The Rachel Reeves "Fun" Tax Cuts

Summary

---

Newscast – The Rachel Reeves "Fun" Tax Cuts

Date: May 21, 2026
Host(s): Adam Fleming, Chris Mason, Joe Pike
Guest: Helen Miller (Institute for Fiscal Studies Director)
Special Quotation: Clips from Chancellor Rachel Reeves

---

Episode Overview

This episode of the BBC's Newscast unpacks the government's new temporary VAT cut on "fun" attractions announced by Chancellor Rachel Reeves—a measure styled as the "Great British Summer Savings Scheme." The panel investigates whether such targeted tax cuts make a meaningful difference for families facing cost-of-living pressures. Further, the team analyses other economic levers being deployed, the latest net migration figures, and a lively debate breaks out over capital gains tax reform in light of political ambitions and leadership jostling within Labour.

---

Key Discussion Points & Insights

1. Rachel Reeves’ “Fun” VAT Cut (Summer Attractions)

[02:04–06:15]

• Policy Details:

  • Temporary VAT cut from 20% to 5% on attractions like zoos, museums, theme parks, and soft play during school summer holidays across the UK.
  • Scheme runs from late June (Scottish school holidays) to early September.

• Political Framing:

  • Chris Mason: "They managed to keep a kind of rabbit in the hat... a brief tax reduction on fun... a VAT cut from 20% to 5% on things like zoos and museums and soft play." [02:29]
  • Adam Fleming notes it's part of a wider set of retail policies supporting families—like freezing rail fares—without enormous government expense.

• Economic Perspective (Helen Miller, IFS):

  • The measure is "pretty small beer," costing around £300 million government-wide (approx. £10 per household, skewed to families with children).
  • Miller cautions the effectiveness depends on whether attractions pass the savings to consumers: "If you're running an attraction where you already have more demand than you can handle, you have less incentive to cut prices." [05:22]
  • She describes the policy as "retail offer" akin to "every little helps": small, noticeable, but not fundamentally addressing structural problems.

• Memorable Exchange:

  • Helen Miller: “It is still pretty small beer… It’s a bit like, yeah, every little helps kind of feel to it.” [06:15]

---

2. Cost of Living – Policy Interventions and Their Limits

[06:15–12:52]

• Structural vs. Short-term Solutions:

  • Miller reframes the so-called "cost of living crisis" as a "low income growth crisis," asserting that wage stagnation, not high prices alone, is the core problem.

    “The real crisis...is not so much a cost of living crisis as a low income growth crisis. The fundamental problem is that prices have been high, but incomes are low relative to those prices. What’s going to make us feel better is income growth, not just shoving money at people.” – Helen Miller [06:16]

• Tariff Tweaks on Groceries:

  • The government is also trimming import tariffs (e.g., on nuts and chocolate biscuits), but Miller says these will barely move food prices for consumers.

    “Tweaking tariffs on nuts and chocolate biscuits…a good thing in a sense, but I don’t think it’s going to be hugely noticeable on your food bill.” – Helen Miller [10:03]

• Energy Bills and Fuel Duty:

  • Recent policies include not restoring the 5p fuel duty cut and discounts for hauliers, but nothing new for household energy bills ahead of the price cap ending.
  • On winter cost-of-energy relief, Chris Mason underscores that government supports will likely be more targeted, but much remains uncertain:

    “We don’t know…who they would target and with what kind of support… The phrase I kept hearing was, ‘who knows where we’ll be come October.’” — Chris Mason [12:55]

---

3. Net Migration Numbers – Political Narratives

[13:37–17:49]

• Headline Figure:

  • Net migration is down to 171,000—half 2024’s number, returning to 2012 levels (excluding the pandemic).

• Political Spin:

  • Joe Pike: The government is lining up “a series of announcements that look like things are going pretty positively.”
  • Chris Mason: Conservatives claim credit for pre-election reforms (e.g., limiting student family visas).

• Labour Dynamics:

  • Internally, some Labour members are uneasy about tough migration controls.
  • Panel reflects on the paradox of economic and policy “good news” for the government, juxtaposed with party turmoil (leadership questions, lack of clear narrative from Starmer).

