June 24, 2026 • 22 mins
Can Andy Burnham keep his promises without hitting Britons in the pocket? Merryn Somerset Webb speaks with Bloomberg's Phil Aldrick about the tax hikes, spending pressures and economic realities facing Britain's likely next Prime Minister—and why there may be no painless solutions.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Merrin Talk's
Your Money, the personal finance edition of Merin Talk's Money
and these bonus podcasts we talk about the best strategies
(00:24):
for making the most of your money. I'm Merin Dumbsup,
Web editor at Large for Bloomberg UK Wealth Now. This
week kicked off with some drama in British politics and
a particular surprise there. Following Andy Burnham's victory in the
Makefield by election and growing brother from Labor and Peace
Kiss someone announced his resignation as Labor leader and Prime Minister.
(00:44):
Burnham quickly confirmed what we already knew, which is that
he would be seeking the leadership and that is widely
expected to happen in the next few weeks without much
of a contest. So we imagine that Andy Burnham will
be the next Prime Minister. And the question then is
what will Britain look like under Andy Burnham? And more importantly,
(01:05):
what will it mean for your money? Spoiler probably nothing good.
With me to help explore that question, It's Philip Alderic,
senior reporter covering the UK Cony for Bloomberg News. Phil Welcome,
thank you for joining us today.
Speaker 2 (01:21):
Good to be here, right.
Speaker 1 (01:22):
The first thing to say, I guess is that assuming
that Andy Burnham is going to stick to the fiscal rules,
which he has said he is going to do, that
leaves him with very little immediate wiggle room. Right.
Speaker 2 (01:35):
Yeah, I mean, we've got twenty three billion of headroom
that Rachel Reeves left us with, which itself was a
relatively small amount of headroom. Unless he gets really lucky
with growth. Yeah, he's going to He's really got very
few options at the end of the parliament. Most of
the hard work is going to be done with these
frozen tax thresholds, which are going to really irritate most
(01:57):
of the electorate. So you can't see them the government
pushing through that, even a Burnham government pushing through with
something which is going to be some unpopular right before
a general election.
Speaker 1 (02:07):
Yeah, I mean, I suppose the first thing we should
actually do is just remind everybody roughly what the fiscal
rules are, right, which is that you correct me if
I'm wrong this You're the technical guy here, not me. One.
That we need to be pushing towards the budget surplus
by twenty nine thirty, so that spending is in surplus,
although there's that sort of fluffy bit around what is
spending and what is investment right, And the second major
(02:29):
one is that public debt is a percentage of GDP
needs to be beginning to trend down by twenty nine thirty,
and looking at where we are now, that seems to
be verging on impossible. And we had the the May
borrowing numbers were horrible, weren't they much higher than expected?
And nearly twelve billion pounds in May spend on interest
on our debt alone, which is horrible. So you look
(02:51):
at this stuff and you think, well, even if the
Parma government had hung on and Reeves had hung on,
this was still going to fail come twenty nine thirty
unless there was a massive spending squeeze or some sort
of bizarre boosting growth, which seems inconceivable. So that was
already going to fail.
Speaker 2 (03:10):
Well, I mean, I think the only thing I caution
there with is obviously the situation right now in the
middle of the Irm war, and not all price spike
et cetera. The inflation's picked up, so a lot of
that may just be a temporary spike. The underlying state
of the public finances does remain pretty dire. It was
going to be very difficult for Starmer to deliver the
fiscal rules and get growth going and get your investment
(03:32):
up because there are so many pressures on all sorts
of public spending at the moment.
Speaker 1 (03:37):
Okay, So let's assume that it is going to be
Andy Burnham, of course, not absolutely certain yet that there
could be a contestant. Then we get all kinds of
spending commitments checked in from everyone trying to win, and
everything gets what rather worse than we think. But let's
assume that not going to happen. We have an orderly
transition the bond market and the equity market. Figure that's
(03:57):
kind of okay, because fiscal rules something some and so
that all stairs relatively calm. When we look at what
Burnamus talked about, He's talked about things like looking again
at the freezers on income tax allowances. He's talked about
reconsidering the inheritance tax charges on farmers. He's looked at
(04:23):
talked about cutting business rates down for pubs and listening
lifting threshold for small businesses. He's talked about reversing the
rise in employers national insurance. But all these things would
be marvelous because all of them have been fairly nasty
drags on growth and on sentiment in the UK. But
going back to this idea that there's very little room
(04:45):
to do anything, it seems inconceivable that he could possibly
do those things without also introducing new taxes, perhaps on wealth.
Speaker 2 (04:53):
Yeah, I mean, it's implausible to think that he can.
He can make all these all these tax cuts for
particicular sections of society and to help ease some of
the pressures that on business without you know, without recovering
the money from elsewhere. And we've and we've seen that
no spending cuts seems to be it seemed to be
pretty undeliverable in under this government with and you know,
(05:14):
the makeup of the labor governments or the Labor Party,
with the backbench rebellions still sort of brewing. Whenever there
is talk of a spending cut, it's going to be
the same problem that burn And faces in regard to that. So, yes,
if there's going to be a tax cut, there's going
to be a tax rise to pay for that tax cut.
That that's the way if he's if he is honestly
going to stick to the fiscal rules that Rachel Reeves
(05:36):
is introduced, then, yeah, somebody is going to bear some
pain to ease the pain on someone else.
