Burnham’s first economic test: fix Britain fast — or markets will do it for him

By Samuel Mather-Holgate- BOOK A CALL BACK

• Andy Burnham is widely expected to become prime minister later this month, and his first major economic speech was closely watched by markets because the UK is already facing high borrowing costs and fragile confidence.
• The immediate market reaction to Burnham’s speech was relatively calm: sterling edged up and gilt yields fell after he said he would stick to Labour’s fiscal rules.
• That means the first lesson is obvious: if Burnham wants room to govern, he must look pro-growth, pro-investment and fiscally credible from day one.
• The biggest economic priorities should be housing and Stamp Duty reform, a more competitive and more intelligently tiered corporation tax system, lower taxes on employment, and a serious plan for growth outside London. Burnham has already signalled a strong devolution agenda through his proposed “No 10 North”.
• Reform UK remains a political threat, but its tax-and-spending maths has repeatedly been criticised by the Institute for Fiscal Studies as unrealistic or under-costed. That matters because bond markets do not fund wishful thinking forever.

Britain is about to get another new prime minister. Again.

With Keir Starmer gone and Andy Burnham now the overwhelming favourite to take over, the next big question is not who wins the internal politics. It is whether the next government can restore enough economic confidence to lower the temperature in markets, revive business investment and stop Britain drifting into a low-growth, high-tax, high-friction mess.

That is the real challenge.

Because Burnham is not walking into a clean handover. He is inheriting a country with stretched public services, sticky borrowing costs, a weak growth story, housing dysfunction and a tax system that increasingly punishes work, hiring and moving house. On top of that, Reuters reported today that he is also staring at a £4.7 billion defence funding gap after Starmer’s late defence push, while the IFS has warned the next prime minister faces genuinely tough fiscal choices.

So this is not the moment for vague slogans.

It is the moment for hard economic priorities.

What the market reaction tells us

The pound has not fallen off a cliff because Burnham gave a speech.

That matters, because it tells you what markets were really looking for: not brilliance, not ideology, just reassurance that Britain is not about to lose the plot.

When Starmer resigned, Reuters reported sterling and gilts both weakened as investors digested yet more UK political upheaval and waited to see what kind of leader Burnham might be. But after Burnham’s first economic speech on 29 June, where he said he would respect Labour’s fiscal rules, sterling edged up and gilt yields eased. Reuters also noted that the pound was still down 1.7% for the month against the dollar, so the broader picture remains fragile.

That is the point.

Markets are not in love with Britain. They are just relieved when politicians do not actively scare them.

Burnham should take that hint.

What to expect from Burnham

The broad direction is already visible.

Burnham’s first big pitch was about devolution, rebalancing power away from Westminster, and creating a “No 10 North” in Manchester as part of a wider attempt to rewire how economic policy is made. Reuters described the speech as a promise to shift power away from London while maintaining the current fiscal rules. The Financial Times has reported that the plan is meant to create a northern strategic centre focused on growth, regional power and long-term planning.

That suggests a Burnham programme is likely to include:

• more devolution
• more emphasis on regional growth
• more activism on housing
• more state involvement in strategic sectors
• and a strong political effort to show Labour can still sound economically serious while being more interventionist than Starmer

That can work, but only if the numbers work.

And that is where Burnham will be judged.

The first thing he should do: reform Stamp Duty properly

If Burnham wants a fast pro-growth win, Stamp Duty should be near the top of the list.

Stamp Duty Land Tax in England and Northern Ireland still creates a major friction cost every time people move. The current residential structure starts charging above £125,000, with higher bands thereafter, and surcharges apply in some situations including many additional property purchases. That is a tax on mobility, a tax on downsizing, a tax on upsizing, and often a tax on rational decisions.

Economically, that is backwards.

Britain does not need more reasons for people to stay stuck in the wrong property, in the wrong place, with the wrong commute, simply because moving triggers a large transaction bill. That is bad for labour mobility, bad for family finances, and bad for the housing market.

