Eh?

Dear Nick

I am aware I probably upset you yesterday. I made clear that I think Andy Burnham is proving to be a disastrous Prime Minister, just like all those who have gone before him in recent years and decades.

You claimed I could not know that and that I had to give him time. And anyway, you said, in a country like ours, with a parliamentary democracy which discourages honesty because we have a media that attacks any straight-talking politician, how can I already know what he is going to do and what the outcome might be? You then became even more animated and asked what I proposed instead. Might I vote for Reform as an alternative? At that point I felt we were getting nowhere, so let me address these points a little more calmly.

First, I respect your integrity and professional ability. I understand you are first-rate in your field, but your field is not

Political theory or anything closely related to it. I, however, have been a professor in this subject, and I’ve been watching Prime Ministers, Chancellors and their economic policies in detail since the 1970s, which I suspect you will agree you have not, despite our broadly similar ages.

This explains the difference between your approach to Andy Burnham and mine. You think he looks to be okay, a decent sort of chap and someone possessed of more charisma than most of his predecessors. My answer is, so what? Those things help, but Clement Attlee possessed none of them and effected more change in the UK than probably any other Prime Minister, Margaret Thatcher included, in the last century. They are not the basis of success.

Success instead rests on three things, in my opinion.

The first is a deep understanding of the country’s needs.

The second is an understanding of exactly how government, and most especially its finances, works, because without finances, nothing happens in government.

Third, it means having the iron will, based on a well-formed personal ethic, to ensure that government is changed to meet the country’s needs in ways the Civil Service, the media, the City, and the interests of big business might not want.

You can play around with these criteria, but I think they are sufficient for this purpose. My suggestion is that we can already tell that Andy Burnham fails to meet them.

Understanding  the country

First, at no point in the campaign to become Prime Minister did Burnham explain what he thought the country’s needs were. Nor has he since. If he knew, I am quite sure that he would. Why is that? It is because if he knew anything about political theory he would know that there is no better time to do so than in the first few weeks of office, especially when Parliament is not sitting at that time. He has let the opportunity pass.

I think that is because it did not exist, because he had nothing to say. Like David Cameron before him, I strongly suspect that he wanted to be Prime Minister just because he thought he “would be good at it”. As Cameron did, however, prove, a gulf can exist between thinking you might be good at something and actually being so. 
In the case of being Prime Minister, that gulf might be especially wide. This is not a job where thinking you might be good at it is a sufficient criterion for being appointed, although that seems to happen nonetheless. This is a job where, without knowing what you want to achieve, you not only have no chance of doing so, but you might dismally fail, and I suspect Burnham will, just as Cameron did.

Understanding government and its finances

But I accept that you might argue that this is just a hunch, so let me move to my second criterion. This is that you cannot succeed as Prime Minister unless you know how government, and most especially its finances, works. There is no indication whatsoever that Burnham is possessed of this knowledge or understanding. I have a number of reasons for saying so.

Firstly, his only experience in the Treasury was working under Gordon Brown before the 2008 global financial crisis. Brown has never shown the slightest understanding that the UK government creates money when it spends and taxes to recover that money from the economy and that it, as a result, operates on a spend-and – tax cycle. That also means government borrowing is nothing of the sort, because the facilities in question are equivalent to the savings accounts provided by any bank.

If Gordon Brown did not understand this, or pass this knowledge on to Andy Burnham, I suspect no one else has since. What is more, during his long period away from Westminster, working in Manchester, he has become used to managing organisations that can only spend if they can raise revenue or borrow before doing so.

That, of course, is true of all but one organisation in the UK as a whole. Every level of  government but that of the UK as a whole, and every business and every household, works in this way, which is why it seems that every politician thinks that government must behave in the same way as well.

But the precise point is that central government is not like a devolved government, a local authority, a parish council, a business or a household. None of them creates the money that they use. All of them use the currency that is created by our central government when it spends, not least to provide them with much of their income in the case of all those other forms of government.
This distinction is massive, fundamental, and, if not understood, totally disabling for those who take on the task of running the central government without the knowledge or understanding of how it operates that might equip them for the task.

I can almost forgive the younger Burnham for not knowing that government worked in this way. He was in the Treasury before it was realised that it could, in combination with the Bank of England which it controls, create almost unlimited amounts of money to deal with the issues that we face inside this country, so long as there were unemployed resources capable of being put to work inside our economy which would otherwise be unemployed or go to waste.

Although the QE process not a perfect example of how this is done, it did show that £895 billion of government money creation did not result in inflation, but did save us from economic disaster in 2009 and thereafter, and again in 2020/21, and could have done so even more if only government timidity had not got in the way.

