UK tax and regulatory overhaul urged as Burnham economic agenda takes shape

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UK tax and regulatory overhaul

Highlights

Andy Haldane calls for radical simplification of the UK tax code and regulatory reduction, arguing complexity and anti-business culture hinder growth.
Haldane urges redirecting pension fund incentives toward UK companies rather than overseas investment but opposes mandating UK asset holdings for pension funds.
Haldane warns that rising public spending is the UK's 'fiscal Achilles heel' and markets require evidence of spending control to support proposed growth measures like war bonds.

Growth agenda and policy priorities

As reported by the Financial Times, Haldane says a government led by Burnham needs to radically simplify the UK tax code and cut back what he describes as a thicket of regulation if it wants to lift growth.

The former Bank of England chief economist says reforms could be carried out at close to no fiscal cost, arguing the tax system is "stupendously complex" and marked by inconsistencies in the way businesses, individuals and housing are taxed. He also says companies face an enduring regulatory burden and points to what he calls a slightly anti-business culture in the UK.

Haldane also urges ministers to reconsider tax relief that supports pension fund investment overseas and instead create incentives for British savers' money to be directed into UK companies. He says he does not support forcing pension funds to hold a set share of UK assets, a proposal previously floated by the government and later defeated in the House of Lords.

Fiscal discipline and market implications

Burnham has hinted at heavier taxes on landowners while also backing costly commitments such as easing student loan burdens and increasing defence spending if he enters Downing Street. Haldane warns that rising public outlays are currently the UK's "fiscal Achilles heel" and says markets need clear evidence that government can keep spending under control.

He argues that stronger growth remains the most effective way to calm bond investors, while adding that proposals such as war bonds with possible preferential tax treatment would be accepted by markets only if there are concrete signs of spending restraint. Haldane also calls for broader use of the National Security and Investment Act to block overseas takeovers of British companies through what he describes as an expansive interpretation of national security.

The comments are likely to draw attention because Burnham's fiscal approach and its reception in bond markets are already under scrutiny since he became MP for Makerfield last week and Prime Minister Keir Starmer says he will resign. Haldane is advising Burnham alongside Lord Jim O'Neill and Richard Hughes, while Rachel Reeves, who is set to be replaced as chancellor by Burnham and offered a lesser cabinet role, has previously pledged to ease regulation as part of the government's growth agenda.

Our earlier article on Haldane’s pension allocation proposals explained his call for UK occupational schemes to default more of their assets into British equities rather than global indices. We also noted his argument that pension tax relief should be reconsidered when savings ultimately flow overseas, as part of a wider push to channel long-term capital into UK growth and reduce the risk of promising firms being bought out from abroad.

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