Andy Burnham's chief economic adviser, Jim O'Neill, has called for billions of pounds in additional borrowing to fund infrastructure projects, indicating a potential policy shift from the current government under Keir Starmer. O'Neill, a former Goldman Sachs chief economist and ex-minister, proposed creating an independent body for infrastructure spending similar to the Office for Budget Responsibility (OBR), which could authorize significantly higher expenditure on major projects.
Extra Borrowing and Market Jitters
The proposed borrowing increase may unsettle bond markets, especially given Burnham's previous remarks about not being 'in hock' to them. However, O'Neill argued that such borrowing would still comply with the government's fiscal rules and provide enough transparency to reassure investors. 'There is a lot more room under the existing fiscal rules to borrow for investment, and the next chancellor should take advantage of that,' he said.
Burnham's Economic Team and Policy Direction
Burnham, almost certain to succeed Starmer as prime minister, is consulting three high-profile economists: O'Neill, former Bank of England economist Andy Haldane, and ex-OBR head Richard Hughes. He is also considering candidates for chancellor, with Ed Miliband and Wes Streeting as frontrunners. Burnham is expected to deliver a speech next week outlining his policy agenda, including devolution measures.
Fiscal Rules and Infrastructure Spending
Despite past speculation that he might abandon fiscal targets, Burnham committed during his Makerfield campaign to stick to existing rules and Labour's manifesto pledges not to raise income tax, VAT, or national insurance. O'Neill believes Burnham can increase infrastructure spending within these rules, particularly on northern transport projects like a new underground station at Manchester Piccadilly. O'Neill previously chaired the Northern Powerhouse Partnership and supports its rail proposals.
Independent Infrastructure Body
O'Neill suggested transforming the National Infrastructure and Service Transformation Authority (Nista) into an independent organization to transparently assess projects' growth multipliers. 'We need Nista as a separate, much more transparent entity,' he said. This would depersonalize debates over projects like HS2, moving away from subjective views.
