Andy Burnham’s first week as Prime Minister

Andy Burnham’s first week as Prime Minister is now under his belt – but is history repeating itself?

Seven days into his premiership, Andy Burnham has already thrust the tax debate back into the headlines as he grapples with “the need to make things fairer” and the practicalities of making tax changes. We have a new Chancellor, John Healey MP, and a commitment to ensure that all policy announcements are fully funded by “re-prioritising” the government’s budget. Tax rises seem likely too. The question is which ones, when, and by how much?

In Andy Burnham’s first speech as Prime Minister on 20 July he said that “[i]n the 1980s, Britain took some wrong turns.” For some this has been interpreted as a return to the politics of the 1970s when we also had a Chancellor called Healey. Lord Denis Healey was the Labour Chancellor from March 1974 to May 1979 when the Conservatives regained power. He introduced a number of tax policies to tax wealth such as the Development Land Tax in 1976 which had rates of up to 80% on property development profits as well as the introduction of Capital Transfer Tax in 1975 which was introduced to tax gifts in the seven years prior to death, a rule that still applies today.

Wealth taxes return to the political agenda

Lord Denis Healey was a great believer in an annual wealth tax which was included in the Labour Party Manifesto in 1976 although it was never enacted due to its unpopularity as well as complexity. Wealth taxes continue to be popular with the public with a YouGov poll in May 2026 showing over 75% supporting a 2% wealth tax on assets over £10 million. The Patriotic Millionaires, a number of British wealthy individuals are calling on the government to level a wealth tax, which is certainly keeping the conversation going. It is not a new one – back in December 2020 the Wealth Tax Commission, a think-tank published their findings on a potential wealth tax in the UK. Their conclusion was that it is probably best to reform existing capital taxes rather than seek to introduce a whole new tax which is costly, time consuming and complex. Andy Burnham has refused to rule out a wealth tax which is understandable in his first week, but a wealth tax does seem contrary to John Healey’s five priorities one of which is “wealth creation”. John Healey’s four other priorities – fiscal stability, growth in every postcode, backing Britain & making life more affordable – do not obviously lead to a particular direction of travel for tax policy.

Property tax reform: from council tax surcharges to Land Value Tax

Property taxes seem high on the agenda with rumours that Andy Burnham is considering reducing the threshold for the High Value Council Tax Surcharge from £2 million to £1.5 million when it is introduced from April 2028 bringing an additional 150,000 homes into the scope of this charge. Andy Burham has been a long-time supporter of an annual Land Value Tax having written articles for The Guardian in 2010 and again as part of the Labour Party Leadership campaign. He is quoted as saying that introducing the measure could enable other unpopular taxes to be scrapped. “If we move towards a land value tax we could end some of the most unpopular taxes such as stamp duty and inheritance tax […] These issues are very important, particularly stamp duty because it stands in the way of young people putting down their roots and getting on in life.” A Land Value Tax is not without its challenges – it requires valuation as well as a whole new system to collect the tax. It is also difficult to set the rate – property taxes contribute significantly to the UK’s tax revenues. The Office of Budget Responsibility estimated that property taxes raised c£16.4 billion in 2025/26 which represents almost 1.3% of annual tax revenues. Any newly introduced Land Value Tax would need to raise at least this amount (after costs of implementation) in order to be successful.

There has been media speculation about other potential tax increases such as the alignment between income tax and Capital Gains Tax (CGT) rates meaning that CGT rates could increase from 24% up to 45%. This could raise an additional £8 billion per year according to the Resolution Foundation or could cost the Treasury up to £7.8 billion per year according to IG, a trading platform. Clearly, this is not a clear-cut decision so will need some careful consideration.

Early tax announcements and the funding challenge

The announcements already made such as the cut to VAT on some energy bills from September 2026 as well as the 20% cut in business rates for pubs, clubs and music venues from April 2027 have all been welcome announcements although we await to see the outcome of the VAT consultation on online non-compliance which is expected to fund these announcements.

Other tax changes are more expensive to implement. An easy way to ease the cost of living crisis is to increase the tax-free personal allowance which mainly benefits those on low incomes. It is, however, very expensive. If the personal allowances was increased to £16,000 which is the amount that it would be if it had not been frozen back in 2021, the £3,500 increase would cost almost £6 billion. That is unlikely to be funded by “reprioritisation” so this would need a tax rise to increase tax revenues. For example, to increase the basic rate of income tax from 20% to 21% which would raise £8.2 billion, or increasing the VAT rate by 1% could raise as much as £9.2 billion. However, these rate rises are likely to only exacerbate the cost of living crisis.

John Healey will therefore need to consider other places to raise tax if the government wants to go ahead with some of the expensive tax measures. Is this landlords? The retired? The wealthy? Entrepreneurs? Businesses? Overseas investors? None of these are without political risk and, ultimately, they may need to make changes that impact a number of categories of taxpayers in order to raise the amount of tax revenue needed.

The importance of certainty for the UK economy

Hopefully, Andy Burnham and John Healey will use the summer recess to carefully consider their options as there is no obvious answer. The media speculation should mellow as the commentary on the possibilities is at times more harmful to the UK’s economy than the policy announcements themselves. Uncertainty and speculation are not the UK economy’s friends at a time when it needs all the friends that it can get.

If you have any questions relating to potential upcoming tax changes or would like to discuss any of the above, please don’t hesitate to get in touch with Jo Bateson or your usual Mercer & Hole contact.