EXCLUSIVE: Rachel Reeves told to target wealthy in Budget as tax rises and spending cuts on the table

Researchers argued that deepening wealth inequality was creating existential risks to society as they warned that the gap between the richest and poorest has widened

View Image

Rachel Reeves has been urged to target Britain's wealthiest in the Budget as analysis found the gap between the richest and the poorest has dramatically widened.

Researchers argued that deepening wealth inequality was creating existential risks to society, such as social unrest, failure to tackle the climate crisis, economic stagnation and even the decline of democracy.

A new report from the Fairness Foundation said the absolute 'wealth gap' between the richest and poorest 10% of people in the UK deepened by 54% between 2011 and 2021 due to the rising value of assets like property.

Inheritance and gifts have doubled over the past two decades to £100 billion, and are expected to double again by 2040, it said. The richest 10% of families consistently own just over half of total wealth.

But the poorest 10% of households have a total net worth (including work pensions, vehicles, and household items, as well as financial and housing wealth) of £15,400 or less.

Will Snell, of the Fairness Foundation, said: "Without effective policy intervention, Britain will become steadily more unequal, and as a result more socially divided, economically unproductive and politically disengaged.

"Bold action is needed. By effectively taxing wealth and sharing it more broadly throughout the economy, the Chancellor can use the opportunity of the Budget to finally address the damaging levels of wealth inequality in today's economy and start to rebuild our shattered social contract."

It comes as the Chancellor said she was considering both tax hikes and spending cuts in next month's Budget, as she seeks to give herself more breathing space against future economic turbulence.

Experts from the Institute for Fiscal Studies estimate she needs to fill a £22 billion black hole.

Ms Reeves has signalled that she is looking at targeting wealthiest individuals in the Budget, recently saying that "those with the broadest shoulders should pay their fair share". But she is understood to be resisting calls for a dedicated wealth tax.

Speaking on a visit to Saudi Arabia, she said: “Growth will be a big part of that Budget story, in a way that, frankly, I think growth has been neglected as a tool of fiscal policy in the last few years.

"But we are looking, of course, at tax and spending to ensure that we both have resilience against future shocks by ensuring we've got sufficient headroom, and also just ensuring that those fiscal rules are adhered to."

Labour promised to protect working people from hikes to national insurance, VAT and income tax in its manifesto.

But speculation has been mounting over whether Ms Reeves could be forced to break the key election pledge.

At the weekend, she refused to rule out an income tax rise but said she would "continue to support working people by keeping their taxes as low as possible".