Speaker 1 (05:42):
Looking at whether there's risers might come, and one of
the things that he has previously suggested is reintroducing the
fifty p rate of tax on higher earners.
Speaker 2 (05:51):
Doesn't make any money. I mean it doesn't. It never
makes doesn't touch the size, does it, really.
Speaker 1 (05:55):
It doesn't touch the size. There was a wonderful article
on the one of the papers at the weekend. I
don't know if you saw it, and about gosh, I
don't know, seven or eight years ago, ten years ago,
whenever it was Scottish referendum, I write an article saying
that taxes were going to go up in Scotland and
that one should rush out and buy houses in Northumberland,
just on the border, because that's where everybody would go.
You know, the top rate of tax in Scotland is
(06:17):
now forty eight percent and here's the headline, Scottish tax
exiles flood into Northumberland. Families fleeing the SMP's higher rates
are driving up president in Northumberland. So you know, fifty pm,
we'd all be going the other way.
Speaker 2 (06:30):
Yeah, exactly, yes, gif for Scotland it would be a
symbolic gesture rather than an attempt to reduce the constraints
that he has, his fiscal constraints that he has. I
think he's also talked about sort of doing the council
tax revaluation. That again would be a shift in the
balance of taxes because people in the borer regions would
pay less than people in London, and the wealthier regions
(06:52):
would end up paying more because their houses were valid
more then, so that would be a redistributive operation. But
he could you can also attach to that some some
form of net tax increase as well, so I could
you know, I could imagine him him doing something like that.
And he's also talked about I mean, in the past
he talked about ten percent inheritance tax on I think
(07:14):
on all inheritance. So we've obviously got them, you know,
up to a million pound before you you end up
getting HD being incurred with inheritance tax. So and that
he talked about that was in relation to social care
in the past. So again that's a that could raise
you know, substantial sums of money and as you said,
is effectively a tax on inherited wealth.
Speaker 1 (07:33):
And that would be interesting because one of the things
that people worry about all the time, absolutely NonStop is
inheritance tax, even people whose estates will never fall into
the inheritance tax, whereas you worry about it all the time,
and suddenly he'd give them good reason to worry about it.
Speaker 2 (07:47):
Yeah, and the last time they worried about it was
with Terre's and May's dementia taxes, as Labor branded it
back then, and it cost her majority, didn't it. So
it's obviously, as we all know, it's the least one
of the least popular time. This is the thing. There
is economic restraint and then there's political constraint, and the
two are sort of operating hand in hand. The physical
(08:08):
situation rather than the fiscal rules in the UK is
itself a massive constraint, and then the efforts to actually
try and fix that have proved to be a huge
political constraint. So you end up just in complete stalemate.
And that's the big challenge for Burnham is how he
breaks that stalemate where Starmer was unable to well.
Speaker 1 (08:24):
I suppose Ah could be super strong and just get
on with it, But the obvious route then is to
try and go down as we were just saying with
the inheritance tax to try and go further down the
wealth tax route, and he has talked about, for example,
equalizing the rates on income tax and capital gains tax,
which sounds very attractive to lots of people, but of
course is fairly outrageous because that's an absolutely massive wealth tax.
(08:49):
So when the rates of capital gains tax were were
cut previously under Gordon Brown to what today's relatively low
sounding levels, one of the things had happened at the
same time was the removal of the indexing to inflation.
And because the rates were lower, that was sort of
vaguely acceptable because you're no longer you're paying a lower rate,
but you're paying tax on your inflationary gains as opposed
to your real gain. It was kind of a reasonable compromise.
(09:12):
But if you were to put capital gains tax rates
up to income tax rates without taking into account inflation,
you have introduced, I mean, it's a wealth tax at
the moment, but you would have introduced a massive wealth tax.
And that we have few enough of our rich happily
staying in the UK at the moment, this would be
something I suspect that would really drive up departures.
Speaker 2 (09:34):
I mean a lot of small business owners. They make
their money through taking capital gains on the businesses that
the profits that they've made and the gains that they've made.
I think people in general would see it as unfair
if you had a capital gains tax which was unadjusted
for inflation. Obviously, the people who are defending the idea
will point back to Nigel Lawson in the nineteen eighties,
(09:56):
and that was when capital gains tax was last The
rates were drawn to be equivalent to the income tax rates,
and so you know, there is a sort of you know,
the labor can say, oh, well, the Tories did it,
but of course back then there was the inflation adjustment.
And the Liberal Democrats say in the election manifesto, in
their election manifesto in twenty twenty four, they had something
similar where they wanted to they wanted to harmonize the
(10:17):
rates but with the income tax rates, but they would
introduce in inflation adjustments. So for your thinking about doing this,
you either do it the way he wants to do
it and just irritate so many people that it will
backfire inevitably, or you do it in a way The
Liberal Democrats were suggesting which ends up raising you know,
after behavioral adjustments or whatever. It only ends up raising
it three or four billion, which is nice to have,
(10:39):
but it doesn't solve everything. So it's not a big
you know, it's not a big bazooka.
Speaker 1 (10:43):
Yeah, I'm One of the things that you will hear
from wealth managers at the moment is that people refuse
to take capital gains because they don't want to pay
capital gains tax. So we have much lower turnover and
possibly in the UK equity markets and other parts of
the market than we would otherwise because people are very
key not to take their capital gains tax. Of course,
because because you pay both capital gains tax and inheritance tax,
(11:04):
people are loath to pay capital gains tax when they
know they're then going to have to pay inheritance tax.
