It may still be summer, but the Autumn Budget is already starting to loom over Labour. Last year, the new government struggled to make a positive impact with its first fiscal event, with the Left angry at a lack of spending and the Right incensed by tax rises. Now, the Government needs something to arrest its political decline without threatening the tentative growth of the economy or causing another panic in the bond markets. It is a difficult plot to chart.

One rumored solution is the introduction of capital gains tax on high-value homes. This would see the normal exemption for primary residences abolished for houses worth more than £1.5 million. In many ways, it is a canny move. It taps into the unfairness felt about the huge property rises older, richer voters have enjoyed, while insulating ordinary people from the new levy.

There is an obvious political motive here for Chancellor Rachel Reeves. Ever since Labour came to power, there have been growing calls for a wealth tax to raise money from the richest. With the Government losing voters to its Left, there is a political incentive to offer one — but not an economic one. Pure wealth taxes are complicated to introduce, threaten growth, and take time to raise money properly. The CGT extension shortcuts this, and is an easier way of showing intent to soak the rich.

It may not, however, be radical enough. As a simple matter of practicality, it will not be a quick revenue-raiser. Rather than the annual tax proposed by some on the Left, this will only raise money when properties are sold, meaning it will take time for cash to come in and be readily spendable. This will be even more true if, as predicted, it cools or distorts the housing market. While the levy might ease the fiscal burden over time, it won’t provide the windfall for which proponents of a wealth tax are hoping.

The policy also runs the risk of throwing the Tories a lifeline. Though the party is struggling, opposing this policy could help it right itself in traditional Conservative constituencies. The levy would largely fall on those parts of the country with the very highest house prices: smart parts of London, the South East commuter belt, and posher rural areas. It is these areas in which Reform UK has made less headway but the Conservatives have lost ground to the Liberal Democrats. Defending the property values of older, wealthier voters could help Kemi Badenoch’s party cut through.

In the early 2010s, the “mansion tax” was a headline policy of Ed Miliband. Instead of delivering success to Labour, it bolstered the Tories, who could attack their rivals as anti-success. It also drove a wedge between David Cameron and the Lib Dems, considering that the latter had proposed similar policies. If Ed Davey does the same this time around, it could give Badenoch a real point of differentiation in the comfortably-off constituencies that are now blue-yellow battlegrounds.

The mood, however, might prove different now. A decade ago, rising house prices felt like the pinnacle of aspiration. In 2025, politics is different, with more people seeing the rising cost of housing as a barrier they will never cross in their lifetime. Reeves is looking to take advantage of this, with a tax that is easier to raise than a wealth tax, which in some ways resembles one. Labour’s broader gamble is that this is enough to soothe those who are drifting further Left with their votes. In doing so, the Chancellor might also be handing the Conservatives a way back in affluent constituencies.

Ultimately, Labour’s proposal captures the bind in which the Government finds itself. It wants to look bold without scaring the markets, redistributive without alienating the aspirational middle, and pragmatic without seeming timid. A capital gains levy on expensive homes straddles those competing demands neatly on paper, but it risks pleasing no one in practice. If the revenues are slow, the Left will remain restless; if the politics rebound, the center-right will find new energy. A government that pleased almost no one with its first Budget might end up disappointing with its second too.

---

John Oxley is a corporate strategist and political commentator. His Substack is Joxley Writes.

Mr_John_Oxley

---