God help us. With high inflation, low productivity and anaemic growth, Britain’s economy is approaching the eye of the storm.
And who do we have to steer us to safety? Andy Burnham. I hope you brought trunks.
The PM has warned of a ‘challenging’ Budget next month after news that inflation was up 3.1 per cent in August, as the war in Iran rages on and Houthi rebels in Yemen wreak havoc on shipping lanes and pipelines, raising the price of oil and gas.
Burnham has branded the development ‘concerning’. No kidding. If I were the self-styled ‘cost-of-living Prime Minister’, potentially on the verge of calling an election, I would be worried, too.
Tinkering
The future looks as dreary as the present. Energy prices are set to rise by 25 per cent by January, which economists warn could tip inflation over 4 per cent – double the Bank of England target.
Readers might be relieved that the Bank chose to keep the base rate steady at 3.75 per cent yesterday. But don’t be fooled – markets are already pricing at least four rises in the coming months, making the cost of borrowing vastly more expensive.
Meanwhile, on Tuesday, the yield on ten-year gilts – the mechanism by which the Government borrows money – reached its highest level since 2007, 5.41 per cent. Borrowing costs on 30-year gilts rose to a daily high of 5.93 per cent, the highest since 1998.
All of this means that the Government is losing fiscal headroom – and fast. Having started off with £23billion to insulate the economy against shocks, Burnham is now left with £5billion to £10billion. The Prime Minister will have to raise at least £11billion to maintain his wiggle room.
Joseph Dinnage argues that Britain’s economy is heading into a difficult period and blames the government, particularly Prime Minister Andy Burnham
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.
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
