God help us. Britain is heading towards the eye of an economic storm, with inflation climbing, productivity weak and growth painfully anaemic.
And the man expected to guide the country through it is Andy Burnham. Let us hope he packed his trunks.
The Prime Minister has warned that next month’s Budget will be ‘challenging’, after inflation rose to 3.1 per cent in August. The continuing war in Iran and disruption caused by Houthi rebels in Yemen to shipping routes and pipelines have pushed up oil and gas prices.
Burnham has described the situation as ‘concerning’. Quite. Any self-styled ‘cost-of-living Prime Minister’, especially one who may be nearing an election, should be deeply alarmed.
Tinkering
There is little reason to expect an improvement soon. Energy prices are forecast to jump by 25 per cent by January, and economists warn that could drive inflation above 4 per cent — twice the Bank of England’s target.
Some readers may take comfort from the Bank’s decision yesterday to leave the base rate unchanged at 3.75 per cent. They should not be too reassured: markets are already anticipating at least four increases in the months ahead, sharply raising borrowing costs.
The pressure is already evident in government debt markets. On Tuesday, the yield on ten-year gilts — through which the Government borrows money — hit 5.41 per cent, its highest point since 2007. Yields on 30-year gilts reached an intraday high of 5.93 per cent, the highest since 1998.
The result is a rapidly shrinking fiscal buffer. Burnham began with £23billion of headroom to protect the economy against shocks, but now has only £5billion to £10billion left. To restore that room for manoeuvre, the Prime Minister will need to raise at least £11billion.
Joseph Dinnage argues that Britain’s economy is moving into a difficult period and holds the Government — particularly Prime Minister Andy Burnham — responsible.
Dinnage also criticises the Chancellor of the Exchequer John Healey for failing to respond with spending restraint and growth-focused policies. Healey is pictured arriving at Downing Street ahead of a roundtable with business leaders on September 14
What does that mean? You guessed it, tax rises. Of course, he and Chancellor John Healey could cut public spending to make up the difference. Don’t hold your breath.
Let’s not forget that this is the same Andy Burnham who this month stood at the despatch box and promised that national security – in the most dangerous period in history since the Second World War – ‘cannot come at the expense of social security’.
That is the behaviour of a minor provincial official, not a national leader. The ex-mayor has been parachuted down from Manchester, and is more interested in tinkering with the cost of a weekly food shop than reckoning with the geopolitical and economic challenges of the day.
The former Bank of England chief economist Andy Haldane put it best this week: ‘The market now suspects this is a traditional tax-and-spend socialist government with better TikTok videos.’
Haldane was in fact an informal adviser to Burnham on the economy earlier this year. And he is only the latest of the Prime Minister’s former confidants losing faith in him.
Lord (Jim) O’Neill, who advised Burnham on economic affairs in the run-up to the leadership election, has suggested the PM and Healey are failing to control the excesses of public spending.
They’re both entirely right. Burnham will dislike the comparison, but I haven’t seen this level of hubris since Liz Truss.
Our national debt is over £3trillion, taxation is at levels not seen since the days of Clement Attlee and public spending sits at 49.1 per cent of national output or GDP, higher than the average among developed countries.
Rather than confront the problem and take on the most economically harmful influences within his party, Burnham – like Keir Starmer – is sticking to the same dreary socialist formula that has bedevilled Britain since the war (with the happy interlude of Mrs Thatcher).
In fairness to Burnham, the coming inflation is not exclusively his fault. Regrettably for him, the war in Iran and ensuing jump in oil prices will not be stopped by another rendition of The Smiths by the PM near the Ukrainian frontline.
However, the policies that he has already announced will make life even tougher for British taxpayers.
Take pensions. Figures this week suggest pensioners will have a £488 rise in their state pension in 2027, taking the yearly payment above £13,000 – above the frozen £12,570 tax-free personal allowance.
Ministers have exempted those whose sole income is the state pension, but millions of retirees with private pensions will be forced to hand back some of their state pension to the Government.
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So that sleight of hand known as fiscal drag will generate an even bigger windfall for the Treasury.
Where will the revenue from this stealth raid go? To everyone and anyone, it seems: A £2 English ‘bus fare cap’, projected to cost £454million; £340million on a futile attempt to end rough sleeping; billions on Burnham’s planned ‘social housing revolution’.
Yet more cash will be splurged if he brings Thames Water into public ownership. Not to mention his perpetual game of footsie with the so-called Waspi women – those aged 66 to 76 – whose failure to keep up to date with changes to the pension system Burnham has bizarrely said deserves ‘recompense’.
Dinnage says that former Prime Minister Keir Starmer failed to keep the goal of delivering economic growth
Dinnage accuses Healey of following the Rachel Reeves (Pictured) playbook, claiming he was unaware of the true scale of Britain’s fiscal woes before taking office
Hubris
And this is just what we know now. Healey is obviously preparing us for even more tax rises in next month’s Budget. Like his predecessor Rachel Reeves, the Chancellor is crying ignorance, claiming he was unaware of the true scale of Britain’s fiscal malaise before taking the job.
Confronted with all this, you would have thought that the Burnham administration would be desperately looking for savings and cuts, rather than opportunities to spend.
If Burnham is serious about improving our lives, then he would deliver on the promise Starmer failed to keep: delivering economic growth.
That can’t be done without sustainable levels of public spending, a tax system that incentivises ambition and a labour market that facilitates job creation. Drastic improvements can be made in all three areas.
When it comes to public spending, the Office for National Statistics estimates that over half the British population are net recipients of the state, rather than net contributors.
In the 2025-26 financial year, we are estimated to have spent almost £335billion on social security and welfare benefits – 10.6 per cent of GDP. This can’t go on.
Cliff edges for child benefits and frozen income tax thresholds mean there’s little incentive to go for that next promotion or start a side hustle.
Misguided
As far as the jobs market is concerned, Labour’s misguided employment rights legislation and National Insurance increases have made businesses think twice about taking on new hires.
Between 2024 and 2026, the cost of employing a full-time worker on the minimum wage has risen by £3,414 a year due to the cost of these measures.
We at the Prosperity Institute have been working on research that suggests taking the difficult decision of freezing the National Living Wage for five years could create up to 600,000 jobs and add £2.4billion to the Exchequer.
This would be a welcome start, but the Prime Minister would also be advised to face down the eco-zealots in his party and approve the oil and gas fields at Jackdaw and Rosebank, which would both create jobs and shore up our energy security.
If Burnham was truly committed to saving taxpayers’ cash, he would scrap Net Zero entirely, which we have calculated would save hardworking Britons £40billion every year by the end of the decade.
The humanities graduate Burnham will no doubt know it was Karl Marx who said that history repeats itself, first as tragedy and second as farce.
Unless Burnham wants to be remembered as a Prime Minister who, like Starmer, merely promised to fix these critical problems in Britain’s economy, he must put ideology to one side, cut spending, reform the tax system and allow businesses to thrive.
- Joseph Dinnage is senior press officer at the Prosperity Institute