Burnham has three weeks to do the maths before reality strikes

Andy Burnham is now prime minister in all but name. He has three weeks to find a credible fiscal plan, decide who his chancellor will be, and reassure international investors he’s not carting in a magic money tree to squat next to the Swiss-cheese plant on the filing cabinet in No 10. As political apprenticeships go, it’s a pretty tight timeline. But there are signs he’s taking the challenge seriously. Burnham is already being advised by heavyweights Andy Haldane, a former Bank of England chief economist; Richard Hughes, a former chair of the Office for Budget Responsibility; and Jim O’Neill, a crossbench peer and former Treasury minister. It’s an attempt to reassure nervous investors Burnham won’t sell off more bonds to fund a spending spree, amid concerns that the UK’s debt levels are already at a record high. Fundamental to his vision is a near-as-dammit nationalisation of key utilities such as water and electricity, which will require higher borrowing. The aim is to get bills down eventually by getting rid of shareholder payments. And then, hopefully, inflation falls too. Crucially, Burnham could do this within Rachel Reeves’s fiscal rules. That’s because the taxpayer gets an asset in return for its investment, and hopefully one that will give a financial return over time. “If you do public ownership, it is important to stress this is not coming out like day-to-day spending,” an economist close to Burnham told The i Paper. “You typically swap a government bond for the shares, so it’s kind of an asset swap. It’s not going to be ‘there’s £20bn less for the NHS this year because we’re doing this’; that’s not how it works in contemporary economies. When France took the final part of [electricity giant] EDF into public ownership, they simply issued a bond for the final parts of share equity.” We already have some early ideas of his tax plans. Burnham has said he wants to halve VAT for the ailing pub industry. He’s also said he will stick by Labour’s manifesto promise to maintain the pensions triple lock for this Parliament and honour the pledge not to raise the income tax or national insurance contributions (NICs) on workers – which forced Reeves into hiking employer NICs in the first place. More likely are tax rises that don’t break that manifesto pledge. He could raise capital gains tax again and impose a levy on banks, which would undoubtedly be popular with his backbenchers. He could also speed up or increase the mansion tax to come in earlier than 2028. A wealth tax, floated by would-be rival Wes Streeting, is an idea in vogue. Where the markets will be more hawkish is on day-to-day spending, which includes costs such as welfare benefits, pensions and public services. Burnham’s broad hints at spending largesse come against the backdrop of grim borrowing figures and tight expenditure plans already set out by Chancellor Rachel Reeves for the back end of this Parliament; not to mention the unresolved row over defence spending. In the eyes of Labour MPs, somewhere on the Avanti West Coast Mainline between Manchester and London on Monday morning, Burnham went from Clark Kent to Superman. He got on the train in a T-shirt only to emerge in suit and collar in London. By the time he’d reached Parliament, he had a tie on, too. Starmer’s departure and Burnham’s arrival was greeted by only muted yelps from the bond markets. The price of UK government borrowing went up on Friday, but only modestly – because Burnham was already seen as a shoo-in for prime minister and he had let it be known he would stick to Reeves’s fiscal rules. Better-than-expected inflation figures last week – despite Donald Trump’s ongoing Iran negotiations – also soothed investor nerves. Even after Starmer resigned on Monday morning, traders blinked and went about their days. Perhaps more pressing is the row over defence spending. John Healey resigned over the decision not to fully fund the defence investment plan – with £13bn allocated of the £18bn he had asked for by 2030, and then only by salami-slicing the capital budgets of other departments. Reappointing Healey to defence secretary would be a marker of the direction of travel, but would have implications on other wings of the party who think defence can only be boosted if welfare is slashed. Some Labour MPs think Healey should be made chancellor. “He has Treasury experience, he could find the money he needs and he is very popular,” one minister said. Other names in the frame for chancellor include Foreign Secretary Yvette Cooper and Work and Pensions Secretary Pat McFadden. There is a concerted campaign lobbying campaign to keep Energy Secretary Ed Miliband out of the frame. “Perhaps you separate out energy spending and give Ed control over it in his own right,” one Labour aide suggested. Either way, Burnham needs to move quickly. The ongoing impact of the Iran war will affect the cost of living. He can’t keep the country and markets guessing all summer and into the autumn as they await the next budget. That’s why his choice of chancellor is the subject of so much speculation. He certainly has no absence of volunteers for the job. If there was any doubt that this leadership election was over before it began, the whoops and cheers with which around 200 Labour MPs greeted Burnham as he arrived for a photo with them in Westminster Hall should quash them. He got out his phone and took a selfie with the crowd. “It was a bit vomit-making,” one Labour MP remarked after the mobbing. “Everyone is being a bit needy.” Among Starmer’s close Cabinet allies who were in prominent positions for the photo were Reeves and Jonathan Reynolds, the chief whip, as well as Housing Secretary Steve Reed and Cabinet Office Minister Nick Thomas-Symonds. Reeves was not in Downing Street alongside other close aides when Sir Keir Starmer resigned on Monday morning. After the photo, Burnham retired for meetings. He’s squatting in the room of the Labour whip who organises the allocation of offices at Westminster. The whip has moved out, so Burnham can be near to key allies Lou Haigh and Anneliese Midgley. It won’t be for long. All the competition has vanished, only weeks separate him from Downing Street. But he may may find, as Starmer and Rishi Sunak and Theresa May did before him, how quickly political capital and economically credibility evaporates on contact with office. He only has three weeks – at most – to get ready.