The Burnham Identity

A Blairite, Brownite and a Corbynite walk into a bar; “What you having Andy?”. So runs the old joke. But in the early hours of Friday 19th June, a man born in Aintree, Merseyside, who grew up in Warrington, has governed Manchester and supports Everton Football Club will have to pick a side.  

Or will he? The most successful leaders represent broad coalitions. To win, they have to be a chameleon. The current Republican American president started out as a Democratic donor and real estate mogul; the current French president had to create a whole new party to shake off his time serving as economy minister in the discredited prior government; and a Brussels-educated member of the Oxbridge elite won a landslide victory on a tide of anti-establishment and eurosceptic sentiment to become UK Prime Minister in 2019. 

The difference between Burnham and Trump/Macron/Boris is that he won’t have won a direct mandate. And he will inherit a majority that was so large and so broad that it has already fractured. Whilst there is a centripetal force that comes from being a winner, the relentless fratricide will have left too many wounds. From the first minute, like Jason Bourne, they will be coming for him. And “they” won’t just be the usual troublemakers. Alongside the growing pool of left-wing headbangers there will be Starmerites who have no future ahead of them. There are 91 MPs who are paid government ministers, which, after some retentions, leaves almost one fifth of the party cast aside once the new leader sweeps in. 

The current working majority is 166, meaning 83 MPs could scupper government legislation. If Wes Streeting or Al Carns is serious about a leadership challenge, then the 81 MPs required to get their name on the ballot means the new PM already has an effective veto from those for whom he wasn’t the first choice. And they won’t be the only people to put their names into the ring. Remember Alison McGovern and Paul Barker who tried to run for the Deputy Leadership last September? Probably not, but that didn’t stop them once the contest opened. Starmer might continue to claim he would automatically join the ballot, as is his right, but he could easily be left in the unpleasant position of almost all of his own MPs nominating someone else. If three candidates made it over the threshold then 60% have publicly chosen an alternative. It’s not tenable for him to carry on.

In reality, there will not be a contest. Starmer’s fighting talk and Streeting’s ever more candid threats are simply negotiations for their position in The Burnham Supremacy. Once Burnham has won, he will have unstoppable momentum. Not only will he have won, he will have vanquished the villainous right-wing in the process. He will deliver hope to his MPs that there are still some safe Labour seats left. And every single question about the government’s plans will be directed to him. 

You can already see the transition of power in action. We don’t usually have a by-election candidate making £350 million promises to cut business rates, funded by higher taxes on tech companies and tackling tax evasion. Nor are they usually asked by the BBC to explain, word for word, what the fiscal rules are. They’re not usually chased by Bloomberg to commit to the fiscal rules and to rule out holding a snap general election. 

And it’s not just about Burnham. The markets don’t care that Rachel Reeves pulled out of the CBI Dinner at the last minute or the summertime VAT tinkering because she is no longer relevant. The future occupant of No11 is Miliband or Mahmood shaped. The economic policy detail has been written by Louise Haigh or Mark McVitie. The Burnham Identity has a whole new cast list.

Markets have mostly ignored this new reality, apparently preferring to wait until the outcome of the by-election and in any case anticipating little policy change once a drawn-out contest concludes. This is complacent.

Burnham will almost certainly win the by-election, and win convincingly. 

As outlined in our latest podcast with Rob Ford, Sky News Elections Analyst and Professor of Politics at Manchester, Burnham holds the advantage:

• The seat has never not returned a Labour MP.
• The Labour Party is part of its identity.
  • As Rob Ford puts it in his Substack, it’s “a seat of white, British born, home owning commuters working everyday jobs full time”. In the North West on the outskirts of Merseyside, that means Labour. 
• It’s not “Red Wall” – it still voted Labour in 2019 despite being in the top 12% of Leave-voting seats.
• Reform performed well in the local elections but at least some of that was down to voters sending a message to the Labour Party that they must change tack.
  • The Reform message from the local election is now Burnham’s: Vote for me, get rid of Starmer.
• And Reform face a challenge from their right flank in the form of Rupert Lowe’s Restore.
  • Historically there were some wards in Makerfield that voted BNP and in this by-election it is win-win for them to vote Restore: they’ll get rid of Starmer and tell Farage to move further right.
  • Splitting the right-wing vote will help Burnham.
• Then there is the Burnham factor.
  • He is from the area, with his daughters having gone to school in the constituency and he represented part of the current seat when he was previously an MP in the now-neighbouring constituency of Leigh.
  • In the Manchester Mayor elections, the Wigan Borough voted overwhelmingly for him:

• And then there is the unique nature of this particular by-election. Makerfield voters will be able to choose the next prime minister.
  • For a constituency that has often felt unheard in Westminster, this is the ultimate local representation. The UK has not had a prime minister from the North West in over a century and don’t Lancastrians, Liverpudlians and Mancunians know it.  

Constituency level polls confirm Burnham has the advantage. Others before polling day might show a closer race, which is helpful for Get Out The Vote for all parties. Turnout is likely to be high, meaning an even bigger eventual win for Burnham, propelling him into Downing Street within a few weeks. 

As we note in our Year Ahead, we are in a “platy-leptokurtic” world. That means the market tends to sit more often in the upside of the distribution, with steady positive returns, ignoring downside risks. But once those risks become clear and present, the market runs to the other side of the boat. Our heuristic is that this seems to happen around the 25 level in the VIX. At that point, the clash between Burnham’s lip service to the fiscal rules alongside promises of nationalisation and reversing the rise in national insurance will be forced to face reality.