Can Andy Burnham really change Britain if he accepts the economic rules that the Office for Budget Responsibility (OBR) expects every government to follow?
In this video, I argue that this is the defining economic question facing the next Labour government. The issue is not Andy Burnham's leadership style, personality or political instincts. It is whether any government can rebuild Britain while accepting a fiscal framework built on assumptions created during the George Osborne era.
The OBR says Britain faces rising debt, higher spending pressures, increasing interest costs and the need for tighter public finances. But are those conclusions inevitable, or do they depend on economic assumptions that deserve to be challenged?
I explain why I believe the real constraints on the British economy are not government borrowing, but unused people, unused skills, unused knowledge and unused productive capacity.
I also explain why the cost of government debt matters far more than the amount of debt itself, and why government has considerably more control over those costs than is usually acknowledged.
Ultimately this is a debate about who governs Britain. Do elected politicians shape economic policy, or do fiscal rules become more important than democracy itself?
If Labour wants to rebuild Britain, it must first change the country's economic framework. But has it got the courage to do so?
This is the audio version:
The Debate Ammunition for this video is available here.
This is the transcript:
Can Andy Burnham change Britain if he accepts the rules that the Office for Budget Responsibility want to impose upon him?
The Office for Budget Responsibility was created by George Osborne when he first became Chancellor of the Exchequer in 2010. Why did he do it? As a PR exercise, to say that his Conservative government was going to be more responsible than Labour was, in his opinion.
And he did it to create a body that was supposedly independent of government, that would constrain the activity of government, by saying what the government couldn't afford to do. That is what the Office for Budget Responsibility, or the OBR for short, was created to do, and it's still doing it.
It's issued its report for 2026, and it says that Labour cannot afford the plans that it's put in place. The bigger question, though, is much more important. Could any Prime Minister, whether they be Labour, Tory, Green, or anybody else, succeed with the rules that the Office for Budget Responsibility wants to impose upon our economy? That is what this video is about.
Let's be clear: Andy Burnham has strengths. We know he communicates well. We know he understands communities. We know he cares about public services. He has a record in Greater Manchester that deserves respect. But the question I'm asking is not about his strengths or his personality. The question I am asking is: can he stand up to the Office for Budget Responsibility, which is based in the UK Treasury and says, “I am going to make my own choices, and you are not going to restrict them”?
They are saying the UK has debt that is unsustainable.
They say it has an ageing population that is going to increase spending, inevitably, over the years to come, and something will have to give as a result.
They are saying that defence costs are going to rise, although they, like almost everybody else in politics, have no real idea why that is the case, and it's all about Donald Trump demanding it and not about real need.
And they say that interest cost is now increasing after recent inflation, and therefore that cost too is going to rise.
And as a consequence, they say that fiscal tightening must begin soon, or the UK's debt will be unsustainable, in their opinion, after 2030.
What do they say is required? Less government spending. Higher taxes. Greater pressure on pensions, and probably the end of the pension triple lock. Pressure on the NHS to reduce its costs, and year-on-year austerity by any other name. This is the neoliberal playbook written out in plain print for all to see, and that's unsurprising.
George Osborne, who created this office, was a neoliberal. He was an arch-neoliberal. He came into office to shrink government, and he created the OBR to achieve that goal. Now his legacy is being imposed upon Labour, and Andy Burnham has a choice.
Does he accept the OBR's analysis? Would he keep Labour's fiscal rules, which were written to make it happy, or does he do something else? Does he cut spending? Does he cut pensions? Does he constrain the NHS, or does he challenge the assumptions? This is the biggest decision he will have to make when he comes into government.
Must government debt be reduced? That is the question he needs to ask. He could look to Japan for inspiration. Government debt in proportion to GDP there is well over 200%. It has yet to reach 100% in the UK. There is evidence that governments can run with very high levels of debt, and it doesn't matter. Life goes on.
But the Office for Budget Responsibility does not agree, on the basis of flawed analysis prepared in the early 20th century, which was shown to be false, but which still underpins all neoliberal thinking.
So, the question is: is debt really becoming unaffordable? And let's be clear, it's not the quantity of debt that matters when we talk about unaffordability; it's the cost of debt. The cost of the debt is the interest rate. And as I've explained time and time again on this channel, you can reduce the cost of the interest rate if you are the Prime Minister or the Chancellor.
You can stop paying interest on all central bank reserve account balances that are held with the Bank of England.
You can tell the Bank of England to cut the base interest rate. That's within the Chancellor's power.
You can do those things, and you would immediately cut the cost to government.
