John Healey Warned by Institute of Economic Affairs That Capital Gains Tax Raid Could Blow £6.2 Billion Hole

The Institute of Economic Affairs warned Chancellor John Healey that a proposed Capital Gains Tax increase could leave the public finances £6.2billion worse off over the remainder of the Parliament. The think tank argues that higher rates could change investor behaviour and reduce the amount collected.

The proposal would raise the two rates from 18% and 24% to 20% and 34%. The warning appeared in a report published on September 26, 2026.

The £6.2billion figure is the institute’s estimate of the effect, not a confirmed Treasury forecast. It describes the projected cost of the tax change across the rest of the Parliament.

Higher rates could prompt investors to hold on to assets

The institute’s case rests on the point at which the tax becomes due. Tax is paid when an asset is sold and a gain is realised, giving owners a choice about when to dispose of an asset.

If rates rise, some investors could put off selling. Others could avoid a sale altogether. The institute argues that this response could shrink receipts enough to outweigh the expected revenue from higher rates.

That forecast depends on taxpayers changing their decisions in response to the proposed rates. The report’s central warning is that a higher rate does not necessarily translate into more revenue when people can postpone the taxable event.

Healey has also presented economic growth as a defining aim. Ahead of the next Budget, he has faced questions about spending restraint and how the government will meet its fiscal rules.

Healey has tied his mission to growth and fiscal restraint

At Labour’s conference in Liverpool, the debate over tax came as the next Budget approached. It is scheduled for 28 October.

In a September 7, 2026 report on his first major speech since taking the job, Healey described growth as his central mission. He also said Labour had to “be honest” about the need to control public spending at the next Budget.

Healey said he was “in lockstep” with Andy Burnham on meeting the government’s fiscal rules. He also promised to uphold Labour’s manifesto pledge not to raise taxes on working people.

The CGT warning therefore lands alongside a stated commitment to growth and limits on tax increases affecting working people. The institute says the proposed change risks discouraging the transactions that generate taxable gains.

Borrowing costs and defence spending are adding pressure

Healey had already resisted commenting on possible tax decisions. On September 6, 2026, he acknowledged that borrowing costs were at “historic highs” and said: “If I respond to speculation now that will only fuel more speculation.”

The Treasury also faced possible multi-billion-pound gaps linked to higher borrowing costs and defence spending pressures. Separate September estimates placed the gap at £4.7bn, £10bn–£15bn and £8.5bn.

Those figures describe wider pressure on the public finances, rather than the estimated effect of the proposed CGT change. The institute’s £6.2billion calculation concerns the proposed rate increase over the remainder of the Parliament.

The Treasury says tax decisions will come at fiscal events

A Treasury spokesperson declined to discuss the proposal, saying tax plans would be set out at formal fiscal events rather than addressed routinely in response to speculation.

“As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”

The next scheduled fiscal event in the material is the Budget on 28 October.