Andy Burnham received an early boost on Thursday as official figures showed the UK economy grew 0.1% in May, beating forecasts of flat growth — but the incoming prime minister immediately faced warnings over tax rises and a looming constitutional clash over the House of Lords. The Office for National Statistics reported that GDP rose after a 0.1% fall in April, driven by a 0.3% increase in the service sector, though production fell 0.5% and construction dropped 0.8%. The three months to May saw growth of 0.7%, down from 0.8% in the previous quarter. The ONS flagged that the Middle East conflict had disrupted global supply chains, particularly because of the conflict in Iran. Pantheon Macroeconomics economist Rob Wood said the resilience meant interest rates were set for a “prolonged period” on hold, adding that “solid growth is one reason that a hike is more likely than a cut”. Danni Hewson, head of financial analysis at AJ Bell, called the 0.1% rise “hardly cause for celebration” and warned that Burnham faces “tough choices”. The TUC’s Paul Nowak said the outlook “remains uncertain”.
Burnham, who becomes prime minister on Monday, has not ruled out a wealth tax. In an interview with former footballer Gary Lineker, the Labour MP said he would take time to review the public finances and wanted to focus on “bringing people together”. “I'm not going rule things out right now,” he said, adding that “at some point that might be having to ask for a little more” in tax. He has pledged not to raise VAT, income tax or national insurance as per Labour’s 2024 manifesto, but has suggested increasing business rates on warehouses to fund cuts for pubs. Reform UK’s Robert Jenrick said Burnham had admitted “people will have to pay more in tax”, while Conservative leader Kemi Badenoch accused him of “obsessing about who they can tax to pay for more benefits”.
“UK economy grew 0.1% in May, beating forecasts, but Burnham faces tax rise questions and Lords reform battle.”
Meanwhile, Burnham’s plan to replace the House of Lords with an elected “senate of the nations and regions” has drawn a rare intervention from the Lord Speaker. Lord Forsyth of Drumlean will warn on Thursday evening that the proposal risks blowing a “constitutional fuse”. In a speech to the Hansard Society, he will question whether an elected chamber would function as well as the Lords, warning of US-style “gridlock” and regional representatives prioritising their own areas. Burnham has called an unelected second chamber “quite scandalous”, telling The House magazine: “I don’t think we can justify half of our national legislature being unelected.” Lord Forsyth will say that anyone advocating “rewiring politics” must consider whether their new system would “keep the lights on”.
With Burnham due to appoint his cabinet — Shabana Mahmood is now seen as the front-runner for chancellor — the prime minister-in-waiting must navigate an economy that is growing only modestly, a tax system constrained by manifesto promises, and an upper chamber that is ready to fight for its existence.