In his first speech as prime minister, Andy Burnham promised to give people more “breathing space” on the cost of living – but within hours admitted that changing the tax-free personal allowance would be “difficult” in current economic circumstances.
The new PM confirmed he will be “looking at” the personal allowance ahead of his first Budget in the autumn, a move that would allow people to earn more before paying income tax. Policies are due to be announced on Tuesday, his first full day in office.
“Burnham promises cost of living relief and tax threshold review but admits changes will be 'difficult'.”
Burnham has long made the cost of living a defining issue. Many people, he has previously said, cannot go out for a pint on a Friday, cannot take the kids out, and cannot go on holiday because of financial pressure. Easing that burden, however, has proved elusive for his predecessors.
Just months ago, Sir Keir Starmer and then-chancellor Rachel Reeves were promising the same focus. In January this year, they spoke of every minute not talking about the cost of living as “a wasted minute” and called it the “number one focus”. They cut £150 from a typical annual domestic energy bill in April by shifting some levies onto taxation. But those bills soon rose again, along with the cost of food and mortgages, owing to the impact of US-Israeli strikes on Iran.
“A more volatile world is a more expensive world,” said Adam French of the financial information service Moneyfacts.
Burnham’s room for manoeuvre is constrained. Under existing policy, income tax and National Insurance thresholds are frozen until April 2031 in England, Wales and Northern Ireland, meaning that as earnings rise, a greater proportion is taxed – a major revenue raiser for the government. Partially reversing that freeze would require finding the money elsewhere or borrowing.
Hinting at the trade-offs ahead, Burnham has also spoken of “asking for a little bit more” in tax from some people. His new chancellor, John Healey, will be the one who has to deliver any changes and outline how to pay for them.
The question now is whether the promised breathing space can survive the same volatile world that crushed earlier plans.