But of course capital gains are wiped out on death,
so you only pay inheritance tax, so people will only
want to pay one of those, not two of those.
So if you put the rate of capital gains tax up,
then that becomes even more of a problem. The behavior
of stuff that it drives is really out of proportion
(11:26):
to the to the tax.
Speaker 2 (11:28):
Well and actually on the behavioral stuff. It is a
reminder that the hmrc's own estimates of harmonizing the CGT
with the income tax rates are for there to be
and you end up losing tax revenue because of this
exact thing, because everybody just assumes we're gonna we're going
to wait it out, We're not going to cash in anything,
so there's no tax to be paid. And then you know,
they hope for a Tory or reform government next time
(11:49):
around who will just completely reverse the policy, which you
know they will inevitably run on. And I mean they're
also you know, they're saying now that they wouldn't wouldn't
enforce such a right. So yeah, I mean, it doesn't,
it doesn't work. And we saw some behavioral action by
business owners and others a couple of years ago after
it was anticipated that the capital gains tax would rise
to everybody basically cashed in before the budget. So we've
(12:11):
seen a massive spike in actual capital gains tax revenues
and it's all been driven by behavioral stuff. So again,
wealth tax is such a difficult one to actually guarantee
you're going to get any income off because it is
subject to so much behavioral change more constraints there.
Speaker 1 (12:41):
What is interesting here is the limited period. I mean,
I know there's talk about how there's a possibility that
Andy Burnham might call an election and we might have
another general election. I'm not convinced on that one. I
don't know how you feel about it. But barring that,
we're only talking about a couple of years left in
this term. And so the other conversation that is happening
around Andy Burnham, and the thing that he's mentioned several
times is the idea of introducing some kind of of
(13:02):
land value tax. But of course this is an incredibly
complicated thing to do, where you have to come up
with a value for every single bit of land, because
this is not a property tax. It's not about the
value of houses. It's about the value of the land itself.
And the idea of a land value tax is to
is to charge you very much higher amounts for land
in areas surrounded by state provided amenities, etc. To force
(13:25):
you to make that land productive, so to prevent people
from simply sitting or bits of land and not using
them properly. But to introduce a tax like that, I
mean that takes years. So I'm hearing lots of people
worrying about a land value tax of what is going
to be awful and how all this work and blah
blah blah. But I suppose the answer in the end
is that we've got a very short time period here
and it probably wouldn't work. Don't need to worry about
(13:46):
that kind of thing.
Speaker 2 (13:47):
Well, as you say, the complications involved, you just thought
it would be an obstacle in themselves to this. If
he needs to win the next election, he needs to
have done something by then.
Speaker 1 (13:56):
You know.
Speaker 2 (13:57):
One of the other things people talking about is, you know,
revaluing the council tax ban, so revaluing the entire housing
stock in the UK so that the nineteen ninety three
valuation estimates are updated for today. But that itself takes
a long time, which probably which doesn't sound anything like
as complicated as doing this kind of what is the
amenity value of the local services that are provided by
(14:17):
the state for the land, and then we'll tax a
little bit of that. But if the council tax revaluation
is going to know, would take a few years to
do that. I mean that seems implausible that he'll be
able to put in a land value tax and actually
get anything out of it in time for an election.
Speaker 1 (14:31):
Yeah, So what do you think he does have scope
to do if we're looking at you know, not as
longer than two years here, and he needs to win
the next election, and you know, let's say, let's say
I'm putting this out here, that he actually manages to
hang on for the full full period and we don't
have another prime minister in six months or nine months
or a year. So let's say it gets the whole lot.
(14:51):
What could he conceivably do within the constraints of the
fiscal rules that would actually be a effective and be
reasonably popular. Yeah, I mean I'm coming up with nothing.
Speaker 2 (15:03):
By the way, I'm not sure what would necessarily be popular.
They're going to have to touch spending in some way
because you know, we have the tax burdeners is already
going to be hitting you know, the highest since in
the post war period. Debt is edging higher. It's getting
up to very close one hundred percent of GDP. It's
the deficit has been running at you know, five percent,
(15:25):
between four and five percent for the last four or
five years. I mean, it's completely and utterly unsustainable too.
Then the idea that you can find a tax that
is going to be an acceptable tax. I mean, I
can imagine him increasing inheritance tax, for example, because unpopular
as it is, it doesn't touch you immediately. It is
something for the future. But the spending stuff, there's talk
(15:48):
about the triple lock to try and restrain pension of
spending again would be hugely unpopular because we saw that
with the winter fuel a lance. Then you've obviously got
the health benefits which have reached in reaching about one
hundred sixty billion a year at the moment, going up
to one hundred and ninety by the end of the parliament.
I mean Jim O'Neil who's one of the advisors to
Burnham at the moment, he was even saying, you know,
you've got to touch these shibbles. You've got to say,
(16:10):
you know, NHS spending. There has to be some constraint
on NHS spending. And Burnham is the former Health Secretary
who has said he you know, he dinede a ditch
just to prevent prescription charges, et cetera. But there's people
within the NHS talk about rationing some services because it's unaffordable.
We've got this bow mool cost disease, which is developments
(16:30):
in technology end up not leading to productivity gains but
end up just being new technological costs to the service.
So it's just, you know, you have this mushrooming NHS state.
