An open letter to a new Prime Minister

Prefer audio? Listen to the recorded version below.

Dear Mr Burnham,

After your prolonged sojourn in Metropolitan Manchester, welcome back to Westminster. The summer recess is over, as is your leisurely social tour of the UK taking the grass roots temperature and posting self-promotional Tik Tok reels. Your brief political honeymoon has finished too. Given your towering ambition to be Labour leader and prime minister, and having premeditatedly defenestrated your predecessor, the electorate has every right to expect you to be ready for office and government with a concrete, credible plan.

Time waits for no man. The bond markets certainly don’t. Just in the brief five weeks since you were confirmed as PM, UK 10-year Gilt yields spiked by a quarter point to their highest level since early in the Global Financial Crisis two decades ago. You might not like reminding, but at their summit this week they were almost a point higher than at peak panic in the car-crash budget in October 2022; you enjoy mocking her but lower yields than you face cost Liz Truss her job.

Of course, with global inflationary pressures the UK is not alone among overindebted fiscally incontinent western democracies suffering a government bond rout. However, of our major competitors, apart from Australia we have managed to contrive the highest borrowing costs by a wide margin. The financial markets are expressing their scepticism that beyond the superficial social media posts and learning of your preference for crisps over pork scratchings, there is little substance behind it. Without a public mandate for a new plan and bound by Labour’s 2024 manifesto commitments, already the source of economic sclerosis, it’s now up to you to prove wrong those of us in the markets who doubt your ability to effect substantial improvements in the national rather than your partisan interest.

You are already besieged with a plethora of political issues requiring your urgent attention: legal and illegal immigration; prison overcrowding; defence spending; lethal, casual hooliganism and pernicious organised crime; the Argentine threat to the Falklands; building bridges with Donald Trump to name but a few. But these must not deflect you from what must be your single overriding aim: restoration of a sustainable real UK growth rate of 2-2.5% and the significant reduction in nominal national debt. If you succeed, all else, including your social aims, will fall into place; you will rightly be promoted high in the pantheon of great Prime Ministers. Fail, and far from being venerated, the inexorable slide towards national penury will be indelibly carved into your political gravestone: “The Rt Hon Andrew (‘Hi, I’m Andy’) Burnham (2026-2029), opportunistic prime ministerial wannabe; another in a long line of short-lived Downing Street empty vessels who promised so much but delivered so little. He meant well.”

The auguries are not good. Your socialist principles hardened under the tutelage of Left-wing leaders Ed Miliband and Jeremy Corbyn (in both of whose shadow cabinets you willingly served after your ministerial career under the centre-Left Tony Blair and Gordon Brown) cause you to declare that Great Britain “took wrong turns” in the 1980s under Margaret Thatcher. The inference is that her unshakable conviction that the State works for the people, rather than everyone being beholden to the State, was wrong. Your implication is that the 1970s were halcyon days to be revived and revisited: they were not and should not. Inflation hit nearly 25% in 1979; in 1976 under a Labour chancellor (another Healey, Denis in this case), the UK had to be bailed out financially by the International Monetary Fund; the accusation of de-industrialisation that you level against Thatcher had its roots in the nationalised industries, 1970s militant unionism, poor management, uncompetitive costs, bad products and worse workmanship (ask anyone who bought a British Leyland car who experienced vicious financial depreciation on their purchase thanks to all-pervading rust and unreliable mechanicals); we suffered the three day week, work to rule, the Winter of Discontent, flares, stacks, feathered hair, the Bay City Rollers, and endless power cuts. Even wearing rose-tinted spectacles (shielding from the glare of Glam Rock and teeny-bop pop), they were grim times.

“Good growth in every postcode. Hope in every heart”. It might make a good soundbite but it is neither an economic nor social policy. Contrast with “AMERICA FIRST” and “MAKE AMERICA GREAT AGAIN”, however much you might disdain Donald Trump’s values, as statements of strategic intent there is no comparison. It certainly does not always achieve it, but America and the Americans always set out to win; seemingly we are content with merely taking part. “Good” growth? Is there bad growth? What does this phrase mean? And “in every postcode”? In an integrated national economic system, how do you measure growth by delineated postcode? Why? This is as nonsensical as your predecessor’s contortions about “working people”. It tripped off his tongue but tied him in knots; you run the same risk. “Hope in every heart” is well-meaning but so much sentimental twaddle. Of course, giving people hope is important but inspiring people to better themselves and their families and to aspire to enjoying the fruits of their labours is likely to produce far greater measurable personal and national satisfaction.

Number 10 North and the balkanisation of the United Kingdom encourages a federalised system with layers of expensive bureaucracy demanding increasing plenipotentiary and tax raising powers. It is a bizarre way of streamlining government.

Your stated aim is greater public sector intervention, especially state ownership of steel, transport and utilities. It was Milton Friedman who said that when government takes control from the private sector, expect the running cost to double. Public sector operating expenditure is already more than 40% of GDP, five points higher than three decades ago; your aim should be to reduce it through prudent fiscal management, not cause it to rise further driven by political ideology and a determination to exercise political control.

