UK taxpayers are already facing a "Burnham penalty" as speculation surrounding the Labour leadership has driven up the government’s borrowing costs, Shadow Chancellor Sir Mel Stride is set to claim. The political turbulence in Westminster, fuelled by Greater Manchester mayor Andy Burnham's potential return to Parliament and a possible challenge to Sir Keir Starmer for the party's top job, has been reflected in moves in the bond markets.
Gilt yields rise amid political uncertainty
Gilt yields, which represent the interest rate on government borrowing, have seen an increase since Labour's recent election results cast doubt on Sir Keir's leadership. This uncertainty has reportedly emboldened rivals, including Mr Burnham and former health secretary Wes Streeting.
In a forthcoming speech in Westminster, Sir Mel is expected to highlight that the yield on 10-year gilts now consistently exceeds 5 per cent. He will describe this as a "damning verdict by markets on the current Government."
Conservative analysis estimates £5.4bn cost
New analysis released by the Conservatives suggests that if the spike in yields observed last Friday – following reports of Mr Burnham's potential route back to Westminster via the Makerfield by-election – were to persist over a five-year period, it could incur an estimated cost of £5.4 billion in total. This figure equates to nearly £300 for every working family across the country.
Yields rose again on Monday before easing back below the levels seen on Friday.
In a New Statesman interview last year, Mr Burnham said the Government had to “get beyond this thing of being in hock to the bond markets”, fuelling City jitters about the potential approach he would have to the public finances.
Sir Mel will say “Andy Burnham is already costing us all money”, adding: “Markets do not care about personalities – they care about the fundamentals.”
One fundamental issue is “the prospect of a new prime minister coming in with a plan to borrow even more, to raise anti-growth taxes even higher than those baked into existing plans and with an insufficient understanding of the connection between these actions and market movements”.
Stride criticises government's fiscal direction
Speaking at a centre for Policy Studies event, Sir Mel will say that “even if Keir Starmer struggles on, it is clear his government is not in control of the fiscal direction of travel”.
The weakened Prime Minister’s ability to act is now shaped by backbench pressure to spend more and hike taxes, he will claim.
“This is a government increasingly unable to take tough decisions and being pulled to the left – a recipe for more borrowing, more taxes and higher inflation,” Sir Mel will say.
Burnham camp defends record
A spokesperson for Mr Burnham said: “The Conservatives and Reform represent the failed economics that has sucked wealth and power out of places like Makerfield for 40 years.”
The spokesman said Mr Burnham was standing in the by-election to show “a different path” for communities in Makerfield “making life’s essentials more affordable, reindustrialising with good jobs, and building council housing”.
In an ITV News interview over the weekend Mr Burnham insisted “there’s got to be fiscal discipline” and the bond markets could not be ignored.
But he pointed to his record in Greater Manchester where there were “rock solid public finances” but also an economy that’s growing at 3%, bucking the national trend.
