The taxes Andy Burnham could raise to bankroll a spending surge

Andy Burnham is learning, quickly, that manifestos are not contracts so much as starting positions. In the heat of an election, they are drafted to reassure voters and to box in opponents. In office, they become a set of political constraints to be interpreted, stretched and, when necessary, politely redefined.

The Labour leadership has spent years promising stability on the headline taxes that shape household budgets and boardroom decisions. Income tax, VAT, corporation tax and the National Insurance paid directly by employees were presented as red lines, a signal to voters and investors that a change of government would not mean a raid on the obvious levers of the Treasury. Burnham, now positioning himself as the heir apparent, says he will “stick by the manifesto and the promises it made”. Yet in the same breath he has spoken of “room within that manifesto for movement on tax”, a phrase that will sound to many like the soft clink of a lock being picked.

It is not hard to see why the line matters. The public has only recently been introduced to Labour’s preferred method of promise management. Rachel Reeves argued that a pledge not to increase National Insurance applied principally to the contributions workers see on their payslips, not to the far larger sums employers pay on wages. That distinction, neat on paper and brutal in practice, delivered a reported £25bn increase in employer National Insurance, a move that angered business and, the article argues, helped sap confidence and hiring across parts of the economy.

Burnham has not offered a detailed map of his intended “movement”, but the underlying problem is plain enough. If the big four taxes remain untouched in their headline rates, the scope to finance anything resembling a spending spree narrows sharply. The major revenue raisers already dominate the ledger: income tax, VAT, corporation tax and employee National Insurance together account for vast sums each year. If those are held steady, any government that wants to spend more must either borrow more, cut elsewhere, or become inventive with the taxes that sit beneath the headline. Burnham’s rhetoric suggests he prefers the third option, at least in part.

His most concrete hint so far has been a rebalancing act within business rates, aimed at shifting the burden from the high street towards the logistics sheds and distribution depots that have become the backbone of the online economy. The political pitch is obvious. Town centres have struggled for years, and hospitality in particular has been squeezed by rising costs, including higher business rates and changes to National Insurance that bear down most heavily on low paid, labour intensive sectors. A policy framed as rescuing pubs and cafes has an easy moral logic, especially when contrasted with the impersonal scale of warehouse parks on motorway junctions.

Burnham told LBC that he believes there is a case for higher business rates on warehouses and major developments on the outskirts of cities, with the proceeds used to cut business rates for pubs by 20 per cent and lift some high street businesses out of rates altogether. He added a further twist: the relief should be targeted towards businesses he sees as providing “social benefits”, places that bring people together. It is a beguiling image, the state tilting the table back towards the communal life of the street. It is also, inevitably, a form of economic planning dressed as tax reform, with ministers deciding which kinds of enterprise deserve protection and which should shoulder the bill.

The policy would sit comfortably alongside the manifesto language about levelling the playing field between high street traders and online giants, and about a business rates system that “disincentivises investment” and creates “uncertainty”. The trouble is that the reform Burnham implies may create uncertainties of its own. Warehouses and online retail are not marginal players; they are a major channel for investment and employment. A sharper tax burden on logistics risks deterring precisely the kind of capital spending that governments claim to want when they speak of growth. And if higher costs are simply passed down the chain, shoppers may find that the cheaper prices that drew them online become harder to sustain.

There is, too, a question of coherence. Traditional bricks and mortar retailers might be forgiven for asking why they should be excluded from relief if they do not fit the “bringing people together” template. A shop selling clothes or household goods may contribute to the life of a street no less than a coffee shop does, yet Burnham’s framing suggests a preference for experiences over transactions. Once the Treasury starts awarding tax favours on the basis of social value, it must decide, endlessly and contentiously, what counts. That is not a technocratic footnote; it is the heart of the politics.

More importantly, even a dramatic reshuffle of business rates is unlikely to conjure the tens of billions required for a genuine spending expansion. Business rates can shift burdens between sectors, but as a tool for raising large additional sums they have limits, not least because pushing too hard risks shrinking the very tax base on which the policy depends. A government that talks of funding major programmes through a switch from pubs to warehouses is offering, at best, an appetizer.

