If Britain was free of debt and balancing the books, we know what Burnham would do. Same as any Labour PM. Tax, borrow and spend. Unfortunately, we aren’t free of debt. We’re drowning in it, owing almost £3trillion. And we’re on course to borrow another £130billion or so this year. So what are Burnham and chancellor John Healey preparing to do? You guessed it. Tax, borrow and spend regardless.
Labour MPs demand it. They didn’t eject Keir Starmer because they thought he was taxing, borrowing and spending too little. Last week, Burnham faced 125 questions in Parliament. His answer to almost every spending request was the same. Spend more. And with every reply, Britain got poorer. The bond market was watching and UK gilt yields climbed to the highest level since 1998.
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That may not sound a big deal, but it will cost us billions in extra interest. We already pay £110billion a year servicing our debts, more than the defence and education budgets combined. Now we’ll pay even more. By the time Burnham was done, the chancellor’s fiscal headroom had plunged from £26billion to less than £14billion. If the Iran war drags on and inflation climbs higher, it could vanish altogether.
The National Institute of Economic and Social Research reckons we need £40billion of tax rises or spending cuts in the Budget. Healey is working on the tax hikes. We can forget the spending cuts.
City experts are urgently calling for Burnham to wake up as we sail into a perfect financial storm. So have two of the men he brought in to beef up his financial credibility. Former Bank of England chief economist Andy Haldane and Goldman Sachs economist Jim O’Neill. Haldane has urged Healey not to tax, borrow or spend a penny more for the next three years. As if.
Lord O’Neill has skewered talk of introducing a wealth tax and hiking capital gains tax. He said this will spook businesses and will drive entrepreneurs. Neither man is backing Burnham today.
Last week, O’Neill went on the attack again, calling for Burnham to rein in the “excesses” of government expenditure and tackle “sacred cows”. O’Neill even called for the triple lock to be axed. Burnham is committed to it for the rest of this Parliament. Something else may have to go.
This crisis will build in waves. Yesterday, bond yields retreated. They will climb again. Burnham’s critics will come in waves too, but he won’t listen. No matter how many are screaming at him to stop.
He won’t stop, and he can’t stop. Labour won’t let him. He knows any hint of spending cuts will drive the left into a frenzy, with dire consequences for his personal popularity and the Labour Party he was brought in to save.
But Britain is already dangerously exposed. Our borrowing costs are among the highest in the developed world. As inflation climbs everywhere, they will only get higher. Especially if we get a winter energy crisis. And Burnham keeps nudging us closer to the edge.
If Burnham won’t cut, he’ll either have to tax more, which will destroy growth, or borrow more, which will bring the wrath of the bond market upon us. It will finally force us to slam on the brakes. But not before a 1970s-style fiscal crisis.
Tax, borrow, spend, repeat. Tory and Labour governments have been doing it for three decades. At some point, that cycle has to stop. Burnham must listen before it’s too late.
Reform UK leader Nigel Farage (Image: Getty)
Reform UK will increase the tax-free personal allowance to £15,000 if Nigel Farage wins the next general election. Robert Jenrick will pledge to bring in the change in the first 100 days of becoming chancellor in his speech at the party’s conference today.
The tax-free amount has been frozen at £12,570 since 2021 in a major stealth tax and is due to stay at that level until 2031. Mr Jenrick will tell the gathering in Birmingham: “As chancellor, I will wake each morning with one purpose. To make Britain a better place to be a worker than it was the day before.
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“In the first hundred days of a Reform government, in our first Budget, we will raise the tax-free personal allowance from £12,570 to £15,000.”
He is expected to add: “1.3 million were dragged into paying tax last year alone. Why? Because the tax-free allowance has been stuck at 12 and a half grand since 2021. And Labour has frozen it until 2031.
“That betrayal costs a full-time worker on the minimum wage more than £750 a year. And now for the first time, the freeze means they’re going to be taxing the state pension. What a disgrace.”
Mr Jenrick will challenge Andy Burnham to match the policy, saying: “The hard choice for Burnham and for us is exactly the same. It’s either welfare waste, foreign aid and migrants – or the British worker. We choose the worker.”
He will add that it remains Reform’s long-term aim to bump up the tax-free amount to £20,000.
He is expected to say: “When we can — only when it is paid for in full — I will go further, step-by-step, until we’ve reached Reform’s ambition of a £20,000 tax free allowance.”
The Prime Minister raised hopes that he could unfreeze the personal allowance shortly after entering 10 Downing Street in July.
He said the issue was “lodged in my mind” after hearing it on the campaign trail during the Makerfield by-election.
But Mr Burnham later said there was no immediate commitment to increase the tax-free amount but that it would be looked at in the Budget.
The PM said: “Well, it’s funny these days you can’t answer a question honestly without then people reading everything else into it.”
He added: “I want to answer questions honestly in this job, as I said before.
“I think that’s all about trust in politics and doing politics differently, and I’m determined to keep working in that way.
“It was raised a lot, but I then went on to say, ‘But we’ll have to look at it at the Budget alongside everything else’. So no commitment, no unfunded promise.
“It’s just perhaps the way politics is these days and the way people report things, but that was an honest answer. There is no commitment at this point to change, but we will look at that at the Budget.”
A Labour Party spokesperson said: “Robert Jenrick only seems to be interested in making people better off when Reform UK are trying to distract from the latest scandal engulfing their party. The public will see right through it.