New British Prime Minister Andy Burnham has shelved a proposal to raise the tax-free personal allowance, citing financial challenges, despite having previously suggested the idea and growing voter concerns over the cost of living.
| PULSE POINTS |
❓ WHAT HAPPENED: New British Prime Minister Andy Burnham has U-turned on proposals to increase the tax-free personal allowance, roughly equivalent to the Standard Deduction in the U.S., after assuming office. 📺 DETAIL: Prime Minister Burnham announced there would be no change to the tax-free personal allowance. The tax-free personal allowance is currently £12,570 (~$16,800), meaning earnings up to this amount are not subject to income tax unless you earn over £100,000 (~$134,000), at which point it begins to gradually decrease until hitting zero at £125,140 (~$167,340). Significantly, the personal allowance has been frozen since 2021, resulting in its value being gradually eroded and more people paying taxes as inflation pushes up earnings. This process is known as fiscal drag. Burnham previously suggested that he would increase the personal allowance to help alleviate pressures created by the cost of living crisis, but later decided that altering the allowance would cost the government too much money. While Burnham’s allies now claim that changes in the personal allowance were not part of his immediate priorities, it was one of his most notable proposals during the Makerfield by-election (special election) which saw him returned to the House of Commons. Burnham resigned from his role as Mayor of Greater Manchester to run in the by-election and replace Sir Keir Starmer as Labour leader and, ultimately, Prime Minister. 🎯 IMPACT: The decision to maintain the frozen allowance could exacerbate financial pressures on families already struggling with inflation. The fact that the new Prime Minister has U-turned so soon in his tenure on what was one of his most eye-catching proposals raises questions about the left-wing government’s direction of travel on taxes. 📺 FLASHBACK: Burnham has come under increased scrutiny amid reports that he intends to pursue a higher-tax agenda. According to analysis by Nigel Farage’s Reform UK, this could add the equivalent of around $51 billion in new taxes. “Andy Burnham has spent 20 years reaching for other people’s money—a death tax on family homes, a graduate tax on young people getting their first pay cheque, a £14 billion raid on savings and investment, and new levies on everything from your parking space at work to your weekend away,” said Reform UK’s Shadow Chancellor Robert Jenrick. This is part of a broader warning from Farage that Burnham’s leadership will see a leftward shift that is likely to lead to tax hikes. |
Image by Kirsty O’Connor / No 10 Downing Street.
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