Andy Burnham faces Labour revolt as ally brands ministers 'scared and lazy' if they fail to tackle welfare reform
Andy Burnham faces the prospect of a fresh Labour revolt over welfare reform as a close ally branded ministers "scared and lazy" if they fail to confront difficult spending decisions.
Lord Jim O'Neill, who turned down a job advising the Prime Minister just days ago, has urged the Government to tackle Britain's soaring benefits bill rather than resort to further tax rises.
The former Goldman Sachs chief economist warned Mr Burnham will face "hard choices" when Parliament returns from recess ahead of Chancellor John Healey's first Budget.
Lord O'Neill accused ministers of avoiding politically difficult decisions on public spending while considering increases to capital gains tax (CGT) and inheritance tax.
"They're just being scared and lazy and constrained in dealing with the sacred cows," he told The Times.
His intervention risks opening another battle over welfare inside Labour as ministers grapple with how to rein in spending while balancing the public finances.
Lord O'Neill argued that tackling the welfare bill represented the most credible route to bringing down national debt rather than imposing further taxes.
"I don't get why they would raise tax," he said, insisting ministers should instead focus on reforming public expenditure.
Any attempt to pursue further welfare reform could prove difficult for Mr Burnham if Labour MPs resist efforts to rein in benefits spending.
The Stockport-born economist had been widely expected to become Mr Burnham's Chief Economic Adviser after the Prime Minister reportedly spent more than a month attempting to recruit him.
However, Lord O'Neill turned down the role just days ago, preferring to remain free of "financial constraints" and instead act as an informal voice the Government could consult.
The crossbench peer, who previously served as a Treasury minister under the Conservatives, also strongly criticised the prospect of further wealth tax rises.
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"I do think it would be stupid," he said of potential increases to CGT or inheritance tax.
Lord O'Neill argued that businesses were already grappling with Brexit, national insurance changes and zero-hours contract reforms while economic growth remained weak.
He warned that pressing ahead with tax rises would show ministers were not prioritising growth "as sincerely as they claim they are".
The intervention comes as Chancellor John Healey prepares his first Budget with the Government's fiscal headroom believed to have fallen from £22billion to around £15billion.
Mr Healey is also facing pressure from defence spending commitments and the economic fallout from the conflict with Iran.
Next month's Budget will not set a target for Britain to spend three per cent of GDP on defence by 2030, despite Mr Healey resigning from the Cabinet over the issue just months ago.
The Treasury has confirmed the milestone will not feature in the October 28 fiscal statement, with a decision on the timetable instead pushed back until next year's spending review.
It leaves Mr Healey overseeing the Treasury after previously accusing it of being "unwilling" to provide the resources needed to protect Britain.
Meanwhile, CGT receipts reached £24.2billion in the 2024/25 tax year following rate increases under former Chancellor Rachel Reeves, although experts have questioned whether the surge will prove sustainable.
Elizabeth Bradley, a partner at law firm BCLP, warned the increase "may be a sugar hit caused by forestalling".
Pete Fairchild of Crowe separately warned that wealthy people continued to leave Britain because of tax changes.
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