Andy Burnham taps former OBR chair for fiscal advice amid UK leadership ambitions

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Burnham consults ex-OBR chair

Highlights

Andy Burnham appointed former OBR chair Richard Hughes as senior fiscal adviser this month ahead of a possible Labour leadership challenge.
Hughes resigned from OBR in December after a serious data leak and now works as senior economic adviser at Taula Capital.
Burnham seeks to reassure investors by pledging no plans to change government fiscal rules despite concerns over potential borrowing to fund social housing investment.

Fiscal preparation ahead of leadership bid

As first reported by Financial Times, Hughes was brought in at the start of the month to help Burnham understand how the markets and the fiscal watchdog could assess his policies if he becomes the UK’s next prime minister. A Burnham spokesman confirms the appointment, as Burnham seeks to return to Westminster as an MP in Thursday’s Makerfield by-election and position himself to challenge Sir Keir Starmer for the Labour leadership.

Hughes resigned from the Office for Budget Responsibility in December after the watchdog accidentally released its Budget analysis before Chancellor Rachel Reeves delivered the statement. An internal OBR inquiry described the episode as the most serious failure in the watchdog’s 15-year history, and Hughes has since taken a role as senior economic adviser at London-based fund manager Taula Capital.

Market concerns around borrowing plans

Investor sensitivity to Burnham’s potential economic stance remains a key issue, particularly around the impact that any future borrowing plans could have on gilt markets. Burnham has been trying to distance himself from comments made in September suggesting the UK needed to move beyond being overly constrained by bond markets.

He has since said those remarks were misinterpreted and told the Financial Times last month that Britain had, over a long period, given up control of the economy’s fundamental drivers. In May, Burnham also sought to reassure investors by committing to the government’s fiscal rules, with his spokesman saying he has no plans to change them, although recent concern persists that he could seek flexibility to speed up billions of pounds of social housing investment.

Speculation over a possible Burnham-led economic team is also building. Ed Miliband, the energy secretary, is being discussed as a potential chancellor if Burnham were to unseat Starmer, with Miliband drawing on his Treasury experience to provide economic advice.

Our earlier article on the Bank of England’s rate hold highlighted Governor Andrew Bailey’s emphasis on the importance of stability as investors watch how political developments could affect UK market confidence, including the by-election that could return Andy Burnham to parliament. We noted that Bailey pointed to an upward slope in government borrowing costs, suggesting markets are pricing in additional risk premia beyond interest-rate expectations as the central bank monitors investor risk perceptions in the gilt market.

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