Burnham should be looking at:

• cutting SDLT on main residences
• shifting more of the tax burden away from ordinary movers
• keeping tougher treatment for speculative or clearly non-productive activity where needed
• and pairing any reform with serious housebuilding and planning reform so lower friction does not simply feed higher prices

This is one of the clearest areas where better tax design could improve economic behaviour quickly.

He should not just cut corporation tax — he should tier it intelligently

The UK’s corporation tax system is already partly tiered. The small profits rate is 19% for profits under £50,000, the main rate is 25% above £250,000, and marginal relief applies in between.

That is better than a flat 25%, but it is still not especially growth-friendly.

If Burnham wants to sound serious about investment without looking reckless, a smarter approach would be:

• keep the small profits rate competitive
• lower the main rate gradually rather than dramatically
• preserve or improve marginal relief
• and create a clearer, more stable structure that rewards retained profits, investment and scaling businesses rather than punishing them

There is a difference between pro-business and simplistic.

A blanket dash to 15% tomorrow would look expensive and, depending on how it was funded, could easily spook markets. But a better-tiered system with a credible timetable, linked to spending discipline and a growth plan, would be a much stronger signal.

Burnham needs to understand that corporation tax is not only about revenue. It is about whether Britain looks like a country worth building in.

Employer National Insurance is an obvious drag on hiring

This one matters more than politicians often admit.

Employer National Insurance is now 15%, and the secondary threshold was reduced to £5,000 from April 2025. HMRC guidance confirms employers now pay employer NI on earnings above that lower threshold, while the Employment Allowance was expanded.

That is a straight hit on the cost of employing people.

If Burnham wants growth, wage growth and stronger employment, he should be looking hard at the tax on hiring. Scrapping employer NI entirely would be expensive, so that is not a casual promise to make. But reducing it, narrowing it, or redesigning it more intelligently for smaller firms and labour-intensive businesses would be pro-growth in a way that is far easier to defend economically than some flashier interventions.

Britain has spent years talking about productivity while taxing jobs as if they were a luxury.

That makes no sense.

On wealth taxes: possible, but only if done with extreme care

This is where politicians often get lazy.

There is no broad annual wealth tax in the UK now. The UK taxes various forms of wealth and capital already, but not through one comprehensive annual wealth levy.

Could Burnham look at wealth taxes? Yes.

Should he? Possibly, but only very carefully.

The problem with wealth taxes is not that they are immoral. The problem is that they are often badly designed, easy to avoid, hard to administer, and politically tempting well before they are economically sound. Even reporting around Burnham’s own orbit suggests there is internal concern about relying on wealth taxes too heavily, with advisers warning they can deter investment and raise less than expected if people change behaviour.

So the right lesson is not “never tax wealth”. It is this:

If Burnham wants to go near wealth taxation, it needs to be:

• narrow
• well-defined
• hard to avoid
• administratively realistic
• and clearly preferable to even more distortionary taxes elsewhere

A badly built wealth tax would not make Britain fairer. It would just make Britain look desperate.

The real growth play is housing, investment and devolution together

This is where Burnham has a genuine opportunity.

His instinctive focus on devolution is not just a political gimmick. If done properly, it could improve economic decision-making by shifting power closer to the places actually trying to grow. Reuters described his speech as a plan to rebalance power away from Westminster, while the FT says “No 10 North” is intended to create an alternative centre of strategic growth thinking.

That fits a serious economic argument:

• Britain is too centralised
• too slow to build
• too poor at turning local strengths into national growth
• and too dependent on Whitehall bottlenecks

If Burnham combines devolution with:

• housebuilding
• planning reform
• transport and infrastructure that actually unlocks labour markets
• lower friction taxes like Stamp Duty
• and better incentives for firms to hire and invest

then he has the beginnings of a real economic programme.