So, you could increase the debt by maybe 25%, but if at the same time you could cut the cost of borrowing - the interest rate that you pay by 25% or more, which is entirely plausible at this point in time - you could, in fact, afford to do so without breaching any of the constraints that the Office for Budget Responsibility are talking about.
And anyway, are these constraints real or is something else being ignored? Because, after all, these constraints are those of neoliberal economics. Neoliberal economics treats the government as if it is a household. Money is assumed to be scarce within that household, and markets are assumed to decide what is possible. Fiscal rules then become more important than people. The government serves the interests of the City and not the population. That is precisely what neoliberalism was designed to do.
But in Britain, the real constraints are different. We have people in this country who want to work, and aren't. We have skills, but we are not using them. We have knowledge, but not applying it. We have energy, and yet we are not turning it into productive use.
Money could organise those resources. It could create economic growth. It could deliver greater taxation revenues for the government, but not if the OBR's prescription is followed. And at the same time, the OBR presumes that the government does not create money. And yet, as a matter of fact, we know that all money is created by the government. How do we know? It's even printed on the bank notes.
The fact is, nobody but the government is permitted to create money in this country - okay, you'll now say that banks do, but they only do so under licence from the government - so the government actually creates money. It is never scarce for the government. It can always pay its debts. It can always fund its programmes. It can always extend its overdraft with the Bank of England.
So, what does Andy Burnham do?
Does he look at economic reality and say, we have unemployment and unused resources in the UK economy, and we should put them to use?
Does he accept the OBR's view of money, which is that it is scarce?
Or does he accept the reality of the situation which he's really managing, which means that money is not scarce for him at all?
So, to put that another way, does he live with the fantasy rules that the Office for Budget Responsibility has created, or does he live with reality? That is the choice that Andy Burnham has to make.
He has to decide: will he manage in accordance with rules which are entirely made up? The Office for Budget Responsibility version. Or will he look at how the economy really works: what I've just explained?
How will he rebuild Britain? That's a question for him to answer, but I will tell you something for certain. He will not be able to rebuild Britain if he does so on the basis of a fantasy.
The real choice he has to make is, then, about economics, and not leadership. Labour is changing its leader, but it won't change Britain unless it changes the economic framework within which the government works. Without that, nothing can change.
That is the challenge facing Andy Burnham. That is the challenge facing Labour. That is the challenge facing a new government. That is the challenge it has to accept. It has to face down the Office for Budget Responsibility. It has to face down the Treasury. It has to face down the sceptics within its own party. It has to deliver for the people of the country. That is what they expect, and nothing less will do if people are to re-engage with politics.
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[…] The video that this Debate Ammunition supports is available here. […]
[…] This event is being organised by Henry Levseson-Gower of The Mint magazine and builds on this morning's video: […]
Richard,
In pre OBR days I suggested that the PSBR should become the Purple Sprouting Broccoli Requirement……….
Perhaps a more useful measure of the nations health
🙂
Funny how the OBR ‘rules’ do not apply to banks or private debt levels. What affect would that have? Would anyone listen?
I think you need to explain the difference between govt created Fiat money and bank created debt money as Steve Keen does. Saying that banks create money under licence does not reveal that difference.
The OBR needs to be reformed or abolished. Are we rule takers or rule makers? The City, the banks and the markets are being allowed to impose these austerity rules. Steve Keen explains how a billionaire tax in California backfires because it is a state tax responding to a federal cut in funds.
In the global economy, the uk, Germany and Japan are severely affected by the war in the Gulf, which continues. The dollar remains the safe haven while the pound, the euro and the yen suffer.
In my view, what we need is a Liz Truss moment for the people. Let the pound devalue against the dollar.
I will
But even if I did I could not so do in every post
This is Steve Keen’s video.
I am sure some find his computer graphics helpful. To laymen like me Richard’s new graphics are more helpful.
https://www.youtube.com/watch?v=Ufn_Z2RqI_c
Steve’s work for those who already understand
I am aiming at those who do not.
That’s a really interesting post.
Unfortunately, IMO, Burnham does have to accept the fantasy constraints of the OBR, albeit only temporarily. He also has to work within the Labour manifesto requirements not to increase income tax, VAT, or employers NI. These constraints make no sense, I strongly disagree with them, but, politically, he needs to work within them. Temporarily.
But that’s OK. There’s a lot he can do with the will and the imagination. Crucially, public spending needs to increase to repair the damage from austerity.
Burnham could stop paying interest on most government reserves (say £12billion), other central banks already do so. He could limit pension tax relief to base rate (another £12 billion). He could equalise tax rates of capital gains and unearned income with income tax. He could introduce much more progressive employers NI to increasing tax on the wealthy. He could increase spending on tax enforcement yielding tens of billions (and Reform Companies House!). He could limit tax relief on ISA’s. He could change the ridiculous system of auctioning gilts; instead he could simply sell them at a predetermined price, higher than currently (i.e. lower rate). And if there wasn’t sufficient cover (unlikely), then change the rules to “borrow” from the Bank of England.
