Burnham’s plan for government

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0:30Tonight podcast for Tuesday 1st September. Andy Burnham has promised to bring back hope during his first appearance as Prime Minister in the Commons, but with the global economic indicators heading in a negative direction, we'll examine whether a leader who famously complained about governments being in hock to the bond markets could find his plans knocked off course by them. Russia has promised consequences after Germany sanctioned Moscow for carrying out a series of hybrid attacks on German territory. We have a report on China's EV export revolution. We hear about the churn at the top of the US military and discuss the film sequels, which have taken an awfully long time to reach the screen.

1:11It probably says something about Andy Burnham's summer communications blitz that many of the tunes he played during his first appearance in the Commons as Prime Minister already sounded familiar. He used his time at the Desats dispatch box to set out an optimistic vision for the country, pledging stronger public control of services, a rewiring of the British state and a new spirit of cross-party cooperation. This is politics done differently. Problem solving over point scoring.

1:45It is what the country needs. It is what the public want more of. And it will characterise my time in office, Mr Speaker. Mr Burnham said he had a clear diagnosis of where the country had gone wrong and what had undermined Britain's prosperity. From the 1980s, this country took a series of wrong turns. Political power was centralised. Economic power privatised. The country de-industrialised. Austerity followed, hollowing out councils and depriving them of the agency to act to reverse any of this. And then Brexit compounded the damage, ushering in a decade of low growth and stalled regeneration.

2:36Change begins with honesty, Mr Speaker. I'm not hearing much of it this afternoon. Unless we are blunt about what went wrong, we won't turn things around. But for all the hope and positivity in the new Prime Minister's message, he is about to be buffeted by the global economic winds that are blowing outside the House of Commons. Today, the government's borrowing costs rose to their highest level since 2008 as the bond markets reacted to renewed tensions in the Middle East, inflation and growing deficits. Well, let's discuss that with Gillian Tett, columnist for the Financial Times and provost of King's College, Cambridge.

3:15Good evening, Gillian. Good evening, although it's a rather bad evening if you're looking at the bond market as far as Andy Burnham's concerned. Well, I want to start with that. What impact is this going to have on him and on his plans? Well, it's pretty bad news. I mean, there's a phrase going around the Bank of England that the UK bond market is a bit like someone chained to the tail of a drunken dragon. And by that, I mean that essentially what's happening in the US with all the melodrama and uncertainty there is very much impacting on the UK bond market too. And the borrowing cost for 10-year bonds has now risen to 5.26%.

3:51It's the highest level since the great financial crisis. And that eventually means that we're going to pay a lot more to service the national debt. I'll just give you one example. Back at the beginning of the decade, the UK was paying about£25 billion a year for the servicing national debt. Last year, it was£105 billion. that's more than four times higher. When you say the melodrama in the United States, what particular melodrama are you talking about? Well, essentially you've had a series of things. President Trump has raised inflation with tariffs. At the same time, the energy shock coming out of the Middle East conflict is also creating more inflation.

4:35The AI boom, or the bubble to cite many people, is further stoking up more inflation right now. And on top of all that, you've got uncertainty about the relationship between the Federal Reserve, the US central bank and the government. And Scott Besson, the US Treasury Secretary, has recently issued some fairly inflammatory comments that have created more jitters as well. So you add that together and US bond yields are going up very sharply and that's dragging up UK ones as well. So when you look at the priorities that Andy Burnham has set out, which particular ones are going to be the most constrained by this, do you think?

5:12Well, I personally think the absolute top priority is to show the markets that the UK is going to pursue a strategy of growth, growth, growth. Because unless Andy Burnham can convince the markets, and frankly convince voters too, that he's going to raise the growth rate, which has been pretty disappointing in recent years, it's going to be very hard to essentially show that the UK has a chance of balancing its books going forward. Yes, there may need to be some tax rises and yes, there almost certainly need to be some spending cuts too. But above all else, what's needed right now are measures to unleash animal spirits, make people feel confident about the future and excited about investing and essentially boosting the growth rate overall in the country.

