The Office for Budget Responsibility (OBR) has warned that Andy Burnham's income tax proposals could result in two million people losing their jobs. The Labour MP for Makerfield, widely tipped to become the next Prime Minister, has suggested there is "room" to raise taxes under his leadership.
OBR Warning on Tax Threshold Freezes
The independent watchdog cautioned that if future governments continue to raise income tax thresholds in line with prices rather than wages, two-thirds of all workers—equivalent to more than 20 million people—could become higher-rate taxpayers within several decades. This estimate was reported by Birmingham Live.
Former Prime Minister Rishi Sunak, during his Conservative government, froze income tax thresholds until 2028. Current Chancellor Rachel Reeves, widely anticipated to be succeeded by Ed Miliband under a Burnham premiership, has extended the policy until the beginning of the next decade.
Labour Supply Impact by 2075
The OBR estimated that "labour supply could fall by around two million" workers by 2075. It further observed that even if governments resumed increasing tax thresholds in line with inflation for the following 50 years, this would still produce "very significant increases in personal tax rates."
David Miles, an executive member of the OBR, cautioned: "It would be painful, because ... if you carry on doing that decade after decade, it isn't too far down the road until the great majority of people are higher rate taxpayers." He added that this would affect people's "willingness to work, willingness to stay in the UK [and] to save, to pay taxes if income tax rates rose by that amount. So it's not a painless road to go down."
Historical Tax Context
"It used to be the case that the UK was a relatively low tax country relative to continental Europe," said Miles. OBR official Tom Josephs warned: "It is certainly a substantial pressure on public spending over the longer term, and is making a very significant contribution to that upward pressure on spending."
Burnham's Response
During a conversation with LBC presenter Andrew Marr, Burnham insisted that Greater Manchester's finances had been "rock solid" throughout his tenure as mayor, while highlighting his former role as a Treasury minister under the previous Labour administration. He said: "I stick by the manifesto and the promises that it made. So, let me be absolutely clear about that, but there is some room within that manifesto for movement on tax."