All these things, and more, could be done entirely within the ridiculous neoliberal constraints, at least temporarily. And they would avoid the (nonsense) backlash from the media scribblers and commentators about “bond vigilantes”. There’s a great deal he could do with the will and imagination.
Longer term a lot of reform of our financial and tax system is needed. We need to get rid of the undemocratic OBR and the independence of the Bank of England. But this doesn’t have to be done immediately.
At different times in history, we have asked ourselves (rightly or wrongly) the political question,
“Who governs Britain?”
and consequences (good or bad) have folĺowed:
The King? (Civil War)
The Pope? (Reformation)
The Trade Unions?(Thatcher & 46 years of Neoliberalism.)
The City? (16 years of austerity)
The EU Commission? (Brexit)
Tech Bros? (X, Google, Meta)
Sexual abusers & traffickers? (Epstein, #MeToo)
Foreign states? (Reganomics, Bush/Iraq, Trump, Israel, Netanyahu, Gaza)
Today, the question is just as important, at a time when democracy is conspicuously failing us, and people’s real needs are ignored, in favour of concentrating power and wealth in the hands of the already powerful and wealthy. So we will need to play politics as well as economics, and once again ask populist questions and sloganise.
Who runs Britain?
The OBR or Parliament?
The technical answer has to be framed in economic language about money and debt, but the political framing which will be needed to grab people’s attention will be the “Who runs Britain?” one.
The new chancellor hamstrung by the fiscal rules of the old one?
Reeves or Burnham?
Starmer or Burnham?
OBR handcuffs? (can a cartoonist pick that one up?)
Who elected the OBR?
Re-imagine the OBR acronym? – Office of B**** R******? (Office of Burnham or Reeves?)
Who Dares, Borrows?
What’s so bad about Debt?
Let’s Make Some Money (and do something useful with it).
What did the OBR ever do for us?
What’s the posterity of austerity?
Private Profit or Public Progress/Benefit?
The City or the People?
and of course, the politics of care and an economy of hope.
All noted
The slogans are vitally important. That is why Farage and other populists are doing so well.
Agreed.
The long, short and tall of it for me is that – as one of the respondents above hints – that state money making power has been repurposed in the image of the private sector. I mean look at the largess of the central bank reserve account – a state safety net – plus interest – for private casino banking. Then look at the austerity we are still under, and the OBR and the equivalent (lack of) money being made available for the public sector/citizen safety nets.
You don’t listen to politicians like Burnham anymore – what you do is observe what he has actually done/what they actually do – see what happens (we learn this whilst working in the slippery area of housing policy). The pound has been essentially privatised by the back door as far as I can tell, to make the country rely on private sector ‘growth’ because that is the Neo-liberal ‘natural order of capital’. So, prosaically, Burnham’s task is to re-nationalise the pound for all in the country.
Hopefully his canniness with communities will help him realise that he can create a bottom up approach to rebuilding the economy, and that public ownership of assets is the key as well as totally democratic and can bring politician and voter together again.
But it will not be easy to get capital to sacrifice the enormous benefits it has got out of Thatcherism. He needs to look at your Taxing Wealth Report, but ignorance of how money is actually created means that someone in the economy has to look as though they are paying for whatever investment he is going to make to avoid a ‘Truss 2’ event. This is the crux of the matter in my view.
It feels to me like each successive government are acting like homeowners trying to increase the market value of a house while ignoring it sits on an eroding cliff edge. Until we address issues like this imminent ecosystem collapse;
https://novaramedia.com/2026/07/10/ecosystem-collapse-threatens-uk-national-security-spy-chiefs-warn/
There is no point in promising anything.
I do not expect anything from Burnham apart from the odd gesture such as devolved regions with funding controlled by London otherwise it will be same as before, “we can’t afford it” etc.
The OBR should have been abolished in July 2024, before the dust of the general election had settled. As a product of the thinking of George Osborne it has never been fit for purpose in any reasonable, dare one say civilised sense.
That this government and chancellor chose to abase themselves before it says much about how useless they have been.
Apologies for the typo.
It should say “been” abolished………..
I edited it
I do when I see them
I don’t see most of my own
Real resources matter more than fiscal rules.
The problem is that those “real resources” have been depleted over the last 50 years. I fear that even if we do abandon artificial fiscal rules we have a very, very long way to go rebuilding the infrastructure (physical and institutional) that is needed to deliver the services/society that we want.
A journey has to start