John Healey is unlikely to act as a check on Andy Burnham's appetite for spending, the boss of a wealth management firm claims. The new Prime Minister's pick for Britain's top economic post came as a surprise on Monday (July 20). Westminster watchers had speculated that it was a choice between Ed Miliband and Shabana Mahmood, but Mr Burnham handed Mr Healey the power to steer Britain's economic policy.
UK defence stocks rose on the announcement the former defence secretary would head up the Treasury. But the yield on 10-year Government bonds moved eight basis points higher to 5.049% at the end of London trading on Monday. It meant the cost of UK state borrowing rose to its highest level for around two months as markets reacted to the UK's latest shift in leader yesterday.
CEO Warns Healey Won't Curb Burnham
Nigel Green, Chief Executive of deVere Group, said Mr Healey’s appointment as Chancellor does nothing to neutralise the danger posed by Mr Burnham’s instincts on borrowing and spending. He said: "Investors are betting on the wrong person again. Healey does not set the direction of this Government, Burnham does, and Burnham is a Prime Minister who spooked the bond market within 24 hours of taking office by promising a ‘new economic model’ and telling reporters he would use ‘any flexibility’ he could find within the fiscal rules. None of that changes because a more familiar face now sits in the Treasury."
Mr Green said Mr Healey's own record would make him an unlikely check on Mr Burnham's appetite for spending. He explained the new Chancellor's defining trait in Keir Starmer's government was asking the Treasury for more money as defence secretary. The CEO said: "Now the man who spent years pushing to loosen the purse strings is the one holding them. Healey might manage how the flexibility gets used. He was never appointed to prevent it, because preventing it was never the plan."
Borrowing Data and Fiscal Control
The new Chancellor was handed some good news on borrowing on Tuesday (July 21) as the Office for National Statistics said public sector net borrowing was £16billion in June, which was 33.1% less than the same month last year. Mr Healey responded to the data by saying "fiscal control" was his "first duty" as Chancellor and "fiscal credibility is the bedrock for economic stability and for national security".
The new PM told reporters yesterday he would use "any flexibility" he could find within the UK's existing fiscal rules but "none of this is about taking risks with the economy". Mr Burnham is bound by rules on spending and borrowing set out by former chancellor Rachel Reeves and his promise to stick to Labour’s manifesto commitment not to hike personal taxes for workers.
DeVere's boss said until Mr Burnham rules out further borrowing dressed up as "flexibility", no Chancellor, however experienced or well regarded, can protect this country, or investors’ portfolios, from a Prime Minister whose first instinct in office was to reach for more room to spend.
