Burnham adviser calls for radical tax overhaul

When Lord O’Neill of Gatley chooses his words carefully, it is usually because he wants policy to move, not merely to make a point. As one of Andy Burnham’s most senior economic advisers, the former Goldman Sachs asset management chairman is not prone to theatrical gestures. Yet the argument he and five other economists have put to government is deliberately stark: taxes are rising rapidly, public services are deteriorating, and the country keeps cycling through leaders without addressing what they describe as “structural and systemic” weaknesses.

Their intervention matters for two reasons. First, it is an explicit rejection of the comforting political habit of treating Britain’s problems as a matter of competence, character or “waste” that can be corrected with tighter management. Second, it lends high-profile support to a blueprint produced by the UCL Institute for Global Prosperity, a report titled Prosperity 2030, which seeks to simplify the tax system and, in doing so, create room for reform without a further lurch into borrowing.

In its headline suggestions, the report does not tiptoe. It proposes abolishing stamp duty and council tax and replacing them with an annual property value tax set at 1 per cent. In its own illustration, a £500,000 home would face an annual bill of £5,000. The report argues the levy could raise £18bn. It also proposes folding income tax and National Insurance into a single levy and extending that consolidation to taxes on capital gains, dividends and inheritance. Under this framework, the base rate would range from 0 per cent to 22 per cent, rising to a top rate of 46 per cent.

Such proposals inevitably provoke an immediate political question: who pays, who gains, and who loses? The report’s authors contend that most working people would be better off. One example given is a person earning between £100,000 and £125,140 with no other source of income, who would be £2,200 better off. That is a deliberately eye-catching case, aimed at showing that simplification need not mean a stealth raid on middle earners. But it also highlights the central tension in any tax redesign: the distributional outcomes are never incidental, and the politics of transition are often harder than the economics of the destination.

Lord O’Neill and his co-signatories argue that the country has run out of road for small calibrations. “Incrementalism will not fix Britain,” their letter says, before reaching for an ambitious historical comparison: they describe the report as being “as ambitious as Beveridge was during the Second World War”, matching the scale of today’s challenges with a programme equal to them. That is not casual rhetoric. The Beveridge report is a byword for a political moment in which a crisis became the forcing mechanism for institutional redesign. By invoking it, the economists are implicitly asking why a nation that can summon boldness in extremis cannot do so in peacetime while its economic model strains.

It is also an indictment of a decade of churn at the top. Seven prime ministers in 10 years, they note, have “inherited the same challenge and failed to solve it for the same reasons”. Their diagnosis is that the failure is not primarily moral but structural. Britain’s policy debate, they imply, has been too eager to sort citizens into the deserving and undeserving, the hard-working and the feckless, while neglecting the institutional machinery that shapes wages, housing, investment and regional opportunity.

The letter arrives at a politically volatile moment. The Telegraph reports that Burnham is preparing to replace Sir Keir Starmer later this month, with much of Burnham’s economic programme still unclear. Whoever becomes chancellor would take over from Rachel Reeves, who has been criticised for raising taxes faster than any other developed nation. In that context, an intervention that claims taxes are rising faster than in comparable economies while services worsen lands not as a technocratic seminar, but as a challenge to the governing story: that higher tax burdens are the unavoidable price of stabilising public finances and repairing the state.

Yet the political appeal of “radical simplification” is precisely that it offers an escape from the argument about whether taxes must always go up. A system can be both high-tax and poorly designed, with complexity breeding avoidance, poor incentives and administrative cost. The UCL report’s promise is that an overhaul could cut taxes for most workers, reduce frictions in the housing market and create fiscal headroom, cited as £38bn, by aligning levies more closely with the economic behaviours Britain wishes to encourage rather than punish.

The most combustible of its ideas is the property value tax. Council tax has long been criticised as outdated and regressive in effect, tied to valuations that bear little resemblance to current market reality. Stamp duty, meanwhile, is widely seen as a brake on mobility, punishing those who move home and, by extension, slowing the reallocation of housing stock to fit changing family and work patterns. Replacing both with a recurring levy is an elegant proposition on paper: it swaps one-off, transaction-heavy taxes for a more stable annual charge, potentially smoothing revenues and shifting incentives away from hoarding property simply because moving is expensive.

But “property value tax” is politically loaded language in Britain because it strikes at a deep national fault line: housing wealth versus income. An annual levy is visible, recurrent and difficult to ignore. Even if the reform were designed to be revenue-neutral overall, it would create identifiable losers and winners across regions and property types. The report’s illustrative £5,000 bill on a £500,000 home is likely to be read not as a mathematical example but as a warning label. For asset-rich, cash-poor households, it raises practical questions about liquidity. For younger renters, it raises a different set of questions: would landlords pass the cost through, or would housing prices adjust downward over time, changing the calculus of ownership?

Burnham has previously said land in the UK was “undertaxed”, suggesting he may be sympathetic to the idea that property and land values are undertaxed relative to labour. That view is not new in economic circles. The argument runs that land is fixed in supply, and taxing it is less distortionary than taxing work or enterprise. But translating a theoretical advantage into a workable political reform is another matter. Any credible package would need a transition plan, protections for vulnerable groups and a clear explanation of how valuations would be set and updated without creating an appeals industry to rival the old system.