5:57Also though he is talking about consumers and the pressures that people are under and are going to be under greater pressure when it comes to energy prices for example. That is also his priority. Absolutely and he's been swept in on a fairly populist wave and the problem is that people are now looking to him to try and deliver miracles. So how he manages to walk that tightrope is going to be very difficult indeed. But he's going to have to make it clear that the country as a whole is, yes, going to have to make some sacrifices, but it's going to have to pull together really strongly to, you know, back business, back the creation of new companies, back the creation of more jobs, and above all else, to boost growth.

6:47Gillian, many thanks. Gillian Tett, columnist for the Financial Times there. Well, let's turn to Mariana Mazzucato, Professor of Economics at University College London. She's the author of The Common Good Economy and she's someone that Labour leaders of all ideological stripes have turned to for guidance. So we're going to turn to you this evening, Mariana, for your thoughts on Andy Burnham's first speech as Prime Minister And first of all, his diagnosis of Britain's ills. He put it down to, well, Margaret Thatcher, the word austerity and Brexit. Sure. I mean, I think his diagnosis especially was that we have to be honest and actually look at the last 40 years and not just the recent blips in terms of what has gone wrong.

7:36And so, you know, too much centralisation, too much privatisation, too much de-industrialisation. But then the question is why? And what actually has to then change in terms of the diagnosis turning actually into a cure. And the whole privatization thing isn't just about, say, you know, privatization versus nationalization. It's very much in terms of the nuance behind what he's talking about in terms of public control. It's not just about, you know, the fact that water and the water industry in this country has completely become dysfunctional in terms of, you know, Thames Water, for example, and giving money out to shareholders instead of reinvesting in the infrastructure.

8:13It's about what is the new relationship that we need between public and private actors so it's more symbiotic, it's less extractive. What does it mean for corporate governance? What does it mean for conditionalities attached, whether it's to a tax incentive, whether it's to a procurement contract, which, by the way, includes water rights that the state gives to private water companies. Putting, and this kind of comes to the book that I've just written, putting this notion of good and what he also called living well at the center of contracts so that we actually create value differently from the beginning instead of picking up the mess after the fact.

8:49One thing he hasn't talked about that I must say I think is urgent is that the private sector in the UK continues to invest at one of the lowest rates in the OECD, and that's been happening for the last 20 years. We also have one of the lowest levels of public sector investment. So this low growth that Gillian's been talking about requires a kickstart in both public investment and private sector investment. So a big kickstart and big structural changes you're talking about as well. And to what extent do these global economic headwinds constrain his ability to achieve that? Well, these global headwinds are, you know, constraining everybody's kind of growth goals.

9:30What's different in the UK is there's also been kind of acts of self-harm, if you want, kind of creating problems internally, which make it even much harder. So, for example, having fiscal rules that do not properly take into account the value of public investment in the long term, then actually hurts the denominator of debt to GDP, which ultimately is what matters. Jillian's right that the cost of the debt is increasing. But if we don't stimulate the growth that we require, because we have potentially fiscal rules that are constraining it, then that's going to be a problem for long-run growth, which doesn't mean that we shouldn't have fiscal rules.

10:09The question is, is the current structure of the fiscal rules going to impede the level and quality and direction of public investment and how to also evaluate that in terms of the public return for the public investment? And I think a lot of work needs to be done there inside the Treasury. Well, I was going to ask what you make of what you're hearing from the new Chancellor, John Healy, and looking ahead to his first budget, what would you say the priorities need to be? Well what I find quite curious is that when you have you know someone who's had so much experience on defence becoming chancellor the first thing is someone like that knows that when it's for war money comes out of the woodwork.

10:46When it's for health and education we say that budgets are constrained. So the real question is how do we treat our social problems our earthly problems as you know urgently as we tend to treat military industrial complex and wartime problems. It's not a coincidence that during COVID, so many countries, including the US, pulled out tools that are usually used for war, like the Defense Production Procurement Act, this outcomes orientation, which I talk about in my other book, A Mission Economy. How do we not just think about sectors, but problems and think of it in an intersectoral way? And the military, interestingly, often does that.

