Andy Burnham has promised to abide by the fiscal rules set out by Minister Rachel Reeves to reassure investors and prevent a sharp rise in debt, and not to raise income tax, National Insurance contributions or VAT. He is a staunch advocate of returning public control — though not public ownership — of water, energy and the railways, and maintains a more pro-European stance than Starmer.
Analysis by Editorial Team
Hervé Prettre, Global Head of Investment Analysis at Edmond de Rothschild, notes that “If Andy Burnham were to win the party’s internal vote (possibly in July if no other candidate emerges, or in September otherwise), political uncertainty would persist regarding the direction of the new government’s fiscal policy. Burnham would have to balance a more ambitious social agenda with fiscal discipline if he is to avoid tensions in the UK debt markets.
In this context, the succession of Rachel Reeves, the current Chancellor of the Exchequer — regarded as a pillar of the government’s fiscal credibility — could become a matter of great significance.
The markets have reacted very little so far, as Starmer’s resignation was widely anticipated and Burnham is not perceived as an extremist: he had a successful tenure in Manchester, has promised to respect the fiscal rules established by Chancellor Rachel Reeves to reassure investors and prevent a sharp rise in debt, and has pledged to uphold the Labour manifesto’s promise not to raise income tax, National Insurance contributions or VAT. He has also called for a “new drive for reindustrialisation”, is a staunch advocate of returning public control – though not public ownership – of water, energy and the railways, and maintains a more pro-European stance than Starmer.
As regards the Bank of England, investors have slightly scaled back their rate expectations: they now price in a single rise to 4 per cent in December, up from the current 3.75 per cent. Yields on 10-year gilts have fallen from 4.84 per cent to 4.80 per cent. The FTSE 100 has performed slightly better than the Stoxx 50.
The coming days will be decisive in determining whether Andy Burnham will be able to meet voters’ expectations whilst respecting the limits set by the financial markets.”
