Keir Starmer brings in ex-Bank of England boss who backed wealth taxes

Sir Keir Starmer has drafted in a former Bank of England deputy governor who has repeatedly championed new wealth taxes - sparking fears of punishing raids on family homes, pensions and inheritances.

Baroness Minouche Shafik, who will now serve as the Prime Minister's chief economic adviser, has previously urged fresh levies on property, land and even prestige cars.

Her appointment has raised alarm that the middle classes will bear the brunt of attempts to plug a £50billion black hole in the public finances.

In a 2018 article titled "a new social contract", Lady Shafik wrote: "Tax systems have become less progressive as advanced economies lowered corporate taxes and top rates on personal income in the 1980s and 1990s and raised value-added taxes.

"This is especially problematic given widening inequality in market incomes. And because wealth has grown even more unequal than income, we should explore taxing wealth such as inheritance, land, and real estate."

She has also argued that "those with comfortable pension pots must be expected to pay more towards the common good" and proposed "the imposition of property taxes which would direct a flow of capital from those in high value properties to those unable to get on the property ladder, through a capital endowment scheme", according to a report of her 2023 speech by Panmure House.

Lady Shafik co-chaired the Economy 2030 Inquiry, set up by Labour minister Torsten Bell, which recommended tax hikes on inheritance, property, shares, landlords, pensions and dividends. The final report proposed capital gains tax upon death, National Insurance on rental income and more than doubling the basic rate of dividend tax to 20%.

Dr Gerard Lyons, an economist, told the Telegraph: "The combination of Torsten Bell and Minouche Shafik, alongside the restraints of manifesto commitments, fiscal rules and overspending, points to a Budget where taxes will go up and the bias will be towards hitting the middle classes hard with increased taxes on property and capital."

Economist Julian Jessop, a government critic, added: "Shafik has no business experience and little clout in the financial markets.

"Shafik's expertise is in the economics of developing countries, and she seems even keener on wealth taxes and income redistribution.

"Her recent track record in leadership roles in academia suggests she has difficulty engaging with the challenges of the real world."

The Conservative shadow chancellor, Sir Mel Stride, said: "Labour's appointment of Minouche Shafik confirms their intent - higher taxes, more borrowing, and punishing success.

"Shafik has previously proposed tax hikes on everything from inheritance and pensions to family homes and employers. Far too many successful people are already quitting the country under Labour. This is yet another worrying sign that more will follow."

Critics have also highlighted that Lady Shafik once dismissed the link between hard work and success as "pernicious".

Ms Reeves faces the unenviable task of plugging the yawning gap in the nation's finances against a backdrop of sluggish growth and rising debt. Some economists have even warned Britain risks heading towards an IMF bailout.

Lady Shafik has a long history with Labour, serving as top civil servant at the International Development Department in Gordon Brown's government. She later held senior roles at the IMF, the World Bank and was vice-chancellor of the London School of Economics.

Most recently, she was president of Columbia University in New York but resigned earlier this year following controversy over anti-Israel protests.