cited recent data showing approximately 10,000 to 15,000 high net worth individuals have already left the UK following Labour’s tax increases. New World Wealth analytics reported that Britain lost a net 10,800 millionaires in 2024, a 157 per cent increase from 4,200 in 2023.
“Some people, the socialists, might say ‘well, who cares about that?’,” Sir Mel said. Well, the problem is that the amount of tax that those people have been paying requires about a third of a million people on average earnings to cover that lost tax that’s just gone straight out of the door.
The shadow chancellor warned that additional wealth taxes would drive more high earners abroad: “So the last thing we want to be doing now is piling further taxes on the wealth creators. We need to be, if anything, getting those taxes down, and empowering them to go out and do what they do best.”
Fiscal Pressures Mount
The Chancellor faces significant fiscal challenges following Labour’s recent policy reversals. The government’s U-turn on disability benefit cuts will cost approximately £5 billion, while the partial reversal of winter fuel payment restrictions adds nearly £1 billion to spending.
These reversals have virtually eliminated the savings from welfare reforms that were central to Labour’s fiscal strategy. The Institute for Fiscal Studies noted the government has moved “from the position of saving some money to saving nothing, at least by the end of this parliament.”
City and Treasury sources suggest Reeves may need to revise her fiscal rules to create additional borrowing room. The Chancellor’s two “non-negotiable” rules require day-to-day spending to be matched by tax revenues and net financial debt to fall as a share of the economy.
Some economists warn the government could miss its fiscal targets by as much as £57 billion, according to the National Institute for Economic and Social Research, potentially making Reeves “one of the most profligate Chancellors of all time.”
Stagnation Concerns
Lord Kinnock’s intervention highlighted broader concerns about the government’s direction after one year in office. “It’s not actually the accurate picture, but the appearance is being given that they have been bogged down by their own imposed limitations,” he said.
The former leader, who faced his own challenges with public perception during his tenure, argued that asset values have “zoomed” over the past 20 years while earned incomes have stagnated in real terms. This disparity, he suggested, justified targeted wealth taxation.
He emphasized that a £10 million threshold would only affect those with “very big fortunes” while raising substantial revenue. “Now it’s not going to pay all the bills, but I think that a gesture or a substantial gesture in the direction of equity fairness would make a big difference,” Lord Kinnock stated.
International Context
The wealth tax debate occurs against a backdrop of global millionaire migration. According to Henley & Partners, approximately 142,000 millionaires are expected to relocate internationally in 2025, with the UK experiencing the highest outflows in Europe for the first time.
Popular destinations for departing UK millionaires include Dubai, Singapore, Switzerland, and the United States. The UAE alone is expected to welcome a net inflow of 9,800 millionaires this year, attracted by zero income tax and luxury lifestyles.
However, research from the Tax Justice Network has challenged claims of a millionaire “exodus,” arguing that migration rates remain proportionally similar to previous years and that 80 per cent of UK millionaires support wealth taxation.
Political Implications
Lord Kinnock’s call for wealth taxation adds to mounting pressure on Starmer and Reeves as they prepare for the autumn Budget. The government has already faced significant rebellions over welfare reforms, with more than 120 Labour MPs forcing concessions on disability benefits.
Labour pledged before the election not to raise taxes on “working people,” but growing fiscal pressures may force a reconsideration. Several Labour MPs from across the party’s spectrum have urged implementation of wealth taxes as an alternative to benefit cuts.
The Chancellor must now balance competing demands: maintaining fiscal credibility with markets, avoiding further rebellions from her own MPs, and finding revenue to fund public services while adhering to manifesto commitments on taxation.
As Lord Kinnock concluded: “I think that this government, much as I love them, has got an audacity deficit.” Whether Starmer and Reeves will embrace his wealth tax proposal remains to be seen as they navigate these fiscal and political challenges.
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