Burnham pressed on economy at first PMQs as borrowing costs surge.

Andy Burnham, in his inaugural Prime Minister’s Questions, asserted that his administration would be "grounded in fiscal responsibility," a pledge delivered amidst a challenging economic backdrop characterized by significantly rising UK borrowing costs. The Labour leader, who assumed the premiership from Sir Keir Starmer in July, faced his first direct parliamentary confrontation with Conservative leader Kemi Badenoch, who immediately pressed him on the pressing issues of national debt and public spending.

Badenoch initiated her questioning by demanding clarity from Burnham on where his government intended to implement spending cuts and how he planned to address the nation’s escalating debt burden. Her challenge was underscored by Wednesday’s stark economic figures, which saw the cost of government borrowing for the UK reach a new 18-year high. This meant the interest rate the government had to pay to borrow money from investors was at a level not seen since the financial crisis of 2008 for 10-year bonds, and even further back to 1998 for 30-year bonds. Such increases reflect a market perception of higher risk associated with UK debt, driven by a combination of global economic uncertainties and domestic fiscal concerns.

In response, Burnham deflected the blame squarely onto the preceding Conservative government, arguing that the "turbulence on global markets are because of that exposure that they left behind." This was a clear reference to the economic instability that followed the short-lived Liz Truss administration, whose unfunded tax cuts in the 2022 mini-budget sent bond yields soaring and triggered widespread market panic, severely impacting public confidence and household finances. Burnham aimed to frame his administration as a necessary corrective to what he depicted as a legacy of economic mismanagement.

Having taken the reins from Sir Keir Starmer just before Parliament’s summer recess, Wednesday’s PMQs represented Burnham’s first opportunity to directly engage Badenoch in the Commons. He used the platform to reiterate his commitment to a prudent economic approach, emphasizing that his ministers were actively engaged in strategies to reduce the national debt. He informed Members of Parliament, "This will be a government grounded in fiscal responsibility. It will stick to the fiscal rules, but at the same time, we will help reduce cost-of-living pressure on our constituents, and that’s the approach that we will take." This statement aimed to reassure markets and the public that his government would balance fiscal discipline with measures designed to alleviate the financial strain on ordinary families, a key promise from his leadership campaign.

The climbing interest rates on government bonds, specifically the yield on a 10-year bond hitting its highest level since 2008 and the yield on a 30-year bond reaching a peak last seen in 1998, carry significant implications. These higher yields mean the government must allocate a larger proportion of its budget to servicing its debt, effectively reducing the funds available for public services, infrastructure investment, or other policy initiatives. This looming constraint on spending choices takes on added urgency as the 28 October Budget approaches, with Chancellor John Healey facing the difficult task of balancing the books. Economists warn that persistently high borrowing costs could stifle economic growth and exacerbate the cost-of-living crisis by potentially translating into higher mortgage rates and more expensive credit for businesses and consumers.

Burnham’s PMQs debut followed an intensive summer recess period during which he embarked on a nationwide tour, unveiling a series of eye-catching policies. These initiatives were predominantly focused on tackling the pervasive cost-of-living crisis, including proposals for energy bill relief, increased support for families, and measures to boost regional economies. While popular, these announcements also attracted scrutiny regarding their funding.

Badenoch seized on this perceived lack of detail on Wednesday, asserting that the Prime Minister had presented numerous spending plans without providing a clear roadmap for how these commitments would be financed. She lambasted Burnham, stating, "The markets are clearly worried that we now have a spendthrift prime minister who wants to say yes to everyone but cannot tell us where the money is coming from." Her critique painted Burnham as economically reckless, accusing him of repeating the very errors that led to the Truss government’s downfall. She presented him with a stark choice, demanding he clarify whether he would resort to "higher taxes, more borrowing, or spending cuts" to fund his agenda. "Yesterday he said change begins with honesty, so will he be honest and tell us: is he preparing to raise taxes again, yes or no?" Badenoch pressed, seeking to corner him into a definitive answer ahead of the Budget.

Burnham, however, countered by highlighting that his administration had already taken steps to cut taxes, citing the reduction of VAT on energy bills and a cut in business rates for the hospitality sector. These measures, he argued, demonstrated a proactive approach to easing financial burdens while stimulating economic activity. He firmly rejected the notion of preemptively outlining the entire Budget during PMQs, stating, "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." He further revealed that he and Chancellor John Healey had agreed on an earlier date for the Budget, a strategic decision aimed at reducing market speculation and providing greater fiscal clarity sooner rather than later.

In a shrewd political move, Badenoch also invoked comments from Lord Jim O’Neill, a highly respected economist and cross-bench peer who had been widely tipped to become Burnham’s chief economic adviser but had ultimately ruled out joining the government. Lord O’Neill’s decision, reported recently, had created a ripple of speculation within Westminster. Speaking to the BBC, O’Neill had offered a mixed assessment of Burnham’s early premiership, praising him for "a great first five weeks" which he believed had contributed to lifting both consumer and business confidence. However, O’Neill also delivered a critical warning, suggesting that the "current spike in market interest rates for government debt" would inevitably force a Labour government to confront difficult decisions, specifically "dealing with the triple lock" on the state pension and addressing "excessive" welfare spending – areas traditionally considered sacrosanct by Labour.

Badenoch strategically highlighted Lord O’Neill’s more critical observations, particularly his warning that the Prime Minister’s tone during his Tuesday Commons debut might have unsettled investors. Although O’Neill had also qualified his remarks by noting that the spike in borrowing costs was largely mirroring US market upheaval concerning the Iran conflict, Badenoch focused on the perceived domestic impact. "Lord O’Neill, a close friend of the prime minister, said yesterday’s statement in the Commons was the last thing investors wanted to hear," Badenoch asserted. "Lord O’Neill is a serious economist. He knows what he’s talking about and, sure enough, yesterday the cost of government borrowing rose to its highest in 18 years. How does he plan to tackle the government’s rising debt costs?" she reiterated, using O’Neill’s authority to underscore her economic attack.

Burnham, responding to the challenge, acknowledged that he and Lord O’Neill did "not always agree." He then pivoted to a sharp counter-attack against Badenoch’s recent shadow cabinet reshuffle, which had seen several MPs who were part of former Conservative prime minister Liz Truss’s ill-fated leadership team brought back to her front benches. To shouts of "point-scoring!" from the Conservative side, Burnham launched into a scathing critique: "Can I also say to her and the whole of her new shadow cabinet, the majority of whom were part of a government that lasted for 49 days, a short-lived government that crashed confidence in the economy and hammered people’s mortgages." He continued, directly challenging Badenoch’s judgment: "She took a decision at the weekend, she removed a shadow chancellor who said that the Truss mini budget was a mistake, and she replaced that shadow chancellor with one that helped to write the Truss mini budget." This was a direct jab at Andrew Griffith, who replaced Sir Mel Stride as shadow chancellor in the Tory reshuffle, highlighting Griffith’s previous role as a key economic adviser during the Truss premiership.

Undeterred, Badenoch concluded her questioning by reiterating her central argument that Burnham had failed to rule out tax rises. She drew a direct parallel between his current approach and the errors of the Truss government, claiming: "The reason why that budget failed was because spending was announced before the money to pay for it, which is exactly what he is doing right now." The heated exchange at Burnham’s first PMQs set the tone for a parliamentary session dominated by economic anxieties and a fierce political battle over fiscal responsibility, with the upcoming Budget poised to be a pivotal moment for both the government and the opposition.