Andy Burnham has been warned there is “no scope” for extra borrowing to fund his cost-of-living pledges, as a major think tank said the prime minister must raise taxes or cut spending instead.
The National Institute of Economic and Social Research (Niesr) said the public finances will be squeezed by more persistent inflation driven by the Iran war, and questioned whether Burnham has “fully thought through” how his promises will be paid for.
“Niesr warns Burnham cannot borrow more; must raise taxes or cut spending to fund pledges.”
“There’s clearly no scope for increasing borrowing, so it is about choices,” said Stephen Millard, Niesr’s deputy director for macroeconomics. He suggested the government could look at the welfare bill, the triple lock on pensions, or reform council tax towards a land value tax. “Once you’ve done all of that, then I’m afraid I would break the manifesto promise and would be looking at the income tax rate.”
The warning came as Burnham hosted Volodymyr Zelensky in Portsmouth, his first international visitor since entering No 10. He told the Ukrainian president: “I am personally with you 100%, Mr President, and I will honour every commitment this country has made to Ukraine in full.” The prime minister announced the UK would share the intellectual property behind its “Stone Cloak” electronic warfare system, enabling Ukraine to produce the tablet-sized drone jammers at scale. Exercise Sea Breeze, a maritime drill with Ukrainian personnel, also took place. Burnham said the UK would support a “full and unconditional ceasefire”.
Meanwhile, Burnham is set to hold a social care summit on Wednesday with Tory leader Kemi Badenoch and Lib Dem leader Sir Ed Davey, calling for an end to “political point scoring”. In a speech at a care home, he will say: “For decades, governments have kicked this issue down the road because they’ve seen it as too risky, too difficult, and too complicated.”
But the initiative comes amid mounting economic pressure. Niesr expects inflation to keep rising until February 2027, peaking at 3.8%, and does not believe the Bank of England will cut interest rates until 2028. Director David Aikman said “treading water is not enough” to stop the national debt rising, noting that every major shock this century has ratcheted debt higher. The Treasury said the government will stick to its fiscal rules while investing in “the public services people rely on”.
With Burnham already facing questions over how he will fund £2bn of commitments on energy bills, bus fares and business rates, and needing up to £18bn for defence, the choice between tax rises and spending cuts is becoming unavoidable.
