Sensing even the slightest improvement in the macroeconomic outlook causes many of the Labour MPs, trade union barons and party activists who are installing Burnham in Downing Street to start justifying even more borrowing and government largesse, spending the savings – or, more accurately, the slight projected fall in expenditure increases – before those “savings” have been made. It’s totally mad.
Of course, those rose-tinted Middle Eastern spectacles are also now clouded with the ongoing fog of war.
Washington and Tehran have traded fire in the Strait of Hormuz over six of the last seven days at the time of writing. Freight traffic through the mouth of the Gulf – ordinarily the route of a quarter of the world’s oil and gas supplies – remains 90pc below pre-war levels.
With the US-Iran ceasefire all but non-existent – certainly on hold – oil prices have risen sharply. Less than three weeks into July, Brent crude is above $85, up 20pc this month.
The reality is this ceasefire could crack completely. Even if it doesn’t, the idea the US and Iran can agree a full and binding peace treaty before the 60-day deadline, after which the ceasefire ends anyway, was always optimistic to the point of being fanciful.
We had confirmation last week that the UK’s relatively strong first-quarter growth of 0.6pc followed the same pattern as last year – with firms compressing activity into the first three months of the year to avoid a raft of Labour’s pre-announced tax rises in April, with activity then dropping off sharply.
The UK economy expanded just 0.1pc in May, according to new data from the Office for National Statistics, following a 0.1pc contraction the previous month.
During the 30 years from 1980 to 2010, the UK grew on average by at least 2pc a year. This kept the country on the fiscal straight and narrow, with activity expanding fast enough to create the tax revenues needed, at gradually falling tax rates, to fund ever more expensive public services.
During the 2010s, though, the tax burden rose – with revenues soaring from 32pc to 35pc of GDP. During that period, in the aftermath of the global financial crisis, UK growth averaged just 1.2pc per year.
Since then, after the Covid pandemic and subsequent bounce back, the economy has grown by just 0.3pc in 2022, 1.1pc in 2024 and around 1pc in 2025 – absolutely paltry numbers – as the tax burden has gone up even more.
Now, as Burnham enters Downing Street determined to be “distinctively Labour” and “unashamedly Labour”, it is clear that taxes – despite a tax burden now at 38pc and on course to reach around 41pc of GDP by 2029 – will increase further still.
The UK economy is locked in a high-debt, high-tax, low-growth doom loop with the debt interest bill spiralling as the national debt rises ever higher.
Inflation is coming – the producer price index rose a staggering 8.7pc during the year to May, up from 7.9pc the previous month – and there will be little respite from a lower oil price.
“From here, we do it differently,” said Burnham on Friday. “We win by being us.”
But by “us”, Burnham means Labour. And for the country, Labour spells economic ruin.
Given the change of prime minister and Reform’s leader resigning his parliamentary seat, we’ve seen a tsunami of political news coverage over recent weeks – and it’s set to continue.
The early actions of Andy Burnham, who enters No 10 on Monday, will be the centre of attention over the coming weeks – not least as, astonishingly, he takes office having given no genuine interviews nor made any meaningful policy announcements.
The upcoming by-election between Nigel Farage and Count Binface will, in addition, drive plenty of tiresomely pun-laden headlines between now and the Clacton vote on August 13.
What really matters, though – the recent development that will genuinely impact the immediate lives and livelihoods of millions of British voters – is that since the start of July, the price of oil is up by about a fifth.
Partly because of that but also because of increasing nervousness that Burnham will shift this already big-spending, high-taxation Labour government even further to the Left, the 10-year gilt yield last week went back over 5pc. The Government is paying far more to access credit than any other G7 nation, with borrowing costs once again close to an 18-year high.
Since it became clear that Labour was going to oust Sir Keir Starmer, party strategists have been hoping geopolitics would be kind to them. From early June, as a US-Iran ceasefire came into view, the oil price dropped from $95 to around $70 a barrel by early July. With the Strait of Hormuz reopening, there was talk of lower energy prices, falling inflation and a resumption of interest rate cuts by the Bank of England.
Just weeks ago, eyeing the Gulf through rose-tinted spectacles, some of Burnham’s team were privately crowing about a “strong economic inheritance”. Several Labour MPs I spoke to were rubbing their hands as they discussed how to “spend the fresh fiscal headroom”.
This twisted logic takes some explanation. The Government’s debt interest bill is set to soar from £109bn this fiscal year to £137bn by 2029, the scheduled end of this Parliament, according to the Office for Budget Responsibility (OBR).
A lower oil price might mean lower future inflation – which means OBR boffins may then issue forecasts of a slightly smaller but still huge projected increase in the Government’s massive debt interest bill.
No matter that debt service is already the third largest expenditure on the Government’s balance sheet after health and welfare. Or that interest payments swallow a jaw-dropping 80pc of the Government’s fresh annual borrowing.