• Structural Workforce Needs:

  • Helen Miller predicts policies will need to focus more on skills and training to fill worker shortages in sectors like social care and construction, reducing reliance on migration levers:

    "In some sense, if we don't want higher migration…think about how we train people now." — Helen Miller [18:43]

---

4. Capital Gains Tax – Wealth, Fairness, and Political Pitching

[20:39–27:45]

• Wes Streeting’s Proposal:
  • Recently resigned Health Secretary Wes Streeting proposes equalizing capital gains tax (CGT) and income tax rates—framed as a “wealth tax.”
• Technical Challenges (Helen Miller, IFS):
  • "There are two problems with CGT: one is obvious—rates are lower than income tax—but the trickier one is we tax inflationary gains for no good reason, which hurts investment.” [21:24]
  • Miller calls for a comprehensive CGT reform—adjusting the tax base, taxing inflation-corrected gains, and closing loopholes (death, border flows).
• Revenue Debate:
  • Streeting claims reforms could raise £12 billion, but Miller says "that’s a bit of a punchy number," likely single-digit billions, and only if reform is very robust and excludes carveouts.
• Political Complexity:
  • Carveouts for “genuine entrepreneurs” undermine reforms, as such definitions are murky and create distortions.

    “Once somebody’s got an amazing soft play center and they're doing great, then you can say, oh, that guy did it… But you can’t identify in advance who a genuine entrepreneur is.” — Helen Miller [25:26]

• Leadership Subtext:
  • Panel speculates on Wes Streeting’s strategy: burnishing economic credentials for both party leadership ambitions and appeal to Labour’s left, using wealth tax rhetoric.

---

5. Notable Quotes & Moments

• Rachel Reeves (clip):

  "What matters for families is not just getting by, but being able to enjoy time together without worrying about the next bill. That is why I am launching the Great British Summer Savings Scheme…a temporary cut in the rate of VAT on summer attractions from 20% to 5%." [03:51]

• Meta Analysis on Political Communication:

  • Chris Mason on how policy impact often boils down to whether people feel tangible difference:

    “Things not going up as much as they might otherwise have done is quite a hard sell, isn’t it?” [11:33]

• Adam Fleming (lighthearted):

  "Oh, it's really cute, the idea of Chris Mason opening a soft play center…then we start talking about him dying the day before you and it all seemed a little bit dark." [27:45]

---

Timestamps of Key Segments

| Segment / Topic | Timestamps | |----------------------------------------------------|----------------| | Rachel Reeves’ VAT Cut: Overview & Purpose | 02:04–06:15 | | Structure of UK Cost-of-Living Interventions | 06:15–12:52 | | Food Price, Tariffs, and Cost-of-Living Analysis | 08:03–12:08 | | Energy Policy, Targeted Relief Debate | 11:06–12:55 | | Net Migration Figures Discussion | 13:37–18:20 | | Political Narratives and Labour’s Internal Tension | 14:31–17:49 | | Capital Gains Tax: Policy and Politics | 20:39–27:45 |

---

Tone & Style

The discussion is topical, policy-focused, and accessible to a broad audience, with trademark BBC wryness and camaraderie. Technical analysis by Helen Miller is balanced with practical examples and gentle humour (soft play centre jokes abound). The panel is sceptical of simplistic government solutions, and honest about the difficulty of big structural fixes in economics and politics.

---

Summary

This episode unpacks the government’s attempt to offer pre-summer family financial relief—most notably via the headline-grabbing VAT cut on summer attractions. While panellists agree measures like this play well politically and help a little, they probe how far retail interventions can go in the face of underlying problems: stagnant wages, persistent food inflation, and an energy price crunch looming for the winter.

At the same time, 2026’s political backdrop—dropping migration, churning Labour leadership dynamics, and shadow-cabinet rivals proposing bold tax reforms—points to deep uncertainty about both economic direction and party narratives. The “fun tax” and related measures may bring smiles to summer outings, but Newscast’s panel cautions: no amount of discounted theme parks can substitute for the tougher business of economic growth, skills training, and fairer, more sustainable taxation.

---

Transcript

[Adam Fleming]

This BBC podcast is supported by ads outside the Ukrobecha.

[Chris Mason]

Los ahoros de Memorial Day in Los

[Adam Fleming]

y compra los vasicos pare logar pormenos ahoro centadolares en la parria gas de cuatro que madores char Royal performance series.

[TikTok Advertiser]

Want to get more work done with less effort on TikTok, creators are sharing AI automation tips that save time and deliver better results. Tap to discover. Try TikTok now.

[Joe Pike]

Hello.

[Adam Fleming]

Get your phone calendars out because here is what's coming your way. Newscast style. In the next few days. On Friday, we'll be launching our new miniseries blog, Bile Action Cast. And then I'm going to be appearing at the Hay Festival along with lots of other BBC radio programs. And we will be doing episodes of Newscast on Saturday, Sunday and Monday with members of the Newscast family and friends of the podcast and invited guests in a tent being watched and listened to and asked questions by people who are at the hey Festival. And then you will be able to hear them in your podcast feed very soon after we have recorded them in what will be a sweltering hot tent with lots of bookworms in it. And what you'll hear now is our weekly episode of Newscast, which was broadcast on BBC1 after question time. Newscast.

