On the fourth day of Andy Burnham’s premiership, he has announced a £100 million relief package for pubs, music venues, and clubs, which includes a 20 percent reduction in their business rates, reports BritPanorama.
This follows previous early morning announcements, including the scrapping of VAT from energy bills set to take effect in October, which is projected to cost around £800 million and offer average annual savings of £45 for homeowners. Burnham also revealed a £500 million initiative to cap bus fares in England at £2.
Despite the cumulative nature of these measures aiming to provide relief for Britons and businesses amid rising living costs, questions are being raised about how the government will finance them in conjunction with other significant spending commitments.
Burnham has committed to adhering to the Labour Party’s manifesto pledge of not increasing income tax, VAT, or employee national insurance contributions, which limits his options. Financial experts are questioning how he will balance these initiatives with a constrained budget.
A wealth tax
Emma Reynolds, the new chief Treasury secretary, has not dismissed the possibility of implementing a wealth tax, echoing hints Burnham dropped during an interview with Gary Lineker. Burnham may consider various forms of taxation to support his financial commitments.
This could include a raised top income tax rate from 45p to 50p, which would break manifesto commitments but might be seen as a viable option for revenue generation. However, some analysts suggest such a measure could yield limited returns due to potential capital flight.
Alternatively, a 2 percent levy on high-value assets could generate around £10 billion, whereas aligning capital gains tax with income tax might raise between £10 billion and £14 billion, though it could deter investment.
Raiding other departmental budgets
There are indications that Burnham may look to reallocate existing funds, having stated that the scrapping of VAT on energy bills would be funded by cancelling a digital ID scheme. However, former Chancellor Darren Jones, who was dismissed under Burnham, has challenged the viability of this assertion.
Reports suggest Burnham may also redirect funds from Ed Miliband’s climate fund to support the bus fare cap. While such reallocations may address immediate costs, they are unlikely to sustain larger commitments in the long term.
The ‘Amazon tax’
In addition to measures regarding nightlife, Burnham expressed intentions to reduce business rates for high street retailers and is contemplating a new tax on large warehouses used by online retailers, known as the “Amazon tax.” The efficacy of this proposal in generating revenue remains unclear.
Moral taxes
One avenue being considered is the introduction of higher taxes on businesses deemed socially harmful, such as vape shops, casinos, or establishments with arcade games. The concept of “moral taxes” might also extend to implementing levies on sugary foods and beverages.
New ways of borrowing
While Burnham has emphasized fiscal prudence regarding public spending, he has also indicated a willingness to utilize available flexibility in borrowing limits set by the previous administration. Recently appointed Chancellor John Healey’s support for military funding through mechanisms such as war bonds presents another potential strategy for easing budget pressures.
As Burnham navigates these financial complexities, the effectiveness of his strategies in the face of scrutiny will ultimately define his early days in office.