Now, I stress, I am not wishing a financial crisis on Andy Burnham whilst in office, although, as I told you, I think it is exceptionally likely that such an eventuality will happen before 2029. That will be because of the combined effects of Trump’s war on Iran, global energy and fuel shortages, food shortages as a result of shortage of fertiliser as well as drought, and AI crashing stock exchanges as the AI bubble bursts, and the consequent failure of much of the shadow banking system, which will in turn imperil a great deal of our mainstream banking system in ways we saw in 2008. In that case, he has no choice but to understand that money creation is within his power.

But if he does, he will know that this money creation is actually what happens every time the government spends. It creates all the money it spends. It does not raise tax first. It does not borrow to fund its activities. Instead, it injects money into the economy and then taxes it back to cancel it to avoid inflation, whilst also providing a safe place of deposit for those who will eventually end up holding it. That is how government works now, and has done since the 1970s, when the final breaks with the post-war financial settlement came to an end.

My point is, if he does not know that, and it appears he does not, then he has not equipped himself with the necessary skills to undertake the job that he appears to think he can do, but which he most certainly cannot if he does not understand how the finances of this organisation that he wants to control really work.

And, I would stress, we are already seeing the consequences.

He is backtracking on council house building.

His Chancellor, who was Keir Starmer’s Defence Secretary until he resigned to make the point that a 3% of GDP defence budget was necessary, has already apparently given up that goal, no doubt having been persuaded by the Treasury that we cannot afford it after all, which is just not true if the resources to deliver the defence in question are available. 

And that same Chancellor, John Healey, has now said we cannot max out the country’s credit card, which shows that he, like Andy Burnham, has no comprehension that money is not created outside government, but is something it creates.

That fundamental lack of understanding of government finances guarantees that Burnham will fail just as badly as his many predecessors this century did, because none of them can stand out as a success. That is because all of them, as I pointed out to you, have subscribed to the same political philosophy. There is not a cigarette paper that could be put between them when it comes to fundamentals. That is because they have all subscribed to the same neoliberal understanding of the role of government, which is that it should do as little as possible, which ideology then guaranteed their successive failures.

An iron will

In that case, let me come to my third criterion. This demands possession of an iron will based upon a strong personal ethic, but, so far as I can tell, the only things in which Andy Burnham believes are Everton Football Club, some form of the Roman Catholic faith, and the importance of bus services. Those might matter to him, but they do not make a Prime Minister. They certainly will not in a country where millions feel alienated from government processes that have clearly failed them.

Government has not delivered them the jobs they want.

It has not delivered them strong communities in which they believe.

It has not delivered them a functioning law and order system, or a working NHS, or an education system that fits their children for the world they are facing.

They can see that government has worked especially well for the wealthy, for the City of London, for big business and those living in prosperity in the South East of England, but in the communities in which they live in the rest of England, and in Scotland, Wales and Northern Ireland, the sense of isolation is very strong, and it is giving rise to despair. What else explains the rise of the far right and neo-fascist parties in this country?
If Andy Burnham truly understood what is required to address these issues, and understood the capacity of the government to address them, which a proper understanding of its capacity to manage the economy would provide, then he could couple those two things with an iron will to create change. But he not only lacks the first two characteristics, he has also provided no indication at all of anything like an iron will.

A few pounds off the VAT charge on electricity, whilst making it easier to cancel your Netflix subscription and capping bus fares, does not indicate any understanding of the true scale of the issues this country and this government face. Nor does it indicate that he will do anything but play to the media gallery, seeking short-term headlines with policies of little lasting consequence, just as so many of his predecessors did.

I could go on, but I think you have a flavour of why I can already be sure that Andy Burnham will fail. I have made my case. I stand by it.

The Courageous State
But you asked another, more interesting question in that case, which was, what do we do about it? I made the point that we need a revolution, and that I think it might come when we have that financial collapse I think is so likely.

As I made clear, though, a revolution is not, in this case, people manning the barricades, although I would not entirely rule that out. There are more desperate people in this country now than I have ever known during the course of my life.

Instead, by revolution I mean we must turn and face the other direction. It is time to bring to an end the cowardly state which our governments, of whatever party they have been, have been delivering for decades. We do instead need what I call ‘A Courageous State’

This would stand up for the people of this country against the powers that wish to exploit them. Vitally, it would deliver what people need, and it would do so even if that was at a cost to those with wealth, power and influence whose situations they believe will be prejudiced as a consequence, probably incorrectly, because a flourishing country will, almost inevitably, reward the wealthy more than it will anyone else.
We could have such a government, but that depends on its Prime Minister possessing the three qualities I identified at the start of this note. Is that possible? I think it is.  That is what I work for.

You expressed doubt that this is the case, but you could not explain what you thought the alternative might be. It appeared that you think Andy Burnham is the only option we have.  I, however, believe he is the definition of the problem, which is precisely why our positions differed.

This note may change none of your opinions. I do, of course, respect your right to disagree, but I have now set out my case.

Best regards