[Helen Miller]

Newscast.

[Chris Mason]

From the BBC, humanity's next great voyage begins.

[Adam Fleming]

We are in the midst of a rupture.

[Helen Miller]

Nostalgia will not bring back the old order.

[Chris Mason]

Six, seven. Yeah, it's supposed to be me as a doctor.

[Adam Fleming]

Daddy has has also a special quotation.

[Helen Miller]

Ooh la la.

[Richard Reeves]

Thinking about it like a panto helped.

[Joe Pike]

Do we play music now or what do we do?

[Adam Fleming]

Hello, it's Adam in the newscast studio.

[Chris Mason]

And it is Chris in the newscast studio.

[Joe Pike]

And it's Joe pike also in the newscast studio.

[Adam Fleming]

And we're joined by Helen Miller, director of the Institute for Fiscal Studies.

[Chris Mason]

Hello.

[Helen Miller]

Hello.

[Adam Fleming]

And it's your favourite day of the year, Helen, when there's a political debate about capital gains tax. I live for these days, love talking about. But before we get into tax. Actually, no, there is a tax element to the first thing we're going to talk about. Rachel Reeves is doing a sort of doing a jet to and taking money off people's summer holidays if they're in the UK and they're with their kids and they're going out for the day.

[Chris Mason]

Yes. And in her announcements today, she managed and her team were quite surprised about this. On the upside, they managed to keep a kind of rabbit in the hat to actually announce this whole thing about this cutting V8, this brief tax reduction on fun. I think you can probably sort of badget, can't you? Or family fun. That is going to kick in as Scotland schools break up for the summer at the tail end of June, I think, June 25, and will run until England, Wales and Northern Ireland schools return for the autumn term at the beginning of September. VAT cut from what, 20% to 5% on things like what? Zoos and museums and soft play. Soft play.

[Adam Fleming]

Not a place I've ever been.

[Chris Mason]

Oh, yeah, our kids absolutely loved it.

[Adam Fleming]

How much does a soft Play cost?

[Helen Miller]

6, 7 quid?

[Chris Mason]

Yeah, yeah, yeah. But, but given the. Given the. How appealing they are to kids of a certain age, that can, that can

[Joe Pike]

add back up quite quickly and they can get. But that's probably a side aside.

[Adam Fleming]

This isn't parenting hell.

[Helen Miller]

Don't worry.

[Chris Mason]

I once went to a soft play in the company of a friend with his daughter before I had kids and was on all fours on, like, level four of this quite complicated soft play when I encountered a former colleague of ours on also on all fours, coming the other way.

[Adam Fleming]

Well, anyway, while you picture that, here's Richard Reeves, the Chancellor, announcing this today and not being shouted at by a van driver for once this week, I

[Richard Reeves]

recognise that what matters for families is not just getting by, but being able to enjoy time together without worrying about the next bill. That is why I am launching the Great British Summer Savings Scheme to help families and support our hospitality sector. So I can today announce a temporary cut in the rate of VAT on summer attractions from 20% to 5% over the summer holidays.

[Adam Fleming]

Now, at first you think, okay, government announces they're making theme parks cheaper for families, and you think, oh, that's a bit unusual. But then you think, actually, this is of a piece of quite a few other things the government's been doing this year for the cost of living, for example, freezing some rail fares. So trying to come up with a very retail way of helping you feel like the government's on your side, but not necessarily in a way that costs the government and taxpayers shed loads and shed loads of money.

[Chris Mason]

Yeah, And I was thinking with the. Because with some of this, there was a bit of a rift from some of the critics, some critics, prior to her standing up at lunchtime today saying, you know, does it. To what extent will this add up to something that people can feel and notice? And then the stuff on the vat, on attractions, you think of things like theme parks, which, if you go with a few kids in tow, quite expensive actually. And so if that.

[Adam Fleming]

And also the parks themselves for years have been calling for VAT to be cut on attraction. So it's obviously quite a big deal for them and they think it's a bit of a barrier to people coming and spending money at their attractions. I mean, Helen, what's the economist's view of this?

[Helen Miller]

I mean, I think we shouldn't forget that it is still pretty small beer. Right, so on the, on the VAT car and the free bus travel, the government think it'll cost around 300 million. That's the equivalent of about £10 per household. Now obviously it's gonna be skewed towards households with kids, maybe a bit more for them. But this is not a huge, a huge saving. And of course it depends on the extent to which businesses do pass it on to consumers. I suspect some will, not least because it comes with this big packaging and people will be expecting to see the savings. But if you're running an attraction where you've already got more people who want to come than you can accommodate, you haven't got a great incentive to be cutting prices. And of course, some places already run discount schemes for families and kids in summer. So it's not clear how much additionality this will bring. So the big picture, it is, you know, pretty small. It's clearly kind of a retail, retail offer. It's not going to solve the cost of living crisis, but I don't think we should expect government to be shoving money at families in order to fix the cost of living crisis. The real crisis.