The one thing that I was thinking that he can
do is just to race tax. If he's going to
race tax, he's just got a race tax on everyone.
And then that would require him to say special measures everybody,
(16:51):
everyone who is paying tax is going to have to
pay an extra two percent on the on the basic rate,
and make it, you know, a national project where you know,
you're not going to be singling out sections of society
and saying, you know, we're picking on you because we
need to fix the you know, fix this country. We're
going to pick on everyone because this is a national
(17:11):
this is a national requirement.
Speaker 1 (17:13):
And at some point that has to stop, as you said,
at some point it has to come back to spending.
Spending has to be reduced. At some point someone has
to tackle well for spending. Someone has to tackle the NHL.
Someone has to look at this properly. You can't just
keep saying taxes up, taxes up, taxes up. And if
he puts up taxes across the board, and there is
this brilly interesting conversation going on in the UK about
(17:34):
who is over taxed and who is under taxed, and
it you know, we don't have a very good system
of taxing everybody. The burden is very very very heavy
on the well off and not particularly heavy by international
standards on everybody else. But then you come back to
the fact that an awful lot of the things that
people are expected to pay for themselves in the UK
and finance out of general taxation in other countries, and
(17:55):
in particular ort to enrollment, there's you know, paying paying
into your pension in the way that we do in
the UK. That's not necessarily the case in Europe. And
the same with university education, which we pay for here
at our own pockets, and people don't necessarily not enough,
by the way, but we pay for our own pockets,
which people in Europe do not. And then this dentistry
and you know, various other things that come out of
general taxation out elsewhere but not in the UK. So
(18:18):
if you look at it in the round, very hard
to say that any part of the UK population is undertaxed,
maybe over benefited, but not necessarily undertaxed.
Speaker 2 (18:29):
Yeah, exactly. They're almost hidden taxes, aren't they. And then
of course you've got these levees on the for businesses,
on energy levees, climate change levees and stuff, and even
on the house even on household bills. You've got them
so that some of them anyway are addition are effectively
additional hidden taxes.
Speaker 1 (18:44):
So I mean, I think one of the things that
you could say, Andy of you on this is you
you could could have a go at net zero and
you know, the interesting thing is that if Millivan becomes Chancellor,
then we double down on net zero in a well,
we probably do, and that is one of the things
that's adding or our rush to net zero is adding
hugely to our energy built because the infrastructure required and
(19:06):
the various levees et cetera. Calming down on that slightly
might be one thing that could bring down built across
the board.
Speaker 2 (19:14):
Yeah, that is that's an easy, easy one. What the
tour is just one in Aberdeen? Didn't they the South
because on this campaign to get drilling in the North
Sea again? And I mean, yeah, I mean this one,
I just don't understand it because obviously you can you
can raise a bit of tax revenue. And also instead
of having to you know, pump little ship you container
loads of oil to the UK or whatever you you'll
(19:35):
you'll be going to get more domestically. So I don't
don't I don't see. I don't see why bring it
in by ship is any better than just getting it
out of our own reserves. So and you get more
tax revenue for it. So that one, that's that seems
to me like an obvious easy one. Again, you're not
gonna it's not going to be game changing, but it'll
be helpful.
Speaker 1 (19:54):
Okay, Well, I'm not sure that we've really made our
listeners feel particularly optersted today.
Speaker 2 (20:00):
There's another a lot of optimsm going around. I know
I've had one thought I've had maybe, which is is
could Burnham just be a lucky general? We know Starmo
is so dismally unlucky with the with the international backdrop,
as well as making such a terrible series of errors
that Burnham has got a template for what not to do,
as in the policy options that Starma shows have just
(20:20):
beware of, like walking into land mines. And then also
if you know the Iran Iran waris is going to
be resolved, and if Ukraine Russia just sort of sort
of fades fades back again, and you know, Trump's unable
to do more kind of crazy stuff because of the midterms.
And we've seen the data stand a.
Speaker 1 (20:38):
Little bit better.
Speaker 2 (20:39):
We've got inflation is a bit lower than was expected,
there's signs of signs of life in the jobs market.
You know, you could actually just see a situation where
Burnham gets lucky and you get you just get that
little spurred of growth which probably delivers as much tax
revenue as all of these little things that we've talked
about put together. So that's my optimistic hopeful hat.
Speaker 1 (20:59):
Okay, Well, I think will end there, and I appreciate
the optimism there, but I don't think I'm particularly happy
when the best we can hopeful from our new prime
minister is he gets a little bit of geopolitical luck.
Speaker 2 (21:11):
Yeah, I wishful. Thank you is exactly Yeah. It's not
a strategy.
Speaker 1 (21:16):
It's not a strategy, but maybe it would be something. Well,
thank you so much for joining us today. Thanks listening
to this week's Maren Talk to Your Money. If you
like us, your rate review and subscribe whereever you listen
to the podcasts. Also be sure to follow me and
John on X or Twitter. Marens w and John Underscore,
(21:38):
Stepic and Phil, I know you are on Twitter. What
is it?
Speaker 2 (21:41):
Pat?
Speaker 1 (21:41):
Phil Aldrick?
Speaker 2 (21:42):
Simple?
