The prime minister said his government will make difficult choices at the 28 October Budget, rejecting a former Bank of England economist's claim that markets now view his administration as a "traditional tax and spend socialist government." Andy Burnham told broadcasters he would not gamble with the economy and pointed to spending decisions already made since taking office.
Andy Haldane, who has acted as an economic adviser to the prime minister, told LBC this week that investors had moved from "cautious optimism" to "studied scepticism" about the government's plans. He warned markets were asking whether Burnham would risk angering Labour MPs by cutting public expenditure, and urged the prime minister not to increase taxes further. Haldane said the government's "fiscal Achilles Heel" was an unwillingness or inability to reduce spending and mocked its style, calling it "a traditional tax and spend socialist government with better TikTok videos."
Burnham dismissed that characterisation, saying "That doesn't tell the story. We are not that." He listed steps taken since taking office, including shifting funds within departmental budgets to pay for early cost of living measures and cancelling the planned rollout of a digital ID scheme. "So it's not the case that we aren't going to take difficult decisions," he said, adding officials must keep the economy on track as inflation has risen partly because of the "situation in the Middle East."
The prime minister faces competing pressures. Unions have demanded higher taxes on banks to help subsidise energy bills for poorer households, a proposal the Trades Union Congress put forward at its conference. TUC general secretary Paul Nowak said taxing banks would demonstrate Labour was "on your side" and appealed to voters worried about energy costs.
Budget options are constrained by manifesto pledges not to raise main rates of income tax, VAT or National Insurance, while Burnham has also pledged to meet the debt and spending targets set by the previous government. Rising UK borrowing costs and a deteriorating global backdrop, including the Iran war, have increased the cost of servicing public debt and are expected to erode the £24bn buffer the government inherited. Since taking office, Burnham has committed around £1.8bn for cost of living support, in part by reallocating existing budgets, a move that drew criticism when funding for a proposed VAT cut on household electricity was linked to money earmarked for the digital ID programme.
With markets signalling scepticism and borrowing costs up, the administration will enter the autumn facing a narrower range of choices. Haldane framed the situation as a "straight choice" between raising taxes and cutting spending; the Budget on 28 October will show which route Burnham takes.