[Joe Pike]

Why not?

[Helen Miller]

Well, because the real crisis, I actually wish we could relabel it. I don't think it's so much a cost of living crisis as a low income growth crisis. The fundamental problem we've got is that prices have been high in the past. It's not really that prices are high, it's that incomes are low relative to those prices. What's going to make us really feel better in a few years time is if income growth was going to be picking up. You can't just shove money, you can't just borrow money from the markets or get raise taxes, shove it at some people and fix that problem. You've got to do all the things that governments need to do to get economic growth going, basically. So on the one hand, look, this is not. I don't think we should expect this to be a huge deal. Obviously for some families it will help. It sort of reminded me of, you know, when like supermarkets do these discounting posters and, you know. Well, yeah, you Know, some cut price strawberries and some Jersey Royals and some, you know, extra toilet roll. It's a bit like, yeah, every little helps kind of feel to it, I think. But that shouldn't be, that shouldn't be read as me saying and therefore the government should have done something huge because I don't think that was necessarily the right. The right.

[Chris Mason]

Because that's the other thing, isn't it, with all of this? I was sort of pondering with this around this sort of suggestion of, you know, can or should governments do in an era where we've perhaps in the last decade become accustomed to these colossal interventions associated with wanting or whatever shocks, whether it was the pandemic or the full scale of invasion of Ukraine with furlough and then those big energy interventions and then where that leaves the public finances and therefore how governments approach their decisions in the years after. But then also what we collectively as a society then regard as quote, unquote normal as far as interventions are concerned. And then to that point about what we should, what should we reasonably expect from governments or what should they, what can they best do to try and address these longer term issues around incomes and the cost of living and how people, how affordable things feel to people.

[Adam Fleming]

Joe, on Helen's point about the price of beans and Jersey Royals, other types of potato are available. The announcement we got today is about cutting tariffs. So the import taxes on lots of products which could shave a couple of pennies off each of those products on the shelves. That's actually a less dramatic or expansive policy than was being discussed yesterday when we were hearing something really quite dramatic in a British political context, but which hasn't happened.

[Joe Pike]

Absolutely. And I think that is because the backlash against, against the treasury and from supermarkets from the government of the bank

[Adam Fleming]

of England basically put a cap on

[Joe Pike]

certain products was, was, was really significant and it was, it was not really treated remotely seriously by a lot of people. I suppose Rachel Reeves, in this odd position where she's trying to, she's trying to improve her reputation quite quickly because she realizes there may be an, an end to her position. And she arguably, some close to her say, you know, she should stay if there's a new, if there is a new Prime Minister for, you know, to sort of calm the markets. And therefore, I think what you are seeing is her trying to prove she is creative and inventive in her interventions. And today I think has done that in some ways and that the Tories have welcomed significant amounts of what she's done. They argue the sort of background is economic mismanagement over many months. But she does, she does, she does. If we look at yesterday and today together, you know, yesterday was really a bit of an sort of embarrassing, slightly confusing set of headlines. Even if today you've got on the BBC's website the lead story, cheaper holiday trips for parents.

[Adam Fleming]

Helen, the whole. I mean, we could spend hours talking about how tariffs and international trade policy works and it would feel a bit like back to the Brexit days. But can the government really make a difference to the price of food in the supermarket, with its trade policy, with how much it charges on imports from abroad?

[Helen Miller]

Well, big picture, yes. I mean, tariffs basically are taxes, just differently labelled taxes. And if you put lots of tariffs on things you're bringing to the country, you can make them more expensive. So, yes, in principle we should think taxes, tariffs are levers you can, you can adjust to change prices. The question is, are this particular set of measures going to be noticeable? My guess is probably not, because in the grand scheme of things, tweaking tariffs on nuts and chocolate biscuits, I think it's a good thing in a sense, but I don't think it's going to be hugely noticeable on your food bill. And of course, the background is that we expect food prices to be going up across the summer more broadly because of, you know, things like increases in fertilizer prices. So.

[Adam Fleming]

And that food price inflation, as it's called, could be 10% by the end of the year on some measures.

[Helen Miller]

Yeah, it could be really big. And that's what people are going to notice, I think. Well, people will notice that actually their weekly shop is getting more expensive. They probably aren't going to notice that nuts may be a bit cheap. And again, it depends on how, how supermarkets respond to that, you know, the extent to which you see the price coming down. So I think, yes, tariffs are. Tariffs are good things to get rid of if you can, usually, but we shouldn't expect that to mean big price cuts.