Speaker 1 (21:43):
Excellent, Thank you. This episode was produced by Samasadi and
Moses and I'm sound designed by Aaron Kasper. Questions and
comments in the show and all our shows are always welcome,
and of course we would love to hear any of
your ideas that Andy Burnham might actually be able to
make things better our show email is Merror Money at
bloom Berg dot netm
Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Merrin Talk's
Your Money, the personal finance edition of Merin Talk's Money
and these bonus podcasts we talk about the best strategies
(00:24):
for making the most of your money. I'm Merin Dumbsup,
Web editor at Large for Bloomberg UK Wealth Now. This
week kicked off with some drama in British politics and
a particular surprise there. Following Andy Burnham's victory in the
Makefield by election and growing brother from Labor and Peace
Kiss someone announced his resignation as Labor leader and Prime Minister.
(00:44):
Burnham quickly confirmed what we already knew, which is that
he would be seeking the leadership and that is widely
expected to happen in the next few weeks without much
of a contest. So we imagine that Andy Burnham will
be the next Prime Minister. And the question then is
what will Britain look like under Andy Burnham? And more importantly,
(01:05):
what will it mean for your money? Spoiler probably nothing good.
With me to help explore that question, It's Philip Alderic,
senior reporter covering the UK Cony for Bloomberg News. Phil Welcome,
thank you for joining us today.
Speaker 2 (01:21):
Good to be here, right.
Speaker 1 (01:22):
The first thing to say, I guess is that assuming
that Andy Burnham is going to stick to the fiscal rules,
which he has said he is going to do, that
leaves him with very little immediate wiggle room. Right.
Speaker 2 (01:35):
Yeah, I mean, we've got twenty three billion of headroom
that Rachel Reeves left us with, which itself was a
relatively small amount of headroom. Unless he gets really lucky
with growth. Yeah, he's going to He's really got very
few options at the end of the parliament. Most of
the hard work is going to be done with these
frozen tax thresholds, which are going to really irritate most
(01:57):
of the electorate. So you can't see them the government
pushing through that, even a Burnham government pushing through with
something which is going to be some unpopular right before
a general election.
Speaker 1 (02:07):
Yeah, I mean, I suppose the first thing we should
actually do is just remind everybody roughly what the fiscal
rules are, right, which is that you correct me if
I'm wrong this You're the technical guy here, not me. One.
That we need to be pushing towards the budget surplus
by twenty nine thirty, so that spending is in surplus,
although there's that sort of fluffy bit around what is
spending and what is investment right, And the second major
(02:29):
one is that public debt is a percentage of GDP
needs to be beginning to trend down by twenty nine thirty,
and looking at where we are now, that seems to
be verging on impossible. And we had the the May
borrowing numbers were horrible, weren't they much higher than expected?
And nearly twelve billion pounds in May spend on interest
on our debt alone, which is horrible. So you look
(02:51):
at this stuff and you think, well, even if the
Parma government had hung on and Reeves had hung on,
this was still going to fail come twenty nine thirty
unless there was a massive spending squeeze or some sort
of bizarre boosting growth, which seems inconceivable. So that was
already going to fail.
Speaker 2 (03:10):
Well, I mean, I think the only thing I caution
there with is obviously the situation right now in the
middle of the Irm war, and not all price spike
et cetera. The inflation's picked up, so a lot of
that may just be a temporary spike. The underlying state
of the public finances does remain pretty dire. It was
going to be very difficult for Starmer to deliver the
fiscal rules and get growth going and get your investment
(03:32):
up because there are so many pressures on all sorts
of public spending at the moment.
Speaker 1 (03:37):
Okay, So let's assume that it is going to be
Andy Burnham, of course, not absolutely certain yet that there
could be a contestant. Then we get all kinds of
spending commitments checked in from everyone trying to win, and
everything gets what rather worse than we think. But let's
assume that not going to happen. We have an orderly
transition the bond market and the equity market. Figure that's
(03:57):
kind of okay, because fiscal rules something some and so
that all stairs relatively calm. When we look at what
Burnamus talked about, He's talked about things like looking again
at the freezers on income tax allowances. He's talked about
reconsidering the inheritance tax charges on farmers. He's looked at
(04:23):
talked about cutting business rates down for pubs and listening
lifting threshold for small businesses. He's talked about reversing the
rise in employers national insurance. But all these things would
be marvelous because all of them have been fairly nasty
drags on growth and on sentiment in the UK. But
going back to this idea that there's very little room
(04:45):
to do anything, it seems inconceivable that he could possibly
do those things without also introducing new taxes, perhaps on wealth.
Speaker 2 (04:53):
Yeah, I mean, it's implausible to think that he can.
He can make all these all these tax cuts for
particicular sections of society and to help ease some of
the pressures that on business without you know, without recovering
the money from elsewhere. And we've and we've seen that
no spending cuts seems to be it seemed to be
pretty undeliverable in under this government with and you know,
(05:14):
the makeup of the labor governments or the Labor Party,
with the backbench rebellions still sort of brewing. Whenever there
is talk of a spending cut, it's going to be
the same problem that burn And faces in regard to that. So, yes,
if there's going to be a tax cut, there's going
to be a tax rise to pay for that tax cut.
That that's the way if he's if he is honestly
going to stick to the fiscal rules that Rachel Reeves
(05:36):
is introduced, then, yeah, somebody is going to bear some
pain to ease the pain on someone else.
Speaker 1 (05:42):
Looking at whether there's risers might come, and one of
the things that he has previously suggested is reintroducing the
fifty p rate of tax on higher earners.
