What Andy Burnham and John Healey's first budget means for business

With John Healey standing up to deliver the first budget of Andy Burnham's tenure as prime minister on Wednesday 28 October, founders and CEOs are asking the same question: What does the new occupant of Number 10 mean for their business?

To answer this, we asked Steven Swinford, political editor of The Times, to look past a summer of crowd-pleasing announcements. Here he sets out why tax rises look hard to avoid, where the warnings from business are coming from and why Burnham's promise of growth in every postcode is harder to deliver than it sounds. In this piece:

• Why Burnham's biggest advantage is that he isn't Starmer
• Why tax rises look unavoidable, despite a "steady as she goes" budget
• What the Treasury is weighing up, from capital gains tax to the banking levy
• Why "good growth in every postcode" won't be felt equally across the UK

Andy Burnham has proven to be quite the charmer in his first few months as prime minister. After dispatching Sir Keir Starmer in an almost entirely bloodless coup, the new prime minister – Britain’s seventh in the space of 10 years – spent the summer pursuing a two-fold approach to build some rapport with the nation.

First, he offered a series of relatively modest measures to give people “breathing space” to help with the cost of living, such as capping bus fares and scrapping VAT on electricity bills. Second, he made big, broad pledges to tackle some of the more fundamental issues – social care, welfare and homelessness.

These announcements may have made for at best welcome, at worst uncontroversial news for voters, but UK businesses are still waiting to hear their own round of crowd-pleasers.

Life after Starmer

Burnham enjoys one particular advantage in Number 10: the fact he is not Sir Keir Starmer. His predecessor’s catastrophic misjudgements saw him go from a landslide election victory to becoming the most unpopular prime minister on record.

Having come into office promising to deliver growth and protect the wealth creators, Starmer instead chose to tax businesses to the hilt via an employer national insurance contribution increase and capital gains tax rise; hike the minimum wage and bring in a swathe of red tape.

Business leaders who had greeted Starmer’s premiership with hope were horrified by the reality as Labour retreated to its comfort zone – higher levels of tax and higher levels of public spending.

Confidence levels collapsed in the absence of any clear narrative from Starmer of how growth would be achieved. Mindful of this, Burnham is setting out his own story for how economic growth must be felt across the whole of the UK.

Burnham is a very different political animal. A far more effective communicator and more wily politician, he is also bolstered by the fact that he is a relative outsider. His entire pitch is predicated on change, despite the fact that most of his cabinet served under Starmer and he is still pursuing many of his predecessor’s policies. The latter in particular will need addressing if Burnham is to build credibility among UK business leaders.

The tax rises a ‘steady as she goes’ budget can’t avoid

The summer is over, and the hard part begins now. The prime minister and his chancellor, John Healey, are hoping to deliver an unremarkable budget on 28 October. Burnham wants to take a ‘steady as she goes’ approach, with a slimline fiscal event rather than the tax-and-spend budgets that dominated Rachel Reeves’s time in Number 11.

But tax rises appear to be unavoidable. The Iran war has taken a substantial chunk out of the £22bn-worth of fiscal headroom that Burnham inherited. Add to that Burnham’s unfunded pledges on the cost of living and the need to find an extra £4.7bn over five years for defence spending and the challenges are clear.

The Treasury is looking at an array of measures – increasing capital gains tax, the banking levy and possibly even a move on the profits of oil and gas companies. But the new prime minister knows that he needs to tread carefully, particularly with businesses.

Why business leaders are warning Burnham off

The warnings are already coming thick and fast. Lord O’Neill, a former Goldman Sachs banker who turned down the chance to join Burnham in Number 10, has warned that increasing capital gains tax would be “stupid” because it would hamper growth and lead to wealthy people leaving the country.

Jamie Dimon, the head of JPMorgan Chase, has directly warned Healey against coming after bankers. The message is clear: if you want growth, don’t target those who are responsible for helping create it.

Retailers, the hospitality sector and business leaders are concerned about the government’s plans to limit zero-hours contracts, which they believe will only make it more difficult and costly to employ young people. The plans may have been unveiled by Starmer but they’re Burnham’s to implement, and he has so far supported them in full.

Fiscal devolution and ‘good growth in every postcode’

The other side of the budget – the one Burnham wants to talk about – is fiscal devolution. The government wants to give mayors more of the tax raised in their areas, including income tax, to spend as they see fit. The argument is that the approach will incentivise mayors to grow their local economies, so increasing their tax base.

But there are difficult choices ahead. Burnham’s premiership has been dominated by his pro-Northern message, with an emphasis on Number 10 North in Manchester. He has committed to delivering “good growth in every postcode”.

Economists have pointed out that if you want to grow the economy, you have to start with London. Bolstering London’s economic growth would have more impact on Britain’s GDP than anywhere else in the country. Other potential growth areas include the Northern powerhouses – Manchester, Liverpool, Sheffield and Leeds, along with the West Midlands. The point is simple: not all areas have the same potential for economic growth. The regional business picture may shift under Burnham’s measures, but it won’t be a change that’s felt equally across all regions.

Steven Swinford is political editor of The Times.