Does Andy Burnham’s claim this week that his government is a “second chance at a first impression” make any sense? What the new Prime Minister wants to suggest with that line is that he won’t make the same mistakes as Keir Starmer and Rachel Reeves, who burned through so much political capital for no good reason. But while he won’t make precisely the same mistakes, he may well end up in a very similar position as his predecessors.
There’s a lot about Burnham’s first few days that doesn’t fully make sense, particularly the blizzard of policy and spending announcements. The common theme running through those measures on energy bills, bus fares, and business rates for pubs is that the Prime Minister wants to run a “cost of living government”. He says that his ministers must show how they are going to pay for all their policies – but contradicts that himself by not being clear about how the announcements he’s made so far are going to be funded.
Now the Treasury has made it clear to The i Paper that Burnham will also honour the commitment made by Reeves that pensioners whose only income is the state pension will be excluded from taxation. Pensions will be dragged into taxation next year as a result of the triple lock, which guarantees that state pensions will rise by inflation, wages or 2.5 per cent (whichever is highest). But Burnham and his Chancellor John Healey will ensure that anyone who only has the state pension won’t have to pay tax, with plans on how to assess this due to be announced later in the year.
Politically, this makes sense. It would be a brave or perhaps daft Labour prime minister who came in and picked an early fight with pensioners, given Reeves was holed below the waterline by announcing that she would restrict the winter fuel payment to those on pension credits only. But it only makes sense for now, which is another common theme to much of what Burnham is doing and saying. What doesn’t make sense at all is how he plans to pay for any of this.
Never mind whether some pensioners will be able to avoid income tax. What about the wider burden on the taxpayer for the triple lock itself, Burnham’s plans to end rough sleeping, his desire to “expend quite a lot of political capital” (not to mention vast sums of money) on reforming social care, reducing VAT on energy bills to zero, and anything else he might fancy announcing between now and the government having an actual fiscal event in the autumn?
The Prime Minister is committed to the same fiscal rules that meant Reeves felt forced to make the difficult, politically unpalatable decisions. He is right to avoid her doom-and-gloom language, which made those decisions seem even worse than they were and made voters feel intensely miserable about how many more difficult choices lay ahead. But he cannot avoid the same choices over tax-and-spend.
And that means that at some point, Burnham is going to have to level with taxpayers in the way that every prime minister finds themselves having to do when they want to announce nice things that people want. It’s not just on social care, where unless you have a family member in the system, you’re likely to wrongly believe that care is free at the point of access like the NHS, and therefore get quite angry when a politician suggests you’ve got to stump up a lot more money, either through general taxation or other mechanisms, to fund the broken sector in future. It’s on everything. The reality is that something has to fund these measures. And that something is tax rises.
Even turning to the magic money tree of “taxing the super-rich more” isn’t quite as simple as figures such as Gary Lineker want to suggest, as those pesky super rich have a really irritating tendency to be globally mobile and employ a lot of lawyers and accountants who help them avoid big bills. And so the burden ends up falling on the wider taxpaying public, already struggling not just with the cost of living but the amount of money that evaporates from their payslip into the exchequer each month.
It’s not just pensioners who are threatened by fiscal drag: it’s working people, too, and while Burnham does not want a noisy row with pensioners, he might find that in the long run, he ends up facing the resentment of the wider public, too. And that will mean that his second chance at a first impression will have been wasted, because he will end up in exactly the same predicament as the people he promised he would provide a “circuit breaker” from.
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