BRITAIN is seeking its seventh prime minister in a decade, prompting claims that the country is becoming ungovernable. But Keir Starmer’s likely successor, Andy Burnham, may have a narrow but plausible path to galvanise Britain’s economy. He just may need to channel former US president Richard Nixon to do so.
The first factor in Burnham’s favour is time. The next general election need not be called for three years, leaving him scope to use his sizeable political capital to make fundamental changes if he grasps the nettle early.
The population may be poised for change. Polls show most Britons think the country is going in the wrong direction – and has been for some time.
Productivity growth has withered since the global financial crisis. Pre-crisis economic growth rates of around 2.5% annually have fallen to little more than 1% on average since. At the same time, public debt has climbed from around 36% of GDP in 2007 to near 100% now.
Many may be willing to accept hard choices if convinced they are leading to better times ahead.
Starmer showed no aptitude for weaving that narrative, whereas Burnham, a fluent communicator, may be better positioned to do so.
The next factor is influence. Despite having a huge parliamentary majority, Starmer could not corral the bulk of Labour parliamentarians to support his plans to trim the country’s bloated welfare system.
Burnham, however, has a chance to do just that by channelling the “Nixon in China” effect. This refers to how the former US president’s hawkish, conservative reputation gave him space to seek rapprochement with Communist Beijing in the 1970s in a way a more left-leaning figure could not.
Burnham could do something similar in the opposite political direction. He has long supported progressive economic policies, calling his agenda “business-friendly socialism.”
Combine this track record with the former Manchester mayor’s popularity within his party, and Burnham may be able to convince his left-leaning cohorts that they can trust him to confront the country’s fiscal realities.
So how might Burnham pursue economic reforms?
The first key is getting the messaging right, both to his own party and markets. Because Burnham has only just been voted back into parliament, he could argue that the global backdrop has changed dramatically since Labour took power in 2024. That means he is not beholden to Starmer’s previous commitments not to raise any of the main personal tax rates or touch the generous state pension arrangement known as the “triple lock.”
The next step is surrounding himself with the right people. The fact that Jim O’Neill, former government minister and Goldman Sachs chief economist, has been advising him – reportedly along with former BoE chief economist Andy Haldane – is a good start. But Burnham’s choice of finance minister will be the major test of his fiscal intentions.
Then he must be willing to go big. “We need somebody prepared to do something bold and different,” O’Neill recently told BBC radio. He said Burnham should focus on cutting spending on welfare, healthcare and state pensions, freeing up resources for more productive investment without ballooning the deficit.
A turn in this direction could help win the trust of bond investors and business, much as the 1997 Labour government’s early decision to give the Bank of England (BoE) control of interest rates did. With this trust, Burnham could have even more space to invest without scaring the bond market. The fact that the country is not a debt outlier internationally should help.
Burnham got off to a rocky start on this front, declaring earlier this year that no government should be “in hock” to the bond market. He has since rowed that back, however, and committed to retaining current finance minister Rachel Reeves’ fiscal rules, under which day-to-day spending must be covered by income within three years and overall net debt must fall as a percentage of GDP within five years.
Given the legacy of Liz Truss’ brief premiership in 2022, cut short by a vicious bond market reaction to unfunded tax cuts, UK politicians know they can’t play fast and loose with the public purse.
Burnham will likely run into many of the same hurdles as his predecessor, but may prove luckier than Starmer.
For starters, if the Iran peace deal holds and the Strait of Hormuz reopens fully, inflation could soon fall and the prospect of interest rate cuts next year could grow, modestly reducing the country’s debt concerns.
Another issue is the strength of the political opposition. There has been evidence of tactical voting in successive by-elections, with many voters appearing to back the party best placed to beat the right-wing Reform party, not necessarily the one they actually prefer.
If this assumption is correct, Burnham – who trounced the Reform candidate in his by-election win last week – may have more room to push through reforms without fear of being kicked out of office.
Ultimately, as with Starmer, much will come down to personality and conviction.
Starmer took power without a clear sense of where he wanted to take Britain and with little ability to communicate any path forward. He then abandoned key policy plans when his party objected.
Burnham is an effective, engaging communicator – a massive advantage – but that only counts if he has a plan to sell. Former colleagues, and even allies, say he does not relish making unpopular decisions. The fate of the government and economy from now until 2029 rests on his ability to do just that.
The views expressed here are those of Mike Peacock, the former head of communications at the Bank of England and a former senior editor at Reuters.
