The Labour clamour for wealth taxes at the Budget was mounting today – despite warnings that they could backfire.

Millionaire eco-tycoon and party donor Dale Vince has proposed increasing capital gains tax (CGT).

Mr Vince said that combined with ending interest payments on commercial bank deposits with the Bank of England, this could fund an increase in the personal allowance for millions of Britons.

But Chancellor John Healey has been cautioned that another raid on wealth-creators would be a disaster that would only strangle revenues, with fears that the rich are already leaving the UK. 

Andy Burnham and Mr Healey are desperately looking for ways to balance the books and pay for big spending promises.

The Middle East crisis is believed to have wiped out much of the Chancellor's 'headroom' for meeting his fiscal targets.

But Mr Burnham has been talking up his commitment to helping Britons with the cost of living as energy price rises drive inflation and the BoE prepares to push up interest rates for mortgage payers. 

Unions spent much of their annual TUC conference last week urging ministers to bring in more cash from banks and the wealthy. 

In a submission for the Budget on October 28, Mr Vince said that equalising the rates of CGT with income tax – up to 45 per cent – would generate £14billion.

Alongside ending interest payments to commercial banks, he suggested that could bring in enough to increase the personal allowance by around £3,000 to £15,570 a year.

That is just below what it would have been had it not been frozen in 2021.

Mr Vince said the existing system was 'backwards' and called on ministers to 'put money into the pockets of the people who will spend it' to jump-start the economy.

He told BBC Radio 4's Today programme: 'It will cost £20billion actually to restore the income tax freeze - which is really robbing people, particularly hard-working people.

'We pay interest to the banks every year totalling about £30billion. 

'We, through the Bank of England, pay them 4 per cent at the moment for the money that they're sat on - £30billion a year. Take that back, pay for the income tax allowance, and have £10billion in change.'

However, the Treasury's own estimates indicate that a ten-percentage point rise in CGT would actually lower revenues by £3.5billion by 2028-29. 

Tory Party chairman Kevin Hollinrake warned a CGT increase could be 'the dumbest economic policy of all time', adding: 'The clue is in the name - capital gains tax - means gains on capital that you've invested and put at risk. 

'Tax it as if there's no risk involved and fewer people will invest. Bad for jobs, bad for the economy.' 

He insisted it would also be 'bad for tax receipts'.

'You only pay CGT when you sell stuff, so people who've invested and own stuff already will defer selling stuff until a future government sees sense and lowers CGT,' he added. 'Utterly stupid sixth-form economics.' 

Helen Miller of the Institute for Fiscal Studies (IFS) think-tank suggested a much wider tax reform would be needed to be sure of raising money.

'We shouldn't just think that there's a simple solution where you put the rate up and all this money arrives at the Treasury,' she said.

Wider reforms could involve changes to stop taxing inflationary gains, she said, and looking 'very seriously at what happens when people leave the country', along with incentives for entrepreneurs and start-ups.

Backbench MP Chris Curtis, who chairs the Labour Growth Group, said the policy was 'certainly the right thing to look at' but also 'more complicated than people make it out to be'.

Earlier this year, Mr Curtis's group proposed broader reforms that it claimed could fund a 2p cut in National Insurance.

Former Conservative Treasury minister David Gauke also cast doubt on whether Mr Vince's proposals would work.

Sir David told BBC Radio 4: 'Anything that sounds too good to be true is almost certainly too good to be true. 

'I'm very sceptical that you can raise that sort of money from the banking sector without it having a significant impact on competitiveness - a significant impact on lending to small businesses in particular.'

He added: 'There isn't, I'm afraid, an easy answer, whether that's the banking sector or a few high-net-worth individuals, our tax system is already very dependent upon the very wealthy. I'm afraid answers that sort of sound terrific and mean ordinary people are unaffected are not going to be credible.'