Andy Burnham, self-styled King of the North and would-be Labour leader, gave a telling quote to the party’s in-house magazine, the New Statesman.
“We’ve got to get beyond this thing of being in hock to the bond markets,” he said on the eve of the party’s annual conference in Liverpool. He’s telling some Labour backbenchers and grassroots activists exactly what they want to hear. But they’re not the ones he needs to convince.
The international bond markets, integral to Britain’s borrowing, are dispassionate observers of politics. You cannot “defy” them in the same way you cannot defy gravity. By suggesting you can even try, Burnham has made himself Labour’s equivalent of Cynthia Erivo in the musical Wicked. Green face and broomstick; believe in yourself hard enough and gravity is no longer there.
Labour backbenchers have been chuntering for months that Chancellor Rachel Reeves should break her own fiscal rules to borrow more, especially for an increase in defence spending. The Treasury has even run sessions on the bond markets to try to break the cycle of misunderstanding.
But the Treasury is preaching to a crowd that doesn’t really want to hear what they have to say. If not borrow more, some Labour MPs subsequently argue, then tax the wealthy more. Burnham, unsurprisingly, appears to agree.
The Greater Manchester Mayor also called for the nationalisation of utilities. In another interview – with the Conservatives’ in-house paper, The Daily Telegraph, clearly chosen to wind up No 10 – he suggested higher taxes on the wealthiest.
Burnham argues his programme could be partly funded by higher council tax on expensive homes in London and the home counties, a 50p income tax rate for the highest paid and £40bn of borrowing to build council houses.
The Treasury has repeatedly modelled wealth taxes, only to conclude that the cost of capital flight – wealthy investors deciding not to come to Britain or leave altogether – is higher than any surplus it would bring in. Experiments in Sweden, France, Ireland and Australia have all failed.
Even if Burnham manages to jump the many hurdles to becoming prime minister – find a seat, win it, see off other Cabinet challengers – life won’t become suddenly simple.
Burnham could find himself in the position of former Prime Minister Liz Truss, whose unfunded tax cuts so roiled the bond markets that interest rates went through the roof. Mortgage-payers are still suffering the consequences now.
Britain is already over-leveraged. Annual rates of returns on 10-year British bonds, also known as gilt yields, recently reached 4.8 per cent, compared with 0.2 per cent in 2020. The UK now has the highest yields across the G7 group of wealthy nations. That means debt-interest payments have more than doubled in the past five years. In 2025-26 the Treasury will spend £111bn on interest alone. That’s more than the entire education budget.
Tory leader Kemi Badenoch already blames Reeves for high borrowing costs, calling it the “price of her economic mismanagement”. But the fact the bond markets don’t trust Labour is less to do with Reeves and more to do with No 10’s mismanagement of the Parliamentary Labour Party and subsequent failure to get the welfare cuts through the Commons.
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In fact, the bond markets see Reeves as the little Dutch boy with a finger in the dyke holding back the torrent of leftist desire for more borrowing. Why else did they wobble so dramatically when they misinterpreted her crying during Prime Minister’s Questions as a sign she had been fired? No one else in the Labour Party, traders calculated, could even try to hold back the flood.
Britain’s high yields are tracking a general trend where investors are worried rich countries are taking on too much debt. Reeves has promised to reduce the deficit from 3.9 per cent of GDP this year to 2.1 per cent by 2029. Yet, despite a huge parliamentary majority, after the welfare debacle investors think she is less, not more, likely to succeed.
Allies of the Prime Minister point out that the very first question Burnham would be asked if he challenges Starmer is whether he would keep Reeves as Chancellor. Even hesitating over saying yes could drive Britain’s borrowing costs higher. And that’s before this putative prime minister even borrows a single penny for his housing scheme.
It’s fair to say Burnham’s intervention has caused some irritation among allies of Starmer. On Thursday, aides swapped messages about the Manchester Mayor’s “economic illiteracy”.
One Government insider told The i Paper: “It reminds me of the internet back in the 2000s, where it was like, ‘Click here for one simple way to lose belly fat’. If there was a button that you could just do to fix things we’d obviously do it. We haven’t not done wealth tax for some unknown reason, or done spending rises like we haven’t thought about it enough or not tried hard enough.”
Burnham is not subtle. He said MPs are privately urging him to challenge Starmer and that “wholesale change” was required to see off an “existential” threat to the ruling party. For Labour’s lefty purists already in a jittery mood, this is catnip.
The former minister and ex-MP for Leigh accused Downing Street of creating a “climate of fear” as he set out his vision for how to “turn the country around”. He also talks of doing a deal with socialist Jeremy Corbyn in the name of a “progressive alliance.”
But Burnham’s leftward tilt also ignores the vast swathe of centrist voters who made up Labour’s broad election coalition: those persuaded to lend Starmer their vote on the basis of promises not to impose certain tax rises.
Burnham has been on quite the journey from New Labour chief secretary to the Treasury, where in 2007 he argued for “vigilance and discipline” in spending.
Now he’s telling some left-wing Labour MPs, the unions and grassroots exactly what they want to hear as they allow themselves a week of introspection at their annual conference. Look up over the sky in Liverpool this weekend and you might spot a green-faced Northerner on a broomstick, defying gravity.
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