Burnham Economic Adviser Turns Down Role and Demands Welfare Reform

A former Conservative Treasury minister who had been widely expected to become Andy Burnham’s chief economic adviser has ruled himself out of the job, urging ministers instead to take a “sensible” and “realistic” line on welfare spending.

Lord Jim O’Neill had been seen as a potential key recruit for the new Prime Minister as Labour confronts fresh pressure over the public finances, including yesterday’s revelation that the UK ran a larger-than-forecast July deficit of £1.8billion. But he has now confirmed he will not be joining Mr Burnham’s top team.

The former minister insisted his decision was not the result of a policy clash with Mr Burnham. However, he made clear that Britain’s rising debt burden cannot be addressed without confronting the scale of welfare spending.

The welfare bill has continued to climb sharply, with current estimates putting government spending in the area at roughly £1billion every day.

Figures published yesterday by the Office for National Statistics added to the concern. July is normally a stronger month for the Treasury because of tax receipts, yet the Government borrowed £2.3billion more than forecasters had expected.

Speaking to the BBC today, Lord O’Neill, who served in David Cameron’s second administration, said the roots of the deficit and the sharp rise in national debt lay in a significant increase in public spending over recent years. He warned that if the UK wants to secure stronger long-term economic growth, those pressures will eventually have to be addressed.

He said that should include looking at the pensions triple lock, alongside “a more realistic and sensible approach to welfare spending” as part of genuine welfare reform.

Lord O’Neill added that he remains in favour of a more measured and practical approach to both government spending and taxation.

He also confirmed he was not in favour of so-called wealth taxes which many have forecast Mr Burnham will increase to fund government spending rather than tackling the astronomical welfare bill instead.

‘I am not a fan of further increases in these kinds of taxes particularly as it relates to capital gains for genuine risk taking things like venture capital,’ said Lord O’Neill.

‘We need more genuine risk taking and more entrepreneurs and then we need to boost the green shoots of growth – some of which have emerged from the previous government.

‘The last thing we should do is try and discourage genuine risk taking so again that’s a choice for the government but I would not be in favour of that at all,’ he told Radio 4’s Today programme.

Lord O’Neill, a former chief economic adviser at merchant bank Goldman Sachs, was expected to be a key figure in the government ahead of what will be its defining first Budget in October.

The well-respected economist said he had turned down the key government job because he did not want to be under ‘financial constraints’ and would rather just be a ‘voice’ to turn to when needed.

Denying he had fallen out with the PM, the crossbench peer explained he would prefer not to have his financial interests tied up in a blind trust – a necessary measure implemented to avoid public conflicts of interest for politicians.

‘When it came to it, I have lots of other things going on that I very much enjoy and having been a minister before and having all the constraints that understandably go with it like a blind trust and to abandon everything else you do – never mind the fact that it is 24/7 – made me come to the conclusion that I would rather just be a voice – if they want to talk to me that is – and get on with the rest of the things in my life.’

Lord O’Neill, who is from Stockport and chairs the Greater Manchester Local Enterprise Partnership (LEP) Advisory Board, got to know Mr Burnham well during his tenure as Greater Manchester Mayor.

He said he believed in his focus on regional devolution and growth as a strategy that could work for the entire UK.

‘Greater Manchester has shown that if you have bold ambition and greater accountability with local elected leaders, things can change.

‘Greater Manchester has grown at three time the rate of London for the past 15 years and is the biggest growing urban conurbation in the country.

‘If he can repeat that around a number of places with a lot of people – then if you simply just add up the maths – then the national economic performance will improve.’

He suggested further devolution could also lead to a ‘more integrated approach’ to key areas like welfare, cutting across ‘the traditional siloed approach’.

‘I am a strong believer that you are only really able to solve those issues and cut the welfare bill if you have a more joined up approach,’ he said.