If Burnham wants a main course without breaking the headline tax pledges, he has to look to the quieter machinery of the system. One of the most potent of these devices is the manipulation of thresholds. The British state has become adept at raising money without announcing a tax rise, simply by freezing the points at which taxpayers move into higher bands or begin paying a charge at all. When wages rise with inflation or beyond it, a frozen threshold drags more income into tax and pushes more people into higher rates. It is stealthy, efficient, and politically useful because it can be described as maintaining rates rather than increasing them.

The article points to the freeze in income tax thresholds announced in 2021 by Rishi Sunak and extended by Reeves. This year alone, the policy is expected to raise an additional £42bn for the government, and by the start of the 2030s it could raise more than £60bn annually. Those are immense sums extracted not by legislating a higher rate but by refusing to adjust the system to the realities of pay and prices. There is always room, technically, to squeeze further, either by extending the freeze or lowering starting points for charges, as happened with employer National Insurance being levied from a lower threshold.

Burnham could, if he wished, use the same approach and insist he had kept to the manifesto. But his political brand has long traded on a kind of civic radicalism, the language of power shifting away from Westminster. In that context, one of the most intriguing suggestions in the piece is not merely that taxes could be adjusted, but that control over them could be devolved.

Lord O’Neill of Gatley, described as an economist and a key Burnham ally, has indicated that local authorities could gain control over tax rates and revenues. Business rates devolution is presented as a strong probability, and aspects of income tax are described as something that could be studied “in a serious way”. The appeal for Burnham is double edged. Devolution would allow him to argue he is remaking the state, not merely raising taxes. It would also open a political escape hatch. If income tax is increased locally by a mayor or authority, central government can claim it has not broken its manifesto pledge not to raise national headline rates.

That is the sort of manoeuvre that delights strategists and infuriates taxpayers. For citizens, the distinction between a national and a local rise matters less than the number on the payslip. For business, a patchwork of varying local rates could introduce complexity and, depending on the scale, affect investment decisions and labour mobility. A Britain in which tax rates differ meaningfully between city regions would be a Britain in which companies and workers begin to factor fiscal geography into decisions about where to live and operate. That may or may not be desirable, but it would be a profound shift in the country’s political economy, closer in spirit to federal systems than to Britain’s centralised tradition.

There is also a more subtle question: what, exactly, would local control mean in practice? If local authorities are given powers without sufficient revenue, they become administrators of austerity. If they are given meaningful levers, they become mini Treasuries, responsible for balancing local public services against local tax burdens. Burnham’s supporters may see that as democratic renewal. His opponents will frame it as an opportunity to raise taxes by stealth while blaming local politicians for the fallout. Either way, it would redistribute political pain as much as it redistributes fiscal authority.

Then there is wealth, the area where Labour’s internal argument has often been most fervent. The article notes that “wealth is in the sights” of Burnham and points to allies backing wealth taxes, ramping up capital gains tax and transforming property taxation. Here, the manifesto promise to “share wealth” becomes more than a slogan; it becomes a justification for reaching into assets rather than earnings.

Capital gains tax has long been a favourite target of those who argue that the tax system privileges wealth over work. Aligning capital gains rates with income tax rates has an intuitive fairness, at least to those who see investment profits as income by another name. Yet the piece highlights a practical obstacle: HMRC estimates indicate that matching rates could ultimately lose money for the Exchequer. That is not an ideological claim but a behavioural one. Raise the tax on gains too sharply and investors may defer sales, restructure holdings, or shift activity in ways that reduce the taxable events. The Treasury would then have made a political statement at the price of diminished revenue.

Burnham, if he is serious about funding large spending commitments, cannot afford symbolic revenue raisers that shrink the base. This is the enduring tension in wealth taxation. The most popular versions are those that sound punitive towards the affluent. The most effective versions are those designed to collect reliably without provoking avoidance and flight. The two do not always coincide.

Property taxation is even more politically treacherous. Britain’s homes are not merely places to live; they are, for millions, the main store of wealth and the anchor of retirement security. Proposals to “raid” expensive homes include expanding a mansion tax or rebasing council tax calculations. Another, more sweeping option would be to overhaul the entire system by scrapping council tax and stamp duty and replacing them with an annual levy based on a home’s value or on the value of the land beneath it.