Speaker 2 (05:51):
Doesn't make any money. I mean it doesn't. It never
makes doesn't touch the size, does it, really.
Speaker 1 (05:55):
It doesn't touch the size. There was a wonderful article
on the one of the papers at the weekend. I
don't know if you saw it, and about gosh, I
don't know, seven or eight years ago, ten years ago,
whenever it was Scottish referendum, I write an article saying
that taxes were going to go up in Scotland and
that one should rush out and buy houses in Northumberland,
just on the border, because that's where everybody would go.
You know, the top rate of tax in Scotland is
(06:17):
now forty eight percent and here's the headline, Scottish tax
exiles flood into Northumberland. Families fleeing the SMP's higher rates
are driving up president in Northumberland. So you know, fifty pm,
we'd all be going the other way.
Speaker 2 (06:30):
Yeah, exactly, yes, gif for Scotland it would be a
symbolic gesture rather than an attempt to reduce the constraints
that he has, his fiscal constraints that he has. I
think he's also talked about sort of doing the council
tax revaluation. That again would be a shift in the
balance of taxes because people in the borer regions would
pay less than people in London, and the wealthier regions
(06:52):
would end up paying more because their houses were valid
more then, so that would be a redistributive operation. But
he could you can also attach to that some some
form of net tax increase as well, so I could
you know, I could imagine him him doing something like that.
And he's also talked about I mean, in the past
he talked about ten percent inheritance tax on I think
(07:14):
on all inheritance. So we've obviously got them, you know,
up to a million pound before you you end up
getting HD being incurred with inheritance tax. So and that
he talked about that was in relation to social care
in the past. So again that's a that could raise
you know, substantial sums of money and as you said,
is effectively a tax on inherited wealth.
Speaker 1 (07:33):
And that would be interesting because one of the things
that people worry about all the time, absolutely NonStop is
inheritance tax, even people whose estates will never fall into
the inheritance tax, whereas you worry about it all the time,
and suddenly he'd give them good reason to worry about it.
Speaker 2 (07:47):
Yeah, and the last time they worried about it was
with Terre's and May's dementia taxes, as Labor branded it
back then, and it cost her majority, didn't it. So
it's obviously, as we all know, it's the least one
of the least popular time. This is the thing. There
is economic restraint and then there's political constraint, and the
two are sort of operating hand in hand. The physical
(08:08):
situation rather than the fiscal rules in the UK is
itself a massive constraint, and then the efforts to actually
try and fix that have proved to be a huge
political constraint. So you end up just in complete stalemate.
And that's the big challenge for Burnham is how he
breaks that stalemate where Starmer was unable to well.
Speaker 1 (08:24):
I suppose Ah could be super strong and just get
on with it, But the obvious route then is to
try and go down as we were just saying with
the inheritance tax to try and go further down the
wealth tax route, and he has talked about, for example,
equalizing the rates on income tax and capital gains tax,
which sounds very attractive to lots of people, but of
course is fairly outrageous because that's an absolutely massive wealth tax.
(08:49):
So when the rates of capital gains tax were were
cut previously under Gordon Brown to what today's relatively low
sounding levels, one of the things had happened at the
same time was the removal of the indexing to inflation.
And because the rates were lower, that was sort of
vaguely acceptable because you're no longer you're paying a lower rate,
but you're paying tax on your inflationary gains as opposed
to your real gain. It was kind of a reasonable compromise.
(09:12):
But if you were to put capital gains tax rates
up to income tax rates without taking into account inflation,
you have introduced, I mean, it's a wealth tax at
the moment, but you would have introduced a massive wealth tax.
And that we have few enough of our rich happily
staying in the UK at the moment, this would be
something I suspect that would really drive up departures.
Speaker 2 (09:34):
I mean a lot of small business owners. They make
their money through taking capital gains on the businesses that
the profits that they've made and the gains that they've made.
I think people in general would see it as unfair
if you had a capital gains tax which was unadjusted
for inflation. Obviously, the people who are defending the idea
will point back to Nigel Lawson in the nineteen eighties,
(09:56):
and that was when capital gains tax was last The
rates were drawn to be equivalent to the income tax rates,
and so you know, there is a sort of you know,
the labor can say, oh, well, the Tories did it,
but of course back then there was the inflation adjustment.
And the Liberal Democrats say in the election manifesto, in
their election manifesto in twenty twenty four, they had something
similar where they wanted to they wanted to harmonize the
(10:17):
rates but with the income tax rates, but they would
introduce in inflation adjustments. So for your thinking about doing this,
you either do it the way he wants to do
it and just irritate so many people that it will
backfire inevitably, or you do it in a way The
Liberal Democrats were suggesting which ends up raising you know,
after behavioral adjustments or whatever. It only ends up raising
it three or four billion, which is nice to have,
(10:39):
but it doesn't solve everything. So it's not a big
you know, it's not a big bazooka.
Speaker 1 (10:43):
Yeah, I'm One of the things that you will hear
from wealth managers at the moment is that people refuse
to take capital gains because they don't want to pay
capital gains tax. So we have much lower turnover and
possibly in the UK equity markets and other parts of
the market than we would otherwise because people are very
key not to take their capital gains tax. Of course,
because because you pay both capital gains tax and inheritance tax,
(11:04):
people are loath to pay capital gains tax when they
know they're then going to have to pay inheritance tax.
But of course capital gains are wiped out on death,
so you only pay inheritance tax, so people will only
want to pay one of those, not two of those.
