Alex Brummer, a financial columnist, has warned that Chancellor John Healey's exploration of new borrowing routes to fund Prime Minister Andy Burnham's spending plans would be a disaster for Britain, arguing the government should cut spending instead.
Brummer wrote that in the early run-up to the Budget scheduled for October 28, Healey is looking at ways to stretch an already overwrought government balance sheet to meet Burnham's objectives.
Burnham's initiatives, including a £2 bus fare and a VAT cut on energy bills, can almost certainly be funded from existing headroom, Brummer wrote. He said the bigger concern is the defence investment plan, a legacy of Healey's previous role as defence secretary, which is £15bn short over the next four years. Burnham's pledge to fix social care, after what Brummer called dozens of failed attempts, could cost as much as £18.5bn, while the cost of a growth agenda covering social housing and infrastructure remains uncharted.
National debt nears £3 trillion
Brummer called it enormously disappointing that a government facing years of penury, with a national debt of £3 trillion, close to 100 per cent of total output, and the highest government bond yields among G7 nations, was considering more borrowing.
He said Chancellor Rachel Reeves' adoption of public sector net financial liabilities, known as PSNFL, as the measure for investment decisions has created what the Office for Budget Responsibility has labelled a "fiscal illusion." He called it "bonkers" that the student loans portfolio is classified as a state asset. According to Brummer, the Treasury has been tasked with finding new ways to borrow, including greater use of Public Financial Institutions, or "PuFins," such as the National Wealth Fund and the National Housing Bank.
Brummer wrote that this is borrowing by another name that adds to public debt, and predicted bond markets would quickly find that out. He questioned why anyone would think spending more on social housing and infrastructure would be self-funding. Reeves' 2025 spending review allocated £39bn to a ten-year affordable housing programme and £15.6bn to fund transport in regions with elected mayors, he noted, adding that capacity constraints, a slow planning system and the spending consumed by HS2 mean further spending is futile.
Brummer argued that Britain's tax burden is at the point of diminishing returns, and that radical spending reductions, of the kind Denis Healey adopted in 1976, are the only sustainable answer rather than more borrowing.
Paramount Skydance's Warner Discovery deal
Brummer also questioned why the Competition and Markets Authority felt the need to get ahead of litigation in California and other US states by endorsing Paramount Skydance's $110bn deal for Warner Discovery. Contrary to the enthusiasm shown for the deal on the BBC's Today programme, he wrote that consolidation would be bad for creative jobs and innovation in Britain, and that pledges on the future of Channel 5 are time-limited and easily picked apart.
Brummer said the Competition and Markets Authority has lost its bite since Douglas Gurr, a former Amazon executive, took the helm, leaving Britain's creative sector dangerously exposed.
