Rachel Reeves has been urged to launch an £18bn tax raid largely on wealthy southerners in an effort to rebalance the economy and narrow the North-South divide.

Ramping up capital gains tax rates to match income tax rates would roughly double the levy’s annual haul, particularly targeting rich households in London and the South East, according to the Institute for Public Policy Research (IPPR), a left-leaning think tank.

Marcus Johns, economist at the think tank, said higher taxes would both raise money for a cash-strapped Government to help spend in poorer areas, and directly reduce inequality.

“We under-tax income from wealth compared to income from work and this special treatment benefits people living in the richest parts of the country like London and the South East. This is not just unfair, it’s a handicap on our efforts to rebalance wealth and opportunity between the regions,” he said.

“60pc of all private wealth in the UK is inherited rather than accumulated through work. That means people who inherit very little, or nothing, face an uphill task to build the wealth needed for a comfortable lifestyle.”

Capital gains made in London each year are almost five times higher per head than those in Wales.

Currently capital gains tax (CGT) – charged on the profit made on the sale of assets including shares and buy to let homes – is charged at between 10pc and 28pc, depending on the type of asset and the income of the person making the gain. It is set to raise £15.2bn this year.