Labour Civil War Erupts Over ‘Andy Burnham’s Chancellor Pick’
Andy Burnham has barely had time to settle into Downing Street, but the knives are already out.
The new Prime Minister’s decision to appoint John Healey as Chancellor has opened up a much bigger argument inside Labour about what kind of government Burnham actually intends to lead. For some Labour figures, Healey is a reassuring choice: experienced, loyal and capable of navigating the machinery of government. For others, his appointment raises an uncomfortable question — why put a former Defence Secretary in charge of the Treasury when Britain is already facing a brutal financial squeeze?
That question matters because Burnham’s first Budget is approaching fast.
Healey is due to deliver his first Budget on October 28, and he has promised to remain within the government’s fiscal rules. Yet the Treasury faces mounting pressure, with borrowing costs rising and fiscal headroom estimated to have fallen sharply.
Suddenly, the choice of Chancellor looks less like a routine Cabinet appointment and more like a declaration of political intent.
And that is where Labour’s internal tensions begin.
Burnham wanted a different kind of government
The arrival of Burnham represents a dramatic change in direction for Labour.
His political brand was built in Greater Manchester around devolution, regional investment and a willingness to challenge Whitehall. As Prime Minister, he has already announced plans to send more than 100 Whitehall officials into regional mayoral offices and has established the No 10 North operation in Manchester to help drive economic growth.
Burnham has been explicit about his frustration with the traditional Treasury model.
He argues that Britain’s economic policy has been too heavily controlled from the centre and that the Treasury’s focus on fiscal restraint can sometimes work against long-term growth. His decision to give No 10 North a major role in economic policy is therefore not merely administrative.
It is ideological.
Burnham wants power moved out of Westminster.
He wants regions to have more control.
And he wants government to concentrate on growth rather than simply balancing the books.
But then comes John Healey.
Why Healey?
Healey is not an obvious choice for Chancellor.
He spent much of the previous government as Defence Secretary and has been an MP since 1997. He is an experienced Labour politician, but he is not the traditional Treasury technocrat associated with the role.
That may actually be precisely why Burnham chose him.
The appointment has been described as a calculated risk. One analysis argued that Healey could use his experience inside government while pursuing a more ambitious growth agenda, although his background in defence creates questions about how he will balance competing spending priorities.
And those competing priorities are enormous.
Defence spending is under pressure.
Public services require investment.
Burnham has promised cheaper household energy and transport.
He wants greater regional investment.
He wants to tackle homelessness.
He wants to pursue a major programme of devolution.
At the same time, the government must maintain market confidence.
This is not a normal Treasury job.
It is a political minefield.
The money problem is becoming impossible to ignore
The appointment of any Chancellor would have been difficult in the current circumstances.
Britain’s public finances are under serious pressure.
Government borrowing unexpectedly moved into deficit in July, with a £1.8 billion shortfall when economists had expected a surplus. Government debt is now close to £3 trillion, while the amount of fiscal headroom available to the Chancellor has been squeezed by higher borrowing costs.
Healey therefore faces an unenviable task.
He must find money for Burnham’s commitments without breaking the fiscal rules.
That is easier said than done.
The government’s first Budget is expected to involve difficult decisions, and analysts have warned that additional revenue may be needed to finance new commitments, particularly defence spending.
This creates the potential for a spectacular clash inside Labour.
Burnham wants to demonstrate that Labour can deliver visible improvements.
The Treasury wants to prevent spending commitments from getting out of control.
And Healey is caught directly between the two.
Labour’s old argument is back
This is not the first time Labour has fought over economics.
The party has historically contained two competing instincts.
One believes Labour must demonstrate fiscal discipline, reassure business and maintain credibility with financial markets.
The other believes Labour wins when it offers bold public investment and challenges the economic orthodoxies of the establishment.
Burnham has always leaned towards the second tradition.
His political career in Greater Manchester was built around the argument that Westminster has too much power and local government too little.
His current government is taking that philosophy nationwide.
The creation of No 10 North is perhaps the clearest example. Burnham has effectively created a second centre of economic policymaking outside the traditional Treasury structure.
That is potentially revolutionary.
It is also potentially explosive.
Because Britain has only one Chancellor.
And that Chancellor still controls the nation’s finances.
The Treasury may not be amused
The danger is obvious.
If Burnham’s No 10 North operation starts developing economic policy independently of the Treasury, there could be confusion over who actually controls the government’s economic agenda.
Is it the Prime Minister?