11:22The problem is that we should learn how to do it for our most urgent societal challenges. Well, I'm glad you mentioned the mission economy because people with longish memories will remember that the start of Keir Starmer's premiership, he talked a lot about the missions. He was inspired by you. And those rather fell by the wayside, didn't they? I mean, I agree, except for the net zero one, which I think Ed Miliband actually was, you know, making quite a bit of progress on. But the problem even with that one is it became just about energy. So the whole point about missions, just like going to the moon, is it wasn't just aerospace.

11:54It was investments in nutrition, materials, electronics, software. So the whole missions approach doesn't talk about growth. Growth is a consequence. Growth is the economic outcome if we can actually stimulate, as I mentioned, that much needed public and private sector investment around health and well-being challenges, climate challenges, digital divide challenges. And unfortunately, if we start to confuse economic targets, which are critical as outcomes of that investment, with the goal itself, it's not surprising that we don't achieve growth. Lessons to be learned. Mariana Mazzucati, Professor of Economics at University College London, thanks very much indeed.

12:55Well, Prime Minister Andy Burnham's first appearance in the Commons as Prime Minister was preceded by news of the first by-election that he will have to oversee as leader of the Labour Party, a by-election triggered by the man he replaced in No. 10 following his own by-election victory in Makerfield, of course. Sir Keir Starmer has announced he was standing down from his London seat of Hoban and Sir Pancras to focus on world affairs. But while he's zooming out, we thought we'd zoom in on the constituency, usually a very safe Labour seat, and look at the forces likely to be in play in that by-election.

13:29We're joined by Tony Travers, Professor at the LSE Department of Government. Good evening, Tony. Good evening. It's always been a Labour seat, this one, hasn't it, since 1983. Does Labour face a challenge this time from the Greens, a serious one? Well, it almost certainly does, because in the local elections that took place only in May, the Greens ran Labour second, just second, but nevertheless it was a very close run thing. Labour won seats in Keir Starmer's constituency and it will certainly be a tempting target for the part of the Greens as they look forward to try to build on their success more broadly in the local elections this year.

14:14Obviously a big by-election but the possibility that their leader Zach Polanski might put himself forward. Might. That's quite a big call for him, isn't it? It is, because it's a massive gamble, because it's a Labour seat, as you say, over time. But yet, there's the possibility that with his profile, the Greens could win. But as you say, it's been a Labour seat for a long time. Keir Starmer had a reduced majority in the 2024 election, but still a majority, big majority. but the Greens might hope to take it. But of course, if Zach Polanski or a senior Green put themselves forward and lost, that would be a big problem for them if they won, of course, massive success.

15:03Yes, I think, what, six months ago, the Greens would probably have been feeling rather more confident. Yes, although they didn't. If you look at the wards in Hobart and St Pancras, in fact, the Greens didn't quite win. Labour had the larger number of votes in the southern part of Camden, which is the borough which sort of straddles inner London, a poor band of relatively deprived areas in the middle of the constituency and then central London. So the Greens didn't quite win. Labour won. But undoubtedly, the Greens, after their successes in the local elections, would hope with a high profile candidate to be able to win.

15:44That begs the question of who Labour puts forward as a candidate, of course. Yes. I mean, nationally, clearly, the opinion polls in recent months have suggested support for the Greens has been slipping. But in London, have they maintained their position? I think the support for the Greens has slipped since May, since the local elections. And certainly Andy Burnham's success has become Labour leader, then Prime Minister, has helped Labour. It's pushed it up in the opinion polls. Of course, if there were this by-election in the middle of London, it would, of course, create a big opportunity for him to show he's not just the sort of leader of the north of England, but that he can campaign and win in the south.

16:30So it's a campaign for him, but also for the Greens to show which of these centre-left parties can now win in the middle, not just of London, but other big cities where there's a campaign and a sort of contest between Labour and the Greens. Yeah, we've concentrated a bit on the Greens, but in terms of Andy Burnham, this very early by-election for him, how much damage could it do, how much of a dent could it do to his perceived popularity if it goes against Labour? Certainly if Labour were not to hold Hoban and St Pancras, certainly if the Greens were to win it, It would not be great for Andy Burnham.

