THE RICHARD J MURPHY YOUTUBE CHANNEL
DEBATE AMMUNITION
Can Andy Burnham Change Britain Under OBR Rules?
Funding the Future | July 2026
Topic
Whether any government, and Andy Burnham's in particular, can transform Britain while accepting the neoliberal fiscal framework imposed by the Office for Budget Responsibility.
The video that this Debate Ammunition supports is available here.
The Core Argument
The Office for Budget Responsibility was created by George Osborne in 2010 not as a neutral watchdog but as a political instrument designed to entrench neoliberal economics in the UK Treasury and to shrink the size of the state.
The OBR's 2026 fiscal sustainability report prescribes the same medicine that has failed Britain for fifteen years: less spending, higher taxes on ordinary people, cuts to pensions, and year-on-year austerity.
No Prime Minister, however talented, can transform Britain by accepting rules built on the false premise that government spending is constrained by money rather than by the real resources of people, skills and productive capacity.
The interest cost of government debt is not fixed: a Chancellor can instruct the Bank of England to cut the base rate and stop paying interest on central bank reserve balances, reducing borrowing costs immediately without breaching any real economic limit.
Britain has unemployed people who want to work, unused skills, idle productive capacity and untapped energy. Money can organise those resources. The OBR's rules prevent this from happening by treating money as scarce when, for a currency-issuing government, it never is.
Key Statistics
|
Statistic |
Figure |
|---|---|
|
UK government debt as share of GDP at time of OBR 2026 report |
Approaching 100% |
|
Japanese government debt as share of GDP, cited as counter-evidence |
Well over 200% |
The Argument Structure
Step 1 — The OBR is a political creation, not an independent authority:
George Osborne established the Office for Budget Responsibility in 2010 for two purposes: to present the incoming Conservative government as more fiscally responsible than Labour, and to create an institution that would permanently constrain what governments could claim to afford. The OBR has been executing that brief ever since.
Step 2 — The OBR's 2026 prescription is simply austerity relabelled:
Citing rising debt, an ageing population, higher defence costs and increasing interest payments, the OBR demands fiscal tightening before 2030, or it thinks the debt unsustainable. Its remedies are reduced public spending, higher taxes on ordinary people, pressure on pensions including the triple lock, and cuts to the NHS. This is the neoliberal playbook in plain print.
Step 3 — Interest costs are not a fixed constraint:
The OBR treats the cost of government debt as an unalterable fact. It is not. The Chancellor can direct the Bank of England to cut the base rate. The government can stop paying interest on central bank reserve account balances held by commercial banks at the Bank of England. These steps alone could cut borrowing costs by 25% or more, negating the OBR's core fiscal alarm.
Step 4 — Real resources, not money, are the true constraint:
Britain has people who want to work and are not working. It has skills that are not being applied and productive capacity that is sitting idle. Money can organise all these things into economic activity, growth and tax revenue, but only if the government uses it. The OBR's rules prevent this by insisting that money is scarce for government when, as a matter of operational fact, it is not. Government creates money: that fact is even printed on the bank notes.
Their Argument → Your Rebuttal
|
They Say |
Your Response |
|---|---|
|
The national debt is becoming unsustainable and must be brought under control before it overwhelms public finances. |
Japan has carried government debt at more than 200% of GDP for years. UK debt has not yet reached 100% of GDP. The question that matters is not the quantity of debt but its cost, and the cost of debt is the interest rate. The interest rate is not fixed by some external force. It is set by the Bank of England at the instruction of government. A Chancellor who chooses to cut the base rate and to stop paying interest on commercial banks' reserve balances at the Bank of England can reduce the cost of existing debt substantially and immediately. The OBR's analysis ignores this lever entirely. |
|
Fiscal rules are necessary to reassure the bond markets and prevent a Liz Truss-style crisis. |
The Truss episode involved unfunded tax cuts announced without prior warning and without any credible account of the economic consequences, that coincided with the onset of quantitative tightening by the Bank of England. That is not the same as a government that transparently chooses to organise its unused real resources through public spending. Bond market anxiety is a reaction to uncertainty, not to spending itself. A government that clearly communicates what it is buying, why the real resources exist to deliver it, and how any inflationary pressure will be managed is not in the same position as Truss. Treating bond market sentiment as a constitutional constraint on democratic government is itself the problem, not the solution. |
|
Higher government debt means higher interest payments, leaving less money for public services. |
This argument assumes both that the interest rate is fixed and that money raised by taxation is the only source from which interest can be paid. Neither assumption is correct. Interest rate changes are generally internationally led, and pay little attention to individual government's actions. The government creates money. Interest on government debt is paid by creating money, just as any other government expenditure is. The real question is whether payment of that interest causes inflation, and the answer depends on whether the economy has unused capacity to absorb additional spending. When workers are unemployed and productive capacity is idle, it does not. |
|
Andy Burnham can work within the fiscal rules while still investing in public services and communities. |
Fiscal rules exist precisely to limit what governments can spend. If they did not have that effect, they would have no purpose. Burnham has proposed public ownership, reindustrialisation, mass social housing and regional devolution. None of these is cheap. He has not, however, proposed new tax powers and no wealth taxes of scale. He has committed to keeping Rachel Reeves's fiscal rules. The arithmetic does not work. A productive state cannot be built on a fiscal framework designed to limit state activity. That is not a question of leadership quality; it is a question of economic logic. |
The One-Liners
“No Prime Minister can rebuild Britain on rules designed to prevent Britain from being rebuilt.”
