Far away from Liverpool and Labour delegates full of hope, there was an uncomfortable reminder of the task Andy Burnham faces.
The UK debt office sold £4.25billion of ten-year gilts, to help finance the country’s gaping borrowing needs, with an eye-watering yield of 5.383 per cent. That is the highest return offered since September 1999.
The Prime Minister’s undertaking to adjust the ‘triple lock’ on state pensions beyond 2030 genuinely is bold and goes where other politicians dare not tread.
Over the very long term this could eventually be worth as much as £15billion to the Exchequer. So it is, as the Institute for Fiscal Studies noted, ‘good riddance’ to a bad policy.
However, early budget savings will be in the low billions at best. In other words, the funding for Burnham’s brave new world of a ‘National Care Service’ at a cost of £4billion to £18billion by the mid-2030s is simply not there.
The danger is a further burden on the state. This is not to disparage the amazing work that care workers do which I experienced first-hand in my dear father Michael’s final years.
In a speech to the Labour Party Conference in Liverpool, Prime Minister Andy Burnham said the government will scrap the ‘triple lock’ on state pensions
As radical as Burnham’s proposal is, there is also an opportunity for an opt-out social-market system, similar to that in Germany, where people of all ages pay, with tax relief, into a special savings pot for future needs.
Chancellor John Healey and Burnham have each pledged fiscal discipline.
But without matching state pension changes to the benefits system, where welfare payments are uprated by average earnings, the upward spiral in government spending and borrowing will be impossible to contain.
There was much uncosted stuff in Burnham’s speech, from the mini Bill for bus fares to the potential cost of taking into public ownership water companies accused of polluting rivers and seas.
Yet Britain, alongside most of the rest of the world, is suffering fallout from the Middle East conflict, which has raised energy costs and is keeping inflation elevated. That in turn means rising bond yields.
The high coupon on the ten-year bond is not academic. It pushes up the cost of mortgages for households and sets the pace for fixed-interest borrowing by companies. Until the size of the state is dramatically scythed, prospects for faster growth will be sabotaged.
Power play
The Prime Minister’s promise of more public control of water and power utilities may be popular on the Left, but the threat is empty.
The costs of nationalisation would be prohibitive. Taking the shirts off the back of shareholders, as the last Labour government did when it seized control of Railtrack in 2002, ended in the courts with a compensation bill.
Burnham understands that the UK has an energy pricing problem which is a big burden on business and households.
He hinted that he is ready to unlock new North Sea production, but provided little detail. Instead, there is to be yet another state-backed quango in the shape of GB Grid.
It is intended to disperse blockages which stop green energy from joining the grid. The £4billion promised to fund this initiative is being diverted from Great British Energy, conceived as turning the UK into a leader in green technologies.
The resources will be a drop in the ocean compared to the £70billion which listed National Grid is piling into electricity distribution between now and 2030.
Moreover, GB Grid will face the same ‘nimbyism’ charge as National Grid each time it proposes to erect new super pylons or switching stations.
The one real improvement which Burnham could have backed, before the winter, is a commitment to joining Centrica in rebooting gas storage at Rough, off the Yorkshire coast. It would provide much needed resilience in a world fractured by geo-political chaos. That remains a pipe dream.
Scenting success
Stuart Machin’s fashion journey at M&S takes a big step forward after a deal with luxury goods giant LVMH was unveiled to place Sephora beauty concessions in 100 stores and online.
It is a direct challenge to John Lewis and Boots and aimed at bolstering M&S’s luxury cosmetics credentials among younger, aspirational customers. Once in-store, who knows what will catch their eye…
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