So if you put the rate of capital gains tax up,
then that becomes even more of a problem. The behavior
of stuff that it drives is really out of proportion
(11:26):
to the to the tax.
Speaker 2 (11:28):
Well and actually on the behavioral stuff. It is a
reminder that the hmrc's own estimates of harmonizing the CGT
with the income tax rates are for there to be
and you end up losing tax revenue because of this
exact thing, because everybody just assumes we're gonna we're going
to wait it out, We're not going to cash in anything,
so there's no tax to be paid. And then you know,
they hope for a Tory or reform government next time
(11:49):
around who will just completely reverse the policy, which you
know they will inevitably run on. And I mean they're
also you know, they're saying now that they wouldn't wouldn't
enforce such a right. So yeah, I mean, it doesn't,
it doesn't work. And we saw some behavioral action by
business owners and others a couple of years ago after
it was anticipated that the capital gains tax would rise
to everybody basically cashed in before the budget. So we've
(12:11):
seen a massive spike in actual capital gains tax revenues
and it's all been driven by behavioral stuff. So again,
wealth tax is such a difficult one to actually guarantee
you're going to get any income off because it is
subject to so much behavioral change more constraints there.
Speaker 1 (12:41):
What is interesting here is the limited period. I mean,
I know there's talk about how there's a possibility that
Andy Burnham might call an election and we might have
another general election. I'm not convinced on that one. I
don't know how you feel about it. But barring that,
we're only talking about a couple of years left in
this term. And so the other conversation that is happening
around Andy Burnham, and the thing that he's mentioned several
times is the idea of introducing some kind of of
(13:02):
land value tax. But of course this is an incredibly
complicated thing to do, where you have to come up
with a value for every single bit of land, because
this is not a property tax. It's not about the
value of houses. It's about the value of the land itself.
And the idea of a land value tax is to
is to charge you very much higher amounts for land
in areas surrounded by state provided amenities, etc. To force
(13:25):
you to make that land productive, so to prevent people
from simply sitting or bits of land and not using
them properly. But to introduce a tax like that, I
mean that takes years. So I'm hearing lots of people
worrying about a land value tax of what is going
to be awful and how all this work and blah
blah blah. But I suppose the answer in the end
is that we've got a very short time period here
and it probably wouldn't work. Don't need to worry about
(13:46):
that kind of thing.
Speaker 2 (13:47):
Well, as you say, the complications involved, you just thought
it would be an obstacle in themselves to this. If
he needs to win the next election, he needs to
have done something by then.
Speaker 1 (13:56):
You know.
Speaker 2 (13:57):
One of the other things people talking about is, you know,
revaluing the council tax ban, so revaluing the entire housing
stock in the UK so that the nineteen ninety three
valuation estimates are updated for today. But that itself takes
a long time, which probably which doesn't sound anything like
as complicated as doing this kind of what is the
amenity value of the local services that are provided by
(14:17):
the state for the land, and then we'll tax a
little bit of that. But if the council tax revaluation
is going to know, would take a few years to
do that. I mean that seems implausible that he'll be
able to put in a land value tax and actually
get anything out of it in time for an election.
Speaker 1 (14:31):
Yeah, So what do you think he does have scope
to do if we're looking at you know, not as
longer than two years here, and he needs to win
the next election, and you know, let's say, let's say
I'm putting this out here, that he actually manages to
hang on for the full full period and we don't
have another prime minister in six months or nine months
or a year. So let's say it gets the whole lot.
(14:51):
What could he conceivably do within the constraints of the
fiscal rules that would actually be a effective and be
reasonably popular. Yeah, I mean I'm coming up with nothing.
Speaker 2 (15:03):
By the way, I'm not sure what would necessarily be popular.
They're going to have to touch spending in some way
because you know, we have the tax burdeners is already
going to be hitting you know, the highest since in
the post war period. Debt is edging higher. It's getting
up to very close one hundred percent of GDP. It's
the deficit has been running at you know, five percent,
(15:25):
between four and five percent for the last four or
five years. I mean, it's completely and utterly unsustainable too.
Then the idea that you can find a tax that
is going to be an acceptable tax. I mean, I
can imagine him increasing inheritance tax, for example, because unpopular
as it is, it doesn't touch you immediately. It is
something for the future. But the spending stuff, there's talk
(15:48):
about the triple lock to try and restrain pension of
spending again would be hugely unpopular because we saw that
with the winter fuel a lance. Then you've obviously got
the health benefits which have reached in reaching about one
hundred sixty billion a year at the moment, going up
to one hundred and ninety by the end of the parliament.
I mean Jim O'Neil who's one of the advisors to
Burnham at the moment, he was even saying, you know,
you've got to touch these shibbles. You've got to say,
(16:10):
you know, NHS spending. There has to be some constraint
on NHS spending. And Burnham is the former Health Secretary
who has said he you know, he dinede a ditch
just to prevent prescription charges, et cetera. But there's people
within the NHS talk about rationing some services because it's unaffordable.
We've got this bow mool cost disease, which is developments
(16:30):
in technology end up not leading to productivity gains but
end up just being new technological costs to the service.
So it's just, you know, you have this mushrooming NHS state.
The one thing that I was thinking that he can
do is just to race tax. If he's going to
race tax, he's just got a race tax on everyone.
