Andy Burnham's prospective chief economic adviser, Jim O'Neill, has called for increased government borrowing to fund infrastructure projects. O'Neill suggested creating an independent body for infrastructure spending, similar to the Office for Budget Responsibility, to reassure markets.
The proposal signals a potential shift in economic policy under a future Andy Burnham government, with a focus on increased infrastructure investment funded by borrowing. This could impact government debt levels, fiscal policy debates, and investor sentiment towards UK bonds.
Jim O'Neill, who is being considered as Andy Burnham's chief economic adviser, has advocated for significant increases in government borrowing to fund infrastructure projects. O'Neill, an economist and former minister, suggested the creation of an independent body, similar to the Office for Budget Responsibility (OBR), to oversee infrastructure spending. This body would aim to provide greater transparency to financial markets regarding the growth impact of major projects.
O'Neill argued that there is substantial capacity for additional borrowing within the UK's existing fiscal rules, stating that "there is a lot more room under the existing fiscal rules to borrow for investment." He believes that such borrowing, when used for investment, could be balanced by the assets acquired, aligning with changes to fiscal rules implemented by Rachel Reeves. He also suggested that an independent body would reassure bond markets.
Burnham, who is widely expected to become prime minister, is perceived as potentially adopting more left-wing economic policies than the current government. He has been consulting with prominent economists, including Andy Haldane and Richard Hughes, to shape his policy agenda. O'Neill's past advocacy for the Northern Powerhouse rail proposals and his role as former chair of the Northern Powerhouse Partnership indicate a focus on infrastructure development.
The proposal could involve transforming the National Infrastructure and Service Transformation Authority (Nista) into a more autonomous and transparent organization. This approach aims to move discussions about infrastructure projects away from subjective political opinions towards objective assessments of their economic benefits.