Beyond Westminster

27th July 2026

Britain has become accustomed to changing Prime Ministers. Andy Burnham’s recent appointment marks the seventh occupant of Number 10 in little more than a decade, bringing with it the familiar wave of commentary about what a new government might mean for the economy and financial markets.

It is an understandable question. Governments influence taxation, public spending, regulation and investment, all of which have consequences for households, businesses and investors. But we think that rather than focusing solely on what might change, it is worth considering what is designed to stay the same. The answer often tells us far more about the likely direction of policy and markets than the identity of the individual entering Downing Street.

 

Burnham’s policy direction

Financial markets are constantly trying to assess the future. That means there is a huge value placed on predictability. Governments are expected to change priorities over time, but investors need confidence that the framework within which those decisions are made remains credible. Institutions help provide that continuity by reducing uncertainty about how policy is developed, scrutinised and implemented.

A change of Prime Minister is rarely inconsequential as they eye changes to tax policy, spending priorities, planning rules, trade deals and the regulatory environment. However, a government’s room for manoeuvre tends to matter more than its manifesto. Burnham’s programme provides a useful illustration of this distinction between political ambition and institutional constraint.

His emphasis on devolution, infrastructure investment and housebuilding suggests a government more willing to intervene in the economy.¹ Devolution would bring changes to both what gets decided across fiscal or planning areas, and who decides it. At the same time, he has committed to stick to the government’s fiscal rules, and his decision to bring in former Bank of England chief economist Andy Haldane as an adviser suggests he knows that none of this works without the markets on side.

That credibility was tested before he’d even taken office. Comments in September 2025 that Britain needed to get beyond being “in hock to the bond markets” drew a sharp response from the Treasury and renewed debate over how far any government can disregard the investors financing public borrowing. ²

The same balance is evident in taxation. Burnham has long argued that Britain taxes labour too heavily relative to wealth. He has supported substantial property tax reform, including proposals under which a proportional tax based on current property values would replace council tax and stamp duty. ³

Capital gains tax is likely to remain part of the pre-Budget debate, particularly given long-running calls within Labour and associated think tanks to reduce the difference between the taxation of gains and earned income. Full equalisation would nevertheless involve material behavioural and economic risks, because taxpayers can alter the timing and structure of disposals. Reform of inheritance tax and the top rate of income tax also remain possibilities, even if they appear less likely to feature prominently in the government’s earliest fiscal measures.

Whatever Burnham proposes on capital gains or property tax, it doesn’t happen in a vacuum. Any such policy would still have to fit within the government’s fiscal rules, survive scrutiny from the OBR (office for Budget Responsibility) and keep the confidence of the bondholders who fund public borrowing. This institutional framework shapes whether an idea makes it into law, and in what form.

 

Government guardrails

Since May 1997, operational responsibility for setting interest rates has rested with the Bank of England’s Monetary Policy Committee rather than ministers. Governments appoint the Governor and determine the Bank of England’s remit, but day-to-day monetary policy is deliberately insulated from political pressure. Investors may disagree with individual interest rate decisions, but they have generally retained confidence that those decisions will be taken within a well-established and independent process.

Fiscal policy follows a similar principle. Governments remain free to decide how much to tax and spend, but the OBR independently assesses the economic and fiscal outlook alongside those plans. The OBR does not approve or reject government policy. It produces the official forecasts and assesses the implications of announced policies, including whether the government is on course to meet its fiscal targets.

Parliament itself represents another important source of continuity. However ambitious any incoming administration may be, legislation must still pass through Parliament. The size, cohesion and willingness of the government’s Commons majority to support difficult measures will influence how quickly its programme can be implemented.

Markets impose their own guardrails. The government pays for its borrowing by selling gilts, and the price investors pay for them reflects a constant judgment on whether the public finances add up. Borrowing costs move in line with that confidence each trading rather than being confined to the Budget or polling day.

 

Markets test credibility every trading day, not just at elections

 

Taken together, these institutions do not prevent political change, nor should they. Elections exist precisely because governments are expected to pursue different priorities. What they provide is confidence that economic policy will continue to be developed, scrutinised and financed in a similar way, allowing investors to distinguish between a change in policy and a change in the framework through which policy is made.

 

When credibility is tested

The autumn of 2022 makes the point well. Liz Truss’s mini-Budget paired large, unfunded tax cuts with no independent forecast from the OBR, leaving the market with nothing to show the numbers had been properly tested. ⁴

Gilt yields climbed, the pound fell, and within days the Bank of England had to step in to calm the bond market. The government had no choice but to reverse course – first the U-turn, then Chancellor Kwarteng’s sacking, then Truss’s own resignation. There are limits investors and institutions place on any government, however large its majority, and fiscal plans that bypass scrutiny don’t survive contact with the market for long.

 

The Bank’s credibility survived – the Budget’s did not

 

The same pattern shows up outside the UK. Investors have grown uneasy about the political pressure on the US Federal Reserve to cut rates faster, despite inflation running above its target level. The pressure raises questions over the Fed’s independence over the longer term. While markets can usually adapt to changes in political leadership, they become considerably less comfortable when the institutions underpinning economic order appear less predictable or less independent.

 

Looking beyond Westminster

As the new government begins its work, attention has naturally focused on Cabinet appointments and early policy announcements.

Few had John Healey pencilled in for the chancellor’s job, with consensus leaning towards Shabana Mahmood or Ed Miliband. Healey brings credible experience at the Treasury under Blair, though close attention will be paid to his fiscal discipline given he recently resigned as defence secretary after arguing for higher spending.

For those with a long-term view, remember that markets tend to take a new Prime Minister in their stride – much like Larry the cat, who has outlasted six of them and shows no sign of handing in his notice. What matters more are the guardrails of fiscal rules, OBR scrutiny, and the gilt market’s verdict. The harder test comes in the autumn, when Burnham’s first Budget will show whether his stated instincts across tax and property translate into big policy changes.

Our usual philosophy applies, namely that we will continue to build portfolios which capture returns across a range of economic and political cycles rather than react to short-term developments. Global growth, interest rates, corporate earnings and currency movements will continue to drive portfolio returns over the medium and long term, but tax policy, if it changes, has a direct and personal effect on the returns investors actually receive. To that end, our financial planning team will keep a close watch on developments as they unfold, and will assess individual positions and recommendations where needed.

If you have any questions on the above or to find out more about our investment service, please call 020 7287 2225 or email hello@edisonwm.com.

 

Important information

This insight piece does not constitute advice.

The value of investments and the income arising from them can go down as well as up and is not guaranteed, which means that you may not get back what you invested. Past performance is not necessarily a guide to the future.

Sources:

¹ Local Government Association, June 2026.

² Morningstar.co.uk, July 2026.

³ House of Commons Library, July 2026.

⁴ Bank of England, March 2023.

Edison Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. The company is registered in England and Wales and its registered address is shown below. The company’s registration number is 06198377 and its VAT registration number is 909 8003 22. The Financial Conduct Authority does not regulate tax planning or trusts.

The information contained within this insight piece is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases, and reliefs from taxation may be subject to change.

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