LONDON: UK Prime Minister Andy Burnham has hinted that he doesn’t want his government to repeat the tax rises of recent Labour budgets, as Chancellor of the Exchequer John Healey prepares for a tricky financial statement on Monday.
Former Chancellor of the Exchequer Rachel Reeves delivered two budgets, raising taxes by a cumulative £68bil (US$90bil) in 2029 and 2030, according to Office for Budget Responsibility projections.
That will lift the tax take to a record 38% of economic output by 2030.
“We have had two budgets, in 2024 and 2025, and we have to be conscious of the extent to which we have raised revenue,” Burnham told reporters travelling with him to the United Nations (UN) in New York this week.
“We have to make sure we get the balance right,” he said.
The Treasury has also previously indicated Healey, Reeves’ successor, does not want to implement a budget of the same scale.
But most economists expect he will have to raise some taxes to help plug the gap in the public finances that has opened up as rising borrowing costs fuelled by the United States war in Iran erode the financial headroom he inherited.
Bloomberg Economics earlier this month estimated the surge in gilt yields would knock about £12bil off the government’s £23.6bil buffer.
In an interview with the New Statesman published on Wednesday, Burnham said the United Kingdom has left itself “overexposed” to global bond markets, and defended controversial comments he made last year to the same publication that the United Kingdom should not be “in hock” to the global market.
As Healey prepares his budget, Treasury officials have looked at the possibility of hiking taxes on banks, oil and gas companies and gambling.
Burnham’s comments to reporters on the UN trip this week send a note of caution to those on the left of his party, who believe he should raise more revenue so the government can spend more.
Burnham declined to be drawn on whether the balance was right between taxing wealth and income, deferring that to the budget.
The premier acknowledged he faced a more difficult economic picture due to global conflicts, forcing a tonal shift ahead of the budget.
But he said it was not true to suggest he had not been prepared for this.
“It’s not the case that we were surprised when we came in, not least because I was in access talks and understood very clearly the position,” Burnham said, referring to discussions his team had with ministries before he took over from Keir Starmer in July.
“Because of the situation in the Middle East, the position changed, and has changed over the time I’ve been in. That’s just the reality.”
Days before Burnham entered Downing Street, Bloomberg reported that he was receiving gloomy internal economic assessments of rising inflation and a worsening economy thanks to the Iran war.
Then in August Bloomberg obtained Treasury forecasts warning of a growth downgrade in 2027 if the conflict continued.
Despite the economic pressures, Burnham plans to use his first leader’s speech at Labour’s annual conference next week to project a message of hope and optimism.
“The message will be it’s time for Britain to believe again, it’s time for Britain to have hope again,” Burnham said.
“A more stable Britain will be one that can then set out a new direction, drawing a line with the last decade.” — Bloomberg
