The political landscape is abuzz with the new prime minister, Andy Burnham, and his ambitious agenda to tackle the cost of living crisis. As he assembles his cabinet, the question on everyone's mind is: how will he fund his bold promises?
A Cost of Living Government
Burnham has made it clear that his government will prioritize easing the financial burdens on voters. He aims to reduce the national bus fare cap and remove VAT from electricity bills, a move estimated to cost £850 million next year. But where will the money come from?
One of Burnham's key pledges is to roll out a national care service, a move that could further strain the budget. Sources suggest he plans to accelerate the implementation of this promise, potentially costing additional funds before the election.
Funding Challenges and Pledges
The removal of VAT from electricity bills is a significant step, but it raises questions about funding. Burnham's promise to pay for this by scrapping the government's digital ID scheme has been met with skepticism. The minister in charge of the policy until recently, Darren Jones, pointed out that the DigitalID program was unfunded, leaving the government to find alternative sources for its new policies.
Downing Street has ruled out using defense bonds to pay for higher military spending, and it remains to be seen how the government will navigate these financial challenges while adhering to existing borrowing rules.
A Social Care Announcement
Burnham is reportedly working on a major social care announcement, aiming to lay the groundwork for a social care service before the election. This involves bringing forward the review of social care by Louise Casey, who is now expected to report as early as next year.
The funding model for this initiative is a delicate matter, as previous proposals have faced backlash due to concerns about a potential "death tax." Burnham acknowledges the sensitivity of the issue, stating, "I am ready to use some of my political capital on this issue... It's not defensible."
Financial Constraints and Fiscal Discipline
Burnham is aware of the financial constraints he faces, especially as he aims to implement lasting social reforms. He has abandoned plans to raise the threshold for income tax, a move that could have been seen as a breach of Labour's manifesto pledge.
His advisers believe that increasing the top rate of income tax to fund these reforms could be politically risky, given the party's commitment to not raising income tax, national insurance, or VAT.
A New Era for Whitehall
The changes to Whitehall are significant, with the creation of a powerful Office for the Prime Minister and the Cabinet, and the transfer of responsibility for the UK's growth strategy to the new No 10 North. These structural changes are part of Burnham's vision for a more efficient and effective government.
Conclusion
Andy Burnham's ambitious agenda to tackle the cost of living crisis is a bold move, but it comes with significant financial challenges. As he navigates these complexities, the new prime minister will need to strike a delicate balance between easing the burdens on voters and maintaining fiscal discipline. The coming weeks and months will be crucial in determining how Burnham's government will fund its promises and deliver on its social care vision.
