‘We need to be careful’: Andy Burnham’s team keenly aware of fiscal tightrope

Chancellor pick and early policies avoid market meltdown but next week remains ‘moment of real peril’

Andy Burnham has not quite gone for Keir Starmer’s extreme caution in the run-up to entering No 10 – but he is certainly aware that any early wrong moves would cost him.

Back in 2024, Starmer was criticised for his “Ming vase” strategy of treading very carefully so as not to drop a valuable metaphorical piece of china being carried across the room.

He was meticulous before entering office, giving little away on policy and insisting on ironclad fiscal discipline, but things began to crack in the first few months of government over winter fuel payments, the freebies scandal and blunders in appointing his top team.

Now Burnham has been passed the priceless vase and those around him are acutely aware of the risks of a sudden drop. The rightwing press are desperate to portray him as a 1970s throwback, willing to jeopardise the nation’s finances in the pursuit of greater nationalisation of utilities and council housebuilding.

But the new prime minister has so far shown he is aware of the balancing act he needs to pull off between appearing bold but not reckless when it comes to the economy.

“We need to be very careful,” says one member of Burnham’s team. “We need to show that he’s serious about change as the public will form their opinion of him very quickly. But we have to avoid a Liz Truss-style moment: it’s almost like the markets are waiting to be spooked.”

Another senior member of his team said: “We know that there’s a very delicate balance between capturing people’s attention and not spooking the markets. Next week is a moment of real peril for Andy and, while change is priced in, it feels like they’re teetering.”

The act of unseating a sitting Labour prime minister carried huge danger in itself, although Burnham still maintains he was not directly involved and merely picked up the baton when passed to him. He has been mindful since then of not triggering an adverse financial reaction, given the markets have for a while been calmed by Rachel Reeves’s insistence on sticking to her fiscal rules.

After previously causing alarm among investors by saying governments should not be in hock to the bond markets, Burnham appeared to slightly walk back from that position during the campaign, saying he had never said gilt investors could be ignored. “Access talks focused the mind even more on that point,” says one Whitehall source. “Burnham and his people knew they had to appoint a chancellor who has credibility.”

His choice of John Healey as chancellor – an unshowy veteran MP who has been Treasury minister – and advisers such as Jim O’Neill and Andy Haldane is a sign he is prioritising steadiness and experience.

With this in mind, there will be announcements in the coming weeks to make voters sit up and pay attention, but Burnham’s team has downplayed the prospect of a “big bang” policy comparable to Gordon Brown granting independence to the Bank of England. His major announcement on the steps of Downing Street was about ending rough sleeping – a tall order for him personally, but not a pledge to make the bond investors take fright.

In the garden of Downing Street after he walked into No 10 for the first time, Burnham was clear his priority was stability. He said he would look at “any flexibility” within the government’s existing fiscal rules to help borrow billions more to invest in infrastructure – but insisted he would take a measured approach to the economy.

“I’ve said we’ll stick to the fiscal rules and by that I mean the existing fiscal rules and use, obviously, any flexibility within them. But we will stick to the existing rules,” he said.

“So none of this is about taking risks with the economy. I’ve never done that in any role that I’ve had. I’ve always taken a very prudent approach.”

He will have to plug a multibillion-pound hole in the defence budget, is expected look at raising the personal allowance to lower taxes, must fund a council housebuilding programme and will probably have to pay for the costs of taking Thames Water and potentially other utilities into public ownership.

The markets were slightly jittery on Monday but there was no Truss-style meltdown – and businesses appeared reassured by the choice of Healey, while even rival politicians found it difficult to criticise the appointment. It’s only day one but there have been no smashed vases yet.