The Office for Budget Responsibility is explicit that without intense remedial action to curb state spending, the United Kingdom faces a financial catastrophe. You, your new Chancellor John Healey, every single member of your cabinet and all 403 of your MPs need to be thoroughly acquainted with the contents and fully understanding of the ramifications of the OBR’s July Fiscal Risks and Sustainability Report. The evidence is there; you cannot say you were not aware of it. It is your responsibility to do everything in your collective power to act in the long-term national interest, not merely the short-term partisan interests of the Labour party; it is your duty to prevent the UK sliding into the economic and financial abyss.

You want to see the economy grow. We heard that before from Keir Starmer and Rachel Reeves. Their actions said otherwise: loading direct financial and indirect frictional costs of employment on businesses produced the opposite effect, as they were told would happen. However tempting, extracting “windfall” taxes from the energy, banking and legal sectors is counterproductive; eventually it will drive them offshore to lower tax domiciles; it will deter international companies investing in the UK. The losers are the UK’s competitiveness and the Treasury; new job opportunities will dry up. No-one will thank you for that.

You do not enjoy a command economy, one that responds to orders and a click of the fingers. The economy will not grow and certainly not accelerate simply because you desire it to. It needs incentives which not only retain and attract investment but which allow investors to make decent returns (which they can re-invest creating a virtuous circle). Rachel Reeves has already sown the seeds of considerable long-term damage by actively breaking the continuity of capital in family-run businesses and farms through her changes to the IHT exemptions (after the furore, the minor amendments make little difference when they are eaten up by inflation); this policy should be scrapped entirely before significant irreversible damage is done to the fabric of small business, the bedrock of the economy.

Informed speculation is that you are considering a further assault on wealth and wealth creators with capital taxes on unrealised gains and harmonising CGT and income tax rates; they say you plan to target further taxes on the value of properties including the taxpayer’s primary residence. Not only is the suggested warrant issued to HMRC “house inspectors” to have access to all target properties a gross invasion of personal privacy by the State, such a policy will distort the UK housing market through the arbitrary judgement of a property’s value as determined by a government valuer rather than normal market forces. Are you prepared for the political as well as the financial consequences, particularly in the Southeast of England?

No doubt ideas are being revived too to levy National Insurance on “unearned” income from investments and pensions, as well as further increasing the fiscal drag through freezing tax allowances. All will sap confidence and undermine consumption, the principal driver of growth.

You believe in creating equality, equity and fairness. However laudable, it is just not real. Life is unfair. There will always be inequality. There will always be relative poverty too by definition if household earnings more than 60% below the national median are deemed impoverished: there will always be someone 60% below the median unless everyone has an identical nominal income. Beware the simultaneous welfare and taxation traps. Heed the economist Arthur Laffer: if you give people generous handouts for doing little, benefits become entitlements and you incentivise them to expect more and do even less; if you increase taxation on people who work, penalising them to the point that their marginal income benefits the Treasury more than the individual, rationally they will withdraw their marginal labour (this has already happened in practice among NHS consultants). It destroys productivity.  Given healthcare and welfare are the government’s biggest outlays, and the tax burden already weighs significantly and disproportionately on a small group of taxpayers providing a large percentage of government income tax receipts, the resulting growing deficit from “progressive” welfare and taxation policies becomes self-fulfilling. The OBR is explicitly warning against failing to control spending; the IMF is equally unequivocal warning you that the tax burden is significantly out of kilter, grossly imbalanced and so high that it is both unsustainable and incompatible with promoting a growth economy.

Do not address these issues piecemeal; it is a holistic problem. You need to mend our enduring, structural systemic weakness: a profoundly unbalanced economy. We have an over-reliance on a burgeoning public sector particularly for marginal employment; we have too many people of working age who are economically inactive and too many who depend on benefits for their income; a relatively diminishing private sector is heavily over-reliant on services and is under-invested and under-represented in manufacturing from both of which flows a constant current account deficit and an imbalance between imports and exports.

There are no quick fixes but there are early wins. As pre-requisites, you must provide a strategy that lowers energy costs and which restores energy security and industrial competitiveness. You must reduce the financial and frictional costs of employment in the private sector. Then you need to provide tax incentives that attract inward investment. You determine and control all of these. Unleashing the private sector rather than relying on the public sector to be the marginal employer catalyses a vibrant, match fit, competitive economy capable of taking on the best in the world and beating them. You will never remove inequality but you certainly can facilitate conditions in which national income and personal standards of living rise to everyone’s benefit.

Level up; do not level down. Don’t just talk about hope and handouts; give us inspiration and aspiration. These are not wrong turns; they are essential needs.

You wanted the job. You’ve got it. Here is the blueprint for success. Get to work and make it happen. Onwards and upwards.

Yours sincerely etc

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