LONDON (AP) 鈥� U.K. Prime Minister announcements during his first 24 hours on the job underscore the political and financial challenges he faces as he tries to jump-start the country鈥檚 sluggish economy.
Burnham, from Britain鈥檚 left-leaning Labour Party, faces restive voters seeking relief from the high cost of living. At the same time, the investors who help finance the government by buying its bonds are demanding that he reduce public sector debt that has ballooned to levels last seen in the 1960s.
In an effort to balance the competing demands, Burnham surprised pundits by naming former Defense Secretary John Healey as his Treasury chief. Healey, who served in the Treasury under former Prime Minister Gordon Brown, is seen as someone who will make sure the government lives up to its pledge to reduce Britain鈥檚 debt pile.
Then, first thing Tuesday morning, Burnham made a down payment on his commitment to ease the pressure on cash-strapped consumers. The government announced it would scrap the tax on home for at least six months beginning in October, saving the average household 45 pounds ($60) a year.
Importantly, the government said the move would be paid for by canceling plans to introduce digital ID, in an effort to reassure investors that Burnham isn鈥檛 about to go on an unfunded spending spree.
Treasury chief has a big job ahead
鈥淗ealey has a daunting task on his hands,鈥欌�� said Victoria Scholar, the head of investment at interactive investor.
鈥淭he government has ambitious plans to tackle pressures 鈥� but he faces a very difficult set of public finances to carry these expensive plans through.鈥�
Now that he鈥檚 controlling the purse strings, Burnham faces the same issues that have bedeviled every prime minister since the financial crisis of 2008. And their failure to find answers is a big part of the reason that the eight men and women who have taken up residence behind the famous black door at 10 Downing Street in that period have had an average tenure of two years.
Burnham, , faces the challenge of finding a way to reinvigorate an economy that has grown an average of less than 1.5% a year since 2009, compared with an annual average of 3% in the 15 years before the financial crisis.
As he develops his economic plans, Burnham will be constrained by promises to reduce government debt, which now exceeds 95% of gross domestic product. According to Britain鈥檚 budget watchdog, debt interest payments rose to 111.2 billion pounds ($149 billion), or 8.3% of government spending, in the financial year that ended in April, leaving less money to spend on government services ranging from healthcare to education and defense.
New challenges are added to the old ones
But he also faces a new challenge after his predecessor, like most other European governments, pledged to increase defense spending to 3.5% of GDP by 2035. That came after pressure from U.S. President Donald Trump, who has criticized his allies for not paying their fair share of Europe鈥檚 defense.
Meeting that commitment will cost about 36 billion pounds a year, or 500 pounds for each person in the U.K., according to estimates from the Institute for Fiscal Studies, a respected independent researcher.
鈥淲e should absolutely acknowledge that these constraints are structural,鈥� said Olivia O鈥橲ullivan at Chatham House, a London-based think tank. 鈥淭hey would be tough for any prime minister at this time.鈥�
And that鈥檚 why boosting economic output is so crucial to all of Burnham鈥檚 plans.
Stimulating economic growth is key to Burnham’s plans
Without faster growth, British taxpayers will either have to pay higher taxes or accept cuts in popular programs such as the National Health Service, which offers free medical care to everyone. A booming economy, on the other hand, would boost the revenue generated by existing taxes and tax rates because the value of company profits, worker salaries and other transactions would rise.
when angry Labour lawmakers forced him to cancel welfare cuts designed to help balance the budget. More recently he was widely criticized for failing to offer a credible plan for increasing defense spending.
Some Labour supporters have grumbled that the government 鈥渟houldn鈥檛 be in hock to the bond market.鈥� But economists say Burnham and Healey must take the financial constraints seriously if they are going to succeed in bolstering the economy and increasing the pot available to fund popular programs.
鈥淚t鈥檚 not some imaginary bogeyman in the bond market,鈥� said David Aikman, director of the independent National Institute of Economic and Social Research. 鈥淲e need people to buy the debt we鈥檙e issuing.鈥�
So far, Burnham has offered little detail on his plans for the British economy.
His big idea is to 鈥渞eindustrialize鈥� the economy by shifting investment away from London to other parts of the country that were hard hit by the decline in manufacturing. Burnham also says he will increase construction of public housing to address the nation鈥檚 housing shortage and bolster the construction industry, and support the small and medium-size businesses that account for 60% of private employment.
At the same time, he has pledged to stick to Labour鈥檚 promises not to raise taxes on working people and to maintain the 鈥渢riple lock鈥� on state pensions, an expensive policy that guarantees pensions will rise each year by the annual increase in consumer price inflation, average wage growth, or 2.5%, whichever is higher.
Jim O鈥橬eill, a former chief economist for Goldman Sachs and member of the House of Lords who has advised Burnham in the past, told the BBC last month that Britain鈥檚 new prime minister must 鈥済et real.鈥�
鈥淲e need somebody that鈥檚 prepared to do something bold and different,鈥� he said.
Burnham, he added, 鈥渉as got the same challenge that everybody else seems to avoid and that鈥檚 doing something about things like welfare, stop this never-ending spectacular rise in the spending on NHS. 鈥� Do something about the triple lock, etc., etc., and get out of this weird sort of prison of being owned by every little small group that opposes anything anybody wants to do. 鈥�
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