Economists warn that Andy Burnham's new chancellor is lining up the next assault in Labour's war on wealth. Rachel Reeves has already hit taxpayers twice. Now John Healey is preparing a third strike, set to raise taxes by another £25billion in the Budget on October 28, according to Capital Economics calculations.
That's on top of the £26billion Reeves raised in 2025 and the record £40billion blitz in 2024. It's the only way to fund all the spending pledges Burnham has been stacking up since entering Number 10 three weeks ago.
Burnham's spending spree
Burnham has capped bus fares at £2, knocked VAT off electricity bills and cut business rates on pubs. He has also promised to overhaul social care, hike defence spending and launch the largest council housebuilding programme since the 1950s.
Ruth Gregory, deputy chief UK economist at Capital Economics, said Burnham's policies will cost tens of billions, piling still more pressure on the public finances. The result, she said: "This tax-raising budget could be almost as big as the last."
Record tax burden
Gregory said the upcoming Budget would increase both the tax burden, already at a record high, and the size of the UK state. She added: "We suspect most of the extra burden will fall on households."
Pensioners, working people and entrepreneurs will be footing the bill, while benefit claimants have nothing to fear. Backbench Labour MPs won't let Burnham make any meaningful cuts to spending, just as they blocked Reeves's attempts to tackle welfare.
Fiscal rules and tax raids
Healey is also considering fiddling with the fiscal rules to borrow another £9billion a year, which will go straight onto the £3trillion debt pile. Gregory has suggested he could launch a tax raid on banks.
She said he might wriggle around Labour's manifesto pledge not to raise income tax, National Insurance or VAT, instead introducing a defence levy or social care levy, which is income tax by another name. It will add yet more complexity to the tax system.
Gregory warned that a £25billion raid would push the tax burden to a record 39% of GDP, some way higher than the G7 average of 36%. She didn't speculate on which taxes would rise, but she did say pensioners and entrepreneurs would be hardest hit. Savings, investments, property, inheritance and capital gains could all come under attack. The details won't be known until October 28.
