Labour MPs have warned Chancellor Rachel Reeves that "kite flying" briefings about potential tax rises are damaging consumer confidence and threatening economic growth. The 2024 cohort of MPs fear a repeat of last year's damaging early Budget messaging that was blamed for stalling the economy.
There is particular concern that speculation about housing sector taxes could "gum up" the property market. Buyers and sellers are reportedly waiting to see if they will gain or lose from any changes before completing transactions.
Budget shortfall drives speculation
Reeves faces a budget shortfall requiring tax rises this autumn, with estimates ranging from £20bn to over £40bn. The gap is against her self-imposed fiscal rule of not borrowing for day-to-day expenditure, meeting it instead from tax income.
Recent leaks suggest possible changes including stamp duty and council tax overhauls, capital gains tax on high-value primary residences, and national insurance on landlords' rental income. According to gbnews.com, house prices in London and the South East have already dropped to 2018 levels due to the speculation.
Property market paralysis
A Labour MP said: "The key thing in the next few months is that we don't end up in a cycle of talking about tax rises [and] confidence in the economy weakens. We need to be positive and optimistic and on the front foot."
Another MP warned about the "distortive effect" on the property market, saying: "If you are doing any tax stuff, there is an issue that if you announce some of these changes it can gum up the housing market." Only gbnews.com reports that Terry Wogan's £3.7m house has received zero viewings since being listed in November.
Historical precedent
Comparisons have been drawn with last August when Sir Keir Starmer (Labour) delivered a speech warning that the October Budget was "going to be painful". The economy barely grew in the final half of 2024, and Starmer later admitted the speech was a mistake because it "squeezed the hope out".
A Labour source said: "Last year we went far too early on the pitch-laying for the Budget. Keir did that speech in the rose garden, saying the sky was falling on our heads. That tanked confidence."
Rental sector concerns
City A.M reports that one million additional rental homes are needed by 2031, making supply disruption particularly damaging. One-third of small landlords were already planning to exit the sector before the new tax speculation began.
Education minister Stephen Morgan declined to comment on the speculation when asked about taxing landlords. A Treasury source insisted it was "ridiculous to suggest HMT is 'kite flying' this far out from the Budget".
Sources used: "The i", "gbnews.com", "City A.M"
Note: This article has been edited with the help of Artificial Intelligence.