Such proposals carry a reformer’s logic. Council tax is widely criticised for being based on valuations that are decades out of date. Stamp duty is condemned for discouraging mobility by penalising transactions, effectively taxing people for moving house. An annual levy on value or land could, in theory, be fairer and more economically efficient. But a tax system is not adopted in theory; it is adopted in a country with voters, newspapers and a memory of the poll tax riots of 1990. Any politician who touches property taxation is handling live wire.

The distributional consequences are also stark. A revalued council tax or a new annual levy would create clear winners and losers, and those losers would not necessarily be the caricatured super rich. Depending on design, pensioners in valuable homes with low incomes could be hit, as could families in areas where house prices have risen far faster than wages. A government could add deferrals and protections, but each adjustment reduces revenue and increases complexity. Meanwhile, the political message would be unavoidable: the state is shifting from taxing what people earn to taxing what they own.

That shift is, in fact, the most revealing thread running through Burnham’s hinted options. Business rates tweaks, threshold freezes, devolution of income tax powers, higher capital gains, and property levies all point to a government searching for money without admitting it is raising the big national rates. It is a strategy of indirection. The risk is that indirection breeds mistrust. When politicians promise not to raise taxes and then raise them through technicalities, voters conclude, not unreasonably, that the promise was meaningless. The more sophisticated the manoeuvre, the deeper the cynicism it can produce.

Burnham’s defenders will argue that the country’s needs require flexibility, that public services and investment cannot be sustained by slogans, and that the current tax system is full of distortions and unfairness. They will say that rebalancing from high street to warehouses corrects an obvious imbalance, that threshold freezes are a response to fiscal reality, that devolution brings decisions closer to communities, and that wealth taxation is a matter of justice in a country of entrenched asset inequality.

His critics will reply that each of these moves carries economic costs and political risks. Punishing a growth sector such as logistics may dampen investment. Freezing thresholds is a stealth tax on workers that bites hardest in an inflationary age. Devolving taxes may fracture the national economy into competing jurisdictions and obscure accountability. Wealth taxes can be evaded, can yield less than promised, and can unsettle a housing market on which households and banks rely.

What makes the moment significant is not any single proposal but the posture behind them. Burnham has presented himself as a leader who wants to “do things differently”, a phrase that can mean almost anything until it meets the tax code. In practice, “doing things differently” often means shifting burdens to those with less political power to resist, or at least to those who can be portrayed as deserving targets. Online giants make convenient villains; homeowners in leafy postcodes can be framed as beneficiaries of unearned windfalls. Yet Britain is a country where large numbers of voters aspire to be homeowners and investors. Tax policy that treats wealth as fair game can end up antagonising not only the rich, but the anxious middle who fear they will be next.

Burnham’s challenge, if he is to turn rhetorical “movement” into governing policy, is to decide whether he wants a tax system that is more transparent or one that is more manoeuvrable. The methods described in this article favour manoeuvrability: moving burdens within business rates, extracting revenue through thresholds, shifting responsibility downwards through devolution, and targeting wealth through complex reforms. They offer money, or at least the hope of it, while preserving the appearance of fidelity to manifesto promises on headline rates. But they also risk producing a tax regime that feels more arbitrary and more politicised.

For now, the phrase “room within the manifesto” is doing a great deal of work. It is a signal to supporters that ambition has not been capped by pre election caution. It is a warning to taxpayers that the old assurances may not hold as firmly as they imagined. And it is a reminder that in modern Britain, the real tax debate often happens not in the rates announced at the despatch box, but in the quiet adjustments that determine who pays, when, and how much.

If Burnham does become prime minister, the question will not simply be which pockets he raids, but whether he can persuade the country that the raid is coherent, necessary and fair. The public has tolerated tax rises by stealth for years, in part because the mechanisms are hard to see and harder to attribute. A leader who makes a virtue of “movement” may discover that visibility changes everything. The moment people feel the hand in the pocket, they do not much care whether it belongs to Westminster, a devolved mayoralty, or the Treasury acting through a technicality. They care that it is there.