Andy Burnham will find he has very little room for manoeuvre in the Budget (Image: Getty)
On Monday, Burnham and Chancellor John Healey had a plan. Today, they’re feeling a bit roughed up. The plan was courtesy of Labour donor Dale Vince, in time for Healey’s Budget on October 28. It involved hiking the frozen £12,570 personal allowance by £3,000. That would take it to £15,570 in April, roughly where it might have been if the freeze had never been introduced. It would have been massively popular.
This would save lower earners around £600 a year and be a blessing for pensioners too. It would remove any prospect of the state pension becoming taxable from April. I suggested that adopting it could even help sweep Andy Burnham to victory in a snap election in November. But I also warned there were problems.
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The move would cost around £20billion and I wasn’t convinced by Vince’s methods of raising it. He wants to push capital gains tax rates up to the same level as income tax bands, even though HMRC’s own modelling suggests this might actually reduce revenues rather than raise the £14billion Vince calculates. Vince also wants Healey to go in hard on the big banks.
Yesterday, the whole thing took a total battering. New government borrowing figures were released, and once again, they were absolutely horrible. They also landed at a terrible time for Healey. Public sector net borrowing soared £18.3billion in August, £3.5billion more than forecast.
Borrowing for the full financial year is now on course to hit £129billion, according to Pantheon Economics, well above the £115billion forecast by the Office for Budget Responsibility. Here’s the shocking bit. Thanks to Labour, we’re paying more tax than ever, but are still nowhere near balancing the books. Why? Because the government has lost control of spending. And it’s left Burnham and Healey in a deep fiscal hole.
Worse, the cost of servicing the debt is rising as inflation and gilt yields rocket. August debt interest hit a record £8.8billion. After today’s disastrous numbers, Healey’s fiscal headroom is gone. He may have to find another £15billion just to stand still. That makes the idea of funding a big hike to the personal allowance look almost impossible, unless Healey inflicts even more pain elsewhere.
On Monday, Burnham and Healey had the makings of a cunning plan. Increase the personal allowance, give millions of workers an unexpected tax cut, neutralise the looming state pension tax problem, then, if all that worked, go to the country with a snap election.
But they’ll be feeling groggy today, as the reality of Britain’s financial plight has just punched them in the face, Mike Tyson-style. Fnding £20billion to fund a £3,000 personal allowance increase look increasingly fanciful.
Obviously, this serves Labour right, for allowing Rachel Reeves to run loose with the nation’s finances. Unfortunately, it looks like taxpayers will now be punched in the face for the third Budget in a row, this time by Healey. What a mess. Burnham needs a new plan.
Andy Burnham Thought He Was Onto a Winner – Now He’s Facing a Major Political Setback
Andy Burnham entered Downing Street promising a different kind of Labour government, but the political landscape surrounding his premiership has already become considerably more complicated.
The prime minister has attempted to combine ambitious promises on living costs, public services and economic reform with a commitment to fiscal discipline. Yet several developments have created fresh difficulties for the government, from pressure in the financial markets to questions over taxation and immigration.
The latest polling provides an additional complication.
A YouGov poll conducted on September 20 and 21 put Labour on 23%, with Reform UK and the Conservatives both on 21%. It was the first time in 18 months that Reform and the Conservatives had been level in YouGov’s polling.
Another recent Ipsos poll, conducted from September 10 to 15, gave Labour 27%, Reform UK 23% and the Conservatives 21%. Although Labour led that survey, seven in ten respondents said they were dissatisfied with how the government was running the country.
The contrasting results underline how volatile the political environment remains.
For Burnham, the immediate challenge is not simply winning an argument with his opponents. It is demonstrating that the promises made during the early months of his premiership can be converted into policies that are financially credible.
The Budget is at the centre of everything
The government’s first major test will be the October Budget.
Chancellor John Healey is preparing the statement against a difficult fiscal background, while Burnham has repeatedly insisted that the government will respect its fiscal rules.
At his first Prime Minister’s Questions, Burnham refused to rule out tax changes and said he would not “write the Budget” in advance. The decision to announce the Budget date in October was partly intended to reduce uncertainty and avoid prolonged speculation about possible measures.
That caution reflects a wider problem.
During the summer, Burnham announced a series of policies designed to address household costs and increase government involvement in essential services. Those promises created expectations among Labour supporters while simultaneously raising questions from financial analysts about how they would be paid for.
The government now has to reconcile those commitments with the Treasury’s available room for manoeuvre.
Bond markets have already delivered a warning
One of the most serious challenges came earlier in September, when UK government borrowing costs increased sharply.
The Guardian reported that the yield on 10-year UK government bonds briefly reached 5.29%, its highest level since 2008, during a period of intense selling in government debt markets. Higher borrowing costs create additional pressure because the government must spend more servicing existing debt.
Burnham responded by emphasising fiscal responsibility.
He said the October Budget would stick to the government’s fiscal rules while also seeking to reduce pressure on household living costs.
That balancing act is at the heart of his economic programme.
