As Andy Burnham settles into his new role as Prime Minister, the UK's cost of living crisis is poised to take centre stage in British politics. The financial struggles faced by families up and down the country have become an election-winning issue, with Mr Burnham promising to breathe life back into household finances that are feeling the strain of rising energy bills, transport costs, and unaffordable housing. With his first policy announcements expected on Tuesday, attention will focus intensely on how his government plans to make essential services and goods more affordable.
The challenge facing Mr Burnham is substantial: finding a balance between alleviating financial pressures on households and avoiding damaging economic stability. His government has pledged to support citizens in areas such as energy costs, transport, and housing affordability, but funding these initiatives will require careful consideration – and potentially difficult trade-offs. The Chancellor, whose identity has yet to be confirmed, will play a crucial role in outlining how policy ambitions are financed and implemented.
One area where Mr Burnham has previously hinted at reform is taxation. He has suggested adjusting the personal allowance to allow individuals to earn more before they begin paying income tax – a shift from the current government policy that has frozen income tax and National Insurance thresholds until April 2031 in England, Wales, and Northern Ireland. While this move could reduce the tax burden on some, it would also necessitate finding alternative revenue streams or increasing borrowing, given that threshold freezes have been a significant revenue generator for the Treasury. Mr Burnham has also indicated a willingness to 'ask for a little bit more' in tax from certain individuals.
Despite potential adjustments to specific tax policies, the new government is expected to adhere to the Labour manifesto pledge of not increasing the main three taxes: income tax, National Insurance, and VAT. However, recent changes to inheritance tax affecting family farms have shown that other taxes can be altered – a possibility that could include replacing stamp duty and council tax with an alternative property tax or aligning capital gains tax rates with income tax rates on profits from selling assets like secondary properties or certain shares. Any such reforms would likely be complex, take time to implement, and create both winners and losers.
The government is also anticipated to maintain its self-imposed fiscal rules, a framework guiding decisions on taxation and public spending that has been subject to debate among economists. While some view these rules as essential for economic stability and improved living standards, others argue they can be restrictive. With Mr Burnham's policy announcements set to spark intense scrutiny of his government's fiscal strategy, one thing is clear: the post-election landscape will continue to shift in response to changing economic conditions.