Andy Burnham’s first day as the new British Prime Minister began with the announcement of lower bills for the British public (VAT will be abolished) and continued with the promise that this would be “a government dedicated to quality of life”, whilst images circulated of the first Cabinet meeting, characterised by cheerful smiles reminiscent of a school trip – with the exception of the new Foreign Secretary, Ed Miliband, who maintained a grim expression. Burnham finalised his appointments late into the evening, and as morning broke, the underlying dynamics of this selection became clearer: it was as brutal as was inevitable, but also a tad too brazen – which is to say, the new Prime Minister has made many enemies; will he be able to manage them? The settling of scores has already begun, and it centres on the economy.
Herein lies the first act of audacity. John Healey’s appointment as Chancellor of the Exchequer came as a surprise, as evidenced by Miliband’s scowl in his direction, and is perhaps a reward for the former Defence Secretary, who resigned on the eve of Burnham’s rise, dealing a blow to the then Prime Minister Keir Starmer from which he has never fully recovered. Along with the reward, however, comes the bill for Healey, who had resigned because Starmer and his Chancellor, Rachel Reeves, had not allocated sufficient funds for defence, risking leaving the country defenceless in the face of unequivocal threats such as that from Russia. It had been a serious accusation against a government that has always shown a keen awareness of the urgency of rearmament, and against a party – Labour – whose stance on defence is worlds apart from that of the continental left. Healey can now therefore follow through on her protest and make the investments she deemed necessary to the point of resigning (3 per cent of GDP by 2030), but she must balance this priority with the promises made by Burnham on welfare reform, lower utility bills, raising the personal tax-free threshold, and housing for the homeless: as Alex Wickham writes in Bloomberg, Burnham naturally has “noble goals”, but all the means to achieve them are extremely costly. Resources are lacking; if the country takes on too much debt, the markets react badly – as soon as Burnham spoke of “fiscal flexibility”, there was a jolt in government bond prices. For Healey, there is an added cost: if he does not go ahead with the increase in defence spending, he will show that he was not concerned about the Russian threat, but merely wanted to undermine Starmer; if he does proceed with rearmament, he must tell Burnham that his do-goodism does not pay for itself – which is, after all, the very reason why Starmer himself had to perform that balancing act. Healey and Burnham have been discussing the issue of defence bonds in recent days, but the volatility of the markets risks wiping the smiles off everyone’s faces very quickly.
