Labour leadership hopeful Andy Burnham has said he would revise his party’s freeze on income tax if he becomes Prime Minister. The mayor of Greater Manchester warned that pensioners are being harmed by the policy, which the Office for Budget Responsibility said would drag an estimated 1m pensioners into paying the tax for the first time. In an interview with the i paper, Mr Burnham also said he would keep the pension triple lock in place for the remainder of the current parliament. Meanwhile, a petition with 119,000 signatures calls for a new tax code for state pensioners, giving them a higher tax-exempt limit to avoid being hit by the freeze.

Ministers are considering a significant shift in the English tax system by devolving control over business rates, or even income tax receipts, to regional mayors. Local government secretary Steve Reed said the Government aims to give local leaders more control over tax income. However, he pointed to the need for an equalisation mechanism to prevent regional inequality. JP Spencer, the director of devolution policy at the ThinkLabour thinktank, said: “Devolving the revenue from income tax or business rates to local areas would be a huge change in how our tax system and country works. It would give places the longer-term certainty to invest, plan and deliver better services for their residents.”

Retailers are urging the Government to speed up plans to close the £135 “de minimis” customs loophole, warning delays could put UK high streets at risk and turn Britain into a destination for low-cost imports. The rule allows overseas sellers such as Temu and Shein to ship low-value parcels duty-free, while UK retailers face import duties, VAT and compliance costs. Andrew Murphy, chief executive of The Entertainer, criticised plans to wait until 2029 for reform, arguing it prolongs an uneven playing field.

Phillip Inman in the Guardian considers the merits of taxes on wealth, noting that Labour leadership hopefuls Andy Burnham and Wes Streeting have suggested they would favour such policies. Gabriel Zucman, an economist, advocates for a 2% tax on fortunes over £100m, citing research showing that the top 0.001% of families in the Sunday Times Rich List own the equivalent of 22% of GDP, up from 5% in 1989.

Labour’s employment minister, Kate Dearden, has defended her party’s workers’ rights reforms arguing they simply align the UK with other OECD countries. Following complaints from businesses about the extra burdens the Employment Rights Act brings, Deardon said: “After lagging behind, we’re now in a place where we’re matching rights in other countries and providing those opportunities for our own workforce.” The Government is also consulting on regulations to replace zero-hours contracts, aiming to balance flexibility and job security for workers.

With Office for National Statistics data showing that the UK economy contracted by 0.1% in April, critics have suggested that Government tax policies and red tape are exacerbating the situation. Anna Leach, chief economist at the Institute of Directors, said: “The removal of barriers to growth, from tax and regulation and the delivery of a predictable policy environment, must remain the focus of Government policy action.” The ONS data shows that output in the services sector was down 0.2%, with this offsetting a 0.1% rise in construction and 0.4% growth in manufacturing. Danni Hewson, head of financial analysis at AJ Bell, has warned that a “summer of sluggishness” could “edge into recession,” while Luke Bartholomew, deputy chief economist at fund manager Aberdeen, said “recession risks are elevated.”

The UK housing market is expected to remain sluggish into 2027, according to the EY Item Club. Economists cite weak consumer confidence, rising unemployment, and high mortgage rates as key factors. House prices rose by 2.7% last year but are projected to increase by only 1.1% in 2026 and 0.7% in 2027. “An economy that’s under pressure will cause the housing market to lose steam,” Matt Swannell, chief economic adviser to the forecasting group, said. Recent data shows a significant decline in inquiries and sales, prompting sellers to reduce asking prices.

The Government has finalised an £18bn investment agreement with Japan as it looks to strengthen international ties, post-Brexit. Prime Minister Sir Keir Starmer said “landmark agreements” on technology and life sciences will boost the UK economy and improve trade with Japan, the world’s fourth largest economy.

Data from the Office for National Statistics (ONS) shows that the UK economy contracted by 0.1% in April, marking its first monthly fall since August last year. While the economy contracted on a month-by-month basis, it grew by 0.7% in the three months to April, compared with the previous quarter. The monthly decline was driven by the conflict in the Middle East, with the war pushing up costs for many businesses and households as energy bills rise and consumer demand falls. Reflecting on the ONS data, Yael Selfin, chief economist at KPMG UK, said the contraction indicates “renewed fragility in the UK economy,” while Suren Thiru, chief economist at ICAEW, commented: “April’s drop likely signals the start of a damaging descent into stagflation.” Thomas Pugh, chief economist at RSM, said the economy was likely to hit a “standstill for the rest of the year.”

Andrew Bailey, the Governor of the Bank of England, has defended the central bank’s bond-selling policy, stating it has not incurred losses for taxpayers. In an article for The Times, he explained that the quantitative tightening (QT) process is necessary for future emergency actions. Bailey noted that profits from bond purchases between 2013 and 2022 totalled £124bn, while current sales are at lower prices. He said: “We are reducing our gilt holdings to give us the capacity to intervene again in future if needed.” The BoE’s QT has raised government borrowing costs by 0.4 percentage points from 2022 to 2024.

The Bank of England is likely to maintain interest rates at 3.75% amid economic uncertainty and rising inflation pressures. Economists predict no rate increase this month, despite concerns over energy costs affecting household bills. Suren Thiru, chief economist for ICAEW, said: “An interest rate hold on Thursday looks highly certain.” Recent data shows a 0.1% decline in GDP, indicating economic contraction. The Bank’s Monetary Policy Committee will remain cautious, balancing inflation risks with growth concerns.

Liam Halligan warns in a piece for the Telegraph that with inflation re-emerging across the globe, the worldwide rate-easing cycle has come to an end. With major economies either raising their rates or predicted to, Halligan believes any stay by the Bank of England on rate hikes this Thursday won’t last for long. He reckons the inflation rate in the UK could hit 4% this autumn and we could be looking at two increases from the Bank of England by the end of this year, hitting mortgages, corporate loans and business investment.

The Telegraph claims that the Prime Minister will not offer the new Defence Minister any more cash for the military than his predecessor. Whitehall sources suggested Dan Jarvis would not be given more that the £13.5bn settlement that led John Healey to quit last week. A source close to Mr Jarvis suggested he would look to cut wasteful spending in the MoD to free up more money for defence projects. Mr Healey accused Sir Keir Starmer of being “unable” to fund his department enough to keep Britain safe. Meanwhile, the Royal Marines have interdicted a Russian-flagged oil tanker in the English Channel, with the Government claiming it was a sanctioned vessel in Vladimir Putin’s “shadow” fleet.