Chas Lister

Labour's Fantasy Economics, and the Reckoning to Come Labour have never quite believed that arithmetic applies to them. Blair borrowed against a boom he assumed would never end. Brown declared the cycle of boom and bust abolished, shortly before both returned with force. Reeves promised discipline in 2024, then discovered within months that discipline and her spending pledges could not coexist, and reached for stealth taxes and an employer National Insurance raid to close the gap. Each time, the party has treated the bill as something that happens to other governments. Andy Burnham is simply the latest name on a very old tab. His defence is that nine years running Greater Manchester taught him restraint. The Institute for Government has already quietly demolished that claim. Mayors, it notes, need only "a limited grasp on fiscal policy." Their budgets are substantively set in Whitehall. Their tax-raising powers stretch to a small council precept that only three mayors nationwide have bothered to use. Most tellingly, their organisations "do not borrow from global capital markets." Burnham spent almost a decade spending money he did not raise, under a scrutiny regime the same report calls underfunded and often inquorate. He built a tram network. He never once had to explain himself to a bond trader. That inexperience would matter less if his instincts leaned towards caution. They do not. Since Makerfield he has promised to nationalise the water companies, settle the WASPI claim, revive the scrapped northern leg of HS2, cut rail fares, and build council housing at a scale unseen since the war. Alongside all this sits a pledge to hold Reeves's fiscal rules and leave income tax, VAT and National Insurance untouched, the exact promise that broke Reeves within a year of making it. His first real test as a national figure, the WASPI question, saw him wobble immediately towards the expensive option. Nine years without market discipline has left him with the reflexes of a man who has never had to justify a decision to someone who might sell his country's debt. The OBR has now spared him the excuse every one of his predecessors enjoyed. Blair, Brown and Reeves each discovered the limits of borrowing after the fact. Burnham has been handed the number in advance, £120bn, dated and published, before he has taken office. He is walking towards it anyway. What that reckoning looks like in practice is worth stating plainly, because Labour has spent three governments avoiding the words. Gilt yields already sit near a twenty-eight-year high. A government that keeps promising more while raising less eventually finds buyers unwilling to lend except at punishing rates, and a Chancellor forced to choose between inflating the debt away or, in the phrase economists now use without embarrassment, financial repression, corralling private savings into funding the state by regulation rather than persuasion. Ken Rogoff has already said the IMF would be called back not because Britain needs rescuing in the manner of 1976, but because politicians always need someone else to blame for the cuts they lack the courage to name themselves. Denis Healey eventually understood the game was up. Whether Burnham recognises the same moment when it arrives is the open question of his premiership, and the one his party has never managed to answer for itself. He is still promising water companies to the state, council houses on a wartime scale, and fares held down by decree, all while the invoice has sat on Labour's desk since Blair first left it there, unread by every occupant since. "Nine years without market discipline has left Burnham with the reflexes of a man who has never had to justify a decision to someone who might sell his country's debt."