Andy Burnham, the front-runner to succeed Sir Keir Starmer as prime minister, has spent years making one argument with uncanny consistency: that Britain’s taxes are too efficient and wealth too easy.
Following his victory in the Makerfield by-election and Starmer’s resignation, that controversy has ceased to be a fringe issue for his party and has become a question the City, the board and the family business are all now being forced to answer.
The change has “tremendous consequences for households, businesses, investors and the economy,” warned Nigel Green, chief executive of the deVere Group, one of the world’s largest independent financial advisory firms. His intervention comes as investors increasingly weigh up what the Burnham government could say about tax, investment, property, wealth creation and Britain’s competitiveness, at a time when the world’s capital is more selective than at any time in living memory.
Burnham has long held that the country depends more on tax revenue, while accumulated wealth, goods and property should have a larger share. As he moves closer to Downing Street, those environmental conditions are moving from the fringes of politics to the center of the economic debate. The uneasiness is palpable: Business Matters reported that eight out of ten SME owners fear what Andy Burnham’s premiership will mean for their business.
“Andy Burnham’s rise to the top of British politics marks one of the most important moments for investors in years,” said Green. “For the first time in a generation Britain may have a prime minister who has the political will to look at the wealth and ask whether it should pay more.” This is important because the response does not just affect the rich, but affects investment, jobs, business creation and economic growth.”
Burnham did not propose a wealth tax, an exit tax or any package aimed at private wealth. Yet investors are already training their attention on the most exposed areas if the next government tries to shift the burden on income and assets.
“Capital gains tax, inheritance tax, estate tax, investment income and estates are all very prominent in the discussions happening in all financial markets,” notes Green. “The prospect that the government will put more emphasis on wealth taxation is already sparking discussions among investors, entrepreneurs and business owners about future policy.”
Questions extend to council tax, stamp duty and land tax. Burnham has previously supported property tax reform and has been linked with calls to change the current council tax system in ways that are closer to basic land values. Whether those ideas survive contact with the Treasury is another matter, and as Business Matters has explored, the question of whether Burnham can win over British business is far from settled.
He finds a difficult backdrop: weak growth, stretched public finances and growing pressure to spend. Public sector debt is close to the size of the entire economy, while debts for health care, pensions, infrastructure and defense continue to rise. On top of that, any government faces tough choices about where to find revenue without stifling growth, a tension that is already evident in reports that the Treasury is weighing changes to the inheritance tax and capital gains to close the budget gap.
“Governments have a right to pursue justice,” said Green. But fairness and competition must coexist. The danger is that Britain is entering a mindset where wealth creation is viewed with suspicion rather than encouragement.
Britain remains one of the world’s leading investment destinations, supported by deep financial markets, strong institutions, legal certainty and London’s position as a global financial centre. But the competition is fierce. Financial institutions across Europe, the Middle East and Asia are eagerly courting entrepreneurs, investors and international mobile families.
“Investors around the world are looking at Britain and asking a simple question: is this the most attractive country in terms of capital or the least,” Green said. “The answer will determine where the money will go next.”
The results go beyond the subject’s measurements. Family business succession, property ownership structures, pension arrangements, investment portfolios and estate planning may all be subject to further scrutiny if future governments decide that wealth should contribute a greater proportion of receipts.
“Britain already taxes capital gains. It already taxes inheritance. It already taxes property. It already taxes investment income,” Green noted. “The question now is whether the Burnham government will move forward. And that’s why investors are paying so much attention.”
The numbers describe the poles. According to the Office for National Statistics, personal wealth in Great Britain is estimated at £13.6 trillion, six times the annual national income, with property, pensions and financial assets making up the vast majority. That wealth is also highly concentrated: An analysis by the House of Commons Library shows the richest tenth of households hold about 41 percent of the total, a concentration that fuels the argument that assets should do more to raise more income.
In households, the effects can go far beyond the wealthiest. Inheritance tax changes change family succession. Property tax changes affect homeowners and landlords. Capital gains adjustments are changing the economics of investing and entrepreneurship. Tax exemptions for pensions and investment income can also be included if policymakers hunt income while protecting taxes on employment.
“There is a growing belief in political circles that wealth represents an easy answer to difficult financial questions,” Green said. “History teaches us that it is not that easy. If governments pursue existing wealth, there is a greater risk of discouraging future wealth creation.”
His main concern is the way to travel. “Businesses are investing for many years to come. Investors are giving money for decades to come. If they conclude that Britain is becoming increasingly unfriendly to business, they will adjust accordingly. A generation ago, wealth was captured. Today it is moving a lot. It is comparing places, tax systems and governments. And it is moving.”
As momentum builds behind Burnham, Green timed it as a defining economic test. “Andy Burnham believes that wealth should bear a greater responsibility. It is a belief that has taken him far from politics. Now investors are asking what happens when he starts to form a government.”
“There is a big difference between saying that wealth should pay more and designing policies that will achieve it without harming investment, business and growth,” he concluded. “That is the challenge on the desk of any future prime minister Burnham. He is forcing a national debate about who should pay the extra money, work or wealth. Investors are asking whether Britain will end up paying the bill.”
