Announcing his 1988 Budget, Chancellor Nigel Lawson said that “while tax reform is a simple matter for the armchair critic, it is very much more difficult in practice. It is difficult technically and difficult politically — since any tax system, however it arose, creates powerful vested interests in favour of the status quo.” He wasn’t wrong.
In 2026, Andy Burnham is riding a wave of support as voters return to Labour. But the policies fuelling this popularity won’t come cheap and they sit atop the highest interest rates on government debt in nearly three decades. The new Prime Minister will need to find some revenue and, taken alone, his ambition for economic transformation won’t save him.
The fate of Burnham’s predecessors serves as a warning: the bond-market backlash that blew up the Liz Truss government over unfunded tax cuts, and the pre-Budget briefings and U-turns that eroded Rachel Reeves’s credibility for the sake of technocratic tweaks, not transformative change. The new Prime Minister will need to do fiscal policy differently.
Yet proposed Budget measures are already prompting dissent. We see business advisers concerned about capital gains tax (CGT) reform, billionaires reportedly moving abroad to avoid an ‘exit tax’ and landlords opposed to a proportional property tax, while Londoners are warned that such a change could leave the capital paying £7.5bn more. Such groups, with economic and political sway, risk creating a post-Budget storm. The memory of tractors on Whitehall after farmers faced inheritance tax, and the government’s subsequent partial U-turn, compounds the trepidation.
In the Budget, Burnham should push through the noise to deliver meaningful tax reforms. But in the years ahead, Britain needs a more fundamental national conversation about the tax system. How should we get more money into the Exchequer without crushing growth? Who should the tax system help, and who should have to pay more? And how can the government manage the “powerful vested interests in favour of the status quo”?
That national conversation will not happen in the standard Budget process. It will not be driven by the Treasury alone. Instead, disruptive institutional change is needed. Learning from Elon Musk’s Department of Government Efficiency (DOGE) — both its successes and failures — Burnham needs a ‘DOGE on tax’.
The Burnham bill
Burnham’s bills are not small, and there are no easy options for paying them.
There are the recent cost-of-living measures, including the £100m cut to business rates for pubs and small venues and the £850m temporary removal of VAT on household electricity bills. Burnham also faces an £800m shortfall on council housebuilding and up to £9bn on defence (if the 3%-of-GDP target is to be met by 2030). A 10% increase in the social care budget, meanwhile, would cost £7.4bn.
That is before we account for the rise in government borrowing costs since the last official forecast in the spring — which has more than halved the Chancellor’s fiscal headroom from £23.6bn to £11.6bn — or the hard-to-measure long-term ambitions such as place-based regeneration and reindustrialisation.
Higher public investment could be funded through borrowing, but that risks raising debt interest costs as lenders demand higher interest rates. Spending cuts should play a role, but the political turmoil after the Starmer government’s cuts to winter fuel payments and disability benefits shows the risks. Tax rises will have to lift some of the weight.
Why we need a DOGE on tax
To drive through transformative tax reform, Burnham’s government needs to build legitimacy, embrace disruption, own trade-offs and give reforms the time and expertise to be assessed properly.
David Cameron’s coalition government tried something similar with the Office for Tax Simplification (OTS). The OTS was designed by Chancellor George Osborne as dry, legalistic and politically toothless. Consequently, ministers happily took the administrative tidying-up offered by the OTS, while shelving structural or politically sensitive reforms.
For a lesson on disruptive institutional change, we should look across the Atlantic. Musk’s DOGE lacked depth, running on chainsaws rather than expertise. It alienated staff and claims about its savings collapsed under scrutiny. But as Demos has identified, the federal initiative had real upsides: it challenged orthodoxies, owned disruption and drew on private-sector nous. DOGE posed good questions, but answered them badly.
Calls for a British DOGE have largely focused on spending cuts, but it is tax where the political and institutional barriers are highest — as decades of inertia show.
Tax reforms that make chancellors nervous
Burnham has two promising ways to raise revenue while keeping the bond markets calm. Both, however, have scared off his predecessors.
