Economics newsletter
Burnham’s National Care Service is a Tory vote winner
Andy Burnham wants to thank the nation’s carers – except, possibly, the one he told us slipped his Granny Kitty’s engagement ring off her finger while she was in a care home a couple of decades ago. I don’t think the Prime Minister is ever quite going to eliminate light-fingered care workers, but he did confirm today that he wants to create a National Care Service which will be free at the point of delivery. This will come into being in the next parliament, assuming he wins it, and he assured us it will be fully-funded, not paid for through more borrowing.
Andy Burnham’s Great British Grid is doomed
There was a very big hole in the Chancellor John Healey’s claim yesterday that he is going to generate a new age of industry. Why would anyone want to open a factory, or any other kind of industrial plant, in Britain when they would be paying far more for their energy than in other countries? UK non-domestic customers paid an average of 26.63 pence per kilowatt-hour for their electricity in 2024, more than any other member state of the International Energy Agency (IEA) and 60 per cent more than the IEA average. It is little wonder that our chemical plants, oil refineries and many other industries are rapidly leaving our shores in the search for cheaper power. But worry not, the government has a plan, or two plans.
John Healey’s ‘new age of industrialisation’ is a fantasy
The first half of John Healey’s first Labour conference speech as Chancellor reminded me of old men in a bowls club reminiscing about the Korean war. For more than 15 minutes Healey set out his credentials as a Labour veteran. He’d gone from his constituency Labour party to the trade union movement and then to No. 11 (note, no mention of private business experience). He’s been around the block so long that Labour is ‘literally’ his family, he said, paying tribute to his wife. Once the thanks to the Mrs were out of the way, things moved to his true love: Gordon Brown. It felt, at times, like the Liverpool Convention Centre had been given over for a Brown memorial rather than the governing party’s conference.
Scrapping the pensions triple lock won’t pay for Burnham’s care service
Andy Burnham told the BBC's Laura Kuenssberg yesterday that he’s ready to ‘rip the plaster off’ and introduce a new social care service, free at the point of use, for everyone in England. ‘Everyone contributes, everyone’s covered,’ the Prime Minister said – but how exactly they will contribute is a question he’s left to Baroness Casey to answer and for voters to endorse at the next general election. The Health Foundation has estimated that the cost a care system like Burnham suggests could be £18.5 billion a year in 2035. (He says it’s ‘not that high’ – but he didn’t offer an alternative.
Government borrowing surged in August
Five weeks out from his first Budget, John Healey is scrambling to make the numbers add up. Figures just released by the Office for National Statistics (ONS) show the government borrowed £18.3 billion in August, making it the second highest August on record behind 2020. It was also £3.5 billion over the Office for Budget Responsibility’s (OBR) forecast for the month. ‘Spending increased more than government income from taxes… partly reflecting the impacts of inflation’, the ONS said, with borrowing for August up £2.9 billion (19 per cent) compared with last year. What’s worse is this borrowing increase came despite an increase in tax receipts, which are £2.5 billion higher than a year ago, with income tax revenue up 6.6 per cent.
Another cost of living crisis is coming
Britain is heading head first towards another cost of living crisis. Figures released by the Office for National Statistics (ONS) show inflation rose to 3.1 per cent last year – up from 2.9 per cent the month before. ‘Sharp’ rises in petrol and diesel costs were the main driver, the ONS said, with air fares making a considerable contribution too. The Chancellor, John Healey, put the blame on global events, saying: ‘The war in the Middle East is impacting on inflation worldwide, not just here at home. In our bills, our weekly shop and at the petrol pumps.
Britain’s public sector wage spiral
Britain is in a wage spiral – though not a traditional one. Instead, job and wage growth is surging in the public sector while the private sector struggles. Unions put pressure on the government because of the cost of living, Labour grants pay rises, the cycle continues and a dwindling private sector picks up the bill. Figures just released by the Office for National Statistics (ONS) show that while private sector wage growth in the three months to July was flat at 2.9 per cent, it grew to 6.3 per cent in the public sector. Statisticians continue to insist that this is partly a ‘base effect’ whereby the timing of public sector pay rises occurred earlier than normal, but this explanation has been used for so long it is no longer credible.
If Burnham won’t make cuts, the IMF will do it for him
Even the weather has been playing along with the bizarre 1976 tribute act in which we seem to be trapped. We have had a mid-term change of Labour Prime Minister, a Chancellor called Healey, a government presiding over low growth and lingering inflation. We are back to punitive levels of taxation. Wealthy individuals, like hedge fund billionaire Chris Rokos this week, are fleeing. The unions are flexing their muscles, and on top of that we have had a prolonged heatwave and drought which, just as 50 years ago, burst with downpours over the August bank holiday weekend. Wealthy individuals, like hedge fund billionaire Chris Rokos this week, are fleeing Older readers may recall what came next.
Why Burnham might regret his No.10 North plan
How realistic is Andy Burnham’s plan to make No. 10 North responsible for the government’s ‘growth mission’? The Prime Minister’s argument is that taking that function away from the Treasury and giving it to No. 10 ‘means you’ve got maximum power to unlock the blockages where they exist in the wider Whitehall system’ – and that basing that mission in Manchester rather than Downing Street is part of a ‘huge transfer of power’ out of Whitehall. Burnham also wants to make more use of the Treasury’s Darlington campus, which is still being built and which Rachel Reeves worked from just twice in 2025 when she was chancellor, so it’s quite a low bar to do ‘more’ with that.
The truth about Net Zero
When I was made Energy Secretary in 2023, I asked civil servants what I thought was a simple question: prove to me that renewables are cheap. This was, after all, the entire premise of Conservative energy policy for a decade. After endless meetings and spreadsheets, it dawned on me that the way Government priced renewables made them look cheap in exactly the same way a Ryanair flight looks cheap. While the cost of the flight seems like a great deal, once you’ve paid for a bag, a seat, and a sandwich, you realise you’ve been stung.