Manchester was Burnham rehearsal – now get ready to pay the bill
Burnham has asked to be judged on Manchester – where his record is more spending, more borrowing and higher taxes, says Gareth Davies
Andy Burnham walks into Downing Street with a simple pitch: judge me on Manchester. I am happy to take him up on it.
Start with tax. In 2018, Mr Burnham created a new charge on council tax bills to fund his own office and priorities. It began at £9 a year for a Band D home. It now stands at £61.75, almost seven times higher, after a 44 per cent increase in his final year alone. Take his precepts together, for policing, fire and mayoral functions, and the Band D bill rose by £130 a year, up 42 per cent, in his last five years.
Then debt. He leaves the Greater Manchester Combined Authority owing a staggering £1.34bn, the highest of any combined authority in England and nearly two and a half times the level in the West Midlands. His flagship bus network runs a net deficit of £227m a year. The accounts even record £550,000 spent just on painting 93 buses yellow!
None of this, of course, is to talk Manchester down. It is a great city and it has grown, and I welcome that. But look at who paid for the growth. Conservative Chancellors signed off more than £1bn for Greater Manchester’s transport settlement in 2022 and £150m of brownfield housing money in 2023, on top of a devolution settlement the combined authority itself calls the largest in England, with annual spending above £3bn. The mayor announced the free bus travel and the capped fares – but it was the national taxpayer and rising local bills that paid for them. It is easy to play Father Christmas when someone else fills the sack.
Which brings us to the difference between the town hall and Downing Street. A Mayor always has a Treasury above him, a bigger budget to lobby, a national taxpayer to bill. A Prime Minister has neither. He has only the country’s credit. And Britain’s credit is already stretched.
Consider what Labour hands him. The national debt stands at £2.98 trillion, 95 per cent of everything Britain produces in a year, more than £40,000 for every man, woman and child. Debt interest cost £110bn last year, around eight per cent of all public spending and among the highest levels in half a century. In May alone, we paid £11.7bn in interest, a record for the month. Borrowing in the first two months of this financial year hit £46bn, a quarter higher than a year earlier and well above the official forecast. Our long-term borrowing costs are the highest in the G7, with long gilt yields above five per cent. Rachel Reeves herself admitted that £1 in every £10 the government spends goes on servicing debt.
That is the inheritance. Now consider the instincts of the man inheriting it. Mr Burnham has called for £40bn of extra borrowing for housing alone. He has floated nationalising water, energy, and rail. He told the New Statesman that Britain must get beyond being “in hock to the bond markets”. Labour’s own Rachel Reeves warned about the destabilisng effect of Burnham’s rhetoric on markets. One analysis published this week put the tax rises implied by his plans at £38bn. Asked about it directly, his own words were that the government “might be having to ask for a little more”. Britain already knows what that means.
He now promises to keep the fiscal rules, and gilt investors have adopted what one commentator called a ‘show-me-first’ attitude. I spent years sitting across the table from the people who buy government debt. They do not vote in our elections. They do, however, set the price of our promises. When they doubt a government, the doubt
arrives in the numbers long before it arrives in any Budget.
So what could this mean for you? Fixed mortgage rates are priced off gilt yields, so a loss of confidence shows up in your remortgage quote within weeks. Higher debt interest means the taxes you already pay buy less, because a growing share goes straight to bondholders rather than to police officers or hospital beds. And if tens of billions of tax rises follow, it will be found where revenue is always found, in your payslip and your pension.
The macro picture is the same story at scale. A country paying £110bn a year in interest has already spent its room for manoeuvre. There is nothing in reserve for the next shock. Manchester taught us how Mr Burnham spends when someone else underwrites him. From this week, the underwriter is you.
Gareth Davies MP is shadow minister for Business and Trade