Capital Economics suggests Andy Burnham could turn to wealth taxes to fund key pledges

A new paper from Capital Economics suggests that the new Prime Minister may move away from recent trend of increasing the burden on businesses – long bemoaned by companies as placing an unfair burden on their finances. Looking ahead, Andy Burnham’s government may instead focus instead on capital, wealth and income – as the administration continues to look for alternatives to public sector cuts.

With a new Prime Minister at 10 Downing Street, the Labour government is keen to find ways to show the change in management is one which will have a meaningful impact on the lived experience of the electorate. With the cost of living crisis continuing to eat away at consumer spending power, while public services which should support citizens with those struggles – including healthcare and public transport – have been underfunded to breaking point, that means the autumn statement is expected to be looking for areas to spend.

Existing fiscal rules would likely prevent heightened borrowing, while Labour MPs are divided on whether to use their parliamentary super-majority to simply change those rules. So, to avoid spending cuts and fund new plans, Andy Burnham’s new administration is expected to be looking to raise funds through taxation.

According to Capital Economics, this is likely to come from a different direction, however. One of Burnham’s first ‘quick-win’ policies was to announce pubs, social clubs and live music venues in England would be given a 20% cut to business rates from April. If business rates more widely are considered off-limits when it comes to raising public funds, the consultants instead have said it might come from taxes on personal wealth instead.

“This tax-raising budget may be ­almost as big as the last, but with the balance tilted away from hikes on businesses seen in recent years towards tax hikes on capital, wealth and income,” Ruth Gregory, deputy chief UK economist at Capital Economics, said in a research note. “Some of the PM’s more ambitious pledges may be delayed beyond this year’s budget… If spending is to rise (perhaps by up to £30-40 billion) taxes will need to rise too (perhaps up to £20-25 billion).”

Gregory then estimated that if taxes were to rise by £25 billion, equal to about 0.8% of GDP, then the tax burden would rise to a new high of 39% of GDP. Potential measures identified by the consultancy include increases in capital gains and inheritance taxes, changes to pensions, taxes on banks and a possible new defence or social care levy. However, Gregory added that Burnham may choose to delay some of the tax rises to avoid a large single hit to those households’ real incomes.

Press speculation

With 2025’s autumn statement having been beset by weeks of contradictory speculation, some experts argued the ‘uncertainty’ had undermined confidence in the UK economy, and led to muted growth. To that end, a treasury spokesperson later refused to be drawn on the report, offering little beyond asserting Chancellor John Healey’s priorities to “boost business, help with the cost of living and support people in every postcode.”

They added, “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.”

However, the UK’s conservative press were less restrained in their commentary. GB News declared “Andy Burnham plots £25 billion tax raid on pensioners and entrepreneurs in first Budget, economists warn”, while The Telegraph claimed Capital Economics had told households to “brace for a war on wealth during the next budget”, while The Sun also branded the – still unconfirmed – plans as a “raid”, particularly focusing on a discussed 1.8% social care levy applied to income above £6,240, “hitting workers over the age of 34.”

There was little interest in the way the taxes might be spread, or whether those paying most might be significantly more capable of affording the “raid”. There was also no space for the idea such a plan could help avoid another very real “raid” on private wealth which many households already face. There is no current national service for social care, and when people reach the age where they cannot live alone, they often find themselves in private sector care homes. While a brief period in these homes is covered by local councils, beyond this, care homes have license to recover fees from the property sales of residents after they die – an unofficial tax on inheritance, which often benefits the boards of extremely poorly-run facilities.

Capital Economics describes itself is a London-based think-tank, which describes itself as delivering “independent, data-driven economic insights”. The firm – whose more-than 200 clients include some of the world’s largest corporations, like social media giant Meta, and oil-magnate Chevron – was founded in 1999, by Roger Bootle. During the Conservative John Major government in the 1990s, Bootle – who is still chair of Capital Economics – was appointed to the UK treasury’s panel of economic forecasters, under Chancellor Kenneth Clarke. A Eurosceptic, Bootle is currently a member of the Economists for Free Trade group, formerly called Economists for Brexit, and remains a columnist for The Telegraph.