Andy Burnham is due to deliver a significant speech on the economy this week — and there is no need to assume the worst before he has even spoken.
The Greater Manchester mayor has brought in some serious economic voices around him, among them Jim O’Neill, now Lord O’Neill and formerly chief economist at Goldman Sachs, as well as Andy Haldane, the former Bank of England policymaker.
So, for the sake of argument, it is worth looking at the more encouraging aspects of Britain’s economic position — and considering what a more credible approach might look like.
After the attention generated by Burnham’s remark that he did not want to be “in hock to the bond markets”, it seems likely he will seek to calm concerns and make clear he is not proposing an unchecked borrowing binge.
Still, with no certainty over who would ultimately run the Treasury, and given the familiar gulf between political rhetoric and action — not least Chancellor Rachel Reeves’s claim about leading the most business-friendly government ever — it is sensible to reserve judgment. For now, it is just a speech.
Hamish McRae argues that Burnham should not be dismissed as someone incapable of improving Britain’s economic management
Even so, it would be unwise to rule out the chance that Burnham’s team could prove more pragmatic than the current one.
Not sweeping visions or grand promises — just a greater degree of basic competence.
Because, if you step back and take stock of where we are as an economy in a complex world, the balance sheet isn’t that bad.
Unlike Germany we are not dependent on producing cars that the Chinese can make at half the cost. And at least our economy is managing to grow a bit.
Our fiscal deficit is far too high but not as bad as that of France or indeed the US. We have, by European standards, a vibrant high-tech start-up sector.
And, let’s shout this out once again, we’re the second-largest exporter of services in the world after the US.
A big chunk of that is the financial services of the City, which despite everything has not done too badly over the past decade.
Did you know that the City has added nearly 134,000 professional and financial jobs since 2019? That’s up 25 per cent
So much for all those jobs London was supposed to lose to Paris, Frankfurt and Milan.
All this has happened despite being saddled with what must rank as the least business-friendly Government for half a century. Just think what we could do if we had a more competent one.
The agenda is not complicated. Tony Blair set it all out a month ago in his famed 5,600-word essay.
The Government had to dump ideology and focus on delivery. It had to deal with things as they are, not as it might wish them to be. It had to cut spending on incapacity and disability benefits, and spend more on defence. It had to prioritise cheaper energy over net zero. And so on.
For most people this is common sense, but it did not go down well with Andy Burnham. There was an ill-tempered spat between the two. Burnham complained: ‘He doesn’t mention inequality once.’
But our prospective Prime Minister doesn’t do detail and we have to hope that he, and whoever he chooses as Chancellor, will learn on the job. At least it will be a relief not to hear the foghorn drone of the current regime.
Bond markets are keeping a close watch on what Andy Burnham could do as PM
Looking ahead there are two clear dangers. One is that the new team can’t learn fast enough and their plans will be derailed by the Government’s deteriorating finances – the huge overshoot in borrowing in the first two months of this financial year.
The other is global events will move against them. At some stage, probably in the next two or three years, the global economic cycle will turn down.
Up to now the world economy has been remarkably resilient, given everything thrown at it. The US in particular has boomed, even if many of its people failed to enjoy the benefits of growth.
You can see that optimism in equity markets. Despite a wobble in the high-tech sector, the S&P 500 index is up 7 per cent this year. JP Morgan has just raised its year-end target to 7,800, implying a further 6 per cent rise.
But somewhere in the future is the next downturn, and there’s an odds-on chance it will happen on this Government’s watch.
It’s so frustrating. We have a decent hand of cards in the global economic game. If only we had a more competent government we could play it so much better.
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