Andy Burnham’s victory in the Makerfield by-election could have significant implications for the UK’s tax policy.
The Greater Manchester Mayor has signalled that he will use his return to Westminster to enter any contest to replace the Prime Minister, Sir Keir Starmer.
He said on Friday Britain needed fundamental change, an end to “trickle-down” economics and an economy that worked for everyone.
Shorts
While much of Burnham’s agenda for Government is still vague, here’s what could change.
Hints of income tax cut
Last year, Burnham said there was “definitely a case” to reintroduce the 50p top rate of income tax before the end of the current Parliament.
However, in an interview with The Observer last month, he appeared to back away from the idea. “I think we need to tread carefully and carry people with us, not necessarily going straight to new areas of division and conflict,” he said.
In any case, raising the additional rate of income tax from its current rate of 45 per cent would breach Labour’s 2024 general election manifesto, which vowed not to increase the three biggest taxes – income tax, national insurance and VAT.
On the BBC’s Question Time earlier this month, Burnham suggested he was open to cutting tax by raising the income tax personal allowance, which currently sits at £12,570.
“On the personal allowance, I’ve heard on so many doorsteps and I’ve said to my team, let’s have a proper look at this and let’s develop a policy,” he said.
The e nd of VAT on private schools ?
If Burnham becomes prime minister, he will have to decide whether he wants to continue with the decisions made by Starmer and Chancellor Rachel Reeves.
One such example is the decision to put VAT on independent school fees . One Labour MP who is a supporter of Burnham told The i Paper they wanted him to reverse the move.
They said: “I believe in hard graft and if the result of my hard graft is that I can afford to send my precious child to a private school so they don’t have to struggle and graft in the way I have then I am completely comfortable with that.
“It doesn’t raise that much and it is merely tokenistic. Andy should reverse it if he wants to get buy-in from middle England to do more radical things.”
Figures from the Independent Schools Council census suggest that the number of children at private schools has fallen by 20,000 in the first full year of the increase. According to the Government, the tax increase will bring in more than £1.8bn a year by 2029-30.
Anthony Seldon, the historian, educator and author, said: “As with all bad government policy, the harm only becomes fully evident some years later. We’re just seeing the early messengers of the damage that has been done – and for what?
“An intelligent government would have worked with the independent sector to raise schools as a whole.”
However, it is likely that any attempt to reverse the tax would face concerted opposition from many Labour MPs.
No rises to national insurance
Burnham has said he will honour the commitment in Labour’s manifesto not to increase income tax, VAT or national insurance.
Launching his by-election campaign last month , he said: “I am committed to the manifesto commitments on tax, I think that’s really important from a trust point of view.”
He did, however, argue there was room to be “more radical” within the confines of these promises.
A new care levy
When Burnham was health secretary in 2009 under Gordon Brown, he proposed a levy on estates to pay for universal social care. In recent years, he has talked about replacing inheritance tax with a progressive “care levy” to fund a national care service.
In an interview with The Guardian earlier this month, he said he remained interested in the idea.
“It is urgent, the need to fix social care, and I personally would look at all of the kind of implications of that in relation to inheritance tax and care charges and everything. I wouldn’t flinch from it,” he said.
Burnham’s leadership rival Streeting has suggested raising capital gains tax to equalise it with income tax. Burnham has not ruled out such an increase.
He said at his campaign launch: “I’ve seen those new proposals. When we’re speaking on capital gains tax, I would want to look at them. I wouldn’t want to commit either way, I’d need to look at them in detail.”
More generally, Burnham has indicated he wants to shift taxation towards wealth. He told Sky News in June last year: “We’ve overtaxed people’s work and we’ve undertaxed people’s assets and wealth and that balance should be put more right.”
Reform of council tax
Burnham’s allies from the North of England are clamouring for a land value tax (LVT) to replace council tax.
The Greater Manchester Mayor appears keen on the idea. “I’ve long been persuaded of the argument for a land value tax,” he said recently. “I’m personally keen to see reform of council tax. It’s a highly regressive tax. I see a big case for land and property and business taxation to be cha…
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