Andy Burnham refused to rule out further tax rises in the October Budget during his first Prime Minister’s Questions on Wednesday, as gilt yields climbed to their highest levels in nearly three decades and Conservative leader Kemi Badenoch accused him of being a “spendthrift prime minister”.
Pressed repeatedly on whether he would hike taxes, Burnham told the Commons: ‘I’ve already indicated my first moves were to cut tax but I’m not going to do what any prime minister has done and write the Budget here. That will be the matter for my right honourable friend,’ referring to Chancellor John Healey. Burnham and Healey have set 28 October as the date for that first Budget, according to Reuters, with the aim of reducing prolonged market speculation.
Burnham PMQs Tax Rises Dominate Exchanges with Badenoch
Badenoch opened her six questions by pointing to a warning from Lord Jim O’Neill, whom Reuters identifies as a former Goldman Sachs economist and an informal adviser to Burnham, who said the prime minister’s Commons statement on Tuesday was “the last thing investors wanted to hear”. She told the House that, “sure enough, yesterday the cost of government borrowing rose to its highest in 18 years”.
Burnham replied that he and Lord O’Neill did not always agree, before turning to the Conservative record. ‘When they were in government, we saw 14 years of stagnant growth. We saw 14 years of debt rising as a percentage of GDP,’ he said, attributing current market turbulence to “exposure that they left behind”.
Reuters separately reported that O’Neill warned further rises in borrowing costs would force the government into spending cuts, a prospect that sharpens the pressure on Healey ahead of the Budget.
Gilt Yields at Multi-Decade Highs Squeeze Fiscal Headroom
The bond market backdrop to Wednesday’s session was stark. Ten-year gilt yields stood at 5.29 per cent, while the Telegraph reported that yields on 20-year gilts surged to 5.82 per cent and 30-year bonds climbed to 5.9 per cent, both the highest levels since 1998. The UK’s gilts rose faster than those of any other G7 nation between Tuesday and Wednesday.
The consequences for Healey’s Budget arithmetic are direct. Higher interest costs have cut fiscal headroom to about £13 billion, down from £23.6 billion in the Spring Statement, Reuters reported. That narrowing of room to manoeuvre makes any new spending commitments or tax cuts significantly harder to justify without further borrowing or offsetting revenue.
Sir Howard Davies, the former chairman of NatWest, said concerns about the government’s approach to public spending were causing “some market jitters”. He said the UK “can’t afford” to maintain the pension triple lock, warning: ‘If a government does not grasp that nettle at some point, then I think its credibility is going to be on the rack.’ He called on Burnham to “make some signs” about Number 10’s overall fiscal approach.
Burnham on Defence, Brexit and the Budget
On defence, Burnham insisted there was “no problem” with his commitment to meet Nato’s target of spending 3.5 per cent of GDP on defence by 2035. He referenced a drone attack on Leipzig airport, which the German government has blamed on Russia, saying it should “unite the House in sending complete condemnation of Russia and complete solidarity in supporting Germany and Ukraine”.
Burnham also told the Commons he wanted to abandon the government’s controversial digital ID plan, and reiterated his support for a closer relationship with the European Union ahead of a UK-EU summit he said was due “in the next couple of months”. He told Liberal Democrat leader Sir Ed Davey, who demanded Britain rejoin the single market, that he agreed Brexit had contributed to low growth but stopped short of endorsing full re-entry.
On antisocial behaviour, Burnham said he backed the “broken window” theory of policing, adding: ‘If you let small things go, bigger things come along.’ He also acknowledged “structural issues” affecting maternity services across the UK, citing long-standing midwife shortages.
The HM Treasury Budget on 28 October will be the first concrete test of how Burnham and Healey plan to respond to the market pressure that dominated the prime minister’s parliamentary debut.
