Andy Burnham has stepped back from earlier hints on the income tax allowance, saying any change would be costly and will be examined at the Budget.
Andy Burnham has pulled back from the idea of raising the income tax allowance, after suggesting at the weekend that the freeze on the tax-free personal allowance was on his mind. The income tax allowance has been fixed at £12,570 since 2021, which has pushed more people into paying tax as wages rise.
Over the weekend, Burnham told the Times that the frustration he heard about the personal allowance while campaigning in the Makerfield by-election had stayed with him. On Monday, he told reporters the issue would be looked at in the next Budget, but he also said any change would be expensive and hard to deliver because of the financial position the government faces.
People close to the prime minister later told BBC News that changes to the personal allowance are not part of his initial plan for tackling the cost of living. Burnham also told his first cabinet meeting that the government needed to show fiscal discipline, prove its commitment to the fiscal rules, and be ready to make difficult choices.
He has said he is committed to Labour’s 2024 manifesto, which promised not to raise the basic, higher, or additional rates of income tax. That would make it harder to offset the cost of lifting the income tax allowance by increasing the top rate for higher earners. The Institute for Fiscal Studies has estimated that unfreezing the threshold could cost between £8.5 billion and £9 billion a year.
Burnham has cast his government as a cost of living government and said ministers must be prepared to reshuffle budgets to make that happen. On Tuesday morning, he announced a cut in VAT on household electricity bills from one October, which he said would save a typical household about £45 a year and be paid for by scrapping Sir Keir Starmer’s digital ID scheme. Former Chief Secretary to the Prime Minister Darren Jones disputed that funding plan, saying the digital ID programme was unfunded. Burnham is also expected to announce another cost of living move on Wednesday, when he is due to set out a lower national cap on bus fares in England outside London, from £3 to £2, starting in January. The main takeaway: Burnham is trying to show he can ease pressure on households without blowing a hole in the public finances.
Sources
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