[Adam Fleming]

And, Chris, there was a long list of things today because there's a lot of measures here and there was some announced yesterday as well. For example, not going ahead with restoring the 5P cuts in fuel duty and a big discount on duty for hauliers as well for the next year, but nothing on household energy bills. And we know that the price cap, which is currently in place and keeping bills down with a little extra discount from government policy as well, that ends the month after next.

[Chris Mason]

It does. And just picking up on Helen's point, and this is the challenge, isn't it? Alongside some of the, alongside the kind of retail Y stuff and then talking about theme parks and stuff. Is that the whole business of things. And the same applies with petrol here or diesel. Things not going up as much as they might otherwise have done is quite a hard sell, isn't it? If your nuts or your marge or whatever has not gone up by as much as it might have done because there's a certain element around the tariff that means it's a reduction. But actually.

[Adam Fleming]

Or your supermarket put the price up last week. Week because the minimum wage has gone up and they're having to pay their younger staff more because that's gone up too.

[Chris Mason]

Sure. All of that into the mix on the energy stuff. So the argument that over and over again folk in the treasury have been making, well, firstly is that it's summer, so they, they are conscious of winter coming and contingency planning around, around winter. Secondly, the thing they go over and over again to emphasize is this idea that the merit as they see it, of targeting supports rather than universal supports because it's cheaper and because it can be more focused. What we don't know as far as the winter is concerned. Well, there's a million things we don't know. We don't know the chances are going to be in the winter, do we? We don't know what the situation in the straight of Hormuz is going to be and crucially we don't know and they're still working it through who they would target and with what kind of support but they over and over again

[Adam Fleming]

and even just like practically how to find those people in the system.

[Chris Mason]

Complete, completely that and back to that age old argument that we've had before, haven't we on newscast that if you try and create some sort of tearing or some sort of cutoff then you can create cliff Ed. If you don't do that then it gets very complicated. But then if it's universal it's very expensive. So all of that. But they, they say at the moment they are working through what they might do come the winter where obviously people's energy bills are much greater, much more expensive and you spend more on energy, but they don't know what we're going they're going to do because they don't know what the situation is going to be. The phrase I kept hearing was who knows where we'll be come October. And that can apply to the individuals I think sometimes who are saying that as well as the economic picture internationally and therefore domestically that we will encounter then.

[Adam Fleming]

Right. So that's one set of numbers to do with people's days out. Let's have a look at another set of numbers that was published today, which is the net migration figure. So this is the difference between the number of people leaving the UK and the number of migrants arriving. And so basically how much the population is growing by because of migration. And the number is 171,000, which is half what it was in 2024 and back to basically where it was in 2012.

[Joe Pike]

So excluding the pandemic.

[Adam Fleming]

Excluding the pandemic when things were skewed both down and very, very up. Joe, when you saw that number, were you surprised?

[Joe Pike]

Well, it fits, Adam, doesn't it? I suppose this series of some government announcements that look like things are actually going pretty positively. Vice Treaty, of course, just before he jumped, was hailing improvements on waiting lists in the NHS in England. Obviously you've got this, Chris, there must be other things that are on your list.

[Chris Mason]

I mean, there's a whole list. But I mean, I think on the migration thing, there has been a trend in that direction. I mean, there's definitely been an argument today about who can claim credit for it, with the Conservatives saying with, with some justification, that things that they were doing just before the election have contributed to this, to this pushing.

[Adam Fleming]

And it's things like, if you come to the UK as an international student, how many members of your family can you bring with you, for example, which is a reform under the Conservative.

[Chris Mason]

And there's some suggesting that the numbers are likely to tick upwards. But outwardly, when we've had such a loud argument, haven't we, for so long around migration, I mean, going back a very long time pre the Brexit referendum, from the Government's perspective, this is something, given that they've wanted to get this number down, you can have an argument about whether it going up or down is a good thing. But the Government is making an argument, it wants to get it down and therefore, from its perspective, can say this is good news. And the Prime Minister's absolutely said that, as has the Home Secretary, that, yeah, it's quite a thing, isn't it? It is quite a number, when not that long ago, the number was not far shy of. Of a million.

[Joe Pike]

And also there was unease in some parts of the Labour Party at some of Shabana Mahmud's interventions and policies. These aren't sort of universally popular amongst the. Amongst the party.

[Adam Fleming]

It's almost like we're not that far from net migration being in the tens of thousands, which is what David Cameron was in which he got completely hammered for, of not achieving.