If he does not, “No 10 North” risks becoming branding.

Why Reform is still a major economic risk

Burnham’s team also needs to understand the political context clearly.

If Labour looks unserious on growth, tax or borrowing, it does not create a neat technocratic vacuum. It creates space for Reform.

And from a market perspective, that is not a small risk.

The Institute for Fiscal Studies was blunt about Reform’s 2024 manifesto, saying the package as a whole was “problematic”, that the spending cuts would save less than claimed, the tax cuts would cost more than claimed, and that the gaps ran to tens of billions. The IFS made a similar point this year about Reform’s Welsh plans, saying the spending cuts needed to fund its tax ambitions were left unspecified and that the party had not fully faced up to fiscal reality.

That matters because the bond market is not a fan club.

If Britain were to move towards a government with large unfunded promises, weak institutional credibility and no serious route to paying for them, borrowing costs would be at real risk of moving sharply higher. That would feed straight into mortgages, business confidence and the public finances themselves.

So yes, Burnham needs to beat Reform politically. But the best way to do that economically is not to copy populism. It is to make growth and credibility look boringly deliverable again.

What Burnham should prioritise in his first 100 days

If I were writing the first serious economic checklist, it would look like this:

First, reassure markets that the fiscal rules are real, not decorative. That worked in the immediate aftermath of his speech, and he should not throw that away.

Second, launch a proper review of Stamp Duty with a clear bias towards mobility, housing supply and lower friction.

Third, set out a business tax roadmap that rewards investment and scaling, rather than just arguing over one headline corporation tax number.

Fourth, revisit employer National Insurance and make hiring cheaper.

Fifth, use devolution as an economic engine, not a constitutional hobby.

Sixth, avoid panic-tax politics. If wealth taxes are considered, do it carefully and surgically, not performatively.

Seventh, make housebuilding central. Not because it sounds modern, but because Britain cannot grow properly while its housing market behaves like a cartel with planning permission.

Final thoughts

Burnham’s opening move has bought him something valuable: time.

Not much time, but some.

The pound did not crumble on his speech. Gilts did not blow out. Markets heard the words “fiscal rules” and relaxed a little. That is useful. But it is only a grace period, not a victory.

He now has a choice.

He can turn that breathing space into a serious pro-growth agenda based on housing, investment, tax reform, devolution and labour-market realism.

Or he can drift into muddled interventionism, symbolic fights and expensive half-measures.

If he chooses the second route, the market will not wait politely.

And if Labour loses its grip on economic credibility, the alternative is not some painless reset. The alternative is a bigger populist gamble at exactly the point Britain can least afford one.

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FAQs

What happened to the pound after Andy Burnham’s first speech?

Reuters reported that sterling edged up after Burnham’s first major economic speech when he said he would stick to Labour’s fiscal rules. However, sterling was still down 1.7% against the dollar over the month as a whole.

Did gilt yields rise or fall after Burnham’s speech?

They eased. Market coverage after the speech showed gilt yields edging lower as investors were reassured by Burnham’s emphasis on fiscal discipline.

What are the current corporation tax rates in the UK?

For 2026, the small profits rate is 19% below £50,000 of taxable profits, the main rate is 25% above £250,000, and marginal relief applies between those thresholds.

What is employer National Insurance now?

Employer National Insurance is 15%, and the secondary threshold was cut to £5,000 from April 2025.

Why is Reform UK seen as an economic risk?

Because the Institute for Fiscal Studies has repeatedly argued that Reform’s tax cuts and spending pledges do not add up, with savings overstated, costs understated and major fiscal gaps left unresolved.

What should Burnham focus on first?

The strongest early priorities would be fiscal credibility, housing and Stamp Duty reform, business tax reform, lower taxes on hiring, and turning devolution into an actual growth strategy. That is partly inference, but it follows from both the current market backdrop and Burnham’s own opening emphasis on regional rebalancing and fiscal discipline.