Labour leadership race narrows as Darren Jones rules out bid

Traders Union
All News
Financial News
Labour leadership race narrows

Highlights

Labour leadership contender Darren Jones rules out a bid, endorses Andy Burnham's project-based investment approach with only a limited increase in government borrowing.
Jones asserts bond investors can remain comfortable if Burnham's economic agenda keeps to fiscal rules, while Legal & General and Aviva support targeted borrowing flexibility for development corporations.
Burnham is expected to outline his agenda—including regional devolution and fiscal strategy—next week, with Reeves unlikely to remain chancellor and new contenders being considered for key economic roles.

Leadership decision and fiscal stance

As reported by Financial Times, Jones says Burnham has reassured him that his economic agenda can be delivered within the government's borrowing rules, with only a limited increase in borrowing for targeted investment. Jones, a former Treasury minister responsible for public spending, says there is scope to "borrow a little bit more" if the money is directed at defined projects rather than broad-based spending.

He points to new towns and mayoral development corporations as areas where investment could support housebuilding, apprenticeships, British business and the energy system. Jones argues that a wider borrowing push risks running into constraints such as shortages of builders and materials, and says project-based investment is a more credible route.

His comments come as markets watch for greater clarity on Burnham's economic approach. Burnham is due to outline part of his agenda in a speech next week, which is expected to focus on devolving more power to regions and elected mayors to drive growth.

Market scrutiny and cabinet implications

Jones says bond investors can be comfortable with a Burnham premiership if policy is handled in the right way, and insists Burnham and his team understand the fiscal rules. The question is sensitive because Burnham recently declined in a BBC interview to answer a question on the two borrowing rules that constrain government policy.

Corporate backing for targeted flexibility has already emerged. Legal & General and Aviva wrote to Chancellor Rachel Reeves in January saying development corporations should be able to borrow outside the fiscal rules, in line with other European countries, to support housing and regeneration.

Jones also says Burnham's choice of chancellor will be critical, while declining to back a candidate for the role. Reeves is not expected to remain in the post, according to indications from Burnham's team, and names mentioned for senior economic roles include Ed Miliband, Wes Streeting and Shabana Mahmood, while former minister James Purnell has been offered the chief of staff job.

If no other Labour candidate enters the contest, Burnham succeeds Sir Keir Starmer on July 17 or 18. Some investors have already signalled they can tolerate targeted changes to fiscal strategy if that creates room for higher investment.

In our earlier coverage of Andy Burnham’s devolution agenda and fiscal message, we outlined how he aimed to reassure investors by sticking to the government’s borrowing rules while pushing a major shift of power and funding from Westminster to regions. We also noted that advisers were exploring growth-focused, project-based investment within those constraints, alongside bigger structural ideas that could reshape how economic policy is run.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.