Business owners bracing for a Burnham premiership have been offered a rare note of reassurance from one of the City’s most respected voices. Jim O’Neill, the economist and former Treasury minister, says the probable next prime minister will not arrive in Downing Street with a fresh round of punishing tax rises.
Speaking on The Rest Is Money podcast with Robert Peston and Steph McGovern, O’Neill said the biggest risk to confidence would be a new government talking the country down all over again.
“If something can be done to change the mindset of consumers and businesses, and make them think, ‘Hang on a second, we don’t have to worry as much about the next few years as we have been doing, effectively on and off since the financial crisis,’ then I think the human instincts and the natural juices would start to flow – so long as you don’t have an incoming government repeating what Keir did: ‘Oh, well, it’s actually way worse than we thought. Sorry, we’re going to tax the hell out of you. Life’s going to be miserable.’ That is definitely not the nature of our probable incoming leader.”
It is a message that will land well with the eight in ten SME owners who fear what a Burnham premiership would mean for their business.
But the reassurance comes with a hard edge. O’Neill argues the UK can no longer duck politically toxic “sacred cows”: the pension triple lock, a root-and-branch overhaul of welfare, replacing council tax and stamp duty with a fairer system of land and property taxation, and a credible long-term framework for infrastructure investment.
On the triple lock, whose mounting long-term cost the Office for Budget Responsibility has repeatedly flagged, he was blunt. “I think the triple lock needs to be dealt with. And I suspect, once the right person is bold enough to do it, it’s going to be pretty hard for any major political opposition to disagree. It’s also very unfair from an intergenerational perspective, with all these young people who can’t afford to buy or rent in some parts of the country being expected to pay more and more tax for a lot of people who own their own homes and still get a very nicely protected pension increase all the time.”
He was equally scathing about Sir Keir Starmer’s tinkering with Britain’s welfare bill. “I do think one of the many mistakes that Keir Starmer presided over was effectively trying to play around with small amounts of savings in welfare, purely to meet what one might regard objectively as an arbitrary fiscal rule or fiscal space. Whereas, if you’re really going to do it, you’ve got to have a systematic reform of everything that connects to the various welfare payments that are going on.”
His call to replace council tax and stamp duty echoes the open letter from economists urging Burnham to scrap both in a radical shake-up of the tax system, which O’Neill signed.
The stakes, he warned, are being set daily in the bond markets. “You’ve got, lurking in the background every second of every day, the financial markets. They are not charging the UK a premium on its borrowing for nothing. They are expecting that, at some point, somebody is going to be bold enough to take on some of these so-called sacred cows and put us on a more sustainable path for debt.”
For SMEs, the practical takeaway is focus. O’Neill argues markets could support higher borrowing for growth-enhancing projects, provided decisions are independently assessed, and he wants far greater devolution of skills, education and employment support, though he cautions the Greater Manchester model cannot simply be copied elsewhere.
His advice to the man who has already signalled room for movement on tax and a business rates cut for high street firms is characteristically direct. “Andy needs to figure out exactly what his key priorities are, communicate that to everybody and then actually stick with them. He then needs to choose the people around him who can deliver them.”
O’Neill stresses he holds no formal role with Burnham. The sacred cows, though, now have a very public list of names against them.
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