[Chris Mason]

And then as you say, if we start picking up on Joe's riff of things that the parallel universe of a scenario where you're less than two years on from a general election with a Prime Minister who won a landslide majority and then is looking at a data set that says that the economy's growing a bit more than some people thought, that inflation's down, perhaps by more than some people thought, that rating lists in England are shrinking, that net migration is shrinking. And then he thinks, hang on a minute, all of these things outwardly are positive indicators and what's the soundtrack? There's basically a leadership election underway and I don't know, you know, that kind of parallel universe that he must imagine of did things have to turn out the way they have turned out? And why is it that labor mps are in of the mindset that they are? Well, we know why, because look at the elections of a few weeks ago and also an acceptance from Keir Starmer's allies as well as his now skeptics of a sense that he has not been able to tell good stories.

[Joe Pike]

Well, basically, and also politically and also,

[Adam Fleming]

let's be realistic, like it's not as if Keir starmer had announced 10p off soft play areas last week would have staved off West Streeting's resignation. I mean, they had a king speech where they laid out legislation for two years on loads of things and that wasn't enough.

[Chris Mason]

And also, look, you know, there might be some positive economic news, but there's the long, long period of it being, of it being pretty flat for 20 years.

[Joe Pike]

And also small boat levels are not, not, not in a great place. I mean, they're sort of ticking up, they're not that far and some of

[Chris Mason]

the worst are still high even though they're coming down. And the, you know, there's lots of, obviously you can turn these numbers on their head, but it's just an interesting riff when you can point to quite a few days now in the last couple of weeks and indeed the last couple of months, where outwardly there have been indicators that from the government's perspective are positive and yet you look at this backdrop.

[Helen Miller]

But I think partly it speaks to the fact that some of these problems we've got are going to take a little while to fix and you have to do some policies and kind of wait for them to start bearing fruit. And it's part of that point about setting out a vision. Right. So the vision sort of has to include where we want to get to and it's going to take some time. And if people expect things to be fixed really quickly, they're going to be upset because no government is going to be able to fix some of these long running problems overnight, whether it's migration or growth or any other problem. So I think partly this disconnect is about people's expectations for how quickly we can fix some of these issues.

[Adam Fleming]

Excellent finger click right into the microphone. Excellent podcasting, getting all the sound effects in. But Helen, is there a future UK where instead of politicians from nearly all political parties worrying that immigration is too high, actually loads of reforms are put in, net migration basically plunges and then there ends up being a conversation about, oh, it's now too low, I mean, possibly.

[Helen Miller]

I mean, I think, you know, you can imagine it in. We've had this before. In certain sectors they're being shortages of workers where even if you want to train British workers, it takes a while to do. You think of like health and social care being good examples of that. You might think that we get to a place where actually we need more workers. Partly what we need to do, therefore, is think now about the kind of workers we might think of needing in the future years. What does training look like? Whether that's, you know, general training and further education or specific training for specific sectors. In some sense, if we don't want higher migration, don't rely on that being the valve through which we adjust our labour markets. Thinking about how we like construction work is another example. Talk to house builders, they'll say, well, actually it's really hard to get skilled trades and in previous years we have just imported people with those skills, but we know we need them. So we can also think about further education colleges and making sure that people are being trained. So yes, I can imagine that world, but I don't think it's inevitable. I think we have the power to train people now.

[Adam Fleming]

Talking of Wes treating the former Health Secretary was on Nick Robinson's political thinking podcast, which I learned this morning because I wanted to listen to it on my smart speaker and you have to say open BBC sounds and play political thinking with Nick Robinson. Because if you don't say the Nick Robinson bit, it just gives you something different.

[Chris Mason]

Does it really?

[Adam Fleming]

Yeah, because I normally just play it on my phone, but I wanted the full like surround sound experience in my living room.

[Chris Mason]

What did come on by failing to name him?

[Adam Fleming]

Just some random thing.

[Joe Pike]

How was it in surround sound?

[Adam Fleming]

I mean, it wasn't really surround sound, it was just slightly Less tinny than on my phone, but very interesting. Listen, about 40 minutes. Westrews expanding on lots of the themes that he did in his speech that he did in the House of Commons on Wednesday, particularly about, oh, do we need to flip round the attention on the generations and think about young people?

[Chris Mason]

More around his pitch on young people. And that does play to a degree to Labour's fears about losing younger people in the Dutch of the Green Party, amongst others. But I thought it was an interesting.

[Adam Fleming]

And Helen, you were bemoaning the lack of policies being talked about by politicians. Wes street and came up with one. He calls it a wealth tax. Basically he would say, oh, he would equalize the rates of capital gains tax with income tax because CGT rates are lower than income tax.

