Jul 22, 2026 · 20 min · 5 segments
On this week's Macrodose, James Meadway looks at who new prime minister Andy Burnham has chosen to be his Chancellor of the Exchequer (0:42), how wildfire season is increasingly becoming a wider…
[upbeat music] Our first story this week is inevitably Andy Burnham finally taking over as prime minister, and surprising almost everyone with the appointment of former Defense Secretary John Healey as the new Chancellor of the Exchequer.
Healey resigned last month over the 18 billion pound Defense Investment Plan, which he claimed was 5 billion pound short of being fully funded, as the government had promised.
His return as chancellor has to be read as a commitment from Burnham's new administration to find that 5 billion extra for defense spending, and this at a time of already increasing pressure on government budgets.
Burnham has made clear he won't be changing the fiscal rules, although he has committed to looking for the maximum flexibility inside them.
So expect some creative accounting to be put in place, and maybe an initiative like war bonds offering a guaranteed return to savers for putting money into military spending.
But the real constraints on government aren't the Treasury's own rules, which I have to say, have been a bit overdone as the source of our economic woes.
Changing the fiscal rules will not make a huge difference to the amount the government can spend, since the real pressures on government are the rising borrowing costs common across the developed world and rising inflation.
They are a product of real world events, far beyond the control of this or potentially any government, like the renewed flare up of the war in Iran, and the ongoing closure of the Strait of Hormuz, and the arrival of the so-called Godzilla El Nino, with all its disruption to agriculture and food systems worldwide.
Add to that the general backdrop of climate change, its exceptional costs, and some UK specific problems of decades of low investment, and a few tweaks to Treasury rules really don't amount to too much.
Burnham has at least hinted at some, most likely attempting to target richer households.
But more worryingly, it'll also likely involve some attempts to cut, most likely centered on the supposed reform of welfare.
This is heavily underlined by the appointment of James Purnell as Burnham's chief of staff.
Purnell is a former cabinet minister under Gordon Brown, and a longtime enthusiast for welfare reform, who has written about the need for significant changes to the welfare system.
Burnham has made a start on his promise to address the cost of living crisis, cutting VAT on the renewable energy part of fuel bills, a move that will save a typical household about 45 pounds from October.
But that's roughly the same as the expected 50 pound increase in Ofgem's price cap for the typical household, also coming in October, so most households won't really notice much difference.
And with one eye on those big picture problems, October onwards is when we might start to see some more significant increases in the price of food, as the disruption to global fertilizer trade and the chaos of El Nino start to make their way through the system.
With that background, it's a brave politician anywhere who promises to tackle the cost of living crisis, at least without seriously challenging the framework within which economic decisions are taken.
Looking back over the last few years, government after government has been battered and sometimes felled by the rise in inflation.
President Biden lost to Donald Trump in no small part because of rising prices.
Narendra Modi lost his parliamentary majority in India due to cost of living concerns.
And in the UK, rising prices helped Keir Starmer to his own 2024 loveless landslide over the Conservative Party.
Across the globe, the same big factors have hit economies and people everywhere.
[upbeat music] Our first story this week is inevitably Andy Burnham finally taking over as prime minister, and surprising almost everyone with the appointment of former Defense Secretary John Healey as the new Chancellor of the Exchequer.
Healey resigned last month over the 18 billion pound Defense Investment Plan, which he claimed was 5 billion pound short of being fully funded, as the government had promised.
His return as chancellor has to be read as a commitment from Burnham's new administration to find that 5 billion extra for defense spending, and this at a time of already increasing pressure on government budgets.
Burnham has made clear he won't be changing the fiscal rules, although he has committed to looking for the maximum flexibility inside them.
So expect some creative accounting to be put in place, and maybe an initiative like war bonds offering a guaranteed return to savers for putting money into military spending.
But the real constraints on government aren't the Treasury's own rules, which I have to say, have been a bit overdone as the source of our economic woes.
Changing the fiscal rules will not make a huge difference to the amount the government can spend, since the real pressures on government are the rising borrowing costs common across the developed world and rising inflation.
They are a product of real world events, far beyond the control of this or potentially any government, like the renewed flare up of the war in Iran, and the ongoing closure of the Strait of Hormuz, and the arrival of the so-called Godzilla El Nino, with all its disruption to agriculture and food systems worldwide.
Add to that the general backdrop of climate change, its exceptional costs, and some UK specific problems of decades of low investment, and a few tweaks to Treasury rules really don't amount to too much.
Burnham has at least hinted at some, most likely attempting to target richer households.
But more worryingly, it'll also likely involve some attempts to cut, most likely centered on the supposed reform of welfare.
This is heavily underlined by the appointment of James Purnell as Burnham's chief of staff.
Purnell is a former cabinet minister under Gordon Brown, and a longtime enthusiast for welfare reform, who has written about the need for significant changes to the welfare system.
Burnham has made a start on his promise to address the cost of living crisis, cutting VAT on the renewable energy part of fuel bills, a move that will save a typical household about 45 pounds from October.
But that's roughly the same as the expected 50 pound increase in Ofgem's price cap for the typical household, also coming in October, so most households won't really notice much difference.
And with one eye on those big picture problems, October onwards is when we might start to see some more significant increases in the price of food, as the disruption to global fertilizer trade and the chaos of El Nino start to make their way through the system.
With that background, it's a brave politician anywhere who promises to tackle the cost of living crisis, at least without seriously challenging the framework within which economic decisions are taken.
Looking back over the last few years, government after government has been battered and sometimes felled by the rise in inflation.
President Biden lost to Donald Trump in no small part because of rising prices.
Narendra Modi lost his parliamentary majority in India due to cost of living concerns.
And in the UK, rising prices helped Keir Starmer to his own 2024 loveless landslide over the Conservative Party.
Across the globe, the same big factors have hit economies and people everywhere.
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