The list of strategic mistakes that led to the resignation of the British prime minister Keir Starmer it will fill many books. However, most stem from the belief that an economy collapsed in 2023 by the war in Ukraine was set to recover significantly. Now, as the war in Iran winds down, his successor may face a similar test.
The way is open for him to succeed Anti Burnham Starmer. The former Manchester mayor is in favor of tighter state control of public services and higher taxes on property, wealth and income. But he has pledged to honor Starmer’s fiscal safeguards, such as balancing spending and managing the public debt. As these rules are judged on official forecasts rather than actual revenue and expenditure, the Office for Fiscal Responsibility (OBR) will retain its role as the ultimate arbiter of fiscal credibility. His predictions have gained outsized influence of late, with declining productivity wreaking havoc in last year’s autumn budget. What has attracted less attention is whether Starmer’s promises were based on forecasts that turned out to be too optimistic. In 2024, however, the expectation of a strong recovery made sense. The departure of Brexit-friendly Conservative governments hid the promise of renewed foreign investment. THE inflation had fallen short of target, consumption was poised to soar and the OBR’s forecasts showed GDP rising from 0.3% in 2023 to 2% in 2025.
Instead, households remained cautious, spending on the disabled increased and a combination of food inflation and a new energy shock in Middle East lowered the outlook and kept interest rates high.
A similar trap may now await Burnham: if the US peace deal with Iran holds, the figures could suddenly look more flattering in 2027.
But tax and benefits reform will not secure Burnham an election victory in 2029. For that, he needs the kind of landslide victory that made him popular in Manchester. A bold overhaul of social housing could be one of them. Regardless, it must chart its own course: reliance on macroeconomic tides is driving ships straight to the rocks.