17:13And of course, it's worth remembering that Labour has a large number of MPs in London. They require London to continue to vote Labour. And despite Burnham's positioning as the prime minister, certainly the sort of leader of the north, he needs to be able to show he can win in the south because Labour, like all political parties, the Conservatives, all others, they need to be able to win in all parts of the country if they're to form a majority. They certainly need to be able to show that they can bring together a coalition, which is not just a Northern coalition or a Midlands coalition, but a Southern coalition to win a general election.

17:54Tony Travers, many thanks. Coming up later on in the programme, why is Hollywood obsessed with making sequels of films from more than two decades ago? The Owen sisters are two beautiful witches. Hang on to your husband's girl. Meet Romy and Michelle. Remember that time I barked from really bad Mexican food? So gross. Runway. It's not just a magazine. It's a global icon. A winding road that brings us back together again. Well discussed why millennial favourites The Devil Wears Prada, Practical Magic and Romy and Michelle's High School Reunion are all getting new films in 2026. Now, after weeks of equivocation, the German government today formally and very publicly blamed Russia for recent hybrid attacks on its infrastructure, including an attempted drone attack at Leipzig Airport.

19:00It's also announced new sanctions, including the closure of the Russian consulate in Bonn. Germany's Foreign Minister, Johann Waderful, said his country was the target of a well-established pattern of Russian aggression in Europe.

19:19The dangerous behaviour of the Russian Federation is part of a long series of attempts at destabilisation, threats, sabotage and aggression towards Europe. With the attempted attack on Leipzig, the Russian leadership has in fact made a deliberate decision to cause further significant damage to our already severely strained bilateral relationship. Well, Russia has called the German accusations baseless and absurd and has vowed to respond. The President of the European Commission, Ursula von der Leyen, said the EU stood in full solidarity with Germany. Andy Burnham has expressed a similar sentiment on Britain's behalf.

19:56The NATO Secretary-General, Mark Rutte, said the alliance would continue to strengthen its ability to, quote, defend all allies against any threat. Well, today's announcement comes as Russia's been stepping up its attacks on Ukraine and as the United States has been engaging with Russia in interesting ways. Last week, the head of the CIA visited Moscow. This week, Russia's finance minister was brought in from the cold, joining a meeting of G20 ministers in North Carolina. Well, joining us to discuss that is Arkady Ostrovsky, Russia and East Europe editor of The Economist. Good evening, Arkady.

20:29Good evening, Jamie. First of all, the response from Germany or the announcement from Germany and the response from Russia, what do you make of it? Well, I think this is all plausible or implausible denials. I think everybody has no illusions about what's going on here. And, you know, Russia is now targeting military factories and will probably also target logistic hubs that supply Ukraine with weapons. it's not a surprise really because the Russians see that Europe is a side in the conflict it's not observant it's not just financing the war it's actually supplying Ukraine with weapons some of the drones and missiles are made in Europe and if those drones are hitting Russian cities and obviously Germany is not at war and Europe is not at war with Russia nevertheless they feel it's a legitimate target.

21:36I don't think it's a huge surprise and it kind of shows how meek the German reaction is going to be in diplomatic terms. Yes, as far as the Russian reaction is concerned, just in the last hour or two, President Putin has been speaking at a news conference. He's been in Bishkek for a summit meeting and he's been speaking about the war in Ukraine. and he's also been giving his reaction to what Germany's been saying, saying it had planted evidence in order to blame Moscow for the drone attack. He's talked about, you know, rumours that he's going to embark on this new wave of mobilisation as being utter nonsense, part of an information attack on Russia.

22:20What's your assessment then of where he stands at the moment and his strategy going forward in the near future? Yeah, I think he, as I said, he's denying it's kind of part of the hybrid warfare, plausible deniability. I mean, he's saying this, obviously, in order not to trigger Article 5 of NATO. And I think European countries, Western countries are in no rush to do that. either nobody wants an open confrontation, but this exchange, this escalation was expected. Putin is doing it. I think what's happening is that Putin has been in this situation, a kind of a stalemate for months and you could argue for years now on the battlefield, losing tens of thousands of men without actually making much progress.

