Labour’s internal rift widened Thursday as Keir Starmer and senior ministers hit out at Andy Burnham for dismissing bond markets, exposing deep divisions.
As a hint of how badly ties have deteriorated between No. 10 and Burnham, senior Labour sources compared the Greater Manchester mayor's attitude to the careless approach employed by former Conservative prime minister Liz Truss.
Burnham's statement in multiple interviews that he would try to challenge the prime minister for the position of leadership if there was a way to do so is said to have infuriated Starmer.
In a New Statesman interview released on Wednesday, Burnham criticized the chancellor's economic strategy, which was specifically criticized by cabinet ministers.
“We’ve got to get beyond this thing of being in hock to the bond markets,”
he said.
The remarks have incensed those in government.
“If you don’t want to be in hock to the bond markets, don’t announce plans that involve billions of borrowing,”
one senior source said.
Bridget Phillipson, the deputy leadership contender, claimed that Truss's "reckless approach on the economy" has already hurt working people.
Burnham stated in a documentary that the two-child benefit cap was the "worst of Westminster" and has put out a number of other solutions. Because Burnham abstained on the legislation that introduced the cap, the line sparked contempt from within the cabinet.
He claimed that "the nuances of that debate just got lost" despite his best efforts at the time to find a method to oppose the law through an amendment.
In previous interviews, Burnham has indicated that he would support nationalizing utilities, imposing a 50% income tax on wealthier earnings, investing in council housing, and raising the council tax on more costly properties.
Starmer and Phillipson both criticised Burnham’s comments on Thursday and warned that to ignore market forces would put the UK at risk of a Truss-style economic meltdown.
In an interview with the Guardian, Phillipson said she had “a lot of respect for Andy” but added:
“We have to tread with real care around casual language on the bond markets. Working people ended up paying more on their mortgages because of Liz Truss’s actions and what happened there.
So let’s just pause and consider whether it’s really a responsible approach for a party of government to be talking in that kind of language, because working people have suffered once because of a reckless approach on the economy. And it’s through having credibility and a clear plan on the economy that we are able to invest more in public services.”
Starmer told broadcasters he would not be drawn on the mayor’s “personal ambition” but said he would take a tough line on the challenge to the fiscal rules. The prime minister said:
“It was three years ago this week that Liz Truss showed what happens if you abandon fiscal rules. Now, in her case, she did that for tax cuts, but the same would happen if it was spending.
I’m not prepared to let a Labour government ever inflict that harm on working people … And there’s nothing progressive about borrowing more than we need to. It’s nothing progressive about abandoning fiscal rules.”
According to him, Labour Members of Parliament were privately encouraging him to run, but any such action would need to be "more than a personality contest." He declared on BBC Radio 5 Live that he would not "be quiet," "toe the line," or "speak in code" when discussing matters that are significant to Greater Manchester.
Burnham charged Downing Street with fostering a "climate of fear" and causing "alienation and demoralization" among MPs in a different interview with the Telegraph. While he wasn't "plotting to get back," he said.
However, Starmer's supporters launched an offensive in response to Burnham's remarks regarding the economy. Housing Secretary Steve Reed claimed that Starmer had grown accustomed to people "taking potshots" at him when he disagreed.
“Andy’s problem is everybody knows what he’s about and nobody knows what he’s for,” one MP from the 2024 intake said.
“It’s gobsmacking from someone who left Westminster when the going was tough, having stood by Corbyn in the shadow cabinet, who is consistently throwing grenades into the parliamentary party from afar for months on end and is now seemingly desperate to get back to Westminster.”
Another senior Labour source said:
“If I could offer Andy a bit of advice, it’s that he’s coming across as a bit desperate.”
A senior Labour aide said:
“You just do not mess around with this stuff on the bond markets. Setting out a policy platform like this just makes him look ludicrous. In the last few days he has spent tens of billions of pounds and actually it doesn’t get him any closer to the leadership but it does put the markets on edge ahead of what is already a difficult budget.”
What did Starmer say about Burnham's bond market comments?
In response to comments made by Andy Burnham regarding the bond markets, Sir Keir Starmer reaffirmed his government’s commitment to a set of strict fiscal rules, and nothing but a regime of economic stability. Burnham suggested in his remarks that Labour will need to get “beyond this thing of being in hock to the bond markets,” and should be borrowing more and investing more publicly.
Starmer pushed back on Burnham’s comments, saying that there is “certainly nothing progressive about borrowing more than the country needs to” when asked about Burnham’s comments and pioneering thoughts on the bond markets.
Starmer made an explicit parallel to the actions of former Prime Minister Liz Truss, which, according to Starmer, resulted in turmoil in the financial markets, as Truss abandoned her promise of fiscal rules with large tax cuts.