Prime Minister Andy Burnham faced sharp questions about the UK's economy, including rising borrowing costs, during his first Prime Minister's Questions (PMQs) as leader. Conservative leader Kemi Badenoch pressed Burnham on where government spending would be cut and how he planned to address the nation's increasing debt.
Badenoch stated that the markets appeared concerned about a "spendthrift prime minister" who has outlined spending plans without detailing their funding. She presented Burnham with a choice between higher taxes, increased borrowing, or spending cuts, directly asking if he intended to raise taxes again. Burnham countered that his administration had already implemented tax cuts, citing reductions in VAT on energy bills and business rates for the hospitality sector. He also announced that he and Chancellor John Healey had agreed on an early October date for the Budget to curb speculation.
Burnham, who became prime minister in July, took over from Sir Keir Starmer shortly before Parliament's summer recess. His appearance at PMQs marked his first direct confrontation with the Conservative leader in the House of Commons. During the recess, Burnham had announced several policies aimed at alleviating the cost of living crisis.
The prime minister attributed the current market turbulence to the economic exposure left by the previous Conservative government. He emphasized his administration's commitment to fiscal responsibility, stating that the government would adhere to fiscal rules while simultaneously working to ease cost-of-living pressures.
The exchange occurred as interest rates on government bonds reached an 18-year high. The yield on a 10-year bond is at its highest level since 2008, and a 30-year bond's yield is at its highest since 1998, indicating an increased cost for the government to borrow over extended periods. This situation could potentially constrain the government's spending options as the Budget approaches.
Badenoch also referenced comments from economist Lord Jim O'Neill, who had been considered for a role as Burnham's chief economic adviser but ultimately ruled out joining the government. Lord O'Neill had reportedly praised Burnham's initial five weeks in office for boosting consumer and business confidence. However, he also suggested that the current spike in market interest rates for government debt would necessitate a review of the state pension's triple lock and what he described as "excessive" welfare spending. Badenoch highlighted O'Neill's warning that Burnham's tone during his initial Commons appearance might have unsettled investors, although the peer also noted that the market spike was largely mirroring global upheaval, including that related to the Iran conflict.