In his speech in Manchester on 29th June, Andy Burnham made some interesting proposals.

He wants all parts of the UK to be able to take greater public control of essential services like water, housing, energy and transport. He also pledges 10-year plans to bring down the cost of these essentials to individuals, families and businesses.

He proposed that regions would be supported to set clear and credible industrial ambitions, with support to achieve them, encouraging more cross-UK partnership between places with complementary industrial clusters. He also wants to shift public procurement so British-based companies are in a better position to win contracts and to protect sovereign manufacturing and production capability across the country in critical sectors like steel, defence, energy, food and farming.

He plans the biggest council house building programme since the post-war period, using vacant public land to reduce costs. This is framed around adopting a national Housing First philosophy pioneered in Finland, plus higher density residential development in towns and business rates reform to support community-building pubs and high street businesses. He linked this to childhood memories of a “secure” council home as a foundation of working-class aspiration that has since been lost.

On education, he calls for ending a school system configured almost entirely around the university route, building instead genuine parity between academic and technical education. He also wants more 45-day work placements and apprenticeships for young people.

Would the outgoing Starmer/Reeves administration have had much disagreement with proposals like this? Probably not with the objectives themselves, but it would have had grave concerns about the methods used to deliver them. According to Burnham, the overarching mechanism is a new “No. 10 North” operation based in Manchester, intended to redistribute power from Whitehall to the regions and nations of the UK.

It is certainly true that progress in improving living standards outside London has been dismal. Burnham associates this failure with the concentration of power in a remote and poorly informed Westminster and Whitehall. Yet this mistakes the symptoms for the underlying cause.

The central problem is not that too much power resides in Westminster. It is that Westminster has voluntarily made its own power dysfunctional by adopting a set of fiscal rules that prevent it from using the capacities that come with issuing the nation’s currency. These rules are a political choice rather than an economic necessity. They treat the British government as though it were financially constrained in the same way as a household, a business or a local authority. It is not.

We saw this clearly with Reeves’ first Budget, where it was argued that winter fuel payments for most pensioners had to be abolished because otherwise the fiscal rules would be breached and confidence in the economy undermined.

Reeves’ entire argument has been that she would like to do many worthwhile things but unfortunately “there is no money.” This ignores the constitutional reality that the United Kingdom is a currency-issuing state. The British government can never run out of the currency that only it can issue. It can always meet liabilities denominated in sterling. It is therefore not financially constrained in the way households, firms or councils are.

This does not mean there are no limits to public spending. There certainly are. But the relevant question is not “Where is the money?” It is “Where are the workers, the skills, the materials and the productive capacity?” The real constraint on a currency-issuing government is the availability of real resources and, ultimately, the risk of inflation if public spending outpaces the economy’s ability to produce goods and services.

Once this distinction is understood, the limitations of Burnham’s proposals become much clearer.

Indeed, an argument could be made that there has already been too much devolution in Britain. Under Margaret Thatcher, and successive Conservative and Labour administrations, much of the state’s capacity to shape economic development has effectively been devolved to private markets, often with disappointing results. The consequences are visible in stagnant regions, deteriorating public services and the growing electoral appeal of parties such as Reform and Restore.

The Bank of England is legally required to ensure that payments authorised by Parliament are settled. Parliament is the legislature of a currency-issuing state. It never has to ask whether sterling is available before authorising expenditure.

Devolved institutions occupy an entirely different position. Councils, combined authorities and any new regional institutions are currency users. Before they can spend, they must first obtain sterling from taxation, borrowing or transfers from central government. Unlike Parliament, they cannot create the currency they spend.

This distinction is fundamental. Devolution may redistribute administrative authority, but it does not redistribute monetary sovereignty. Unless Westminster provides the necessary financial resources, devolved institutions remain constrained by budgets over which they ultimately have little control.

Burnham largely glosses over this distinction. He speaks approvingly of “sound public finances” and of operating within “our current fiscal rules.” Yet these concepts are appropriate for currency users, not for the issuer of the currency itself. For the British state, the relevant question is not solvency but inflation and the effective mobilisation of real resources.

One has the impression that Burnham recognises there is some tension here but has yet to resolve it. By accepting the existing fiscal rules as fixed constraints, he inadvertently accepts the very doctrine that has starved the regions of investment over the past fifteen years.

When implementing the New Deal during the Great Depression, President Roosevelt faced a related administrative question. Large sums were allocated by the federal government to states and counties, but local institutions frequently administered the programmes themselves. Administrative decentralisation proved entirely compatible with monetary centralisation because the financing always came from the federal government, the issuer of the dollar.

One suspects that Burnham has something similar in mind. If so, he must remain absolutely clear about where the money comes from. It comes from the central government, and only the central government, as the issuer of sterling, can focus primarily on mobilising the nation’s real resources rather than worrying about finding the money in advance.

There are at most three years until the next general election. Creating the network of devolved institutions Burnham envisages is far from a trivial undertaking. One suspects that a groan may have gone through the hearts of working people in the impoverished regions when they learned that they would have another layer of bureaucracy to deal with.  Many people living in Britain’s struggling regions may reasonably wonder whether another layer of bureaucracy is what they most urgently need. They want secure employment, affordable homes, reliable public services and opportunities for their children.

Devolution may improve democratic accountability and enable policies to be adapted to local circumstances. But it cannot by itself overcome Britain’s economic malaise if the institutions receiving these new powers remain financially dependent upon a central government that continues to behave as though it were financially constrained.

The decisive question is therefore not where administrative authority is exercised but where monetary sovereignty resides. Unless Westminster abandons fiscal rules that treat the issuer of sterling as though it were merely another currency user, no amount of constitutional redesign will produce the transformation that Burnham seeks. The deeper risk is that, by accepting those rules as immutable facts of economic life rather than political choices, Burnham ends up legitimising the very doctrine that has prevented Britain’s regions from flourishing.