Prime Minister Andy Burnham faced his first Prime Minister's Questions against Conservative leader Kemi Badenoch on Wednesday, with the exchange dominated by rising UK borrowing costs and questions over how the government intends to fund its spending pledges.
Burnham told MPs his administration would be "grounded in fiscal responsibility", adding: "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."
The session took place after the cost of borrowing for the UK reached a new 18-year high on Wednesday. The yield on a 10-year government bond hit its highest level since 2008, while the yield on a 30-year bond reached its highest point since 1998. Higher yields mean it costs the government more to borrow over the long term, potentially constraining spending choices ahead of the Budget on 28 October.
Burnham took over from Sir Keir Starmer in July, before Parliament's summer recess, meaning Wednesday marked the first time he had gone head-to-head with Badenoch at PMQs. He had spent the recess touring the UK, announcing a series of policies focused largely on the cost of living.
Badenoch pressed the Prime Minister to say where spending would be cut and how he planned to address the UK's rising debt. "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," she said. "He needs to pay for all his new promises and he has a choice - higher taxes, more borrowing, or spending cuts."
She pressed him directly on tax, saying: "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?"
Burnham did not give a direct answer, instead pointing to tax measures he said his government had already introduced, including a cut to VAT on energy bills and a reduction in business rates for the hospitality sector. "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 said. He added that he and Chancellor John Healey had agreed to bring forward the date of the Budget in order to reduce market speculation.
Burnham also placed blame for the current market turbulence on the previous Conservative government, saying the "turbulence on global markets are because of that exposure that they left behind".
Badenoch went on to raise remarks made by economist and cross-bench peer Lord Jim O'Neill, who had been tipped as a possible chief economic adviser to Burnham but who has ruled out joining the government. Lord O'Neill had told the BBC that Burnham had enjoyed "a great first five weeks" in office, which he said had helped lift consumer and business confidence. However, the peer also warned that the recent spike in market interest rates for government debt would force Labour to confront the triple lock on the state pension and what he described as "excessive" welfare spending. He suggested that comments made by Burnham during his Tuesday Commons debut would have unsettled investors, though he also noted that the spike in borrowing costs was largely mirroring turmoil in US markets linked to the Iran conflict.
Badenoch quoted the peer's assessment in the chamber, saying: "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. 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?"
Burnham responded that he and Lord O'Neill did "not always agree", before turning his attack to Badenoch's recent shadow cabinet reshuffle, in which Andrew Griffith replaced Sir Mel Stride as shadow chancellor. Amid shouts of "point-scoring!" from Conservative benches, Burnham said: "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. 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."
Badenoch rejected the comparison, arguing that Burnham had failed to rule out future tax rises. "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," she said.
The exchange also touched on defence spending after Badenoch raised the alleged Russian attack on Leipzig airport in Germany, urging Burnham to commit to a 3% defence spending target. The government has so far committed only to meeting a 3.5% Nato spending target by 2035, having pushed back an interim 3% commitment to spring next year. Chancellor Healey resigned as defence secretary in June over the previous government's failure to commit to the 3% increase, a move widely seen as contributing to the end of Sir Keir Starmer's premiership.
Burnham defended his government's position, telling MPs: "The very reason I appointed this Chancellor to his position is because of his strong commitment to the defence of our country and to defence spending. We will fully fund the defence investment plan and at the spending review we will set out a plan to meet the Nato commitments by 2035, there is no problem with our commitment to defence."
