A senior advisor has said constitutional devolution was a key theme for Mr Burnham

Andy Burnham is considering handing regions control over income tax as part of a major devolution drive, a senior adviser has claimed.

The new Makerfield MP, widely expected to become prime minister, is examining what one close ally has described as "constitutional devolution" that would fundamentally reshape how taxes are collected and spent across the country.

Lord Jim O'Neill, who served as a key economic adviser during Mr Burnham's time as Greater Manchester Mayor, told LBC that exploring elements of income tax devolution "is definitely something that would be on the agenda to study in a serious way."

The peer characterised the potential changes as representing an entirely new approach to governance.

"In many ways what we've had the past 12, 13 years is tiptoe with little drip feeding bits of 'if you're good, you can have a little bit more,'" Lord O'Neill said. "This would be a whole new level."

The former economic adviser indicated that devolving business rates is highly likely under a Burnham administration, while responsibilities currently held by Whitehall departments could also be transferred to regional authorities.

"Business rates devolution is a very strong probability. I think exploring [devolving] aspects of income tax is possible ... It is definitely something that would be on the agenda to study in a serious way."

Adult skills training was cited as a prime example of where local decision-making would prove more effective than centralised control.

"Why does anybody in Westminster think they know what the adult skills needs in Rotherham are, and assume they're the same as in Reading?" Lord O'Neill asked. "They're completely different."

He described the redistribution of power away from the capital as "badly needed."

Yet Mr Burnham faces a delicate balancing act on taxation as he seeks to protect ordinary earners from further financial strain.

The prospective prime minister has attempted to calm concerns that voters would face significant tax increases under his leadership.

However, economists have cautioned that shielding middle-income households may prove difficult if substantial new revenue is required.

Britain's tax burden stands at 34.5 per cent of GDP in 2024-25 and is projected to climb to a postwar peak of 38.5 per cent by 2030-31, according to Office for Budget Responsibility forecasts.

The primary cause has been frozen tax thresholds, which Chancellor Rachel Reeves extended in her November Budget.

This policy has affected earners across all income levels, dragging lower-paid workers into the tax system while pushing others into higher brackets.

Trade unions are pressing Mr Burnham to target wealth more aggressively, including through equalising capital gains and income tax rates and imposing higher levies on banks.

"The wealthy and powerful and their backers in the rightwing press are trying to water down the agenda of any future prime minister," said Paul Nowak, general secretary of the Trades Union Congress.

But tax lawyer Dan Neidle believes the traditional approach of extracting revenue from the wealthy and large corporations has reached its limits.

"The idea of raising the basic rate of tax is anathema to most people, and this is the fundamental problem we are in," he said.

Isaac Delestre, an economist at the Institute for Fiscal Studies, warned that concentrating tax rises on a narrow group carries greater risks than spreading the burden more widely.

Mr Burnham has signalled several costly policy ambitions, including reducing the burden of student loans and boosting defence spending, while offering little clarity on how these would be funded.

He has committed to maintaining the state pension triple lock and confirmed he would not increase rates of income tax, national insurance or VAT. He has also promised to lower welfare expenditure by moving people into work rather than cutting benefits.

The IMF warned last month that the long-term capacity for additional revenue increases is "becoming limited" without more fundamental changes to the tax system.

Ruth Curtice, head of the Resolution Foundation, noted that despite record tax levels, opportunities to raise more money exist, but manifesto constraints leave few options that would not worsen existing distortions.