Rightwing economic myths could derail Burnham’s project – to destroy them, look to Keynes

Rightwing economic myths could derail Burnham’s project – to destroy them, look to Keynes Larry Elliott Borrowing can be good, there is no such thing as the ‘nation’s credit card’, and, yes, you can buck the markets – as previous governments have shown

A ndy Burnham does a nice line in nostalgia. His first party conference speech as prime minister was full of fond memories for the Britain of the 1950s and 1960s, when working-class families could sense their lives steadily getting better. The underlying message of his address was that, given time, he could rekindle that optimism and return the country to how it was before Margaret Thatcher wrecked everything.

Much of what Burnham says is true. The 1980s was a decade of deindustrialisation, asset-stripping and financial deregulation that has shaped modern Britain – and not in a good way.

But listen a bit more closely to the speech and it becomes clear that Burnham is struggling to find a way to turn back the clock. For a start, he might not be given time. Energy bills are forecast to rise sharply this winter . John Healey’s first budget, in less than a month’s time, is expected to raise taxes or cut spending – taking money out of an economy that is already struggling.

There’s no question that Burnham and Healey would prefer not to be taking these actions but feel they have no choice. Burnham may well rail against 40 years of neoliberalism. He may think neoliberalism was a dud. But his government is constrained by neoliberal ideas and the language used to express them. Burnham and Healey would never use this language themselves, but that’s irrelevant. To make a real difference, they need to tackle head-on the nostrums of the past four decades. Otherwise they will be for ever in thrall to them.

Top of the list is the idea that the UK government is no different from a household. That means it should match its spending to its income as closely as possible, borrowing prudently and within tightly defined limits. Otherwise it will “max out the nation’s credit card” and risk spiralling into unsustainable debt.

This analogy has the benefit of sounding like a statement of the obvious to many voters, but is actually entirely false. There is no such thing as the nation’s credit card, and a country that prints its own currency can never “max out” or face bankruptcy in the way an individual can.

The notion that the government is living well beyond its means is convenient for those on the political right who have an aversion to public spending. The reality is that, as John Maynard Keynes once said : “Anything we can actually do we can afford.” It was that mentality that allowed the Attlee government to create the welfare state when debt was running at more than 250% of national income – more than double today’s level. I don’t know whether Burnham has seen the new play about Keynes in London’s West End, but it seems as if he ought to.