Prime Minister Andy Burnham opened his tenure vowing to give households more “breathing space” on the cost of living, with policy details expected to emerge on Tuesday, his first full day in office. In his first remarks as prime minister, Burnham said he would be “looking at” the tax-free personal allowance ahead of the autumn Budget, signaling potential changes to how much people can earn before paying income tax. The cost of living has dominated public debate for years, and Burnham’s team faces a forked path: ease bills on energy, transport, housing and essentials while ensuring any relief is financed within fiscal rules. His chancellor is expected to be the primary conduit for detailing how measures will be funded and explained to markets and households alike.
The new administration inherits a policy framework that has frozen income tax and National Insurance thresholds until April 2031 in England, Wales and Northern Ireland. That policy has raised government revenue but also means that as earnings rise, a larger slice of income is taxed. Burnham has signaled a willingness to explore allowing some people to earn slightly more before hitting the tax threshold, though he cautioned that altering the personal allowance would be difficult in the current environment. He also indicated that any changes would fall under Labour’s manifesto commitment not to raise the three main taxes—income tax, National Insurance and VAT—while leaving room for adjustments in other areas of taxation or public spending.
A major question for Burnham and his team is how to fund measures aimed at energy bills, transport costs and housing. He and his chancellor are expected to adhere to self-imposed fiscal rules, a framework that has divided opinion on whether it supports or constrains living standards improvements. Rachel Vahey, head of public policy at AJ Bell, described the squeeze: “the rummage down the back of the sofa for loose change has hit personal finances hard, changed the tax landscape, and makes it more challenging for people to save for their future.”
On energy policy, Burnham has floated options to bring essentials under public control to make them more affordable. One option championed by charities and the regulator is a social tariff to shield vulnerable households, funded by higher bills or taxes on better-off households. While energy bills have fluctuated with wholesale costs, the government has sought to maintain affordability pressures, and the plan remains under scrutiny given the broader economic backdrop. Citizens Advice notes that although average bills have fallen from peak levels, they remain well above those of five years ago, and households continue to face debt and affordability challenges.
Transport is also in focus. Burnham’s track record as mayor of Greater Manchester included reshaping the bus network, and announcements on bus fares are anticipated this week. The devolution framework means policy levers for England are most immediately in his hands, while other parts of the UK will see a more limited impact. The £3 cap on bus fares outside London, introduced in England, is due to run until March next year and remains a voluntary scheme, with not all operators signed up. Rail fares were frozen for the first time in 30 years, affecting season tickets and related products through March 2027.
Housing policy looms large. Burnham argues that without sufficient affordable homes, people rely more on benefits when rents rise. His plan to build more council housing aligns with the government’s broader but delayed targets for housing supply. Mortgage access and terms will depend on the broader economic climate and lender behavior, including building societies that may press for looser lending criteria. Market sentiment toward Burnham and his chancellor’s plans could influence mortgage costs.
Beyond housing and energy, Burnham faces major decisions on sickness and disability benefits, and on labor-market incentives for youth. He has signaled a determination to reform social care, a policy area governments often struggle to implement successfully. If he remains aligned with Labour’s manifesto, he would maintain the state pension triple lock, which increases pensions in line with the highest of inflation, wages, or a set percentage, a policy element closely watched by pensioners and markets alike.
As with any administration confronting external shocks, the outcome of policy choices could hinge on events beyond its control. Investors and households will be watching closely how funding gaps are bridged and where the government places its bets on energy relief, housing, and tax reform, as the new leadership sets out its approach in the coming weeks.
