Andy Burnham urged to scrap income tax and NI in radical fiscal overhaul

Economists including Jim O’Neill write open letter calling for single levy to replace six key taxes to raise money for public services

Prominent economists including Jim O’Neill, an ally of Andy Burnham , are urging the MP for Makerfield to pursue radical tax and spending reform to “unlock the gridlock that plagues the country” when he is confirmed as prime minister.

O’Neill joins Jonathan Portes, an economics professor at King’s College London, and Danny Sriskandarajah, the chief executive of the New Economics Foundation, in calling for bold action in an open letter.

They write: “Taxes in Britain are rising faster than in any comparable economy while public services deteriorate. The country spends £100bn a year in debt interest, more than the entire defence budget and equivalent to half of NHS spending.

“Seven prime ministers in 10 years have inherited the same challenge and failed to solve it for the same reasons: the problems are structural and systemic.”

Other signatories to the letter include John Muellbauer, a senior research fellow of Nuffield College, Oxford, who has long advocated property tax reform, and Prof Henrietta Moore, the director of the Institute for Global Prosperity at University College London.

They suggest the starting point should be the blueprint for a drastic overhaul of tax and public services laid out in a new report from the institute, published on Thursday. Prosperity 2030 suggests replacing six key taxes, including income tax, capital gains tax, inheritance tax and national insurance contributions, with a single levy.

These “national contributions” would be paid on all income, regardless of whether from work, from the sale of assets or from a late relative’s estate.

The authors of the report claim that depending on the rate it was set at, this could raise a whopping additional £75bn a year within five years. They call for the proceeds of these and other tax reforms, including a trebling of air-passenger duty, to be spent on providing universal services to the public – including free bus services and free lunches for all primary schoolchildren, for example.

Moore said: “Prosperity 2030 is about rebuilding the systems that shape everyday life, work, care, housing, skills and the cost of living. It is a plan for an economy that measures success by whether people can live secure, dignified and hopeful lives.”

Dan Neidle, a tax expert from the consultancy Tax Policy Associates, has raised questions about the plausibility of Prosperity 2030’s assumptions, saying: “I don’t see where the numbers come from.”

The report also advocates scrapping stamp duty and council tax in favour of a national 1% levy on the value of property, with the proceeds remitted to local authorities, according to their population.

The latter proposal echoes a suggestion made by the Sheffield Heeley MP Louise Haigh, a key member of Burnham’s team, in a recent pamphlet for the Tribune group of Labour MPs. Burnham himself has talked about the benefits of a “land value tax” levied on property.

Policy wonks from across Labour and beyond are vying to influence the incoming regime. Burnham is expected to be confirmed as Labour leader on 17 July when nominations close and to take over from Keir Starmer as prime minister on 20 July.

A critical early decision will be who to appoint as chancellor, with the energy secretary, Ed Miliband, regarded as the most likely choice.

O’Neill, a crossbench peer and former chief economist at Goldman Sachs, has collaborated with Burnham in Manchester. He has been mooted as a potential senior adviser to the PM-in-waiting, though no formal announcement has been made.