Appointing a new Chancellor is critical if the would-be PM aims to revive the economy, writes TERRY MURDEN
As Andy Burnham prepares to order new curtains for his much-anticipated house move, he will also be pondering over who will be his next door neighbour. In the whirlwind of speculation around the future occupant of Number 10, one other political career is destined to come to an abrupt halt: that of the current chancellor Rachel Reeves.
Ms Reeves has been conspicuously quiet in recent weeks, a sure sign that she knows that if Sir Keir Starmer leaves office she will be asking if she can share the removal van.
The pair are not only politically aligned, they have both built their stories around a life growing up without privilege and a desire to rebuild the country around Labour values. Unfortunately, they mistook those values for blaming the Tories for everything that went wrong, while struggling to come up with workable ideas of their own.
Instead, they used a huge majority in the Commons to force through a series of disastrous policies that have stripped businesses of their profits and margins, driven up unemployment – particularly among the young – and engaged in a one-sided net zero strategy that is destroying a valuable asset and revenue earner.
Neither will be much missed by a frustrated business community looking for a fresh start from whoever may take their place, but understandably nervous about whether a Burnham – or even a Wes Streeting – administration will be any better. As Burnham has stated, this could be Labour’s last chance to get it right. The economy certainly cannot afford many more mistakes.
An early and critical appointment, therefore, is a new chancellor and there will be some dismay that Ed Miliband, a close Burnham ally, is jostling for the job. The current Energy Security Secretary is deeply unpopular because of a just transition policy that means the UK turns its back on its own oil and gas reserves in favour of buying more expensive supplies from Norway. It is the economic equivalent of having a robust security system in your house only to hand the keys and the alarm codes to a burglar.
At least Rachel Reeves was beginning to see through the nonsense of this ideological zealotry and the worry will be that, if installed at the Treasury, Milband will feel emboldened to push further with his green folly and set loose other initiatives that will not put business interests first.
Streeting, the former health secretary, Pat McFadden, the work and pensions secretary, and John Healey, the former defence secretary, are alternatives for the job and surely offer a better prospect than Red Ed.
Aside from avoiding the regular u-turns that revealed Starmer’s incompetence, there will be some key policy areas on which the new PM will be judged. His natural position is to the left of Starmer but in an apparent shift back to the centre he has “taken advice” in order to avoid spooking the bond markets. This will be tested by his approach to tax and public spending.
Fundamentally, he wants to ?draw on his record as mayor of Greater Manchester to rewire Britain’s economy. This so-called “Manchesterism” or “business-friendly socialism” would accelerate the shift of power away from London.
He is committed to Ms Reeves’ fiscal rules, which suggests he would not oversee a large rise in borrowing. He has also committed to Labour’s manifesto promise not to increase the main rates of income tax, VAT or National Insurance.
The markets are sceptical about these pledges and on Friday the yields on government bonds rose over fears that the opposite would apply, not lease because of his plans for greater state intervention in the economy, meaning higher borrowing.
He has repeatedly advocated bringing the English and Welsh water companies “back under stronger public control” and full public ownership for those such as the busted flush that is Thames Water. Nationalising the water industry as a whole would cost an estimated £100 billion.
He has spoken of resurrecting the northern route of the already over-budget HS2 rail scheme and said he wants to compensate the Waspi campaigners over changes to the state pension age, though he appears to have backtracked following concern about the cost of such a scheme.
Businesses will be encouraged that he feels unhappy about the National Insurance hikes, though once again he has offered no promises to overturn one of the most unpopular decisions made by the Chancellor.
“His national economic credibility is untested,” said Kallum Pickering, chief economist ?at investment bank Peel Hunt. “It remains unclear whether his regional approach would translate effectively to national policy,”
Burnham can justifiably argue that he has experience of Cabinet roles and of building a feelgood factor in one of Britain’s great cities – without the trappings of devolved government. It is a good foundation on which to fulfil his ambition to rebuild Labour and the economy.
It means surrounding himself with a pro-business Cabinet prepared to reverse some of the damage that has been done this past two years and not pandering to those associated with the failed Starmer experience.
Terry Murden was Scotland Editor and Business Editor at The Sunday Times, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business
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