The first is reforms that improve fairness and efficiency in the tax system — but are undermined by uncertainty about how much revenue they would raise. Successive chancellors have shied away from pro-growth CGT reform, i.e. matching the rates with income tax, introducing new tax-free allowances to encourage investment and removing opportunities for investors to bypass the tax by moving abroad or passing on assets in inheritance.
Despite calls for change from across the political spectrum, uncertainty about the market response stands in the way. Closing the tax break for partnership businesses — which mainly benefits partners in legal, financial or accounting firms — is another missed opportunity. That reform was reportedly set for the Budget last year, but big-business lobbying and forecasting jitters threw it off course.
These are not isolated problems. They reflect a policymaking process in which Budget tax reforms are designed at speed, drowned in lobbying and starved of external expertise, before being cut down to fit an ever-changing fiscal black hole. Rushed forecasts often change as corporate opponents get louder. Too often, the chancellor of the day gets spooked.
The second clutch of reforms is economically obvious but politically daunting. Swapping council tax and stamp duty for a proportional property tax is a clear example. We would end a system in which North East households typically pay council tax at a rate, relative to the value of their house, more than three times that in London, while unlocking 79,000 homes each year by stopping stamp duty from discouraging property sales.
Merge National Insurance with income tax and you level the playing field between employees and other income earners (investors and landlords, for example), while tackling anti-growth tax incentives that favour one kind of income over another. Even a two-percentage-point shift raises £6bn. Fix the way we tax pensions, where the biggest reliefs often go to the very wealthy, and you achieve a fairer intergenerational settlement.
But once again, the barriers are deep-rooted. All these big but necessary reforms have winners and losers, and the latter shout louder. Landlords, pensioners, business owners, investors, high-value homeowners — these groups can make life extremely hard for a government, and IPPR has highlighted pathologies among the public and the press whereby concerns are amplified at the expense of praise. As Demos has argued, the chronic legitimacy deficit for the tax system means every chancellor feels unable to break with the status quo.
Public misunderstanding compounds this problem. As I’ve heard in focus groups, many people assume that pension contributions are fully taxed, so later charges feel like double taxation. It isn’t true, but try explaining that on the doorstep.
The standard Budget process, held tightly within the Treasury, is not fit to tackle these barriers.
The three pillars of a successful DOGE on tax
To effect progressive change in the tax system, and avoid the fate of the OTS, a successful ‘DOGE on tax’ needs to do three things.
First, build legitimacy through public participation, so the government can own the trade-offs. That does not mean discussing the minutiae of tax reforms (which risks triggering a harmful market reaction), but the values and principles underlying the tax system and how they weigh against each other. Labour should be discussing how to balance tax on work vs wealth, young vs old, sector vs sector. Embedding these values into tax policy — and using Burnham’s successful communications operation to raise their salience — would increase the legitimacy of ambitious tax reforms.
Second, be disruptive by design. That means escaping the restraints of Treasury orthodoxy and the Budget policymaking process. It means producing a mandate for tax reform based on first principles, not day-to-day constraints.
The name of the body also needs to be disruptive. Burnham could call the organisation the RESET Unit (Reforms for Equitable, Simple and Efficient Tax) or the FAIR Tax Unit (Fix, Axe, Improve, Reform). Whatever the choice, he must signal that real change is coming.
Third, assemble the expertise that serious forecasting requires. Do the background research needed and get a range of perspectives. With that, create a stable assessment of the expected revenue and the risks, rather than a rushed spreadsheet that changes weekly in the Budget lead-up and prevents chancellors from making a balanced choice.
Burnham should grasp the opportunity of his first Budget to drive meaningful change, but the radical overhaul we need is unlikely. A DOGE on tax may come too late to shape this Budget, but national renewal was never going to arrive in one fiscal cycle. The tax system is the engine that funds everything else Burnham has promised in the years to come. He needs to be brave enough to rebuild how it’s made.
