Andy Burnham has disregarded suggestions about raising the tax-free personal allowance as he says a change would be expensive. The £12,570 threshold has been frozen since 2021, leading to more individuals being made to pay tax as wages have risen year-on-year.
Burnham's comments on the allowance
Speaking to the Times, Burnham said the "frustration about the personal allowance" he had encountered while campaigning during his by-election earlier this year was "lodged in my mind". The Prime Minister subsequently told reporters on Monday that "all of this will be looked at" in the next Budget, but could be "difficult given the financial circumstances."
Immediate strategy
Sources close to Burnham have spoken to BBC News detailing that any adjustments to the personal allowance do not form part of his immediate strategy for addressing the cost of living crisis.
This follows Burnham telling his first Cabinet meeting: "We've got to show fiscal discipline. We've got to show that our commitment to the fiscal rules is real and we're prepared to make difficult decisions in relation to that."
Manifesto commitment
Burnham has pledged to honour Labour's 2024 manifesto, which contained a commitment not to raise the basic, higher, or additional rates of income tax. That would prevent increasing the top rate of income tax paid by higher earners to cover the expense of lifting the personal allowance.
The Institute for Fiscal Studies has calculated that unfreezing the threshold could ultimately cost £8.5-9bn annually. Burnham said on Monday that he was "just kind of showing I have visibility of the issue and the impact it's had."
Budget outlook
Speaking to reporters, he indicated the matter would be "looked at" during the Budget, while acknowledging: "Obviously it's difficult, given the financial circumstances in which we find ourselves."
Burnham has informed his cabinet of his ambition to lead a "cost of living government", stating that achieving this goal would require ministers to be "prepared to reprioritise" their budget allocations.
VAT reduction and funding
On Tuesday morning, he unveiled a VAT reduction on household electricity bills from 1 October, which would save a typical household around £45 annually. The projected £850m cost would be met by scrapping Sir Keir Starmer's digital ID scheme, he confirmed.
This claim has already been challenged by former Chief Secretary to the Prime Minister, Darren Jones, who maintained that the Digital ID programme was unfunded. "The government will have to set out how it will pay for its new policies at the budget," he wrote on X.
The prime minister's spokesman insisted the policy would be funded by redirecting "savings" identified by departments to cover the cost of the ID scheme.
Further measures
Burnham has pledged that further measures to alleviate cost of living pressures on working people in the UK will be unveiled later this week.
