Burnham’s Pricey Pledges Leave Question of How to Fund Them

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Or sign-in if you have an account.lr9]hd5xb17zvy149x9wuxay_media_dl_1.png Bloomberg(Bloomberg) — Addressing the nation as its new prime minister on Monday, Andy Burnham pledged his first action would be to give people “breathing space” with the cost of living. 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Signaling a change in style by speaking from Downing Street without notes, Burnham cut a confident figure as he heralded “the moment we bring back hope.” His rhetoric was heavy on ambition as he vowed to be the country’s most radical leader in decades, pledging a new economic model to end what he described as decades of failed political consensus.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“We will make this moment a circuit breaker for Britain, bringing forward the biggest changes in the last 40 years,” he said, promising a transformational government that would fundamentally rewire Britain’s economy.It was a far cry from the often piecemeal policy program and wooden delivery of his predecessor Keir Starmer. The shift marks a new communications style that will be welcomed by Labour members of Parliament betting on Burnham to win them the next general election. He has also set himself the almighty challenge of making good on pledges many of his predecessors shied away from.Only hours later, the conversation had moved beyond those positive vibes to the thornier question of how he was going to pay for it all. While his spending commitments were lightly sketched, together they could cost tens of billions of pounds. The new leader succeeded Starmer in a rapid contest in which he was the only candidate, which didn’t permit much scrutiny of his plans. Speaking to reporters in Downing Street, Burnham said he wouldn’t leave office without reforming social care, a policy area he said had been neglected by politicians of all parties for decades. He also said he’s looking at increasing the threshold at which earners have to start paying income tax. That’s another policy that would be popular but, as Burnham acknowledged, it would be similarly costly for the public purse. Burnham has also touted policies on devolution and the public control of utilities, which will also need to be funded. The new prime minister said he would announce detailed spending plans in the coming budget, and unveil a plan for longer-term economic transformation later in the year. Burnham said he would look at using “any flexibility” within the existing fiscal rules to help pay for his policies, indicating a potential increase in public borrowing at his first budget through workarounds like expanding the remit of the National Wealth Fund. Those remarks led gilts to extend a retreat on Monday, a warning shot from markets that served to highlight the limited space he has for fiscal loosening. Gilts saw a relatively steady open on Tuesday morning, with 10-year yields initially edging slightly lower but barely eating into Monday’s eight-basis-point increase.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The new prime minister saved the big shock for after markets closed.To the surprise of Westminster, he named John Healey as chancellor of the Exchequer. Healey arrives at No. 11 with one very big spending commitment of his own. He resigned in protest from Starmer’s government in June, accusing the former chancellor and prime minister of an unwillingness to increase defense spending to 3% of domestic output by 2030.That would amount to billions more pounds that need to be found, setting up an historic budget later this year and months of speculation over potential tax rises. Healey could seek to raise the money via defense bonds, people familiar with the new government’s thinking said, although investors would still view that as extra government borrowing.“Either he can’t deliver this or we’re in for big tax hikes,” said economist Paul Johnson, the former director of the Institute for Fiscal Studies, noting that Burnham had also committed to the so-called triple lock that ensures a rise in the value of state pensions.Some on the left of the party welcomed the ambition offered by Burnham, with MPs saying his Downing Street address felt like the first “proper Labour” speech delivered by a leader for a while, with a focus on more left-wing policies. On top of those longer-term ideas, Burnham said he will announce a series of smaller measures on Tuesday designed to help with the cost of living. The first was a tax cut on household energy bills to save households an average of £45 a year at a cost of £850 million.The measure would offer short-term relief to households and act as a mild anti-inflationary policy. Burnham has also said he is looking at ways to bring down housing costs, for example through rent controls, and transport costs, though it remains unclear the extent to which he is prepared to do more than just repackage existing Starmer policies. Other Labour MPs who spoke to Bloomberg praised the scale of his ambitions but warned of the battle he would face to deliver on them. By promising so much he had given himself a huge amount to live up to, one said, all within the confines of the fiscal rules and the straitjacket of Labour’s manifesto, which rules out raising the major taxes.Some of the party’s fiscal conservatives said there were, nonetheless, already nerves about the exodus of fiscal hawks in Cabinet, combined with the decision to appoint Healey. The top posts in Burnham’s cabinet were held by Healey, new Foreign Secretary Ed Miliband, Defense Secretary Wes Streeting and returning Home Secretary Shabana Mahmood, all key figures in Starmer’s downfall.Some of Burnham’s early decisions also raise the question of whether he will have the political capital to weather any coming storms.Burnham opted to sack almost all of Starmer’s loyalists from the cabinet, including the former chancellor, creating a long list of potential enemies on the backbenches.One MP said most prime ministers want to under-promise and over-deliver. Burnham, they said, risked doing the opposite.—With assistance from Ellen Milligan, Lucy White, Philip Aldrick and Tom Rees.(Updates with detail on markets and energy tax cut from 11th 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. 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