5 crises in Britain that besieged Starmer and haunted Burnham? | economy

Representatives and members of the Labor Party place high hopes in Andy Burnham, the candidate for party leadership, in forming a government capable of confronting the economic and social crises that are currently afflicting Britain, which were the reason for the decline in the party’s popularity in the elections that took place last May.

The current Prime Minister, Keir Starmer, previously faced these crises after winning a large majority in the general elections in July 2024, but he did not succeed in dealing with them in a way that satisfied voters, which led to the rise of the far-right Reform Party led by Nigel Farage in the recent elections, and this rise was one of the most prominent reasons for criticism of Starmer by members of his party.

With the mounting pressure on Starmer from Labor Party representatives and ministers in his government, he had no choice but to announce his resignation from his position, opening the door to the competition for the leadership of the party, which seemed decided in favor of Burnham, the former mayor of Greater Manchester, inheriting a mountain of economic problems that had previously besieged Starmer and he could not escape. The most notable are the following:

First: Debts and loans

Perhaps one of the most prominent problems that the next British Prime Minister must deal with is the deficit in the general budget, and the increase in loans to finance this deficit until the total British government debt reached 3 trillion pounds sterling ($4 trillion), according to the Telegraph newspaper.

The volume of British government loans amounted to 23.3 billion pounds ($31.35 billion) last May alone, according to figures recently announced by the Office for National Statistics and published by the Telegraph newspaper, representing a 30% increase over government loans in the same month last year.

The value of interest paid by the British government on the bonds that the government relies on to finance the general budget deficit rose in May to about 11.7 billion pounds ($15.8 billion), which is the highest monthly interest cost recorded.

The increase in loans is due to the increase in the British government’s expenditures to finance energy subsidy and social aid programmes, in addition to the rise in the interest rate on British bonds, which means that any decision to increase public expenditures will not be easy, as sources must first be searched to finance such an increase.

Second: The need to increase the defense budget

The required increase in defense expenditures represents one of the most important financial problems that have struck Starmer’s government recently, as former Defense Secretary John Healey resigned from his position earlier this June in protest against the failure to increase the funds allocated to military expenses in the manner necessary to maintain the country’s security, according to what Healey said.

The Telegraph newspaper quoted its sources as saying that Burnham held meetings with Labor Party representatives in Parliament and told them that he would increase the funds allocated for investment in defense by more than the amount of 13.5 billion pounds sterling (about 18.2 billion dollars), according to Starmer’s plan.

But the question remains about the source of the expected increase in defense expenditures, especially in light of huge expenditures for social assistance.

The New York Times pointed out in a report by its correspondent in London, Michael Shear, that Andy Burnham, as the next prime minister, must decide what he will do about financing defense expenditures: “Should the army be angry by not providing what it needs to fund social service programs? Or should he tell the British that they must pay more for less services to fund an army necessary to protect the country?”

Third: Inflated social expenditures and weak growth

British Treasury Secretary Rachel Reeves was forced to expand social services programs to satisfy the electoral base of the Labor Party. Then came the closure of the Strait of Hormuz after the outbreak of the Iran War, and the resulting jump in energy prices, to increase government expenditures through energy subsidy programs, and exacerbate the volume of loans that the government obtained to finance these expenditures.

According to British government data, expenditures on social services and assistance in the 2026 budget amounted to about 333 billion pounds sterling ($450 billion), representing about a quarter of all public expenditures, including expenditures on education, defense, and others. It also represents about 10% of the gross domestic product, which amounted to about 3.03 trillion pounds ($4 trillion) in 2025, according to data from the British House of Commons.

According to the Telegraph newspaper, the number of people receiving social assistance from the state due to health problems, including psychological problems such as anxiety and depression, has exceeded about 4 million individuals, which is strongly criticized by the Conservative and Reform parties and other right-wing parties. This, in turn, is one of the thorny issues facing Burnham, as reducing the funds allocated for social assistance may harm the popularity of the Labor Party.

But the alternative, which is to increase taxes to finance other government expenditures, such as defense, will put great pressure on the business sector, especially with the weak economic growth, which reached about 0.6% in the first quarter of this year, and was 0.2% in the last quarter of 2025, that is, growth close to zero.

Weak economic growth represents a very important economic problem that Starmer has failed to deal with, despite repeatedly speaking about the need to raise growth rates to create more jobs and increase state revenues.

A recent study showed that the weak growth of the British economy is clearly linked to exit from the European Union, as Brexit caused a decline in investment in Britain by between 12% and 18%, according to a study by the Office for Budget Responsibility, which explained that Brexit caused a loss between 6% and 8% of Britain’s gross domestic product.

Fourth: The relationship with the European Union

It is noteworthy that Starmer announced his resignation from office one day before the 10th anniversary of the referendum on Britain’s exit from the European Union, or “Brexit,” for which 52% of voters voted in favor on June 23, 2016.

During the ten years following the referendum, six prime ministers have served as Prime Minister, and Burnham is expected to be the seventh of them, which demonstrates the difficulties faced by whoever holds this position in light of the economic pressures exacerbated by Britain’s exit from the European bloc.

Starmer acknowledged that Brexit had caused great harm to the British economy, and said that it had “made Britain poorer and weaker,” which is the opinion of the majority of Britons, as 65% of them believe that it has caused a decline in their standard of living and a reduction in job opportunities available to young people, according to a recent opinion poll conducted by the European Center for Foreign Relations.

But Starmer, despite his acknowledgment of the losses caused by Brexit, refused to return to the European Union in any form for fear of the anger of a sector of British voters that still opposes Britain’s membership in the European Union, and is led by Farage, one of the most prominent leaders of the Brexit campaign.

On the other hand, Burnham supports returning to the European Union, but he in turn refrained from going into details for the same reason, which is the division in British society regarding this thorny issue.

Therefore, Burnham must set a clear position on the details of the relationship with the European Union, including the proposed date for such a return, and whether to hold another referendum, which is not legally necessary, but may be politically important.

Burnham must also determine the type of Britain’s membership in European institutions, as it may be full membership, as it was before Brexit, or membership may be limited to joining specific European agreements.

Wes Streeting, the former health minister who may assume the position of Treasury secretary in Burnham’s next government, according to what the Financial Times reported, after he confirmed his support for Burnham and refused to compete with him for the party leadership, had proposed that Britain join the European customs union, which guarantees the free movement of goods, not services, and does not include the free movement of labor.

Fifth: Immigration file

The immigration file, in turn, is one of the thorny economic-political files in Britain, and one of the most prominent reasons for voting for the right-wing Reform Party in the elections that took place last May, as Farage directed sharp criticism at Starmer because of what he sees as a failure on the part of the Labor government to limit illegal immigration to Britain.

In this context, the New York Times correspondent in London indicated that Burnham expressed his desire to allow immigrants to permanently integrate into Britain more quickly, but he offered his support to Interior Minister Shabana Mahmoud in her efforts to reduce illegal immigration.

Burnham avoided going into details about the immigration issue, which is of great importance to British voters, but he will have to deal with it when he becomes prime minister.

There is no doubt that Burnham faces difficult choices in dealing with all these thorny issues, and his success in facing economic and political pressures and problems remains dependent on his ability to manage these files, and he may prove to be more capable than the six previous prime ministers of Britain in the past ten years.