LONDON (AP) — British Prime Minister Andy Burnham’s The announcements in his first 24 hours in office underscore the political and financial challenges he faces as he tries to revive the country’s struggling economy.
Mr Burnham, from Britain’s left-wing Labor party, faces a rebellious electorate seeking relief from the high cost of living. At the same time, investors who help finance governments by buying bonds are demanding that he reduce public sector debt, which has ballooned to levels not seen since the 1960s.
To balance competing demands, Mr. Burnham surprised experts by nominating former Defense Secretary John Healey to be Treasury secretary. Mr Healy, who served as a Treasury official under former prime minister Gordon Brown, is seen as the man to ensure the government delivers on its pledge to reduce Britain’s debt mountain.
And first thing Tuesday morning, Burnham made the down payment on a promise to ease pressure on cash-strapped consumers. The government has announced that it will abolish housing tax. electricity use The average household will save £45 ($60) a year for at least six months from October.
Importantly, the government said it would cover the costs by halting its digital ID rollout plans to reassure investors that Burnham was not going to squander without money.
The Treasurer has a big job ahead of him.
“Mr. Healy has a daunting task ahead of him,” said Victoria Scoler, director of investments at Interactive Investor.
“The Government has ambitious plans to tackle the following challenges. living expenses …But he faces very difficult finances to carry out these expensive plans. ”
Burnham, who holds the purse strings, faces the same problem that has plagued every prime minister since the 2008 financial crisis. And their failure to find answers is a big part of why the average tenure of the eight men and women who took up residence behind the famous black door at 10 Downing Street during this period was two years.
Burnham like his predecessorfaces the challenge of finding ways to revitalize an economy that has grown at an average of less than 1.5% a year since 2009, compared to an average annual growth rate of 3% in the 15 years before the financial crisis.
Mr Burnham will be constrained in developing his economic plan by a promise to reduce government debt, which currently exceeds 95% of gross domestic product. Debt interest payments rose to 111.2 billion pounds ($149 billion), or 8.3% of government spending, in the fiscal year that ended in April, according to Britain’s budget watchdog, leaving less money available for government services from health to education to defence.
New assignments are added to old assignments
But like many other European governments, he faces new challenges after his predecessor pledged to increase defense spending to 3.5% of GDP by 2035. The move came under pressure from US President Donald Trump, who has criticized allies for not paying their fair share of European defense spending.
The Institute for Fiscal Studies, a respected independent researcher, estimates that delivering on that promise will cost around £36 billion a year, or £500 per British citizen.
“We absolutely have to accept that these constraints are structural,” said Olivia O’Sullivan of Chatham House, a London-based think tank. “It would be a tough situation for any prime minister at this point.”
That’s why expanding economic output is so important to all of Burnham’s plans.
Stimulating economic growth is key to Burnham’s plan
If growth does not accelerate, British taxpayers will have to pay higher taxes or accept cuts to popular programs such as the National Health Service, which provides free healthcare for all. On the other hand, a booming economy increases the revenue generated by existing taxes and tax rates because the value of corporate profits, employee salaries, and other transactions increases.
Former Prime Minister Keir Starmer’s government collapses as economic growth slows Angry Labor MPs forced him to cancel welfare cuts designed to balance the budget. Recently, it was widely criticized for failing to present a credible plan to increase defense spending.
Some Labor supporters complain that the government “shouldn’t be at the mercy of the bond market”. But economists argue that Burnham and Healey need to take fiscal constraints seriously if they are to succeed in pumping up the economy and making more money available for popular programs.
“This is not some hypothetical bogeyman in the bond market,” said David Aikman, director of the independent National Institute of Economic and Social Research. “We need people to buy the bonds we’re issuing.”
So far, Mr Burnham has provided few details about his plans for the UK economy.
His big idea is to “reindustrialize” the economy by moving investment from London to other parts of the country hit hard by the decline in manufacturing. Burnham also said he would increase the construction of social housing and support small and medium-sized enterprises, which account for 60% of private employment, to address the country’s housing shortage and strengthen the construction industry.
At the same time, he pledged to stick to Labor’s pledge not to raise taxes on working people and maintain a “triple lock” on the state pension. This is an expensive policy that guarantees that your pension will rise each year by the higher of consumer price inflation, average wage growth, or 2.5%.
Jim O’Neill, a former chief economist at Goldman Sachs and a member of the House of Lords who has advised Burnham in the past, told the BBC last month that Britain’s new prime minister needs to “get serious”.
“We need people who are bold and ready to do things differently,” he said.
Mr Burnham added: “We have the same challenge that everyone else seems to be avoiding, which is to do something about things like welfare, to stop the endless and staggering increase in spending on the NHS. … to do something about things like the triple lock and get out of this strange kind of prison owned by all these tiny little groups that oppose what somebody wants to do.”
