Burnham adviser urges infrastructure borrowing to break from Starmer economics

Jim O’Neill, a former chief economist at Goldman Sachs and adviser to Andy Burnham, has called for billions of pounds in additional government borrowing to fund infrastructure investment. The proposal, which suggests a departure from the cautious fiscal approach of the Keir Starmer administration, includes the creation of an independent body modelled on the Office for Budget Responsibility to manage spending and provide transparency to bond markets.

O’Neill, who is being considered for the role of chief economic adviser in a potential Burnham government, argued that existing fiscal rules allow for increased borrowing for investment, provided it is balanced by assets on the government’s balance sheet. He suggested transforming the National Infrastructure and Service Transformation Authority into a separate, transparent entity to publish growth multiplier effects, thereby reassuring investors.

The Makerfield MP has been consulting high-profile economists, including O’Neill, Andy Haldane, and Richard Hughes, to shape his policy agenda ahead of his expected succession to Prime Minister. Burnham is widely seen as more left-wing than the current government, and his transition team has spoken to O’Neill about a potential role in Downing Street, the Treasury, or as a devolution adviser.

This stance contrasts with Burnham’s previous commitments to adhere to existing fiscal rules and Labour’s manifesto pledges not to raise income tax, VAT, or national insurance. However, O’Neill contends that there is significant room under current rules to borrow for investment, a position that could add to jitters in bond markets given Burnham’s past comments on borrowing costs.

O’Neill specifically linked this approach to resolving political disputes over projects like HS2, advocating for data-driven transparency over subjective political views. He argued that an independent body would allow the public and financial markets to see clearly which infrastructure projects would boost growth, moving away from personal opinions on specific initiatives.

Ed Miliband and Wes Streeting are emerging as frontrunners for the position of Chancellor under a potential Burnham government. The current Chancellor, Rachel Reeves, has implemented changes to fiscal rules that allow borrowing for investment to be balanced by the assets it funds, a framework O’Neill believes should be utilised more aggressively.

Burnham has previously argued for increased spending on northern transport projects, such as a new underground station at Manchester Piccadilly. O’Neill, who previously chaired the Northern Powerhouse Partnership, has been a long-time advocate for Northern rail proposals and believes the government should take advantage of the flexibility in fiscal rules to boost such infrastructure.