Andy Burnham, widely seen as the next Labour leader and prime minister-in-waiting, has received what may be the worst news imaginable: the fiscal legacy of Rachel Reeves is set to cripple his ambitions before they even begin. Reeves, who is widely expected to be ousted as chancellor after the next election, leaves behind a mountain of debt and a set of fiscal rules that are all but impossible to meet.
Reeves’ Fiscal Rules: A Rusty Bucket
Reeves has repeatedly claimed to have “restored stability” to the UK economy, but critics argue she has only worsened the nation’s financial position. Her so-called “iron-clad” fiscal rules require that day-to-day spending be covered by tax revenues by the end of this Parliament. Yet she is far from that target: this year, borrowing is set to reach £140 billion, following £132 billion last year and £146 billion the year before. The government remains nowhere near balancing the books.
According to the Office for Budget Responsibility (OBR), Britain’s public finances are on an “unsustainable” path, with public sector debt now around 95% of GDP—up from 35.7% when Gordon Brown became chancellor in 1997 and 69.2% when he left. The OBR warns that simply stabilising debt at 95% of GDP would require tax rises or spending cuts worth a staggering £120 billion.
The Timebomb for Burnham
Reeves had planned to leave the most painful fiscal tightening for the final two years of this Parliament, just as Labour gears up for the next general election. This would involve spending cuts, tax rises, or both—an electoral nightmare. Now, that burden falls on Burnham. He faces an impossible trilemma: slash spending and face a Labour revolt, raise taxes and alienate voters, or borrow more and risk a bond market crisis.
“Reeves spent the first half of the Parliament avoiding the hardest choices and pencilled them in for later,” notes political commentator Harvey Jones. “Now it’s Burnham’s problem. He doesn’t stand a chance.”
A Legacy of Debt
The debt crisis is not solely Reeves’ doing; it has deep roots. Under New Labour, debt nearly doubled from 35.7% to 69.2% of GDP. Successive governments have added to the burden, and today’s 95% level puts Britain in serious danger. The OBR has warned that the country is on the road to a fiscal crisis.
If Burnham somehow survives the election and becomes prime minister, he will inherit a treasury that requires immediate austerity. The OBR’s £120 billion figure looms large. “His dreams of having 10 years in power will be blown apart, thanks to her dishonest fiscal plan,” Jones adds.
Who Will Be Chancellor?
Burnham has not yet announced his Cabinet, but speculation is rife. One name mentioned is Ed Miliband, though critics warn that his appointment could trigger a bond market meltdown on day one. Whoever takes the role will face the same impossible choices.
“Rachel Reeves will be the only one laughing,” Jones concludes. “The rest of us certainly won’t.”
