Explaining Manchesterism

Good morning from New Economy Brief.

Andy Burnham will not be a candidate in the upcoming Gorton and Denton by-election. 

But with so much focus on Labour’s internal ‘psychodrama’, there has been less attention to the economic side of the story. This is despite the fact that “Burnham is raising the possibility of a completely different political economy”, according to the New Statesman’s Tom McTague. 

This week’s New Economy Brief explores what we know about Burnham’s proposed ‘Manchesterism’ and what it could mean for the UK. 

‍

Defining ‘Manchesterism’.

‘Manchesterism’ is sometimes understood as what the Greater Manchester Combined Authority’s (GMCA) economic development plans have been since Burnham became Manchester’s Metro Mayor, which have seen the city region become the "fastest growing part of the UK economy”.  

But it’s also used to describe Burnham’s economic plan for the UK if he were to become PM. In Burnham’s own words, it’s a “modern and functional response to the high-inequality, low-growth trap that came from the 1980s drive to privatise economic power and overcentralise political power in the Treasury. It is about creating a new politics to plot our way out of that and develop a new economy.”

So in short: ‘Manchesterism’ involves using public ownership to take more control of providing essential goods and services, in order to expand their supply, reduce costs and make the “basics of life” – necessities like housing, energy, water and transport – more affordable for people.

‍

Reversing the ‘privatisation premium’.

In a recent Guardian op-ed, Burnham argued that “the four horsemen of Britain’s apocalypse are deindustrialisation, privatisation, austerity and Brexit”. And the question of ownership is central to Burnham's story about the UK’s poor economic performance, and how to improve it. 

A core tenet of Manchesterism’s economic strategy is that the public control of essentials is necessary to drive down costs for both ordinary people and the state. Burnham points to examples where the GMCA has built more social housing and taken buses into public ownership to reduce costs.

The think tank Common Wealth has termed this the “privatisation premium”. Their Who Owns Britain project shows the UK public has paid £200bn to shareholders of key industries since privatisation. This is equivalent to every household paying the owners of water, rail, bus, energy and mail companies £250 a year since 2010.

Prices are higher than they otherwise would be for essentials because private shareholders demand an extra return on their investment, which would not happen under public ownership. For example, almost a quarter of the average energy bill in 2024 ended up as corporate profits. Meanwhile half the rail industry’s income in 2023-24 came from taxpayers via direct or indirect subsidies, but all its profits went to shareholders. Public ownership also stops multiple private companies extracting profit at each link in the supply chain.

The government can also borrow much more cheaply than the private sector, so it can afford to invest more in building up supply. For instance, Thames Water’s latest £3bn loan pays 9.75% interest, whereas public sector bodies can borrow at close to the bank rate – currently less than half that. The water sector is a prime example of mismanagement and extractive behaviour by shareholders. Writing for Common Wealth, Ewan McGaughey explains that the government could legally take the water industry into public ownership without paying shareholders a penny. 

Burnham’s New Statesman interview also suggested “there might be ways to reclaim some of the money he says has been ‘siphoned out’ in dividends.” Ewan McGaughey proposes that the government could legislate for a ‘bail in provision’ to charge shareholders for the damage they have done by sweating public assets and extracting value from them in the years since privatisation. 

‍

A new macroeconomic strategy.

Reducing costs for households has the clear economic benefit of letting them spend more of their disposable income on goods and services and create more demand in their local economies, rather than the money being siphoned away to line shareholders who own an increasing amount of essential goods and services. 

But there are other macroeconomic benefits too, including making the economy more resilient to inflationary pressures. For example, rebuilding the social housing stock can help limit house price inflation, and building up ‘buffer stocks’ of energy and food (as economist Isabella Weber has recommended) can reduce price spikes if there is a supply shock from a war, natural disaster or other frictions in trade.

A more active approach to managing inflation. The OBR’s latest report showed how government policy can actively reduce inflation and the expected path of interest rates: the measures in the 2025 Autumn Budget to lower energy bills and extend the freeze on fuel duty were estimated to reduce inflation by 0.3% percentage points in 2026. ‘Manchesterism’ seeks to go further in limiting price rises, using what others have called ‘unconventional fiscal policy’ to fight inflation. (Look out for a forthcoming paper from Common Wealth for more on how reclaiming essentials drives down the cost of living and state spending.) Where the climate crisis and geopolitical frictions make the UK economy increasingly unstable, this gives the state a new role in macroeconomic management. (See NEF’s report on how domestic monetary and fiscal policy need to work together in an increasingly shock-ridden world.)

‍

Why are we “in hock to the bond markets”?

Some of Burnham’s critics have accused him of economic incompetence, pointing to his assertion that “we’ve got to get beyond this thing of being in hock to the bond markets”. 

Pushing back against this criticism in a speech at the Institute for Fiscal Studies, Burnham argued that the reason why the UK is ‘in hock to the bond markets’ is due to a neoliberal political economy that has led us into a ‘doop-loop’ of low growth, high debt and sticky inflation. This resonates with the point made by economists such as Dimitri Zenghelis, who has argued stagflation is the main reason for the UK’s elevated borrowing costs in bond markets.

In his IFS speech, Burnham also talked about how GMCA has been ‘roll[ing] back the 1980s’ with public ownership of buses, more social housing, control of public investment and an industrial strategy to regenerate Greater Manchester and spur economic growth. The idea is to expand ‘Manchesterism’ UK-wide to improve the nation’s macroeconomic fundamentals. Burnham also wants to push towards ‘maximum devolution’ so that all regional leaders not only have the powers he has had in Manchester, but can go further still to introduce policies like rent controls. 

‍

The cost of living crisis makes and breaks governments.

There are international precedents, and a strong political case, for such an economic approach. The return of inflation has destabilised governments across the world. ‘Manchesterism’ somewhat resembles Spain’s approach to the cost of living crisis under the government of Pedro Sanchez – one of the few to survive having their support inflated away by price shocks since 2022. Spain implemented a temporary windfall tax on banks and energy companies to fund free rail fares, strengthened rent controls and took many other steps to hold down the price of essentials and deter ‘greedflation’ by private companies.

Manchesterism’s core argument is simple: that the cost of living crisis, weak growth, political instability and bond market instability all stem from the same source: loss of public control over essential goods and services. Burnham is hoping his plan – and his success in putting it into action as mayor – gives us a blueprint for how to reverse this. Whether he’ll get the chance to test that at a national scale is anyone’s guess