Burnham may just lead the economy back into austerity

But, while I love the sunshine and rainbows as much as the next guy, at some point, there’s no question that he and his Government will have to rein in the cash-heavy spending plans. Otherwise, he might just usher in a new period of austerity.

My argument is based on an unfortunate reality the UK has been facing for a while now: the fragility of and uncertainty within our gilt market – the investable market that funds our Government’s spending.

This market, comprised of many multi-billion-pound institutional investors, has been teetering on the brink of a riot, a mass sell-off, for a while now. Particularly over Starmer’s tenure, yields – the interest rate on these instruments, or how much our Government has to shell out to its investors – have been spiking, including the ten-year bond at its highest peak since 2008, indicating sell-offs in the market already in action and, indeed, a continued lack of sound sentiment in government plans.

With these investors already so disillusioned, it will only take one more misstep to push them over the edge. Burnham’s spending plans would do just that.

It was recently reported that public debt is on course to hit a whopping 300% of GDP by the 2070s. In business terms, that reads as our Government just digging itself deeper and deeper into the red, and planning, spinning, and spending beyond its means. So, while the pledges to build a whole new raft of council housing, de-centralise power, and nationalise utilities are certainly noble, from an investors’ perspective, they just seem like excess, fluff, and economic ineptitude.

Of course, this is made all the worse by the questionable, non-investor-minded attitude this Government has exhibited. Even if you discard the fact Burnham said the UK shouldn’t be “in hock to the bond market” before his premiership – something that sent yields up – stories of our Chancellor searching for extra fiscal buffer come his first Budget certainly won’t calm our investors’ discontent.

The same is true with Healey’s past – albeit now abandoned – plans to line the defence spending pot with “war bonds”. It’s just extra debt re-packaged under a new funky name.

So, put everything together, and indeed, if the Government proceeds as it wants to, the next few months almost write themselves. Investors in public debt, now at breaking point, will sell off their positions in a huff, hoovering up all the spendable pennies in our PM’s spending pot, and forcing either this Government, or the next, to usher in a renewed, unfortunate period of austerity.

I really do like how refreshing Burnham has been, especially in the wake of the mess left from Starmer’s tenure. But, for the sake of the UK public, he must restrain his idealism and treat our economy with the sensitivity, and the deep spending cuts, it now requires. If not, our bond market may just give him a reality check.

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Isaac Goldring is a Client Director at thought leadership PR agency Profile.

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