Lord O'Neill Urges Burnham Tax Overhaul for UK System
Advisor Pushes for Fundamental Tax Changes Ahead of Potential Leadership Shift Lord O'Neill, a former Treasury minister and economist, has urged Andy Burnham to pursue a major overhaul of Britain's tax system should he assume office. The call comes through a letter signed by six economists, including Lord O'Neill, who has acted as one of Burnham's key economic advisors during the recent by-election in Makerfield and the subsequent campaign for prime minister. The draft letter, addressed to the g
Advisor Pushes for Fundamental Tax Changes Ahead of Potential Leadership Shift
Lord O'Neill, a former Treasury minister and economist, has urged Andy Burnham to pursue a major overhaul of Britain's tax system should he assume office. The call comes through a letter signed by six economists, including Lord O'Neill, who has acted as one of Burnham's key economic advisors during the recent by-election in Makerfield and the subsequent campaign for prime minister. The draft letter, addressed to the government and seen by The Telegraph, endorses a report from the UCL Institute for Global Prosperity that identifies structural failures in the tax framework as the root cause of persistent problems.
The letter states that taxes in Britain are rising faster than in any comparable economy while public services deteriorate. It attributes repeated failures across seven prime ministers in ten years to the same structural and systemic issues rather than individual shortcomings. This assessment aligns with the UCL report's emphasis on rebuilding institutions instead of focusing on moral failings of the past half-century.
Details of the Proposed Tax Streamlining from UCL Institute for Global Prosperity
The UCL report, titled Prosperity 30, outlines a five-year plan aimed at simplifying the tax system and creating additional headroom of £38bn. Central to the proposals is the replacement of income tax, employee national insurance, inheritance tax and capital gains tax with a single tax described as national contributions, applied consistently to all income. The report further suggests substituting stamp duty and council tax with an annual property value tax set at 1 per cent.
These measures seek to address inefficiencies that have accumulated over decades. The letter accompanying the report reinforces the principle that solutions lie in institutional reform rather than attempts to remake individual behaviour. Lord O'Neill's involvement lends weight to the recommendations, given his prior role in government and his advisory position with Burnham.
Burnham's Earlier Positions on Council Tax, Inheritance Tax and Business Rates
Burnham has previously indicated support for replacing council tax and stamp duty, favouring instead a land value tax based on property market rental value. In 2023 he backed the abolition of inheritance tax in exchange for a national care levy that would require contributions from everyone, with the wealthiest paying the most, to fund a national care service. These ideas predate the current letter but share common ground with the UCL proposals on property taxation.
Last week Burnham set out further economic policies, pointing to room within the Labour manifesto for movement on tax. He suggested increasing business rates on large warehouses while exempting high street shops and pubs, framing this as an Amazon 
tax to protect Britain's high streets. At the same time he confirmed adherence to the 2024 election manifesto commitments against raising income tax, VAT or national insurance personal contributions.
Structural Pressures on Public Services and Westminster Decision-Making
The letter highlights how Britain's tax system has contributed to deteriorating public services despite rising revenues. This pattern affects institutions across Whitehall and Westminster, where successive governments have struggled to deliver sustainable funding for areas such as the NHS and local authority services. The proposed national contributions tax and property value tax aim to generate headroom that could ease these pressures without breaching manifesto pledges.
Burnham's signals on business rates reform connect directly to daily economic life in towns and cities, where high streets face competition from online giants. Local councils, already managing tight budgets, would see changes in revenue collection methods if the annual property value tax replaced existing levies. The UCL report's five-year timeline offers a structured path for such transitions if implemented.
Calls for Wealth Taxation and Party Member Sentiment Within Labour
Growing calls from left-wing Labour MPs for a wealth tax have accompanied the current discussion. Polling conducted earlier this year showed that 91 per cent of party members believe the government should tax the rich more. One suggested route involves an increase in capital gains tax, a measure recently advocated by Louise Haigh, one of Burnham's close allies.
These internal party dynamics reflect wider debates in Westminster about fiscal fairness. Burnham's response to the UCL-backed letter will determine whether the proposed national contributions and property value tax gain traction in any future policy programme. The letter's signatories, including Lord O'Neill, frame the changes as essential to reversing long-term structural decline rather than short-term adjustments.
Potential Effects on UK Economy and Devolved Administrations
If adopted, the shift to a single national contributions tax could alter incentives around work, savings and investment across the economy. The replacement of multiple levies with an annual property value tax would affect homeowners and landlords differently depending on property values in regions served by devolved governments in Scotland, Wales and Northern Ireland. Local councils in England would also need to adapt collection systems.
The Bank of England and Treasury would face new considerations in forecasting revenue stability under the streamlined system. The letter warns that without such reforms, the cycle of rising taxes and weakening services will persist regardless of who holds office. Burnham's economic team, guided by advisors such as Lord O'Neill, now weighs these options against existing manifesto constraints.
By Erica Thornton, Staff WriterWhat's Your Reaction?
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