And then that would require him to say special measures everybody,
(16:51):
everyone who is paying tax is going to have to
pay an extra two percent on the on the basic rate,
and make it, you know, a national project where you know,
you're not going to be singling out sections of society
and saying, you know, we're picking on you because we
need to fix the you know, fix this country. We're
going to pick on everyone because this is a national
(17:11):
this is a national requirement.
Speaker 1 (17:13):
And at some point that has to stop, as you said,
at some point it has to come back to spending.
Spending has to be reduced. At some point someone has
to tackle well for spending. Someone has to tackle the NHL.
Someone has to look at this properly. You can't just
keep saying taxes up, taxes up, taxes up. And if
he puts up taxes across the board, and there is
this brilly interesting conversation going on in the UK about
(17:34):
who is over taxed and who is under taxed, and
it you know, we don't have a very good system
of taxing everybody. The burden is very very very heavy
on the well off and not particularly heavy by international
standards on everybody else. But then you come back to
the fact that an awful lot of the things that
people are expected to pay for themselves in the UK
and finance out of general taxation in other countries, and
(17:55):
in particular ort to enrollment, there's you know, paying paying
into your pension in the way that we do in
the UK. That's not necessarily the case in Europe. And
the same with university education, which we pay for here
at our own pockets, and people don't necessarily not enough,
by the way, but we pay for our own pockets,
which people in Europe do not. And then this dentistry
and you know, various other things that come out of
general taxation out elsewhere but not in the UK. So
(18:18):
if you look at it in the round, very hard
to say that any part of the UK population is undertaxed,
maybe over benefited, but not necessarily undertaxed.
Speaker 2 (18:29):
Yeah, exactly. They're almost hidden taxes, aren't they. And then
of course you've got these levees on the for businesses,
on energy levees, climate change levees and stuff, and even
on the house even on household bills. You've got them
so that some of them anyway are addition are effectively
additional hidden taxes.
Speaker 1 (18:44):
So I mean, I think one of the things that
you could say, Andy of you on this is you
you could could have a go at net zero and
you know, the interesting thing is that if Millivan becomes Chancellor,
then we double down on net zero in a well,
we probably do, and that is one of the things
that's adding or our rush to net zero is adding
hugely to our energy built because the infrastructure required and
(19:06):
the various levees et cetera. Calming down on that slightly
might be one thing that could bring down built across
the board.
Speaker 2 (19:14):
Yeah, that is that's an easy, easy one. What the
tour is just one in Aberdeen? Didn't they the South
because on this campaign to get drilling in the North
Sea again? And I mean, yeah, I mean this one,
I just don't understand it because obviously you can you
can raise a bit of tax revenue. And also instead
of having to you know, pump little ship you container
loads of oil to the UK or whatever you you'll
(19:35):
you'll be going to get more domestically. So I don't
don't I don't see. I don't see why bring it
in by ship is any better than just getting it
out of our own reserves. So and you get more
tax revenue for it. So that one, that's that seems
to me like an obvious easy one. Again, you're not
gonna it's not going to be game changing, but it'll
be helpful.
Speaker 1 (19:54):
Okay, Well, I'm not sure that we've really made our
listeners feel particularly optersted today.
Speaker 2 (20:00):
There's another a lot of optimsm going around. I know
I've had one thought I've had maybe, which is is
could Burnham just be a lucky general? We know Starmo
is so dismally unlucky with the with the international backdrop,
as well as making such a terrible series of errors
that Burnham has got a template for what not to do,
as in the policy options that Starma shows have just
(20:20):
beware of, like walking into land mines. And then also
if you know the Iran Iran waris is going to
be resolved, and if Ukraine Russia just sort of sort
of fades fades back again, and you know, Trump's unable
to do more kind of crazy stuff because of the midterms.
And we've seen the data stand a.
Speaker 1 (20:38):
Little bit better.
Speaker 2 (20:39):
We've got inflation is a bit lower than was expected,
there's signs of signs of life in the jobs market.
You know, you could actually just see a situation where
Burnham gets lucky and you get you just get that
little spurred of growth which probably delivers as much tax
revenue as all of these little things that we've talked
about put together. So that's my optimistic hopeful hat.
Speaker 1 (20:59):
Okay, Well, I think will end there, and I appreciate
the optimism there, but I don't think I'm particularly happy
when the best we can hopeful from our new prime
minister is he gets a little bit of geopolitical luck.
Speaker 2 (21:11):
Yeah, I wishful. Thank you is exactly Yeah. It's not
a strategy.
Speaker 1 (21:16):
It's not a strategy, but maybe it would be something. Well,
thank you so much for joining us today. Thanks listening
to this week's Maren Talk to Your Money. If you
like us, your rate review and subscribe whereever you listen
to the podcasts. Also be sure to follow me and
John on X or Twitter. Marens w and John Underscore,
(21:38):
Stepic and Phil, I know you are on Twitter. What
is it?
Speaker 2 (21:41):
Pat?
Speaker 1 (21:41):
Phil Aldrick?
Speaker 2 (21:42):
Simple?
Speaker 1 (21:43):
Excellent, Thank you. This episode was produced by Samasadi and
Moses and I'm sound designed by Aaron Kasper. Questions and
comments in the show and all our shows are always welcome,
and of course we would love to hear any of
your ideas that Andy Burnham might actually be able to
make things better our show email is Merror Money at
bloom Berg dot netm
Host
Merryn Somerset Webb
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