Greater Manchester Mayor Andy Burnham Reportedly Plotting Early Election to Seek Mandate for Income Tax Increase

Andy Burnham is considering an early general election as the Treasury confronts a worsening public-finance crisis and ministers weigh tax increases, Labour sources have claimed.

Chancellor John Healey is examining a range of measures aimed at higher earners ahead of next month’s Budget.

The Treasury is seeking to raise an additional £10billion to £15billion. Options under review include increases to capital gains and corporation tax, windfall levies on banks and oil companies, and an expanded mansion tax.

A straightforward increase in income tax is also being considered because it would be simple to implement. However, that move would break Labour’s 2024 manifesto commitment.

An election could therefore be called within the next six months, allowing the Prime Minister to seek a new mandate without remaining bound by pledges on income tax, VAT or National Insurance. Mr Burnham inherited a parliamentary term from Sir Keir Starmer that is due to run until 2029.

Labour’s position in the polls has improved modestly since Mr Burnham entered No 10 in July. An early contest could also allow him to capitalise on Nigel Farage’s difficulties over his party’s finances.

The timing would further take advantage of the Conservative Party’s continuing efforts to rebuild.

Yet campaigning on a platform of higher taxes would give opposition parties an immediate and potentially powerful line of attack.

The proposed tax measures have emerged after the Treasury’s so-called fiscal headroom—the surplus kept as protection against a future economic shock—was estimated to have fallen from £23billion to just £5billion this year.

Higher government borrowing costs, combined with the Iran conflict’s impact on energy prices and inflation, have contributed to the sharp deterioration.

One source said: “They are having a meltdown in there [the Treasury].”

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The source added: “The numbers are getting worse by the day. The markets like to see a ‘2’ in front of the headroom figure, and that seems a long way off. And the easiest way to sort it is off the table.”

A one-pence increase in income tax is estimated to generate roughly £7billion for the Treasury.

The source said Rachel Reeves, Mr Healey’s predecessor, had wanted to increase income tax to reassure financial markets, but concluded that the move was politically unworkable.

Among the proposals being assessed by Mr Healey is an “exit tax” that would charge people leaving the UK for a lower-tax country 20 per cent on their business assets.

Those who remained in the UK could then face a super-rich levy of 2 per cent a year on assets worth more than £10million. The proposal is modelled on France’s wealth tax, which remained in force until 2018.

France’s Impôt de Solidarité sur la Fortune, or ISF, was a progressive annual tax ranging from 0.5 per cent to 1.5 per cent. It applied when an individual’s net wealth exceeded €1.3million.

Treasury officials have cautioned, however, that measures of this kind could ultimately reduce tax receipts, unlike a direct increase in income tax.

That is because tax avoidance techniques, such as moving your cash and home abroad or transferring money to children, eventually more than outweigh the original boost to government coffers.

As The Mail on Sunday revealed in July, Labour is also considering plans to extend the mansion tax to properties valued at more than £1.5million, in a move that would hit nearly 300,000 homes. 

Calling an election would be a bold gamble given the witches’ brew of cost pressures facing voters. 

Oil prices are more than $100 a barrel, there are four increases in interest rates expected by the middle of next year and the average energy bill is forecast to rise by 24 per cent in January to well over £2,000.

Mr Burnham has denied plans to call an early election, saying he will ‘work to the 2024 manifesto’.