LONDON, June 22 (Reuters Breakingviews) – The list of strategic mistakes that led to British Prime Minister Keir Starmer’s resignation on Monday will fill many a book. Yet most stemmed from the ​belief that an economy felled in 2023 by the war in Ukraine was set for a big rebound, ‌enabling both rapid growth and easy fiscal consolidation. It didn’t. Now, as the war in Iran ebbs, his successor may face a similar test — and will need to ensure the government appears firmly in control.

The path is clear for Andy Burnham to succeed Starmer. The former Manchester mayor favours tighter state control of ​utilities and higher taxes on property, wealth and investment income. But he has pledged to honour Starmer’s fiscal guardrails like ​balancing day-to-day spending and putting debt-to-GDP on a falling path. Since those rules are judged against official ⁠forecasts rather than actual revenues and spending, the Office for Budget Responsibility (OBR), the UK’s independent fiscal watchdog, will retain its role as ​the ultimate arbiter of fiscal credibility.

The OBR’s projections have recently held outsized sway, with a downgrade to productivity causing havoc to last year’s ​autumn budget. What has attracted less attention is whether Starmer’s promises were built on forecasts that turned out to be too rosy. Chief among them was ruling out increases in income and value-added taxes. This left officials constantly scrambling to make ends meet. One solution was raising employer National Insurance, angering ​businesses and contributing to higher inflation and interest rates in 2025.

In 2024, however, expecting a strong recovery made sense. The departure of ​Brexit-friendly Conservative governments held the promise of renewed foreign investment. Inflation had fallen back to target, consumption was poised to boom and OBR forecasts suggested ‌GDP growth ⁠would rise from 0.3% in 2023 to 2% in 2025, bringing workers out of welfare.

Instead, households remained cautious, disability spending rose and a combination of food inflation and a new energy shock in the Middle East dimmed prospects and kept interest rates elevated. By March, the OBR expected growth of only 1.1% this year.

Admittedly, no government can escape bad luck and Starmer’s government did much that appeals to ​its base, such as taxing businesses ​to maintain benefits, expanding workers’ ⁠rights, building renewable-energy capacity and curbing migration. But it was an error to choose economic variables wholly outside of its control as a yardstick for success.

A similar trap may now await Burnham: if ​the U.S. peace deal with Iran holds, the data could suddenly look more flattering in 2027, ​and a business‑friendly pick ⁠for Treasury chief, such as former Health Secretary Wes Streeting, would calm bond markets. But tweaking taxes and handouts won’t win Burnham an election in 2029. For that, he needs the type of obvious win that made him popular in Manchester. A bold overhaul of social housing could ⁠be one. ​Regardless, he needs to chart his own course: relying on macroeconomic tides has ​a way of steering ships straight into the rocks.

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