Andy Burnham has dashed hopes of an early income tax giveaway, telling reporters he will not make an immediate change to the frozen personal allowance — even as he acknowledged the “frustration” voters feel about being dragged into paying tax.
The £12,570 threshold has been frozen since 2021, pulling more people into income tax as wages rise. Speaking to the Times during the Makerfield by-election campaign, the prime minister said the “frustration about the personal allowance” he heard was “lodged in my mind”. But on Wednesday, when asked if he would make changes, he replied: “There is no commitment at this point to change, but we will look at that at the Budget.”
“Burnham says no immediate change to frozen personal allowance, hints at Budget review”
Burnham had earlier told his first cabinet meeting: “We’ve got to show fiscal discipline. We’ve got to show that our commitment to the fiscal rules is real and we’re prepared to make difficult decisions in relation to that.” People close to him told BBC News on Tuesday that any adjustments to the personal allowance are not part of his initial plan to tackle the cost of living.
The Institute for Fiscal Studies has estimated that unfreezing the threshold could cost £8.5bn to £9bn a year. Burnham has committed to Labour’s 2024 manifesto, which rules out increasing the basic, higher or additional rates of income tax — meaning he cannot offset the cost by raising top rates.
Separately, on Tuesday morning, Burnham unveiled a VAT reduction on household electricity bills from 1 October, saving a typical household about £45 annually. The £850m cost will be met by scrapping Sir Keir Starmer’s digital ID scheme, he confirmed. But former Chief Secretary to the Prime Minister Darren Jones challenged that, writing on X that the Digital ID programme was “unfunded”. The PM’s spokesman insisted the policy would be funded.
Burnham has told his cabinet he wants to lead a “cost of living government”, requiring ministers to be “prepared to reprioritise” how they allocate budgets. With the Budget still to come, the question of whether the personal allowance will ever be unfrozen — and how to pay for it — remains unresolved.