Andy Burnham has rowed back on the idea that the personal allowance of £12,570 before people start paying income tax could rise, according to reports.
Background on the personal allowance freeze
On the eve of becoming Prime Minister, Mr Burnham raised the prospect of an increase in the allowance, which has been frozen since 2022. He stressed that the freeze was “the thing I heard the most on the doorsteps” during the Makerfield by-election and that the issue was “lodged in my mind”.
“So when people, they’re just characterising me as a tax raiser, well again it’s never that simplistic is it?” he told The Times.
Burnham's comments on the Budget
Just hours after becoming PM on Monday, he explained further: “So all of this will be looked at though at the Budget, and obviously it's difficult given the financial circumstances in which we find ourselves. But I wanted to recognise the point because it's challenging for people and it's people on the lowest incomes perhaps who've most been affected by that. So it's an issue that I'm just kind of showing I have a visibility of the issue. It's difficult because changing the threshold is not without significant consequences. But I'm looking at it.”
However, the BBC reported on Wednesday that any changes to the personal allowance were not part of the new Government’s initial plan to tackle the cost of living, which includes a £2 cap on bus fares outside of London.
Tax experts' views and stealth tax impact
Tax experts say raising the personal allowance is expensive and if the new Government wants to encourage more people into work increasing the threshold for paying National Insurance is a better option. The freezing of the thresholds for paying income tax has raked in tens of billions of pounds for the Treasury in a “stealth tax”. Hundreds of thousands of people have been dragged into paying the 20p basic or 40p higher rate on income tax by the freeze, first introduced by Rishi Sunak and which Chancellor Rachel Reeves has extended by a further three years until 2031.
Broader cost-of-living and tax plans
Mr Burnham has been in talks with the Treasury in recent days as he is set to make a series of announcements to ease the cost-of-living crisis still being suffered by so many households. However, he has also signalled that he may raise taxes on the better off which could hit London particularly hard. He did not rule out bringing back the 50p top rate of tax.
Burnham's premiership priorities
Former Greater Manchester Mayor Mr Burnham, who replaced Sir Keir Starmer as PM after a huge Labour revolt, has already set sky-high expectations of his premiership. He has vowed to undo what he sees as the damage of 40 years of “neoliberalism” which he says has not benefitted many communities across the country. He has pledged the “biggest devolution of power in modern times” and the largest council homes building programme in the post-war period. Crucially, he is seeking to offer hope and optimism for the country, particularly for left-behind communities.
Cabinet appointments and other policies
On Monday afternoon and evening, Mr Burnham named his Cabinet, with John Healey appointed as Chancellor, Ed Miliband Foreign Secretary and Shabana Mahmood remaining Home Secretary. Ilford North MP Wes Streeting became Defence Secretary and Peckham MP Miatta Fahnbulleh Net Zero Secretary. Makerfield MP Mr Burnham wants to devolve power away from Westminster as one of his key priorities, driving that agenda with a new “No 10 North” in Manchester. Tens of thousands of jobs could be moved out of Whitehall.
Promising a “reset of priorities”, Mr Burnham has also announced he will scrap Sir Keir’s flagship digital ID programme to focus money and attention on the cost of living. However, he was caught in a row over funding for his move to axe VAT from domestic electricity bills. Reports have suggested cost-of-living support could include action on energy bills, including allowing more oil and gas drilling in the North Sea. Mr Burnham also faces having to grapple with the Thames Water scandal and whether to put it into a special administration regime as part of a move to find a buyer. Another priority is likely to be reforming social care, which he has said is something he wishes to “expend political capital” on.
