Andy Burnham today refused to rule out tax rises being announced when Chancellor John Healey sets out the Budget next month.
The Prime Minister was pressed on the matter repeatedly by Conservative leader Kemi Badenoch during the pair’s first PMQs clash.
Parliament broke up for its summer break just days before Burnham took charge in Downing Street, meaning, until now, MPs have been unable to question the new resident of No10.
During the six week recess, the new Labour leader announced a series of policies aimed at tackling the cost of living, including a £2 cap on bus fares, the scrapping of VAT from electricity bills, and a reduction in business rates for pubs, social clubs, and music venues.
Questioning her opposite number in the House of Commons this afternoon, Badenoch pushed the Prime Minister on how he intended to pay for the cost of the policies.
“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 added: “Will he be honest and tell us: is he preparing to raise taxes again, yes or no?”
Burnham responded after repeated questioning on the issue: “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 continued: “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.”
As well as repeated Burnham’s summer spending commitments, questions over tax rises have partially been fuelled by a rise in the cost of borrowing.
The UK’s long-term borrowing costs hit their highest level since 1998 yesterday.
While borrowing costs have also risen in other countries, including the US, Japan and the EU, the rise means there is less fiscal headroom for the Government to play with at the Budget.
Deutsche Bank’s chief UK economist, Sanjay Raja, said based on Tuesday’s borrowing costs, half of the spare money kept in reserve by Government risked being wiped out.
Meanwhile, Kathleen Brooks, research director at investment company XTB, warned the current economic outlook was akin to “red lights flashing”.
She admitted: “These are not comfortable times for the new government and the new Chancellor.”