“The OBR was George Osborne's greatest political achievement: austerity was written into the constitution.”
“Britain has the people, the skills and the capacity it needs. The only thing missing is a government willing to use them.”
“The interest rate is not a law of nature. It is a decision. A Chancellor who forgets that is governing with one hand tied behind their back.”
“If money were truly scarce for the government, the Bank of England would occasionally fail to settle a payment. It never has.”
Questions to Ask
If fiscal rules are about economic reality, why does Japan function with government debt exceeding 200% of GDP?
Which specific real resources are unavailable to deliver the investment Britain needs, and which are merely assumed to be unaffordable?
If the Chancellor can reduce the interest rate and stop paying interest on reserve account balances, why is the cost of debt treated as fixed and uncontrollable?
How does accepting the OBR's fiscal framework differ in practice from accepting the Conservative economic settlement that created the problems Burnham says he wants to solve?
Further Reading
|
Post |
Date |
What it covers |
|---|---|---|
|
The OBR says we're in a mess, but has none of the solutions to the problems it identifies |
9 Jul 2025 |
Directly analyses the OBR's own 2025 fiscal sustainability report, arguing decades of neoliberal policy rather than borrowing are the real threat to public finances. |
|
4 Dec 2025 |
Makes the case that the OBR was designed to remove democratic control over fiscal policy and enforce austerity in the interests of the City rather than the public. |
|
|
19 May 2026 |
Examines the contradictions in Burnham's programme: ambitious spending commitments combined with unchanged fiscal rules and no serious tax reform. |
|
|
27 Sep 2025 |
Unpacks the claim that bond markets must approve government spending decisions and explains why a currency-issuing government is not in that position. |
|
|
30 Jun 2026 |
Shows that Burnham's fiscal rule commitments are arithmetically incompatible with his stated ambitions for housing, devolution, and industrial investment. |
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The problem with the debt is the interest paid and, most importantly, to whom it’s paid. That where I’m still confused with MMT. You say it can be paid by creating money but that sounds weird not in practice (it’s indeed doable) but as a scheme. I guess that my question behind my discomfort is ‘why are banks to whom interest is paid, private?’ If banks were all public, why would the state pay interest to itself?
That said, why don’t we make a difference between debt to cover running costs (to be recollected through tax) and debts to cover investment (to be collected through tax or selling the investment, like housing – if government makes debt to build houses that people can buy back afterwards)?
The government does not have to pay interest because it needs money. It pays interest because people want somewhere safe to save. That is a perfectly legitimate function of government.
The problem is that we have largely delegated that role to private financial markets. As a result, a great deal of government interest ends up flowing to financial institutions and those who already possess substantial wealth.
I think we can do better.
Government should offer safe savings products directly to the public, paying a fair rate of interest. That rate should reflect Bank Rate, not speculative market conditions. The savings raised should then provide capital for public investment. In that case, interest is not a reward to financial intermediaries. It is the return paid to citizens for making their savings available for social purpose.
On your second point, I do think there is an important distinction between revenue and capital spending.
Revenue spending pays for today’s services. Over time, the money created for that purpose should, in general, be withdrawn from circulation through taxation if inflationary conditions require it.
Capital spending is different. It creates assets that endure. Houses, transport systems, energy infrastructure and other productive investments generate benefits for decades. There is therefore no reason why the cost should not be recovered over the life of those assets, whether through taxation, user charges, rental income or, in some cases, sale proceeds.
That is why I have argued that we should reconnect saving with investment. If people wish to save, government should provide them with a safe home for those savings and use the capital they provide to finance productive investment. That is a far better use of accumulated savings than allowing them to fuel speculation in existing financial assets.
Thanks, Richard. This confirms my intuition.
One more question.
The reason people want to safe money is to make sure they can have it for a later purpose. But it loses value if interest rate is lower than inflation, which is often the case.
Could a government propose an ‘moving’ interest rate that stick to inflation, making sure money saved doesn’t lose value?
It could….
For the record, the government has failed to settle payments. For example the £400 million it owed Iran for military supplies that were never delivered. And now the teachers’ pensions unpaid by its agent Capita. Maybe insert “of necessity”?