The biggest choice facing Andy Burnham right now is who he will make his chancellor. People who claim to know his mind say they expect him to decide this weekend: market uncertainty through next week might in itself become a major story. No promises have been made to anybody. This is something for the prime-minister-in-waiting himself to chew over during any quiet moments he gets this weekend in Manchester.
The decision is, anyway, personal, even intimate. The relationship between Prime Ministers and Chancellors is always intense, either creatively or toxically. Will this one be wracked by Blair-Brown tensions, or a smoother Cameron-Osborne partnership? But beyond the personal, it’s politically huge. Get it wrong, and Burnham could face a market crisis even before he’s into Number 10. Get it right, and he could find the fiscal straitjacket loosening quickly, and all sorts of possibilities opening up.
Although Rachel Reeves has been working her business supporters hard for words of support, the current Chancellor seems to be fighting a forlorn rearguard action. “Not Rachel,” says a Burnham backer. The most obvious candidates to replace her, though there are others, are Wes Streeting from the centre right, and Ed Miliband from the centre left.
Streeting is one of the best explainers and verbal street-fighters the party has. For what it’s worth (perhaps not much) he is easily the favourite with Ladbrokes. Because he’s associated with the centre right, he would be an effective protector against bond market hostility. Pro-business, he has been working with the influential pro-growth social democratic guru Will Hutton, and the former Bank of England economist Andy Haldane. If his appointment saw gilt yields falling, that would unlock billions of pounds for other purposes much more easily than raising tax.
But, contrary to other reports, after backing him publicly last week and arguing that there was no point interrogating small differences, Streeting has neither lobbied nor asked Burnham for the job of Chancellor and, I am told, has no particular expectations. Streeting has not been one of those “banging the door down” on the much banged-on former mayor’s temporary office. The case against him, presumably, is that he’s made no secret of his appetite for the top job and that, therefore, Burnham may be nervous of having him as his neighbour.
The case against Ed Miliband is better known because it’s been prosecuted so enthusiastically all over the right wing press. Attacked by union leaders for his net zero policies, and savaged by commentators who see him as the knee jerk left-wing candidate, he would be very closely scrutinised by the bond markets. If it didn’t go well, that could end the Burnham project very swiftly. One senior MP says: “It’s actually unfair, but the question is, can Ed get beyond the vicious caricature of him?”
Yet the case for Miliband is powerful and hasn’t been properly aired. It is, in essence, the “Nixon to China” argument. Andy Burnham is seized of the need to move swiftly to reform welfare, particularly the Alan Milburn agenda to tackle youth unemployment and economic inactivity. After the bungled Starmer-Reeves welfare reform package got into trouble on the back benches, doing so requires, it’s argued, a trusted and credible centre left voice: Miliband would be able to deliver the PLP, as, perhaps, another candidate outside the soft left camp could not.
A combination of that, and a clear pledge to abandon the unaffordable and inequitable triple lock as soon as politically possible, in the next election manifesto, would demonstrate a radical government still determined to keep control of public spending; that would be a signal to the bond markets and holders of sterling, while Burnham pushed his radical devolutionary plans.
I have even heard suggestions that Miliband as chancellor might look again at the oil and gas levy, as part of a Burnham drive to get energy prices down. The final part of his case is simply that he is a man, after serving Gordon Brown, who understands Treasury culture and could deliver on the cost-of-living agenda in a way others couldn’t.
Of course, there are plenty of other names being bandied about – Yvette Cooper, a serious economist and a figure likely to be trusted by the markets, would give Burnham another woman in the top job; Shabana Mahmood, almost a blank sheet as far as her economic agenda is concerned, would allow him to impose more Number 10 influence on a Treasury which has been left very much to itself during the Starmer years. Both John Healey, the former defence secretary, and Jonathan Reynolds, the chief whip, have also been discussed.
This weekend, the political world and the financial markets will both be watching carefully for a decision from Manchester. It’s genuinely difficult: at Westminster nobody thinks it’s yet been taken. We will know soon enough.
[Further reading: Keir Starmer: A Political Obituary]
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Subscribe here to commentThis is a great look beneath the surface for the next few days but, like most political commentary, the initiative always seems to be handed over to business lobby and the bond market in short order.
Well if you depend on the bond markets to keep on giving you more wonga best you be nice to them. And if you want bizness to keep on doing biz blahing them up the blah blah is probably a tad counterproductive.
This article is one of many speculative attempts to fill pages about the change of PM with little substance. It churns over well worn and erroneous arguments concerning the government finances. No – the bond market is not in control of our lives. It is only in control in the heads of these who would wish to see the public sector continually reduced in size. Osborne with austerity wanted to ‘shrink the state’. This was a mission initiated by Thatcher. It was always wrong from a macro-economic viewpoint, because without public spending you do not have a state. Further, private sector investment will not pay for the infrastructure to improve our electricity grid, our water, our roads, our justice system, our health and social care. I am constantly amazed that journalists like Marr trot out things that they see as ‘unfair’ and which must be cut to pay for essential investment by the government. The idea that the triple lock is ‘unaffordable and inequitable’ is one example. This mechanism is not inflationary and it ensures that all those pensioners who do not sit on large public or private sector pension schemes at least get something that enables them to just about get by. The state pension is far less than the annual minimum wage, at around 54% of what is considered to be a survival level of income. Readers should reflect on the fact that Marr will benefit hugely from his defined benefit BBC pension scheme which he would surely have joined in 2000 and clocked up 21 years of service. So no – he does not need a state pension at all. Many others don’t either. However, is it cost effective to means test the state pension? No it is not. The admin cost will be considerable, Means testing involves complex forms and many less educated than Marr will lose out. Pension Credit complexity sees around 38% of potential claimants missing out. Some middle and lower earners may have a disincentive to save in private pension if they stand to lose state pension at retirement. Those with larger non-state pensions pay tax, some at 40% so the government claws back an element of the money.
No – if we want to ensure the triple lock continues to help the poorer in our country then get the money for this by reducing some of the GBP22.5 Billion given away every year (source. IFS) by the government on tax reliefs for higher earners like Andrew Marr.