‘The cuts which are even the bare minimum – £180 billion – are wild. The things which you should be doing just look like complete fantasies.’
Andy Burnham is days away from becoming prime minister. According to economist Andrew Lilico, he’s inheriting an economy with almost no room left to manoeuvre – and a sense of personal virtue is no substitute for a plan, as the fate of his predecessor shows.
In this week’s episode of The Capitalist, Lilico joins me to dissect the fiscal trap awaiting the new government. He argues Keir Starmer never had a theory of growth – and that Labour, having spent a decade assuming the Tories underspent, had no answer once they discovered the opposite was true.
On Burnham himself, Lilico is sceptical of the PM-to-be’s promised devolution agenda, which looks set to hand local leaders more control over spending but not the power to raise revenue. As for Burnham’s plan to bring water, energy and transport under ‘public control’, the idea that state ownership can conjure lower bills without paying the going rate of return is, in Lilico’s words, ‘very confused economically’.
Plus: why Burnham’s pick for Chancellor will be critical, and can Burnham survive to the next election?
Below, you’ll find some short excerpts from our conversation.
Marc Sidwell
Editor, CapX
On Starmer’s failure:
‘He didn’t really have a plan of what he wanted to do once he became prime minister. He talked about change, he talked about growth, but he didn’t have any idea how to deliver either of them. He thought his superior integrity and virtue would just by itself make everything work better.’
On devolution:
‘The devolution policy the UK actually needs would be increased fiscal autonomy for regions – more ability to vary, less cross-subsidisation. Whereas what Burnham wants to do is increase local autonomy over expenditure. He doesn’t really have any plans to increase the autonomy over the raising of funds.’
On fiscal rules as ‘mañana politics’:
‘The way to address reducing your deficit and your debt is to just do it. Fiscal rules are an excuse for not cutting the deficit today, but saying I’m going to cut it tomorrow. And the way things have worked in the UK for a long time is we make up these rules, we don’t stick to them and then we change the rule later once we don’t stick to it, to make it looser.’
On the scale of cuts needed:
‘The Tories have some story about cuts of about £50 billion, but that’s way short of anything necessary. You should be thinking the absolute minimum is £180 billion – and that’s politically impossible. People think £50 billion is terribly bold. The things which are even the bare minimum look wild.’