Is it the Chancellor?
Is it the Treasury?
Or is it a new regional economic machine centred around Manchester?
Burnham insists the purpose is to make government work better.
Critics may see something very different: a direct challenge to the traditional power of the Treasury.
That is why Healey’s role becomes so important.
If he is a strong and independent Chancellor, he may resist expensive proposals coming from No 10.
If he is completely aligned with Burnham, he could become the political vehicle through which the Prime Minister attempts to reshape Britain’s economic model.
Either scenario carries risks.
And then there is the tax question
Burnham’s popularity has benefited from a series of relatively modest but highly visible promises.
He has backed measures to reduce household energy costs and restore cheaper bus travel. He has also pushed an ambitious programme on homelessness and regional government.
The problem is that these policies may be popular precisely because people want government to do more.
But doing more costs money.
The government has already faced speculation about tax rises, including possible increases affecting banks, energy companies and other sectors. JPMorgan chief executive Jamie Dimon has publicly warned Healey against increasing taxes on banks, arguing that doing so could damage Britain’s competitiveness.
That warning illustrates the political balancing act.
Labour’s left wants more revenue from wealthy businesses.
The financial sector wants stability.
Burnham wants spending.
Healey needs credibility.
And voters want lower bills.
Somebody is going to be disappointed.
Could Healey become the fall guy?
There is another political danger lurking beneath the surface.
If Burnham’s government becomes unpopular because of tax rises or spending cuts, the Chancellor is likely to absorb much of the blame.
That is how Westminster works.
The Prime Minister can announce the vision.
The Chancellor delivers the numbers.
And when the numbers hurt, the Chancellor gets attacked.
Healey may therefore have been handed one of the most politically dangerous jobs in Britain.
If he raises taxes, he risks angering Labour’s supporters.
If he refuses to raise taxes, he risks leaving Burnham without enough money to deliver his promises.
If he cuts spending, he risks provoking Labour MPs and trade unions.
If he borrows more, financial markets could react badly.
There is almost no politically painless option.
Labour’s internal peace may not survive the Budget
For now, Burnham is enjoying something approaching a political honeymoon.
His approval ratings have been relatively strong, and his summer listening tour has helped create an image of a Prime Minister who is accessible and interested in practical problems.
But that honeymoon will eventually end.
The Budget is where the difficult choices begin.
If Healey produces a cautious Budget, Labour’s left may accuse Burnham of abandoning the radicalism that brought him to Downing Street.
If he produces an expansive Budget, fiscal conservatives within Labour could become alarmed.
If taxes rise substantially, Burnham’s promise of improving living standards could become harder to sell.
And if spending cuts appear alongside tax increases, Labour could face the worst of both worlds.
That is why October 28 could become a defining moment for the new government.
The irony is that Burnham may need exactly the person Labour is fighting over
There is a strange contradiction at the heart of this controversy.
Burnham wants to transform the way Britain is governed.
But transformation requires money.
Healey’s job is to find that money without destroying the credibility of the government.
That makes him indispensable.
The Prime Minister may want to move power away from Westminster, but he cannot move the national debt away from the Treasury.
He may want regional growth, but someone still has to pay for it.
He may want cheaper energy, but the government cannot simply wish away the cost.
And he may want a radically different Labour government, but he still has to operate within the financial constraints inherited from previous administrations.
This is where Healey’s appointment could either become Burnham’s masterstroke or his biggest political mistake.
The civil war may only just be beginning
Calling the dispute a “civil war” may sound dramatic.
But Labour has a long history of internal arguments over economic policy, power and political direction. Burnham’s arrival has reopened questions that had been temporarily buried under the previous government.
What kind of Labour Party does Burnham want?
How much should the state spend?
How much power should the Treasury retain?
How aggressively should Britain tax wealth and business?
How much borrowing is acceptable?
And perhaps most importantly:
Who is really in charge of economic policy?
The appointment of John Healey has not answered those questions.
It may have made them more urgent.
Healey now has to deliver a Budget that satisfies the Treasury, the markets, Labour MPs and Burnham himself.
That is a near-impossible balancing act.
And if he gets it wrong, the arguments inside Labour will become much louder.
For now, Burnham has the political momentum.
Healey has the Treasury.
The Budget is approaching.
And behind the scenes, Labour’s old economic fault lines are beginning to crack open once again.
The biggest battle may not be between Labour and the opposition.
It may be between two competing visions of what Labour government should actually mean.
And John Healey has just been placed directly in the middle of it.