Britain’s next prime minister will inherit an economy that offers little room for easy promises, despite growing public pressure for rapid change.
Andy Burnham is widely expected to succeed Sir Keir Starmer, but a new leader will face the same forces that have unsettled British politics for years. Weak productivity, stagnant living standards, strained public services, and limited job opportunities have left many voters frustrated.
The immediate difficulty will be paying for improvements while maintaining confidence in the public finances. Burnham has indicated that he would retain rules requiring day-to-day spending to be covered by revenue, while debt must eventually fall relative to the size of the economy.
That approach may reassure investors, but it could restrict his ambitions. Higher borrowing costs, global instability, and pressure on energy markets may have reduced the government’s financial buffer, while debt interest already consumes a sizeable part of public spending.
Household finances remain equally fragile. Living standards have grown far more slowly since the financial crisis, while food prices have risen sharply and housing costs continue to weigh on families. Low investment, Brexit uncertainty, the pandemic, and higher energy bills have all weakened economic performance.
Burnham has backed greater investment in infrastructure, skills, public services, and social housing. However, those policies would require funding before they could generate stronger growth.
The labour market presents another challenge. Hiring has weakened, particularly in retail and hospitality, where rising wages, taxes, and operating costs have discouraged recruitment. Younger workers have been hit hardest as entry-level positions disappear and automation reduces demand for some roles.
Defence and welfare spending will add further pressure. Britain’s plan to raise military expenditure to 3.5% of gross domestic product by 2035 could cost tens of billions of pounds.
Former defence secretary John Healey criticised the Treasury for failing to “commit the resources that the nation needs to defend the country at this time of rising threats.”
Welfare costs are also expected to rise, driven by sickness-related benefits and an ageing population. Reforming the state pension triple lock could produce savings, but any change would risk angering older voters.
Housing may prove just as difficult. High rents make it harder for first-time buyers to save, while construction remains below government targets.
Burnham’s central argument is likely to be that Britain must spend more to achieve stronger growth. The harder question is where the money will come from.