[Helen Miller]

Yeah. And this is that this is a broad policy idea that's been talked about for decades at the IFS and elsewhere. So I'm delighted to be, you know, here talking about capital gains tax. It's always a good day, I think Capital gains tax discussions though, I think are a bit tricky because on the one like there are basically two problems with capital gains tax and one of them is really obvious and one of them is really hard to explain. So the obvious one is the one that everyone gets that capital gains tax rates are lower than income tax rates. And that's where you get all these examples about a landlord paying more than a cleaner and that's unfair.

[Chris Mason]

Less than a cleaner?

[Helen Miller]

Less than a cleaner, yes. Less than a cleaner. Yeah. The cleaners paying higher tax rates than landlords and those kinds of examples are clear examples of unfairness. But the other problem with capital gains tax that no one really notices or at least talks about, is that the way the tax base is designed, the definition of what's actually taxed, which includes things like we tax inflationary gains for no good reason, that's actually really bad for investment incentives.

[Chris Mason]

So you could walk us through the taxing inflationary gain.

[Helen Miller]

Yeah. So let's imagine you buy an asset of some sort, Chris, Just any. We've got a business asset and you have a large capital gain over many years.

[Adam Fleming]

A soft play center, for example.

[Helen Miller]

Yeah, it's a soft place and it has a large capital gain.

[Chris Mason]

Yeah.

[Adam Fleming]

But actually because it's become a more valuable business.

[Helen Miller]

Well, it depends. If it's actually that Chris is just really great at running soft play centers and he's put a lot of effort in, made a really shrewd investment, he gets a big gain, then actually most of that gain should be taxed like earned income, because why should you pay less money than Joe, who's just worked hard for a salary? But if all that's happened is you've bought an asset and you've held it for 10 years and inflation's happened and actually it's just risen in line with inflation, you haven't made a real gain. You're no better off than you were before. So whacking a big tax on that actually disincentivises you from doing it in the first place, because now you're worse off than you would otherwise have been. That's one example of a broader set of issues where the capital gains tax is designed in such a way that actually disincentivises investment. So if you just put up rates, you make those problems worse. And that's why we've had this yo yoing effect of capital gains over the years where some politicians say, oh, I see the unfairness problem, we'll put rates up. Then some say, oh no, entrepreneurship and investment, let's put the rates down. And around and around we go. So the kind of solution to this is to realize that you can do two things. You can fix the tax base, so don't be taxing inflationary gains, and a whole bunch of other things you can do that are more technical that we could talk about. But I won't start a tax lecture. And then with a more sensible designed capital gains tax that isn't discouraging investment, then you can part rates.

[Adam Fleming]

To me, that sounds like a lot of work to do to design the new perfect cgt.

[Helen Miller]

It is a lot of work. So the good news is that many of us have been thinking about this for years. We know how to do it. And I was kind of pleased in what Wes Streeting was saying in that he sounded like he was talking about things like investment allowances and not wanting to discourage investment. So. So I hope what he has in mind is this fuller set of reforms. More like what I'm talking about. But it is worth highlighting what you've heard.

[Adam Fleming]

Has he been in touch?

[Helen Miller]

We talked. We talked to lots of people, including the civil service, for years. We've been writing about this for years at the ifs. It's not a new proposal in some ways.

[Joe Pike]

And he has been writing about it before, right? He wrote a pamphlet about six years ago.

[Helen Miller]

Six years ago, yeah. It's an idea that's been picked up by a bunch of people. And it's not that dissimilar to the Nigel Lawson system that we used to have. It is a Bit different, but it's not a million miles away. So it's not as alien as it sounds, I don't think. But if he wanted to do it, there's actually quite a long laundry list of things you'd have to do, including stop forgiving capital gains at death, you know, stop letting people leave the country and having their.

[Adam Fleming]

Because that's the argument that is made by people I saw him doing on social media today, Rupert Harrison, who was George Osborne's brain at the treasury. He says, oh, whenever you go into the treasury and you ask them to look at this, they say, oh, you're going to raise less money than you think. And also really rich, successful entrepreneurs will leave the country.

[Helen Miller]

And it's true. If you just, if you just put up rates of capital gains tax, then actually it wouldn't take too long before you did start losing some money. The point being that if you don't just do that, you also try and stop flows at the border. You stop other things. If you do enough of that, it's good. I mean, one thing that in some ways worried me a bit about what Wes Streeting said, which I think we should all be a bit skeptical about, is there was a line in there about, but of course we'll have lower rates for genuine entrepreneurs, a carve out. And that's where all these things fall down because everyone thinks, oh, this all sounds great, but the genuine entrepreneurs get different rates. You can't identify in advance who a genuine entrepreneur is after the fact. Once somebody's got an amazing soft play center and they're doing great, then you can say, oh, that guy, that guy did it. But if you're starting a business and you look at businesses, you just can't tell. And the minute you can't tell, you give a tax break to business owners. It's also all the other people.

