Burnham to Seek ‘Flexibility’ Within Existing Fiscal Rules

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Or sign-in if you have an account.(Bloomberg) — New Prime Minister Andy Burnham indicated he’d look at using what he called “flexibility” within the UK’s existing fiscal rules to fund his next budget.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an Account“I’ve said we’ll stick to the fiscal rules, and by that I mean the existing fiscal rules, and use obviously any flexibility within them,” Burnham told reporters shortly after becoming premier on Monday afternoon, when asked about the possibility of more borrowing to pay for greater investment in infrastructure.“We will stick to the existing rules and I’ve made that very clear in Downing Street. So none of this is about taking risks with the economy. I’ve never done that in any role that I’ve had,” he added, seeking to reassure investors he would not be reckless with the public finances.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“I’ve always taken a very prudent approach,” he said, pledging to “show how it will be funded and that will be clearly set out in our budget.”UK 10-year yields rose as much as seven basis points to 5.02%, while those on the 30-year rose eight basis points to 5.73%.The influential center-left Resolution Foundation has argued it’s possible to borrow more by expanding the remit of so-called public financial institutions such as the National Wealth Fund. On Monday, it said the government should start with a £16 billion ($21.5 billion) injection into the NWF to attract more than £40 billion in private co-investment in energy and infrastructure projects.Extra borrowing by these institutions falls outside the government’s self-imposed debt rule which requires debt as measured by “public sector net financial liabilities” to fall as a proportion of domestic output by the end of the parliament. The money would fall outside the main “stability” rule that requires taxes to cover all day-to-day spending, but excludes borrowing to invest.The binding constraint is the interest associated with taking on more debt, which does show up on the government balance sheet. Every additional £1 billion of borrowing contributes around £50 million in annual debt interest, Resolution estimated. Ultimately, funds for investment need to be borrowed even if they don’t show up. Financial markets have accepted the principle that borrowing to invest is good for growth but investors’ tolerance is not unlimited.Starmer’s government found about £32 billion more for public financial institutions compared with the previous Conservative government, including £16 billion for the National Housing Bank to fund more homebuilding.Burnham also said he is considering raising the tax-free personal annual income allowance above £12,750 for the first time in five years, though he conceded that would be expensive. “I think it’s been frozen now, hasn’t it for a number of years, so it has dragged more people in — pensioners, I think — and that particularly I think has become a growing issue. So all of this will be looked at though at the budget, and obviously it’s difficult given the financial circumstances in which we find ourselves,” he told reporters.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.“I’m just kind-of showing I have a visibility of the issue and the impact it’s had on the different groups that I’ve mentioned, but it’s difficult because changing the threshold is not without significant consequences. But I’m looking at it,” he said.He indicated he wasn’t looking at raising the top rate of income tax, despite previously proposing a hike. “I think it would just be premature to say that,” he said.Burnham pledged that he would not leave office without reforming social care, another potentially expensive policy.“I am ready to use some of my political capital on this issue. I’ll be blunt with you,” he said.—With assistance from Alice Gledhill.(Updates with market reaction in fifth paragraph.)Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.