Andy Burnham signals the return of the 50p top tax rate as he warns that help on the cost of living will have to be funded by the better off

Andy Burnham has opened the door to reviving the 50p top tax rate by promising changes to the tax to help low-earners.

The new Prime Minister has talked about bringing back the 50p rate in the past, saying there was ‘absolutely a reason’ for it.

Speaking to reporters just hours after entering Number 10, he refused to rule out the idea, despite Labor having a manifesto commitment not to raise the current top rate to 45p.

Asked directly whether the 50p rate could be revived, he said the question was ‘premature’ and added: ‘I’ve barely got my feet under the table.’

Mr Burnham has promised to review the controversial freeze on tax thresholds, which has been in place since 2021 and is set to last until the end of the decade.

He said he was particularly concerned about the impact on low-income retirees. Next year the basic state pension is expected to exceed the current tax starting rate of £12,570.

‘I heard on the doorstep at Makerfield more problems with personal allowance than anything else,’ he said. ‘I think it’s been frozen at the moment, hasn’t it, for a number of years, so it’s dragged more people (retirees, I guess) in here and I think it’s become a growing problem in particular.

‘So all of this will be looked at through the Budget and obviously it’s difficult given the financial circumstances we’re in.

‘But I wanted to make that point because it’s a challenging situation for people and perhaps the people who are most affected by it are the people on the lowest incomes.

‘So this is an issue where I’ve shown that I have visibility into the issue and the impact it has on the different groups that I mentioned, but it’s difficult because changing the threshold has significant consequences. But I’m looking.”

Since taking office two years ago, Labor has imposed tax increases of nearly £70bn, taking the UK’s tax burden to the highest level in history.

Mr Burnham raised fears of a new tax raid, saying he believed there was ‘room for maneuver’ on the tax.

But he insisted yesterday that he had realized the impact of rising taxes on low-wage earners.

‘They just describe me as a tax collector,’ he said. ‘Again, it’s never that simple, is it?’

All income tax cuts have been frozen in 2021 to help cover the £400bn cost of tackling Covid. Rachel Reeves extended ice cream until the end of the decade.

High inflation has turned the tax into the biggest secret raid in history, generating a staggering £120bn a year.

Millions of people were seen being pushed into higher tax brackets; many low-income families are now paying taxes for the first time.

Easing the freeze will allow employees to keep more of their earnings before they start paying tax. But it will cost billions of lira.

Reintroducing the top tax rate of 50p would likely raise relatively modest amounts, potentially as little as £1bn a year.

This would also be a clear breach of Labour’s 2024 manifesto, which pledged not to increase any of the main tax rates.

Mr Burnham repeated that he would ‘stick to the manifesto’. But Left-wing MPs are already calling on him to make a symbolic move to increase the cap rate paid by those earning more than £125,140.

Mr Burnham said any plans to ease living costs would be fully funded, adding: ‘We will show how to fund this.’

The new Prime Minister has also signaled that he will borrow as much as possible without breaking Labor’s fiscal rules.

Mr Burnham said he would stick to the rules but ‘of course use any flexibility within the rules’. He added: ‘None of this is about taking risks on the economy. I’ve never done that in any role I’ve played. ‘I’ve always taken a very cautious approach.’

Shadow Chancellor Sir Mel Stride said: ‘If Andy Burnham wants to cut a particular tax he needs to show how it can be funded.

‘This needs to happen not by raising taxes elsewhere or delving into more debt, but by controlling public spending, especially welfare legislation. ‘Spending control is crucial if we want to stimulate our economy.’