The Observer view: Burnham’s No 11

Andy Burnham has to make the speech of his life tomorrow, on how he plans to fix the UK economy. Unless challenged for the Labour leadership, he will have all of three weeks to turn the speech into a plan, the success of which will depend largely on his choice of chancellor.

No pressure. Not that pressure seems to be getting to him. Early reports from the top of Portcullis House, where his team is installed, suggest he is calm amid a storm of incoming WhatsApps and MPs brought in in batches to meet him.

It will be hard, but essential, to bear in mind the lessons of the recent past. Keir Starmer lost No 10 in No 11. He and Rachel Reeves courted business leaders while in opposition, only to neglect them in power, saddling them with extra costs in an Employment Rights Act pushed through with minimal consultation. At the same time Starmer talked down the economy in order to blame his difficulties on his Tory predecessors, forgetting that this was the economy it was his job to champion.

He moved to scrap the winter fuel allowance, then reversed course. He caved in to public sector pay demands that jeopardised Reeves’s fiscal headroom, lost his nerve on welfare reform, and couldn’t find enough money to fund the defence investment plan or head off the resignation of two formerly loyal ministers. 

Running the economy and retaining credibility with business require three things of a chancellor: confidence in No 11’s fiscal discipline, a relentless commitment to growth and the political judgement to choose acceptable trade-offs.   

So, who? Reeves wants to keep her job and she has a claim to it.  She has championed fiscal devolution, offered a vision of investment and innovation and held firm on borrowing.  But Burnham has little hope of inspiring confidence in a new economic vision with the old chancellor.

Ed Miliband wants it too. He might shore up Burnham’s position with the left of his party, and talk of Jim O’Neil and Andy Haldane, the former Bank of England economist, serving as advisors may calm nerves in the private sector over a Miliband appointment. They would be good hires. The former has deep experience of the kind of regional devolution that is expected to be a centrepiece of Burnham’s speech tomorrow. Haldane, in a speech last week, set out a plan to irrigate the “field of dreams” of high-growth British businesses with British capital. 

Miliband is principled and competent. He has shown he can bend a Whitehall department to his will, and deserves a big role in Burnham’s cabinet. 

But in the worlds of business and finance, he is seen as an obstacle to growth. He’s is judged to be suspicious of wealth creators – remember “predators” and “producers”? The business world hasn’t forgotten it. He’s blamed for being impervious to business’s concern about the high cost of energy.  

Burnham and Miliband would need to have more than warm words to win over business. They would need a programme of policies that might offend his party but would lift the spirits of businesses and investors. Without that, Miliband’s appointment would be a boon to Burnham’s political opponents on the right, a field day for critics in the press and a cause of despair to many in the business world. The new prime minister risks losing the argument before he even has a chance to make it. 

Burnham has already raised heartbeats in the City – and not in a good way – with dismissive talk of the bond markets. The Treasury currently spends £110bn a year on debt interest. The next prime minister cannot afford to let that bill rise even further. If Manchesterism is to amount to anything, Burnham will need a serious growth strategy to fund it – and he’ll need to cast his net widely to find the right person to run it.

Photograph by Yui Mok/Getty Images