Burnham’s plans won’t survive contact with the Treasury

Manchester Mayor’s push for public ownership relies on taxes and borrowing Daily Telegraph Published 19 May 2026 During the 2024 general election campaign, I worked as an adviser to Jeremy Hunt and remained at the Treasury to help ensure the basic machinery of government continued to function. But as the outcome of that election was pretty obvious, it was clear Treasury officials were starting to prepare for Labour. Now that Andy Burnham has a reasonable shot at quickly becoming prime minister, something similar will be happening at 1 Horse Guards Road. Civil servants will already be asking themselves what a Burnham premiership would mean for the next Budget, the fiscal rules and the tax system.

The bond markets appear to have given their verdict. Ten-year gilt yields have remained above 5pc for days, prompting increasingly awkward attempts at reassurance from the Mayor of Greater Manchester. He first offered a vague commitment to “fiscal rules” in general before aides later clarified that he specifically meant the existing fiscal rules. For now, the reassurance seems to have worked. Bond yields, the interest rate paid on the Government’s debt, fell on Monday following the clarification. But investors should still be wary. Manchesterism, as Burnham calls his economic agenda, is incompatible with Britain’s current fiscal framework without massive tax rises. Burnham’s political offer is built around a dream, a Left-wing prospectus of more public ownership, more public spending and more devolution, all funded by looser borrowing constraints and higher taxes on wealth. Yet every element of that programme collides with the fiscal reality. Treasury officials will urge any incoming prime minister not to pursue a massive programme of state expansion financed through optimistic revenue assumptions and creative borrowing structures. And that is precisely where much of Manchesterism leads. Take public ownership. Burnham’s enthusiasm for the Bee Network, Manchester’s local government-run transport network, has encouraged him and the wider Left to treat nationalisation as relatively straightforward. But Greater Manchester did not seize assets or buy monopolies outright. It franchised bus routes as contracts expired. And even then, the project required £135m upfront, plus an ongoing annual subsidy, funded partly through higher property taxation. Water and energy are vastly larger propositions. Nationalising the water industry alone has been estimated by the Department for the Environment, Food and Rural Affairs to involve £100bn simply to acquire the assets. That does not include the further tens of billions a year required for long-term capital investment and maintenance. If you added energy and housing, as Burnham has said he intends to, the figures move from mind-blowing to incomprehensible. How will it all be paid for? Burnham and his supporters have pointed to a variety of borrowing wheezes. The Mayor himself has suggested excluding defence spending from the fiscal rules, thereby freeing up more borrowing, though he has recently ruled that out. Other ideas include allowing development corporations and the National Wealth Fund to borrow outside these same rules. The Treasury’s response will be simple. Markets do not care where liabilities formally sit if the state ultimately guarantees them. This additional borrowing will lead to materially higher debt interest costs. The tax side of the equation is also unlikely to survive serious Treasury scrutiny. Much of Burnham’s programme relies on the assumption that there remains an untapped reservoir of revenue available from “the rich”. Treasury officials are likely to say otherwise. A 50p income tax rate sounds politically potent, but it has historically raised little. Last time one was introduced, it was forecast to raise £3bn a year. HMRC ultimately estimated that it raised only around £1bn. Once behavioural effects are factored in, it will raise at best a few hundred million a year. Capital gains tax increases face similar constraints. We are now at the Treasury’s view of the revenue-maximising level, so it will strongly advise against further increases. Property taxation is no silver bullet. Reeves’s mansion tax illustrates the problem, as it’s now forecast by the OBR to raise only around £400m annually. Increasing the rate or lowering the threshold wouldn’t raise much more. Indeed, some of the policies Burnham favours would actively cost the Exchequer money. A revived 10p starting rate of income tax, for example, would probably require billions in annual funding. All of which means Burnham’s intentions for more public ownership are based on tax and borrowing plans the Treasury will easily argue against. And before his supporters start saying this is why we need to rewrite Treasury orthodoxy, there is nothing ideological about these positions. It is simply reality. I felt the same frustration when trying to cut taxes as they will no doubt feel when raising them. So there will be a reckoning. The presumptive future prime minister could press on despite these warnings and see UK bond yields shoot still higher. More likely, Burnham will face a choice. He either abandons large parts of Manchesterism until a general election or reaches for the only remaining tax lever capable of genuinely raising significant revenue: corporation tax. If Burnham genuinely wants a permanently larger state, large-scale public ownership, and materially higher public spending while remaining within the current fiscal rules, the burden eventually falls on business taxation. The Treasury knows it. The markets know it. And before long, Burnham will have to decide whether he is prepared to admit it, too.