Burnham Warns of Tough Autumn Budget as Tax Rises Remain on the Table

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Prime Minister Andy Burnham has refused to rule out tax increases in his first autumn Budget, acknowledging that the government faces a difficult financial situation ahead of Chancellor John Healey’s fiscal statement on 28 October.  Speaking during his visit to Ukraine, Burnham said he would not be “unrealistic” about the state of the public finances and promised that decisions taken in the Budget would be carefully considered and fully funded.

The government is facing pressure to find additional money as it prepares to deliver several major spending commitments, including social care reform and increased defence spending. The Chancellor has already warned ministers that departments may need to make cuts to help fund new policies.  Burnham defended recent measures including the £2 bus fare cap and the removal of VAT from household electricity bills, insisting that both commitments had been funded through changes to existing spending. He also pointed to the decision to abandon the previous government’s digital ID scheme as one source of savings.

However, economists have warned that the government’s financial room for manoeuvre is limited. The National Institute of Economic and Social Research has said ministers may have to choose between raising taxes, reducing spending or finding other savings if they want to meet their fiscal rules while delivering their policy programme. The pressure has been compounded by unexpectedly high government borrowing. Official figures showed that public sector borrowing reached £1.8 billion in July, adding to concerns about the government’s ability to finance new commitments without taking difficult decisions.

Despite the uncertainty, Burnham has maintained Labour’s manifesto commitment not to increase income tax, VAT or National Insurance for working people. He has nevertheless declined to guarantee that there will be no tax rises of any kind in October. The Prime Minister said the government would continue to look for ways to support households while maintaining what he described as a responsible approach to the public finances. With the Budget less than two months away, the government’s challenge will be to balance its promises on public services, defence and the cost of living against mounting pressure to keep borrowing and taxation under control.