Brits face £25billion tax raid as Andy Burnham scrambles to fund spending pledges – what it means for you

BRITAIN is facing a tax raid worth up to £25billion as Prime Minister Andy Burnham scrambles to find the cash for his sweeping spending pledges, economists have warned. His wish list includes ramping up council housebuilding to pre-war levels, offering free social care, boosting defence spending and capping bus fares at £2, with the total bill estimated at up to £63billion. New analysis from Capital Economics suggests households will bear the brunt of any hikes, with the tax burden set to soar to a record 39% of GDP. That risks leaving Britain with a heavier tax load than every other G7 nation, whose average currently sits at 36%. Sign up for the Money newsletter Thank you! The warning comes ahead of Chancellor John Healey‘s maiden Budget on October 28, which experts say could rival last year’s £26billion tax-raising package. Ruth Gregory, deputy chief UK economist at Capital Economics, said the sums involved were eye-watering. “This tax-raising Budget could be almost as big as the last,” she said. She explained that Burnham’s hands are largely tied because he has vowed to stick to Labour’s manifesto pledges not to raise the biggest revenue earners. That means income tax, VAT, corporation tax and employee National Insurance are all off the table, ruling out changes to more than half of the total tax base. But Gregory warned this leaves ministers with few good options left to fund the Prime Minister’s ambitious spending plans. Most read in Money Get FREE tax guidance about inheritance, property and capital gains worth £250 * If you click on this link we will earn affiliate revenue Are you sick of handing over your hard-earned cash to the taxman? You could slash your tax bill legitimately with the right planning, from inheritance tax on your home to savings and pensions. Award-winning financial advice firm Kellands Chartered Financial Planners are offering Sun Money readers a free one-hour consultation with their experts worth £250. Claim your free session today Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No: 193498 “With Labour MPs unlikely to stomach big spending cuts and the markets unlikely to tolerate big increases in borrowing, higher taxes perhaps worth up to 0.8% of GDP may do the heavy lifting in funding Prime Minister Burnham’s policy ambitions,” she said. “We suspect most of the extra burden will fall on households.” Among the options being considered are changes to capital gains tax, pension tax relief, and a possible hike to the bank surcharge, according to the analysis. Ministers are also said to be eyeing a “Defence Levy” or “Social Care Levy” that could see a penny added to income tax rates, raising an estimated £10billion. But, Burnham is also understood to be weighing up two other rival plans to overhaul how Britain pays for social care, after ordering an accelerated review into the crisis-hit sector. One option would see a new 1.8% social care levy applied to income above £6,240, hitting workers over the age of 34. The other would scrap inheritance tax altogether and replace it with a flat 10% charge on every estate to fund a new National Care Service. Number 10 insists no final decision has been made and that any changes will wait until the review, led by Baroness Louise Casey, is published. Over the longer term, the Government is also understood to be looking at scrapping council tax and stamp duty altogether in favour of a brand new property tax system. Two rival models are on the table, with one a proportional property tax based on a home’s current market value and the other a land value tax based purely on the value of the ground a property sits on. Under the land value tax model, homeowners could face an annual charge equal to 1.28% of the value of the land beneath their property, with no option to defer payment until sale or death. More than 21,000 London homes could end up facing annual bills of over £50,000 under this system, with Kensington and Chelsea the worst hit. Gregory said the Prime Minister was unlikely to go too far on tax rises given the pressure already on family finances. However, she warned: “If Burnham goes really big on spending, bigger tax hikes akin to the £42billion rise unveiled in 2024 are not out of the question.” A Treasury spokesman said: “The Chancellor is fully focused on his priorities which will boost business, help with the cost of living and support people in every postcode. “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.” 2 comments2