Burnham floats major tax relief plan for young people

Labour MP for Makerfield Andy Burnham has floated a multi-billion-pound tax relief plan for young workers, according to allies close to the shadow leadership contender.

[The policy] could help break the logjam

Burnham Ally

The plan, reported by The Independent, has emerged as Burnham has positioned himself as a leading contender to replace Sir Keir Starmer as Prime Minister.

According to allies, the proposal would exempt young people from income tax for their first three years of full-time employment. Further policies include assistance with rent to buy and extending the Our Pass Manchester free or reduced fare scheme in public transport for people aged 18 to 25 across England. 

Estimated to cost £3.5 billion, the plan hopes to help young people save for a house deposit and qualify for mortgages. A Burnham ally involved in developing the policy has said the plan could help “break the logjam” that currently prevents many young people to “save for a deposit to get one [a home]”.  

Barclays found the costs of deposits to buy a home along with high property prices were the biggest obstacles to homeownership for renters, with house prices being the top consideration for Gen Z potential home buyers. First time home-buyers are being forced to pay larger deposits and take longer mortgage debt, as average deposits are now worth 10% more than the average yearly salary.

As a result, the Skipton Group reported that the average age for first time home-buyers is now 34, up from 29 in the mid-1990s, with just 6% of first time home-buyers being under 25. 

Cautioning against the plan, tax expert Dan Niedle warned: “Parents would attempt to divert their earnings through their children so they wouldn’t have to pay income tax either. Mr Burnham would also need to explain where he would raise the approximately £3.5bn the policy would cost.”

[Burnham’s] record managing Greater Manchester’s finances was “rock solid”

Andy Burnham

Burnham does indeed face challenges in financing this proposal. Starmer’s Defence Investment Plan for example leaves a £4.7 billion budget shortfall that would have to be compensated for in the next Budget.

Burnham has pledged to stick to Chancellor Rachel Reeves’ fiscal rules and Labour’s 2024 election manifesto to not increase VAT, income tax, or National Insurance.

However, the widely-anticipated next Prime Minister has argued to LBC presenter Andrew Marr there is “some room” for manoeuvre in tax policies, including raising taxes on giant warehouses and empty high street properties.

His track record managing Greater Manchester’s finances was “rock solid”, he has assured Marr.