Burnham economics adviser calls for tax system overhaul

One of Andy Burnham’s key economic advisors has urged him to overhaul Britain’s tax system if he comes into office.

Lord O'Neill, a former Treasury minister and economist, was one of several figures to sign a letter advising the prime minister in waiting to streamline UK taxes to improve public services.

A draft version of the letter, addressed to the government and seen by The Telegraph, backs a new report by the UCL Institute for Global Prosperity, which proposes a radical simplification of the tax system.

“We agree with the principle underpinning the report: the failures of the last half-century are structural, not moral, and will be solved by rebuilding the institutions, not remaking the people,” the letter, signed by six economists says.

“Incrementalism will not fix Britain.”

The UCL report, Prosperity 30, sets out a five-year plan to streamline the tax system and boost headroom to £38bn.

It proposes replacing income tax, employee national insurance, inheritance tax and capital gains tax into one tax “applied consistently to all income”, called national contributions.

It also reportedly suggests replacing stamp duty and council tax with an annual property value tax of 1 per cent.

Mr Burnham has previously suggested that council tax and stamp duty could be replaced, and has instead advocated for a land value tax, which could see property be taxed on its market rental value.

In 2023, Mr Burnham also supported the abolition of inheritance tax in favour of a “national care levy” that everyone would pay to contribute to a national care service, but said “obviously the wealthiest would pay the most”.

The letter accompanying the report warns that taxes in Britain are “rising faster than in any comparable economy while public services deteriorate”.

“Seven prime ministers in 10 years have inherited the same challenge and failed to solve it for the same reasons: the problems are structural and systemic,” the letter, signed by six economists says.

Lord O’Neill, who was joined by five other economists in signing the letter, according to The Telegraph, is said to have served as one of Mr Burnham’s key economic advisors in the lead up to his by-election in Makerfield and subsequent bid to become the next prime minister.

Mr Burnham sought to set out his economic policies last week, suggesting there is “some room” in the Labour manifesto for “movement on tax”.

The incoming PM signalled he may look at hiking business rates on the giant warehouses, while lifting high street shops and pubs out of having to pay the business rates.

He signalled that he will introduce a so-called “Amazon tax” with a massive reform of business rates in a bid to save Britain’s high streets and pubs.

But he also told Andrew Marr on LBC that he plans to stick to Labour’s 2024 election manifesto promises of not raising income tax, VAT or national insurance personal contributions.

There have also been growing calls for a wealth tax from left-wing Labour MPs, while polling conducted earlier this year revealed that 91 per cent of party members think the government should tax the rich more.

One way to do this would be an increase in capital gains tax (CGT), which one of Mr Burnham’s top allies Louise Haigh has called for in recent days.