Prime Minister Andy Burnham is facing questions regarding his administration's tax policy, particularly concerning the freeze on personal allowance thresholds. While Burnham has indicated a desire to increase the personal allowance, aides have recently downplayed the immediate prospect of such a change, citing significant costs to the Treasury.
Burnham stated that the issue would be considered in the upcoming Autumn Budget. "We'll have to look at it at the budget alongside everything else," he said. "So no commitment, no unfunded promise." He suggested that media reporting had led to misinterpretations of his remarks, emphasizing his commitment to honesty and doing politics differently. "There is no commitment at this point to change, but we will look at that at the Budget," he added.
The freeze on tax thresholds, implemented in 2022, is currently scheduled to remain in effect until 2031. This policy has been a significant revenue raiser, bringing millions of individuals into the tax system.
In parallel, the administration has announced a cap on single bus fares at £2 from January, a measure aimed at easing cost-of-living pressures. The funding for this initiative, totaling £454 million, is reportedly being sourced from a reallocation of international climate grants to loans, with additional funds from underspends in the Net Zero Department budget. This approach appears to necessitate further borrowing.
The administration's commitment to fiscal responsibility was reiterated by Burnham at a recent Cabinet meeting, where he stressed the importance of demonstrating how policies will be funded. "Always we will show how we are going to pay for it, what we are reprioritising," he stated.
However, a plan to reduce domestic electricity bills by 5% through a VAT cut, estimated to cost £850 million, has also encountered funding challenges. The government's proposal to finance this by discontinuing a digital ID scheme has been met with skepticism, with concerns that the new Chancellor, John Healey, may need to find the funds during the Budget, adding pressure to public finances.
Burnham asserted that the policies announced this week, including efforts to end rough sleeping, the bus fare cap, and the proposed VAT reduction on electricity bills, are fully funded through reprioritization. "I'm taking a difficult look at some of the things that the Government was committed to, digital ID being one example, and reprioritising," he explained.
Regarding council housing, Burnham indicated a shift in focus, suggesting that existing social housing funding would be redirected to council housing construction rather than introducing entirely new funding. He described this as placing a greater priority on council housing, leveraging the government's existing £39 billion allocation over ten years.
Official figures released this morning showed inflation dropping to 2.6% in June. However, concerns remain that geopolitical instability could lead to renewed price increases.
The £2 bus fare cap is set to last until 2027. While a national cap existed previously, the current administration had argued it was not affordable. The £2 cap for some areas was funded by local metro mayors.
Chancellor John Healey stated that the bus fare measure would benefit millions and is funded by savings elsewhere, without imposing additional burdens on taxpayers.
In personnel news, Scottish Labour leader Anas Sarwar is expected to receive a peerage and a role in the Department for Business, Innovation, Science and Trade. Dan Jarvis has been appointed security minister, and James Murray has become Financial Secretary to the Treasury and Paymaster General. Anna Turley has moved to a Home Office ministerial role, Florence Eshalomi is now a housing minister, and Andy Slaughter will serve as Solicitor General. Seventeen ministers have been reappointed to their existing roles.