The Economics of Andy Burnham

Why Britain’s Most Hated Tax May Be Andy Burnham’s Greatest Opportunity

There is a number that should embarrass every Chancellor who has ever flinched at inheritance tax, and it is this: roughly one estate in twenty pays it. Not one in three, not one in five. One in twenty. Yet ask the British public which tax they fear and resent most, and inheritance tax wins by a mile, year after year, ahead of income tax, council tax, and almost everything that actually affects most people’s lives. This is no accident. It is a political illusion, sustained by decades of tabloid mythology about the taxman coming for the family home, and it has allowed a tax that is narrowly targeted, economically defensible, and barely felt by ninety-five households in a hundred to be treated as a national outrage. Somewhere in that gap between perception and incidence sits an opportunity that no Chancellor has yet had the nerve to seize. Andy Burnham, it turns out, just might.

Call it Burnhamomics, because everyone else already is. The label covers a cluster of positions Burnham has held, in some cases for well over a decade, that are now coalescing into something resembling a programme: land is undertaxed and labour is overtaxed, council tax is a regressive anachronism still pegged to 1991 valuations, and inheritance tax should be abolished in its current form and replaced by a broader levy that funds social care. None of it is shouted from a manifesto, because there is not one yet. It has to be assembled from a decade of interviews, a mayoralty’s worth of policy experiments, and the steady evolution of a politician who increasingly looks to be positioning himself as Labour’s next Prime Minister.

Start with inheritance tax, because it is where Burnham’s instincts are sharpest and where the case for radicalism is easiest to make to a sceptical audience. The nil-rate band has remained at £325,000 since 2009 and is frozen until at least 2031. During that time, average house prices have risen by roughly seventy per cent. Governments have achieved a substantial stealth tax rise by doing precisely nothing and allowing inflation to do the work. The result is a striking asymmetry. Perceived exposure to inheritance tax has risen sharply because many homeowners, particularly in London and the South East, assume the taxman is coming for their house. Actual exposure has crept up only gradually, from around four per cent of estates a decade ago to just under five today, with the Office for Budget Responsibility projecting around seven per cent by 2030 as pension wealth comes within scope. Even then, it remains overwhelmingly a tax on the wealthiest slice of the distribution, raising around £8–9 billion a year from people who, whatever they tell themselves, are not the ordinary families invoked in the tabloids.

Burnham’s proposal, first floated when he was Health Secretary in 2009 and revived during his leadership launch, is to replace this narrow, deeply unpopular tax with a care levy, paid across the population but calibrated so that those with the greatest wealth contribute the most, with the proceeds ring-fenced for a National Care Service. It failed spectacularly the first time, undone by one of the most effective attack lines in modern British politics: the “death tax”. But the politics of 2026 are not those of 2010. Social care has shifted from a looming concern to a lived crisis for millions of families with direct experience of the financial and emotional costs of growing old without adequate support. The Health Foundation estimates that simply standing still will require billions of pounds in additional funding over the coming years. A replacement for inheritance tax raising roughly what the existing system does is not a token gesture. It is of broadly the right order of magnitude to place a National Care Service on a sustainable footing from the outset.

The elegance of Burnham’s proposal is that it exchanges one of Britain’s most unpopular taxes for one of its most valued public services. It does not ask people simply to accept a new burden. It redistributes an old resentment onto what may prove a fairer base. A tax that currently falls unpredictably on a small minority of estates, often at the worst possible moment in a family’s life, would be replaced by something paid more gradually, more broadly and more transparently linked to a service almost everyone expects eventually to need. Economists would recognise this as tax-base broadening: spreading liability more evenly while reducing distortions and preserving revenue. Burnham’s own formulation—that he would abolish inheritance tax only if “the wealthy are taxed properly while they are alive”—suggests he understands an important point. Taxes triggered by death encourage expensive avoidance planning. Taxes levied during life are generally harder to avoid and economically cleaner.

The same logic underpins Burnham’s thinking on land. He has repeatedly described council tax as “highly regressive”, and he is right. A system still based on 1991 property valuations now charges a modest terrace in parts of northern England at a higher effective rate than a townhouse in Kensington. His preferred replacement, a proportional property tax that also absorbs stamp duty, points towards the land value tax he has advocated for years. The idea, associated with Henry George, is straightforward: tax the value of the land rather than what stands upon it. Because no one can produce or hide additional land, economists have long regarded taxes on land values as among the least economically distortive available. They discourage speculation in underused sites without penalising investment, improvement or development. No British government has attempted such a reform on a national scale. If one eventually does, it will represent a far more consequential restructuring of the tax system than another tweak to income tax bands or VAT thresholds.

Here the sceptic, and I include myself among them by professional habit, has to stop nodding and start counting. Burnham has repeatedly said that he intends to operate within Rachel Reeves’s fiscal rules. That is either the commitment that makes the programme credible to financial markets or the caveat that ultimately constrains it; it is too early to know which. Land value taxes and care levies can, in principle, raise rather than lose revenue. But creating a National Care Service while simultaneously redesigning local government finance would require formidable administrative competence, careful sequencing and political discipline. None of those qualities can be taken for granted simply because the economic logic is sound.

What ties the tax and care agenda together is a single wager: that Britain’s political class has spent two decades treating overdue corrections as though they were dangerous acts of radicalism. A tax that affects one estate in twenty but terrifies the other nineteen. A council tax system still valuing homes as though John Major were in Downing Street. Burnham’s real insight is not any single proposal. It is that the political costs of reform may have been consistently overstated.

Whether he is right is ultimately an empirical question, not an ideological one. The bond markets will have their say. So will homeowners, local authorities, and Parliament. But perhaps the most remarkable fact remains the one with which we began. Inheritance tax is feared by almost everyone and paid by almost no one. If Burnhamomics succeeds, it may be remembered less for abolishing one unpopular tax than for recognising that Britain’s biggest political opportunities often lie in the gap between what voters believe and what the numbers actually say.