The former Tory treasury minister hotly tipped to be Andy Burnham‘s Chief Economic Adviser has turned down the role and called for a ‘sensible, realistic approach to welfare spending’.
With the new PM hoping Lord Jim O’Neill would step in to help Labour tackle the UK’s larger than expected July deficit of £1.8billion announced yesterday, he confirmed that he would not be joining Mr Burnham’s inner circle.
And while he denied he had had any policy disagreement with Mr Burnham, he said the UK must tackle welfare spending to bring down debt.
Current estimates suggest the government is spending around £1billion a day on the spiralling welfare bill.
And official figures released yesterday by the Office for National Statistics – for a month which traditionally sees a surplus because of tax receipts – showed the government had borrowed £2.3billion more than predicted.
‘The underlying dynamics between why our deficit is as it is and debt has risen so much is that we have just boosted government spending dramatically in recent years and – as many people talk about and I am among them – sooner or later, if the country wants to sustain a better longer term growth performance, we have to deal with those things,’ Lord O’Neill, who served during former PM David Cameron‘s second term, told the BBC today.
‘I include the triple lock as well as a more realistic and sensible approach to welfare spending under genuine welfare reform.
‘I am a supporter of a lot more sensible approach to government spending and taxation,’ he added.
Lord O’Neill, pictured with former prime minister Sir Keir Starmer and ex-Chancellor Rachel Reeves, said he would not join Andy Burnham’s new team
He also confirmed he was not in favour of so-called wealth taxes which many have forecast Mr Burnham will increase to fund government spending rather than tackling the astronomical welfare bill instead.
‘I am not a fan of further increases in these kinds of taxes particularly as it relates to capital gains for genuine risk taking things like venture capital,’ said Lord O’Neill.
‘We need more genuine risk taking and more entrepreneurs and then we need to boost the green shoots of growth – some of which have emerged from the previous government.
‘The last thing we should do is try and discourage genuine risk taking so again that’s a choice for the government but I would not be in favour of that at all,’ he told Radio 4’s Today programme.
Lord O’Neill, a former chief economic adviser at merchant bank Goldman Sachs, was expected to be a key figure in the government ahead of what will be its defining first Budget in October.
The well-respected economist said he had turned down the key government job because he did not want to be under ‘financial constraints’ and would rather just be a ‘voice’ to turn to when needed.
Denying he had fallen out with the PM, the crossbench peer explained he would prefer not to have his financial interests tied up in a blind trust – a necessary measure implemented to avoid public conflicts of interest for politicians.
Andy Burnham arrived at Hill Dickinson stadium in Liverpool earlier ahead of Everton’s opening Premier League game against Crystal Palace
‘When it came to it, I have lots of other things going on that I very much enjoy and having been a minister before and having all the constraints that understandably go with it like a blind trust and to abandon everything else you do – never mind the fact that it is 24/7 – made me come to the conclusion that I would rather just be a voice – if they want to talk to me that is – and get on with the rest of the things in my life.’
Lord O’Neill, who is from Stockport and chairs the Greater Manchester Local Enterprise Partnership (LEP) Advisory Board, got to know Mr Burnham well during his tenure as Greater Manchester Mayor.
He said he believed in his focus on regional devolution and growth as a strategy that could work for the entire UK.
‘Greater Manchester has shown that if you have bold ambition and greater accountability with local elected leaders, things can change.
‘Greater Manchester has grown at three time the rate of London for the past 15 years and is the biggest growing urban conurbation in the country.
‘If he can repeat that around a number of places with a lot of people – then if you simply just add up the maths – then the national economic performance will improve.’
He suggested further devolution could also lead to a ‘more integrated approach’ to key areas like welfare, cutting across ‘the traditional siloed approach’.
‘I am a strong believer that you are only really able to solve those issues and cut the welfare bill if you have a more joined up approach,’ he said.
