Andy Burnham's economic priorities and challenges

Andy Burnham has become prime minister at a time when Britain is facing significant global economic challenges and has experienced years of slow growth in people's incomes. This has been made worse by a lack of investment and big differences in wealth between different parts of the country.

Before taking office, Burnham promised to create 'good growth in every postcode' by giving more power to local communities instead of keeping it all in London. However, with the country's finances under pressure and limited time before the next general election, this will be a difficult task.

Burnham has indicated that his main priorities will be in several key areas. Here, we examine these priorities and the complexities involved in achieving them.

A major focus for Burnham will be to strengthen Britain's industrial sector. He aims to protect and grow manufacturing in important areas like steel, defence, energy, and food production. This is partly to bring back jobs to areas that have suffered from factory closures and to compete with manufacturing in Asia.

However, some experts believe that focusing too much on the past industrial era might not be the best way to achieve modern economic success. They suggest that the UK's strengths are more in service industries. High energy costs and strong competition from Asian countries also present significant challenges.

Burnham's ideas about economic growth are heavily influenced by the success of Manchester, where he has focused on developing knowledge-based services rather than traditional industries. However, critics point out that Manchester's success came from private investment in services, not from reopening old factories.

Britain is known for having a very centralised system of tax and spending compared to other major economies. Burnham has promised a major shift in power away from the capital, potentially including a new government office in the north of England and more tax powers for regional leaders.

Organisations like the OECD have suggested that giving more power to regions could help grow the UK economy overall by improving the performance of struggling areas. They believe that coordinating policies on skills, infrastructure, and finance is essential for this improvement.

However, some experts worry that devolving power does not automatically guarantee economic growth. While it allows for local solutions, it could also lead to inefficiencies. For devolution to work, it needs significant funding and regional authorities need the capacity to manage new responsibilities, especially after years of budget cuts.

Burnham has also promised to provide immediate relief for families struggling with the rising cost of living. He plans to announce financial support measures soon. This comes after years of very slow growth in wages, and household incomes have fallen in recent years, something that could happen again without changes.

While energy prices have not risen as sharply as feared due to international events, they remain much higher than before the pandemic. Some people are calling for more significant actions, such as guaranteeing affordable energy prices, introducing rent controls, offering cheaper public transport, and expanding free school meals. Burnham has also spoken about increasing public control over essential services like water, energy, and transport.

Unemployment has recently increased to its highest point since the pandemic, with young people being the most affected. Factors like the war in Ukraine, high interest rates, and the cost of living crisis have made businesses hesitant to hire. Some business leaders also blame recent tax increases for making the situation worse.

Beyond the immediate economic pressures, there are concerns about a longer-term rise in youth unemployment. This is linked to increasing mental health issues among young people, the impact of social media, and changes brought about by artificial intelligence. The number of young people not in employment, education, or training has now passed one million.

To address this, Burnham plans to improve technical education and apprenticeships. He will also consider recommendations from government reviews on youth unemployment and disability benefits, both of which have called for changes to the welfare system.

Burnham faces a significant financial challenge to increase defence spending. He needs to find an extra £4.7bn over five years, on top of a previously announced £15bn, without a clear funding plan. Much of this will be decided in upcoming budget reviews.

The long-term commitment to spend 3.5% of GDP on defence will also be difficult, given the tight public finances and other demands on spending. Experts warn that the UK's debt situation is currently unsustainable.

Burnham has promised the largest programme of council house building since after the second world war. He has linked the significant loss of council homes since the 1980s to the large number of families waiting for social housing.

While previous plans included significant funding for new homes, building the required number is a major challenge. Official figures show that the rate of house building needed has not been achieved in England since 1969, when a large proportion of these homes were affordable social homes built by councils.

Economists agree that increasing investment in transport and housing could significantly benefit the economy by improving people's ability to move for work and increasing overall productivity.

The biggest challenge for Burnham, like many before him, will be finding the money to pay for his plans. The choice of his chancellor is also important. The current plans must be financed within the existing fiscal rules, which are designed to control borrowing and debt.

Sticking to these rules is seen as important to avoid market concerns that could increase the cost of the UK's national debt. While previous policies aimed to reduce borrowing faster than in other major economies, ongoing spending pressures and global financial uncertainty mean borrowing costs remain high.