The Treasury will check Andy Burnham’s ambitions – unless old orthodoxies are challenged | Larry Elliott

John Healey addresses staff at the Treasury, after becoming chancellor, London, 21 July 2026. Photograph: Stefan Rousseau/AFP/Getty ImagesView image in fullscreenJohn Healey addresses staff at the Treasury, after becoming chancellor, London, 21 July 2026. Photograph: Stefan Rousseau/AFP/Getty ImagesThe Treasury will check Andy Burnham’s ambitions – unless old orthodoxies are challengedLarry ElliottFifty years ago, another Healey ran the Treasury.

Today’s chancellor may find some things haven’t changedSome things never change. Fifty years ago, Britain was sweltering in the long hot summer of 1976. The Labour government was acutely aware that the financial markets were scrutinising its every move.

And a man called Healey was running the Treasury.On the surface, the challenges facing John Healey are less severe than those Denis Healey had to grapple with half a century ago. Inflation is a lot lower and the City has reacted calmly to Andy Burnham as prime minister.

And, while things could turn nasty pretty quickly, they would have to get a lot worse before Healey Mk II felt the need to ask the International Monetary Fund for an emergency loan.That’s the good news. The bad news is that today’s Healey has big problems of his own to solve, not least how to reconcile his pledge to run a tight ship with the new administration’s aims of rolling back more than 40 years of Thatcherism and reindustrialising Britain.

Fine aspirations will eventually run into the quicksands of fiscal orthodoxy.But so far things have gone as well as Burnham and Healey could have hoped. The message of optimism – a deliberate contrast with the doom and gloom when Keir Starmer arrived in Downing Street – was the right one.

The cut in VAT on electricity bills and the cap on bus fares were largely symbolic but symbols matter. Burnham was keen to avoid a repetition of Starmer’s first big economic policy announcement: the means testing of the winter fuel payment for pensioners. That and the purging of the Starmerites from the cabinet are intended to give the impression that the real Labour government starts here.

View image in fullscreenThe then chancellor Denis Healey before presenting the budget, 30 March 1976, Photograph: Peter Cade/Getty ImagesOther conclusions can be drawn. Burnham clearly sees Reform UK as his biggest threat. That’s evident not just in the makeup of the cabinet – which has a stronger north of England flavour to it – but in the emphasis on the cost of living and rebuilding Britain’s manufacturing base.

There is an attempt to reconnect the party with its working-class roots.Keeping Shabana Mahmood as the home secretary was also significant because it shows that Burnham intends to maintain a tough stance on migration. That has economic consequences since it will force businesses faced with staff shortages to hire and train UK-born employees rather than bring them in from overseas.

The days of unlimited cheap labour are over. Burnham’s desire to try a different economic model seems genuine, as does his intention to be heavily involved in the big economic decisions.Prime ministers come in three types.

There are those who enjoy focusing on domestic issues, there are those who get a buzz from foreign policy and there are those who want to do everything. It is not rare for a prime minister to start a term of office with a burning passion to sort out the economy only to find after a while that glad-handing on the global stage is more fun. But, for the moment, Burnham falls squarely into category one, and has plans to create an economic power base for himself at No 10 to act as a counterweight to the Treasury.

That, at least, is the theory. In reality, Burnham’s first 24 hours in office showed just how much power and influence the Treasury holds. Healey said meeting the existing fiscal rules was his top priority, and he now has to find the money for a fully funded defence investment plan that the Treasury denied him when he was defence secretary, precipitating his resignation.

The chancellor may get lucky and be able to pay for higher spending through stronger growth, but with the strait of Hormuz still closed and oil prices creeping up again it would be inadvisable to bank on it. That leaves borrowing more or higher taxes. A bit of extra borrowing may be available while sticking to the fiscal rules, but Burnham and Healey have big ambitions and are wary of upsetting the bond markets, which are already charging the government interest rates of 5% to service its debts.

Something has to give.skip past newsletter promotionafter newsletter promotionAndy Burnham is playing the long game in an age of short attention spans | Rafael BehrRead moreHealey has floated the idea of war bonds to pay for higher defence spending, but that would be borrowing by a different name. Inevitably, therefore, taxes are going to rise in the autumn budget and the only real questions are: by how much, who pays them and what damage they will cause.

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