23:13Now, that is not cost free. He feels probably it's draining economic and political resources. He's losing that kind of silent ascent, if you like, toward the elites are grumbling. And I think he feels that he needs to escalate because the settlement, the peace deal, he can't accept because, you know, he thinks that would be weak on this term. So, you know, I think what we had, the inertia scenario, is just not going to continue. I think there is going to be a step up both in attacks on Ukraine and in attacks in Europe. What might those look like? Similar hybrid attacks to ones that have been seen before?

23:56Yeah, I think there will be just a high intensity of those. This is now pretty much a kind of declared pattern. Leipzig is not the only one. There was a foiled arson attack in Slovakia. There was a naval drone shot in Romania. Finland has asked for Swedish air cover. There will be, there could be, we could see an increase in both arson attacks, explosions in Europe, assassination attacks on the heads of the military industrial complex firms. So we could see all that hybrid activity in Europe. basically Russia saying look you can't pretend you're not part of this if you're supplying weapons and we're going to see a step up already seeing a step up and the Ministry of Defence in Russia announced that it's preparing massive attack on energy could also I fear start targeting heating and water to make basically the cities unlivable and Russia has this advantage in ballistic missiles Arkady, many thanks Arkady Ostrovsky, Russia and Eastern Europe editor of The Economist there.

25:04Now, Tesla may be the first brand that comes to mind when you think of electric vehicles, but the country that's currently making the running in that sector is China. It's become the world's biggest exporter of EVs, despite being largely shut out of the American market. Nearly a fifth of all EVs sold in this country are Chinese. So what is the secret of this success, and why are Chinese electric vehicles so cheap? The BBC's Felicity Hanna has been investigating. Here we are. It plays a little tune every time you get in. It's very cheery. Very cheery. It's a little welcome to your car. This is Emma, and she's not the only driver who wanted an electric vehicle and opted for a Chinese model.

25:42So I chose an EV primarily for the sustainability, but also, to be honest, for the fact that they are just so cheap. 18 % of electric vehicles, or EVs, sold in the UK are manufactured in China. In Western Europe, it's also hitting a record high. Andy Palmer has been described as the godfather of EVs for his work at Nissan on the Leaf, and he now runs the consultancy Palmer Automotive. They've got this advantage in battery technology and they've got this advantage in software technology. The interesting thing is about 91 % of the materials that go into batteries are refined in China, so they really have the supply chain sewn up.

26:25If you look at making an EV and you exclude the battery and let's exclude the fuel tank just to be fair on an internal combustion engine, the cost of manufacturing an EV is lower, except for the battery. The battery technology is key. So they're cheap, they're innovative, but are they ethical? A frequent criticism of Chinese car manufacturers is that the quality, innovation and price competitiveness has only been possible because of the support provided by Beijing. Some argue that China is effectively dumping state-subsidized vehicles in the EU and the UK in order to gain market share and that these prices would not be sustainable.

27:04While that is an accusation, however, that has been strongly disputed by the carmakers themselves, Dr Brian Gu is co-president of the Chinese EV maker Xpeng. I don't think the Chinese government is supporting every player. In fact, there are probably more competitors in China than outside of China. I would say the Chinese company's success is because they came out of the most competitive market, I would say the fittest gym, using that analogy, and bring that technology, the efficiency and the cost competitiveness to markets outside of China. So do you think that those accusations that Chinese EV makers are dumping vehicles are genuine concerns from those governments?

27:43We don't agree with the assessment that China is producing excess capacity. In fact, we don't have enough capacity in China to produce and satisfy our demands. So I would say these accusations are unfounded. European governments are understandably anxious about their homegrown car makers and their workforces. It's a concern shared by the US, which has leveled tariffs of 100 % on Chinese-made vehicles. The question is whether drivers will share those concerns or if they simply want to get behind the wheel of a much cheaper car. Felicity Hanna reporting there. We began the programme by talking about the churning in the bond markets.