[Adam Fleming]

Oh yeah. And you need to sort of know in advance so that you can design the tax break.

[Helen Miller]

Because no point until Chris goes to the tax man and says, you know, I've got my capital gain, now can I have my lower rate? If it's going to be an incentive, it has to be in advance. So I do get worried about this idea that we've got this great plan, but we're gonna do this carve out. Because those carve outs are exactly the thing that makes it all fall apart.

[Joe Pike]

West Street Inc. Says this will raise 12 billion.

[Helen Miller]

Yeah. So I think that comes from a research report written by different think tank. My personal view is that's a bit of A punchy number.

[Chris Mason]

Too high.

[Helen Miller]

Too high. Yeah. But importantly, I mean, we could haggle. I mean, nobody's got great data on capital gains tax stuff in a way that it's really hard to do revenue estimates, so it's a bit high for my taste. I'd go with something in the single digit billions. But most importantly, what that number assumes is that you do a really full package of things so you close the borders, you stop uplift at death, so you tax gains when people die. You, you do this full base reform and you put rates up quite a long way. So if you do all of that, then maybe you're getting that it does not include carve outs for entrepreneurs, for example, or so in some sense even that is a high number. You've got to do quite a lot to get.

[Chris Mason]

And just hearing one element of that, as you described it, the carve outs at debts. Given the arguments that we've heard in the last couple of years around, you know, the inheritance tax changes and farmers, if what would effectively be seen as an additional tax when someone's died, therefore effectively an inheritance tax.

[Helen Miller]

Yeah.

[Chris Mason]

And lots of people politically may be tricky.

[Helen Miller]

I don't know, a lot of people mistakenly, in my view, think that if you pay an inheritance tax, you shouldn't pay capital gains tax. I think that's wrong because, you know, imagine we've both got a big capital gain and you realize that the day before you die and I realise the day after I die. Why are we taxed differently? An inheritance tax in some sense is always a second tax. It's always after you've paid your taxes in life, your estate pays more taxes. So I think it makes complete sense that if you're going to have a capital gains tax, you shouldn't be able to avoid it by dying. But it would be, it would be a really, it would be a really big political thing. But if you don't do it, then you're going to slash that revenue. Another thing to remember, of course, is that people can choose when they. I'm getting excited about that. People can choose when they realise their gains. If a reform government said we're going to slash the capital gains tax rate when we come into power, a lot of people would hold on to their capital gains and that would also trash the revenue that you do.

[Adam Fleming]

The only reason I was laughing is because I thought, oh, it's really cute, the idea of Chris Mason opening a soft play center and then we start talking about him dying the day before you and it all seemed a little bit dark anyway. Right.

[Joe Pike]

Isn't there also something interesting about what Wes reading is doing here, which is obviously he wants to think about put himself in a situation where he wants to maybe be leader. But is he also looking at Rachel Reeves job too? Is he trying to burnish his economic credentials in case there wasn't a leadership

[Chris Mason]

and wanted a big job and or being seen to use the language of those within the Labour Party who would regard themselves as to the left of West Streeting, which would be a lot of people within the Labour Party. And using the language of a wealth tax that is often used to talk about other things other than this particular mechanism around capital gains tax is a way of appealing to a electorate that at the moment he needs to win over. When you look at some polling of Labour Party members that suggests he's got quite a lot of sort of, if you like, charming to do of that membership. If we get to a point where there is a there is a contest where the Labour Party membership are deciding who is their new leader.

[Adam Fleming]

Well, I hope you've been charmed by our analysis tonight, Helen. Thank you very much. Thank you Joe. Thanks to you too. Thanks Adam and Chris, lovely to see you as well.

[Chris Mason]

Okay, I think I've just about got rid of the sweat from running to the newscast studio during a heat wave that is building by the minute.

[Helen Miller]

Newscast, Newscast from the BBC.

[Newscast Outro Announcer]

From one newscaster to another, thank you so much for making it to the end of this episode. You clearly do, in the words of Chris Mason, ooze stamina. Can I also gently encourage you to subscribe to us on BBC Signs? Tell everyone you know and don't forget you can email us [e-mail] or if you're that way inclined, send us a WhatsApp on 033-01-239480. Be assured, I promise we listen to everyone.

[TikTok Advertiser]

Hate cleaning, hate scrubbing, hate dishwashing. Bro, we got you millions of videos about smart cleaning hacks will make your chores feel like a breeze. Download TikTok and check it.