Labour’s leader in Wales joins demands for ‘wealth tax’ as Rachel Reeves desperately tries to get a grip on ‘£30bn’ hole in public finances

Labour’s leader in Wales has stoked ‘wealth tax’ demands as Rachel Reeves desperately tries to grip the public finances.

Baroness Morgan said ‘those with the broadest shoulders should carry more of the burden’ amid alarm that the Chancellor will have to raise another £30billion at the Budget.

Ms Reeves was dealt another blow on Friday as figures showed the economy shrinking for a second month in a row.

Labour MPs are baying for wealth taxes, despite warnings from the Treasury’s OBR watchdog that huge revenues are already being raised from too narrow a group of people. 

Asked in an interview with the Sunday People about former leader Lord Kinnock’s suggestion of a 2 per cent tax on assets above £10million, Lady Morgan said: ‘I think people with the broadest shoulders should carry more of the burden.’

The peer acknowledged that Keir Starmer and Ms Reeves were trying to create a ‘stable framework so that people invest and create jobs’. 

But she said ‘other options’ were available to raise funds. ‘I don’t know all the levers available, but the idea of taxing people earning over £10m is not a bad idea,’ she added.

Lady Morgan also piled pressure on Sir Keir to scrap the two-child benefit cap, saying: ‘It’s causing hardship in a lot of families’.

Baroness Morgan said ‘those with the broadest shoulders should carry more of the burden’ amid alarm that the Chancellor will have to raise another £30billion at the Budget

Experts have suggested that the stalling economy together with spending pressures could mean Ms Reeves has a £31billion funding gap to fill

Ms Reeves was dealt another blow on Friday as figures showed the economy shrinking for a second month in a row

Downing Street has refused to rule out a wealth tax, although Ms Reeves previously said she was ‘not interested’ in the idea. 

The tax burden is already set to hit a new high as a proportion of GDP after the last Budget imposed a £41billion increase – the biggest on record for a single package. 

But experts have suggested that the stalling economy together with spending pressures could mean Ms Reeves has a £31billion funding gap to fill. 

Speculation is mounting that the Chancellor will opt to extend the long-running freeze on tax thresholds.

The policy, in place since 2022, is due to end in 2028-29. By that point it will have dragged an extra 4.2million people into the tax system as wages rise.

There will be 3.5million more taxpayers in the higher-rate band, and 600,000 in the top rate.

However, keeping the freeze in place for another two years could bring in an extra £10billion annually for the Treasury according to the IFS think-tank – significantly easing Ms Reeves’ problems. 

Around another 400,000 more people would be paying income tax and 600,000 into higher and additional rates by 2029-30.