{"id":911551,"date":"2026-09-27T12:02:11","date_gmt":"2026-09-27T12:02:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/911551\/"},"modified":"2026-09-27T12:02:11","modified_gmt":"2026-09-27T12:02:11","slug":"burnhams-plan-for-a-radical-reset-collides-with-economic-reality-heather-stewart","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/911551\/","title":{"rendered":"Burnham\u2019s plan for a radical reset collides with economic reality | Heather Stewart"},"content":{"rendered":"

As Labour heads to Liverpool this week, Andy Burnham has promised to deliver \u201cstability\u201d<\/a> in the public finances; but the economic backdrop is anything but stable.<\/p>\n

The longer the US-Israeli war on Iran persists, the more likely it is that UK consumers will have to swallow higher mortgage rates and energy bills \u2013 just as the government is wrestling with its own surging borrowing costs.<\/p>\n

We are only a few weeks into the three-month period tracking energy price moves that the regulator for Great Britain, Ofgem<\/a>, will use as a basis to set the energy price cap in January \u2013 but it\u2019s been a pretty bleak period so far, with the cost of a barrel of crude above $100 for much of that time.<\/p>\n

Based on the pricing in energy futures markets, the Bank of England reckons Ofgem<\/a> could increase the energy price cap, which sets the maximum energy rates paid by homes on standard tariffs, by an eye-watering 24% in January.<\/p>\n

At the same time, the Bank\u2019s policymakers \u2013 from the governor, Andrew Bailey, down \u2013 have repeatedly signalled that while they are reassured high energy prices have not yet fed through into wider inflation, they can\u2019t hold off from raising rates for much longer.<\/p>\n

\u201cWe\u2019ve made it quite clear \u2026 that it\u2019s going to be harder to maintain that stance, the longer we have high energy prices,\u201d Andrew Bailey said on Friday.<\/p>\n

Or as his deputy, Sarah Breeden, who like Bailey did not vote to raise rates in September, put it: \u201cThe more sparks we\u2019re throwing in the tinderbox, the more likely we might \u200bhave to turn the hose on it.\u201d<\/p>\n

Donald Trump made clear over the weekend that he has no intention of staunching the flames himself,<\/a> by bringing the conflict to a close.<\/p>\n

\u201cI\u2019m rejecting their deal,\u201d he told reporters, after Iran made a fresh proposal. \u201cThey want to make a deal where they open the strait immediately because they\u2019re losing so badly \u2026 we\u2019re winning tremendously.\u201d<\/p>\n

With UK inflation already above 3%<\/a> and likely to rise further, markets are expecting the Bank to raise rates four times, to 4.75%, over the next 12 months.<\/p>\n

Such a situation almost certainly won\u2019t happen \u2013 the economy would probably be clobbered into submission long before they got there, and inflation with it. But Bailey and his colleagues are widely expected to make a start in November, the week after John Healey\u2019s first budget.<\/p>\n

Policymakers will also have to reckon with the impact on prices of what is expected to be the most powerful El Ni\u00f1o weather system in 1,000 years<\/a>, which as well as being devastating to human life, is likely to drive up the cost of important foodstuffs.<\/p>\n

Burnham has made offering the public a \u201cbreathing space\u201d from higher costs a hallmark of his early weeks in power, with sensible but modest policies, such as the \u00a32 bus fare cap. A new iteration of the Tories\u2019 help-to-buy scheme for first-time homebuyers will follow at the budget, he announced this weekend<\/a>.<\/p>\n

But while these offerings show a government keen to help, they risk being overshadowed by the wider picture. With the threat of a surge in energy bills looming, the government is keen to avoid announcing a large new support package, conscious of the cumulative cost of Labour\u2019s interventions over the last year.<\/p>\n

\u201cI think people need to remember that measures have already been taken,\u201d Burnham said this weekend. These include the \u00a32.3bn Rachel Reeves spent on lowering energy bills \u2013 including by shifting some green levies on to general taxation \u2013 and his own VAT cut on domestic electricity, which the Treasury has yet to explain how it will fund.<\/p>\n

Yet if, as Trump has hinted, the conflict continues until after the midterm elections in early November, global oil and gas prices could remain high for many more weeks \u2013 locking in a sharp rise in bills for UK consumers in the new year.<\/p>\n

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Economists are urging Healey to be bold on energy in the budget, rather than wait and hope. Experts at the research and innovation foundation Nesta are calling for a gas price stabiliser<\/a>, for example, that would cushion the blow of higher prices now, at the Treasury\u2019s expense \u2013 but bring in additional revenue as market prices dropped in future.<\/p>\n

Any policy that cuts utility bills has the added bonus of bearing down on inflation, helping ease the pressure on the Bank to act.<\/p>\n

Adding to Labour\u2019s woes, though, the government\u2019s cost of borrowing has risen sharply in recent weeks, alongside that of other big economies, as the global bond selloff has gathered pace.<\/p>\n

It has been yet another harsh reminder of how exposed the government\u2019s fiscal position is to the vagaries of global markets, with a knock-on effect for the budget forecasts.<\/p>\n

There are growing warnings, too, about the risks of market instability caused by the interaction of febrile bond markets and the AI mega-bubble.<\/p>\n

Labour was already in a tricky fiscal bind, given demands for higher defence spending \u2013 not least from Healey himself, who now has the job of finding the resources.<\/p>\n

The difficult decisions about how to do so \u2013 let alone fund Burnham\u2019s wider priorities \u2013 look likely to be delayed until a spending review some time in 2027. It is very hard to see how that won\u2019t necessitate a fresh round of tax rises.<\/p>\n

The plan had been for a relatively modest budget, focusing on plans for devolution, and filling the gaps in the defence investment plan announced in the summer.<\/p>\n

This caution looked out of step with Burnham\u2019s promise of a radical political reset and may be untenable if energy bills are going to soar. He and Healey face a tough autumn.<\/p>\n","protected":false},"excerpt":{"rendered":"As Labour heads to Liverpool this week, Andy Burnham has promised to deliver \u201cstability\u201d in the public finances;…\n","protected":false},"author":2,"featured_media":911552,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46],"class_list":["post-911551","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/911551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=911551"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/911551\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/911552"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=911551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=911551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=911551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}