Our new Prime Minister has had a jolly week. Making speeches, chatting to friendly podcasters and generally being liked.
Andy Burnham feels the love. Soon we could all feel the heat (Image: Getty)
I don’t begrudge him a little fun. He’s finally got the job he’s chased for years. Good luck to him. The country seems relieved too. Mostly because he’s not Keir Starmer. We finally have a leader who speaks like a human being rather than an AI chatbot that’s only been fed 300 words. But the soft launch is over. Burnham’s the PM now. Being chatty and blokey only gets you so far. Especially when a looming international crisis could wash away the feelgood factor overnight. And that’s the part he doesn’t seem to have noticed.
Burnham is busy talking about social care, bus fares and devolution. But they’re not the biggest threat facing Britain today. He’s inherited a slowing economy, runaway debt, rising gilt yields, an ageing population, ballooning state spending, spiralling youth unemployment, illegal migration and a defence funding black hole. And every one of those problems will get dramatically worse if Donald Trump fails to end the Iran war. And quickly.
So far, markets have largely shrugged off the latest Middle East crisis. Shares dipped when the bombing began on February 28 but quickly recovered. The FTSE 100 just hit a record high as investors cling to Trump’s repeated promises that peace is just around the corner. It never arrives.
Andy Burnham and Wes Streeting visit visit submarine factory
Instead, the conflict keeps spreading. Both sides are burning through missile stockpiles but neither is backing down. The Strait of Hormuz is largely blocked. The Iranian-backed Houthis are threatening Red Sea shipping too. Saudi Arabia has been dragged in. A missile just struck an Egyptian base in the Mediterranean. A nuclear-capable Russian missile hit NATO member Poland. War is creeping closer by the day.
Oil briefly topped $100 a barrel last week before easing back to $87. It’s still up 20% over the last month. Jet fuel is nudging $150 a barrel. Worse, shortages are looming. The US and China have kept supplies flowing by draining strategic reserves. They can’t do that much longer.
Gas is another headache. European countries are desperately trying to refill storage before winter, with reserves at historic lows. Britain is especially vulnerable because we’ve dismantled most of our gas storage, assuming we could always buy supplies on the open market. And maybe we can. But it’ll cost us.
Burnham’s charm will quickly wear thin if millions are struggling to heat their homes this winter. There won’t be money for another bailout either. Higher energy prices would also reignite inflation, pushing up gilt yields, which are hovering around 5%. That drives up government borrowing costs just when Britain can least afford it.
Burnham has no easy options. Tax more and growth dies. Borrow more and our £3trillion debt mountain gets even bigger. Interest payments already cost £110billion a year and the Office for Budget Responsibility expects that to hit £140billion by 2030. No PM can joke his way out of that.
Maybe Burnham gets lucky. I genuinely hope he does. Every one of us needs this war to end. Oil prices would fall, inflation would ease, interest rates could finally come down and the economy would breathe again.
Burnham seems to be betting on this bright side scenario. It’s a huge gamble. If oil climbs to $120 a barrel, as some traders expect, Britain has a serious problem. If it heads towards $200, I don’t want to think about it. An oil shock would hit everyone. It could hit Andy Burnham hardest of all. Playtime is over. He needs to get to work.