Why Burnham’s economic theories will not bring growth

Mr Burnham’s big idea is to spend more in the public sector to promote growth. Unfortunately for him there is no extra tax revenue spare, so he needs to put up taxes or borrow more to spend more.

If he raises taxes he will  hit output and investment in the private sector by more than the increase in them in the public sector. The Reeves £66 bn tax hike demonstrated that, with depressed growth and rising unemployment  the result.

If he tries to borrow more, already worried markets will drive interest rates up more. This will deter private sector investment. Dear mortgages will keep housebuilding depressed. People will consume less as they pay more in credit card and mortgage interest.

In both cases Mr Burnham will  get more of the wrong kind of public spending. The costs of servicing the state debt will rise more. The benefits bill will soar as more people lose jobs or are unable to find a job as the private sector slims down to pay the extra tax and interest bills.

Mr Burnham’s second big idea is to give more spending power to Mayors. If they spend in the same way as the central government was spending before granting extra tax nothing much changes. If the Mayors spend additional sums and central government carries on spending as before then there need to be tax rises to pay  the extra bills. That will adversely hit UK growth.

Mr Burnham will find that genuine devolution will produce different outcomes in different places. Scotland and Wales shows  devolution  can produce worse outcomes by over reliance on a badly run public sector. They spend more per head than England to grow more slowly. They also often get worse public services for more cost per head.