Andy Burnham was warned that he risks sparking an exodus of the wealthy from Britain if he targets London with a large hike in taxes to fund his landmark reforms.
Councillor Elizabeth Campbell, Conservative leader of Kensington and Chelsea Council, stressed that if the Prime Minister-in-waiting decides to “punish” the capital he would make Britain as a whole poorer rather than richer.
Mr Burnham has said that he believes there is “some room” in the Labour manifesto for “movement on tax,” citing as an example higher levies on warehouses to cut them on businesses in the high street.
The manifesto rules out increasing the rates of income tax, VAT and employee National Insurance contributions.
The former Mayor of Manchester is also expected to increase tax on wealth rather work if he seeks to find extra billions to plug a shortfall in defence spending, deliver the largest council homes building programme since the post-war period and reform Britain with the ‘biggest devolution of power in modern times”.
He has previously backed reforms which would see council tax and stamp duty replaced with a property tax which could land London with an extra £7.5 billion bill.
Speaking to The Standard, Cllr Campbell said: “Mr Burnham has floated higher taxes on expensive homes in London and the South East, the kind of measure that sounds painless until you remember how concentrated the tax base already is.
“The top one per cent of income taxpayers now contribute close to 30 per cent of all income tax, and the top 10 per cent well over half. Many of them live and work in boroughs like mine.
“Drive them out, and Britain is already projected to lose hundreds of thousands of its wealthiest residents this decade, and the bill does not disappear. It simply lands on everyone else.”
The Trades Union Congress is also urging Mr Burnham to hit the City with a new windfall tax of up to £9 billion to £60 billion over four years.
Accusing Mr Burnham of having adopted “anti-London” language, Cllr Campbell stressed: “This matters because rhetoric shapes policy, and policy shapes lives, including the lives of my own residents and the businesses on our high streets in Kensington and Chelsea.
She added: “London is not a rival to be cut down to size. It is the engine.
“The capital generates more than £600 billion of output a year and remains the largest net contributor to the Exchequer of any part of the UK, the money that funds schools and hospitals in Greater Manchester as much as anywhere.
“A country that punishes its most successful city does not become fairer. It only becomes poorer, North and South alike.”
Mr Burnham, who has yet to decide who will be his Chancellor, has vowed not to jettison Rachel Reeves’ fiscal rules as he seeks to reassure the markets before taking over as Prime Minister, as expected on July 20.
“I stick by the manifesto and the promises that it made,” he added on LBC Radio.
“So, let me be absolutely clear about that, but there is some room within that manifesto for movement on tax.
“So, if you take business rates, for instance, I believe there is a case for higher business rates on warehouses and the major developments we see on the outskirts of our cities so that we can cut business rates for pubs.
“And I proposed a 20% cut and lift some high street businesses out of business rates altogether.”
The Makerfield MP and former Cabinet minister stressed that he was “not indisciplined when it comes to the public finances”.
He explained: “I was in the Treasury, I ran the Department of Health, and we had a very healthy, it was tight, but we had a very healthy set of finances.
“I’ve run Greater Manchester, the fastest-growing city region in the country, for a decade.”
His devolution revolution is expected to see tens of thousands of jobs moved out of Whitehall.
London Mayor Sir Sadiq Khan has also warned Mr Burnham not to cut investment in the capital as billions more in funding are expected to be channelled to the North and Midlands.
Regional mayors will get more powers, including Sir Sadiq on homes and education.
A new “No10 North” would be set up to drive economic regeneration in the regions.