The second big plank, a single levy that replaces income tax and National Insurance and extends across capital gains, dividends and inheritance, aims at a different kind of unfairness: the perception that Britain’s tax code treats similar economic capacity differently depending on how it is packaged. National Insurance, in particular, has long been criticised as a tax in all but name, confusing voters and allowing governments to raise burdens while pretending to keep headline income tax rates steady. Folding it into one levy would be honest in a way politics often avoids.

There is also a deeper logic: a unified system could reduce the opportunities for arbitrage between earned and unearned income, and between different legal forms of work. In a labour market where self-employment, contracting and portfolio careers have grown, the boundary lines inside the tax code become ever more important. Complexity is not merely irritating; it shapes behaviour, and often not for the better. A system that is easier to understand can still be progressive, but it has fewer hiding places.

Even so, the moment one speaks of replacing multiple taxes with one, suspicion arises about what is being bundled together and who gets hit. The report suggests a base rate ranging from 0 per cent to 22 per cent, rising to a top rate of 46 per cent. Rates alone do not tell the full story. Thresholds, allowances, treatment of pensions and savings, and the interaction with benefits determine who truly gains. The report claims to cut taxes for most workers, but that claim would be tested not by an average household but by the distribution across age, region, tenure and family structure.

The signatories to the letter are not a narrow clique. Alongside Lord O’Neill, they include Dame Henrietta Moore, director of UCL’s Institute for Global Prosperity, Prof Jonathan Portes of King’s College London, and Prof John Muellbauer of Nuffield College, Oxford. They are joined by Danny Sriskandarajah, chief executive of the New Economics Foundation, and Barry Knight of social policy group Centris. The mix is telling. It suggests an attempt to bridge orthodox economic credibility with a more institution-focused, distribution-conscious tradition of policy thinking.

One of the more striking recommendations in the report sits slightly apart from tax mechanics: the proposal to replace the Jobcentres model with “skill centres” that employ people directly. For young people with no experience, the report envisages a path in which they join as trainees and follow a route to qualify as apprentices. The centres would also serve local firms by providing an “on-demand” pool of skilled and unskilled workers at short notice. The report claims this could generate half a million jobs for young people who are neither earning nor learning.

This is where the report’s broader view of “structural” reform becomes clearer. It is not merely rearranging the tax code; it is attempting to alter the state’s relationship with work and opportunity. Jobcentres are often criticised for policing eligibility rather than building capability. A model that directly employs and trains people would be a different institutional wager: that the state can act as a labour market maker, not just a benefit gatekeeper. Supporters would argue this recognises the real barrier for many young people, which is not unwillingness but the absence of a credible bridge from education to paid work. Skeptics would worry about bureaucracy, cost and the risk of crowding out private hiring.

Andrew Percy, the report’s lead author, frames the case in political rather than purely fiscal terms. “Prosperity 2030 is a plan to cut taxes for working people, abolish the taxes holding back the housing market and get young people into paid work,” he says. “The question is no longer whether Britain can afford reform. It is whether we can afford another decade without it.” That is a challenge designed to turn austerity logic on its head. Instead of asking what reforms are affordable, it asks what stagnation costs.

The economists’ letter makes a similar move. By saying the failures of the last half-century are structural, it implies that Britain’s familiar policy oscillation, between tax rises to shore up services and tax cuts to stimulate growth, is missing the point. If institutions are misaligned, either approach can disappoint. Taxes can rise without services improving if delivery systems are inefficient or expectations outstrip capacity. Taxes can fall without growth accelerating if investment remains weak, housing remains immobile, and skills pipelines fail.

There is also an implicit critique of political incentives. Complexity, after all, is not an accident; it is often the by-product of governments attempting to target reliefs, punishments and exceptions to satisfy competing constituencies without making hard choices explicit. A simpler system is harder to game politically. It forces trade-offs into the open. That, paradoxically, is why the argument for simplification often collapses at the final hurdle. The more coherent the reform, the more visible the pain.

Still, the appeal of the report is that it offers a coherent package rather than a single shiny lever. It combines tax simplification, a shift in the balance between property and labour taxation, a promise of fiscal headroom, and a labour market institution designed to tackle youth disengagement. Taken together, it is an attempt to answer a national mood in which people are asked to pay more while feeling they receive less, and in which the housing market is both the main store of wealth for some and the main barrier to stability for others.

Whether Burnham, if he does indeed take the party leadership as suggested, would embrace anything like this is unknowable from a single report and letter. But the intervention raises the cost of vagueness. If Britain’s next political phase begins with another round of managerial promises, the economists have laid down a marker: the problem is not that voters are bad, or that the country lacks work ethic, or that the state needs one more efficiency drive. The claim is that the system itself is producing weak growth, strained services and rising burdens, and that the answer lies in redesign, not patching.

It is easy to see why such a proposition attracts attention. A state that taxes ever more heavily yet appears to deliver ever less is not merely unpopular; it is unstable. The difficulty is that radical reform, by definition, scrambles familiar arrangements. It can only be done with clarity about who pays, why they pay, and what the nation gets in return. If Lord O’Neill and his colleagues are right that incrementalism has failed, the harder question follows: whether Britain’s politics is capable of the candour and endurance that structural change requires.