Andy Burnham has confirmed he will exempt pensioners on the state pension only from income tax, a move that buys the new prime minister political breathing space but leaves his wider spending plans under a cloud of uncertainty.
The Treasury told The i Paper that Burnham and his chancellor, John Healey, will ensure that anyone whose sole income is the state pension avoids tax, with details of how to assess eligibility due later this year. The decision comes as Burnham faces the same knotty fiscal rules that forced his predecessor Rachel Reeves to make deeply unpopular cuts, including restricting the winter fuel payment to those on pension credits – a move that left her politically exposed.
“Burnham pledges to exempt state pension-only earners from tax but faces questions over funding his cost-of-living policies.”
Burnham this week described his government as a “second chance at a first impression” after the mistakes of Keir Starmer and Reeves. He has rolled out a blizzard of policy announcements on energy bills, bus fares and business rates for pubs under the banner of a “cost of living government”. While he insists ministers must show how they will pay for their policies, he has not provided clear funding for his own pledges.
The prime minister is committed to the same fiscal rules that forced Reeves to make difficult, politically unpalatable decisions. He has deliberately avoided her “doom-and-gloom” language, but the vow to shield pensioners from taxation does not answer the wider question of how he intends to fund the triple lock – which will drag pensions into taxation next year – let alone his promises to end rough sleeping, reform social care, and reduce VAT on energy bills to zero.
Politically, the exemption makes sense. It would be a brave or perhaps daft leader who picked an early fight with pensioners, a voting bloc that proved treacherous for Reeves. But with no fiscal event until autumn, the gaps in Burnham’s funding plans threaten to leave him in a position as precarious as the one he sought to escape.