What could Prime Minister Burnham mean for your money?

What could Prime Minister Burnham mean for your money?

Rob Morgan, Chief Investment Analyst at Charles Stanley Direct, part of Raymond James

Following weeks of political manoeuvring, Andy Burnham has picked up the keys to 10 Downing Street. While many details of his Prime Ministerial plans remain unclear, his early statements, campaign promises and the views of close advisers offer some clues about what could be in store for household finances.

From his recent announcements Burnham is determined to improve living standards, support struggling high streets and invest more heavily in local communities. However, with public finances already under pressure and a repeat of promises not to raise income tax, National Insurance or VAT, any new spending will need to be carefully balanced against the government’s fiscal rules.

For now, financial markets are more curious than they are anxious about the new leader of the Labour party, largely because the former Mayor of Greater Manchester has pledged to stick to existing borrowing targets. The longer-term question is whether those commitments can be reconciled with his ambitions for higher investment and economic renewal.

Who could be the winners from an Andy Burnham Labour government?

Burnham’s initial focus is on easing cost-of-living pressures on consumers and helping smaller businesses. Policies announced or being discussed include removing VAT on household electricity bills, lower public transport system costs and tax cuts for hospitality businesses. These measures aim to provide an immediate boost to household budgets while supporting town centres that have struggled in recent years.

The scale of the proposals made so far is relatively modest in fiscal terms, meaning they could potentially fit within the government’s existing fiscal framework without requiring major tax rises elsewhere. However, we are yet to see exactly how broad and costly various measures might be and whether savings elsewhere might largely cover them.

What tax changes might we see?

Like his Labour government predecessor, Sir Keir Starmer, Burnham has promised not to increase VAT, income tax or National Insurance. Indeed, some of the strongest signals so far suggest that any future tax reforms would focus more on wealth than earnings. Homeowners, business owners, investors and those planning to pass on wealth could therefore be among the groups most affected by Budget announcements.

For homeowners, some of the biggest changes could come through reforms to property taxation. One proposal being discussed is a revaluation of homes for council tax purposes, which could see owners of higher-value properties paying more. Burnham has also previously argued that council tax and stamp duty are outdated. Over the longer term, that could open the door to a more fundamental overhaul of housing taxes, including replacing stamp duty with a land value tax. While any such reforms are likely to be years away, they could have significant implications for homeowners, landowners, prospective buyers and landlords in the meantime.

Business owners could also find themselves subject to changes. Burnham has been critical of barriers that discourage firms from expanding and has expressed support for reforming the VAT registration threshold, which critics argue creates a tax cliff edge that can deter growth. He has also suggested cutting business rates for smaller firms and has shown sympathy towards concerns over the recent increase in employer National Insurance contributions. Collectively, measures in this area could provide some relief for some smaller businesses and high street operators.

Investors may face a more difficult picture. One proposal reportedly under consideration is aligning capital gains tax rates more closely with income tax rates, which would increase the amount paid on profits from the sale of assets such as shares, investment properties and businesses. There have also been suggestions that existing capital gains tax reliefs could be scaled back. While none of these changes are confirmed, they would represent a further tightening of the screw in terms of investment wealth and are likely to be watched closely by investors and entrepreneurs alike.

Those planning to pass on wealth to future generations could also see important changes. A close Burnham ally has suggested abolishing the capital gains tax relief on inherited assets on  death, while Burnham himself has questioned aspects of the current inheritance tax regime, including recent changes affecting farmers. In the past, he has even floated the idea of replacing inheritance tax altogether with a dedicated levy to help fund health and social care. Although such reforms would be politically sensitive and probably take a long time to introduce, they outline a theme running through Burnham’s economic ideas: raising more revenue from accumulated wealth rather than from earnings.

For homeowners, investors, business owners and those engaged in estate planning, the next Budget this autumn will confirm the direction of travel as well as specific policies.

Housing and regeneration in focus

One area where Burnham appears particularly ambitious is housing. He has long argued for a large-scale programme of council house building and supports greater public involvement in regeneration projects. His experience transforming parts of Greater Manchester could provide a blueprint for a national programme.

The idea is for public bodies to acquire and prepare sites for development before partnering with private firms to build homes. If successful, these schemes could boost housing supply, support local economies and potentially help ease pressure on rents and house prices.

Burnham has consistently championed greater devolution and could push more decision-making powers away from Westminster. That may eventually give local authorities greater control over taxes and spending. One proposal he has previously floated is allowing local areas to introduce tourist taxes, while other forms of local revenue-raising could also emerge over time. For consumers and business owners, this could mean a future where taxes and charges vary more significantly depending on where they live.

What about investors?

Investors will be watching closely for signs of greater state involvement in sectors such as energy, water and transport, all areas where Burnham has argued for stronger public control.

Any reforms affecting these industries could have implications for shareholders in listed companies operating in those sectors. However, details remain limited and any significant changes are likely to take time to develop.

For most households, an Andy Burnham premiership initially looks more likely to bring targeted support than sweeping tax rises. Energy bill help, cheaper transport and support for local businesses could provide some short-term relief for squeezed finances.

However, the government’s room for manoeuvre appears limited. If economic conditions deteriorate or spending ambitions grow, the pressure to find additional revenue may increase. Given promises not to raise the UK’s three biggest taxes, wealth taxes, property taxes and capital gains or inheritance tax reforms could be in the crosshairs.

The first Budget under new Chancellor John Healey this autumn is therefore likely to be a crucial moment. As the former Defence Secretary who resigned over lack of funding, his appointment implies a further area where spending is set to rise. The event should provide the clearest indication yet of whether his government intends to confine itself mostly to targeted household support measures or pursue more far-reaching reforms that could reshape how wealth, property and investment are taxed in the UK.