Burnham's tax devolution plan revealed
Andy Burnham's proposed overhaul of HMRC income tax, which could see tax powers devolved to local areas in England, has been outlined ahead of his anticipated ascent to Prime Minister. The Labour MP for Makerfield is set to become the new PM in July if he remains unchallenged.
According to Burnham's advisors, the presumptive future prime minister is considering two models for devolved income tax: retention and rate-setting. Retention allows a local area to keep a share of the income tax raised within its borders to spend locally, without altering individual tax bills. Rate-setting, by contrast, empowers local or regional leaders to determine the tax rate themselves.
Spain and EU nations use rate-setting model
Spain and other European Union nations already employ the rate-setting model. Lord O’Neill of Gatley, tipped to become Burnham’s chief economic adviser, confirmed that the incoming PM would explore devolving “aspects of income tax” upon entering No 10.
Speaking to LBC, Lord O’Neill said: “This would be a whole new level ... Business rates devolution is a very strong probability. I think exploring [devolving] aspects of income tax is possible ... It is definitely something that would be on the agenda to study in a serious way.”
Warning on public spending
Lord O’Neill also cautioned that a “spectacular rise” in public spending could not continue without repercussions from financial markets. “We do not have 10-year gilt yields sitting above Greek equivalent yields for no reason,” he told CNBC. “It’s because we have got a spectacular rise in public spending and our debt levels.”
Chancellor backs Burnham
Chancellor Rachel Reeves has voiced her support for Burnham. “I’m not going to pre-empt the decisions that the new prime minister will make,” she told the BBC. “I’m backing Andy. I think he’d be a great prime minister, but those are his decisions, not mine to make.”
