Andy Burnham, a self-declared lover of poetry, will have to speak in the driest prose if he becomes prime minister. The hard reality, as the UnHerd analysis puts it, is that Britain is “in hock to the bond market” – and all the democratic will in the world cannot change that in the short term. It is a galling situation: fund managers now wield weight similar to, if not greater than, democratically elected governments. But it is the consequence of decades of choices that deferred costs to a future now suddenly upon us.
That future has been shaped by three developments, writes UnHerd: financial globalisation, the replacement of defined-benefit pensions with defined-contribution schemes, and slowing economic growth in rich countries that drove debt higher while developing nations improved their credit-worthiness. The result? Hedge funds – increasingly foreign-owned – have replaced pension funds as the main buyers of government debt. James Carville, the Democratic strategist, once said he’d like to be reincarnated as the bond market because then he could “intimidate everybody”.
“Andy Burnham must tackle Treasury dominance and bond market tyranny to fix Britain's public sector mismanagement.”
Burnham, who as mayor of Greater Manchester experienced the frustration of trying to manage a region while shackled to Whitehall, understands that the problem runs deeper than fiscal arithmetic. According to the New Statesman, in the last decade Britain has been ruled by five prime ministers, all of whom “failed because none of them got to grips with public sector mismanagement”. A central cause, the magazine argues, is that Whitehall directly tries to control too many aspects of the economy, with power excessively concentrated in the Treasury – a degree of concentration “entirely exceptional” and not found in any other high-income democracy.
The solution, the New Statesman suggests, lies in subsidiarity: devolving decisions to the lowest feasible level. A bus service for Manchester, Burnham saw, is better planned there than in London. Research indicates an area of three to eight million people – the size of the Nordics, Baltics or Germany’s 16 regions – is the right span of control for many economic decisions. Britain’s mayor-led City-Region Authorities, like Manchester, are at the small end but have proved workable; Burnham cooperated with Liverpool’s Steve Rotherham and the West Midlands’ Andy Street. In contrast, Whitehall’s attempt to micromanage the whole of England, with its 60 million population, is “clearly too large to succeed”.
Currently, 80% of public spending is made directly by Whitehall – compared with just 30% from Berlin in Germany, a country with far less regional inequality. The New Statesman also points to a skills gap: Treasury recruits come disproportionately from Oxbridge economics and law degrees, lacking the practical experience needed. Local government staff are ill-paid, overwhelmed by statutory duties, and spend time bidding for one of 140 small short-term funds. A recent vignette of the dysfunction: the problem of potholes, a perennial symptom of a system where maintenance loses out in the annual Treasury scramble.
Burnham, should he reach Downing Street, must confront both the bond market and the Treasury. Whether he can shift power downwards and persuade voters to accept the hard reality of limited options remains the open question that will define his potential premiership.