If the government spends more without sufficient revenue, investors can demand higher returns to hold government debt. If ministers respond by raising taxes or reducing spending, some of the government’s political promises may have to be modified.
Neither option is straightforward.
The cost-of-living strategy
Burnham’s political pitch has included measures aimed at reducing household expenses.
The government has discussed interventions affecting energy bills and other essential costs, while also promising reforms to public services.
The political logic is relatively clear: households experiencing pressure from high living costs are likely to pay close attention to whether government policies make everyday expenses more manageable.
But the fiscal logic is more complicated.
A policy can be politically attractive while still requiring billions of pounds in public expenditure or reduced tax revenue.
That is why the October Budget matters so much.
The government will need to demonstrate how its commitments fit within the fiscal framework rather than simply announcing another collection of spending promises.
A polling picture that offers no easy answer
The latest polls do not provide a simple political verdict.
The YouGov survey for The Times showed Labour on 23%, only two points ahead of both Reform UK and the Conservatives.
The Ipsos survey, meanwhile, showed Labour with a four-point advantage over Reform UK and a six-point advantage over the Conservatives.
The differences partly demonstrate why individual polls should not be treated as forecasts.
They measure opinion at specific moments and use different methodologies. The political environment can also change significantly between surveys.
Nevertheless, both polls contain information relevant to Burnham.
Ipsos found that seven in ten respondents were dissatisfied with the way the government was running the country, even though Labour remained ahead of Reform in voting intention.
That suggests that Labour’s position cannot be understood simply by looking at whether it is ahead of another party in a particular poll.
Public dissatisfaction and voting intention can coexist.
Immigration adds another pressure point
Immigration is another area where Burnham’s government faces difficult political choices.
The government has been examining changes to settlement and migration rules, while the issue of small-boat crossings remains highly visible.
Recent incidents involving migrant boats reaching the Kent coast without being intercepted have led ministers to order reviews of border arrangements.
The Guardian reported that ministers acknowledged that not every small boat could be intercepted, following two uncontrolled landings in Kent.
For the government, the issue is complicated by the need to balance border enforcement with maritime rescue responsibilities.
The opposition parties have used individual crossings to challenge the government’s approach, while ministers have emphasised efforts to strengthen border security and tackle people-smuggling networks.
Immigration therefore represents another area where Burnham’s government must demonstrate both practical results and policy consistency.
The problem of expectations
Perhaps the biggest difficulty for the prime minister is the scale of expectations created by his early announcements.
Burnham came into office promising a programme that included intervention on the cost of living, public services and the structure of the economy.
But every new commitment creates a financial question.
Where will the money come from?
Will taxes have to rise?
Will spending elsewhere have to be reduced?
Could borrowing increase?
And would the financial markets accept the government’s approach?
These questions are particularly important because the government’s fiscal headroom is not unlimited.
The Guardian reported that higher borrowing costs could substantially reduce the room available under the fiscal rules, potentially putting pressure on Healey when preparing the October Budget.
The political opponents are waiting
Burnham’s opponents have obvious opportunities to attack.
The Conservatives can argue that Labour is making spending commitments without providing enough information about how they will be financed.
Reform UK can make a broader argument about taxation, immigration and the size of government.
The Liberal Democrats and Greens can challenge Labour from different directions on public services, climate policy and social spending.
That means Burnham cannot rely on a single opposition party remaining the government’s principal challenger.
The latest YouGov numbers illustrate that point particularly clearly: Labour was on 23%, while Reform and the Conservatives were both on 21%.
Why the Budget could change the conversation
The October Budget could therefore become a defining moment for Burnham’s premiership.
A credible fiscal plan could give ministers an opportunity to demonstrate how their commitments will be funded.
Conversely, difficult decisions over tax, spending or borrowing could create new political arguments.
But it would be premature to assume that the Budget will automatically determine Labour’s political fortunes.
Budgets are followed by further economic data, parliamentary debates, policy implementation and changes in public opinion.
Political circumstances can move quickly.
Burnham’s wider challenge
The prime minister’s difficulty is ultimately about balancing several competing objectives.
He wants to reduce household financial pressure.
He wants to maintain investment in public services.
He has promised greater government intervention in parts of the economy.
He must also maintain confidence in Britain’s public finances.
At the same time, his government is dealing with immigration, welfare, national security and foreign-policy questions.
Each issue carries its own political risks.
The September polling shows that Labour has maintained a significant level of support, but it also shows that the government’s position cannot be taken for granted. Ipsos found Labour ahead while also recording widespread dissatisfaction with government performance.
That combination makes the coming months particularly important.
No easy victory — and no confirmed defeat
The language of political headlines can make every setback sound decisive.
Burnham has certainly faced difficult developments since entering Downing Street, but the available evidence does not establish that his government has suffered a definitive political defeat.
The polling is mixed rather than uniform.
The financial markets have presented a challenge, but the government has responded by reiterating its commitment to fiscal rules.
The Budget has not yet been delivered, meaning many of the questions surrounding taxation and spending remain unanswered.
The government’s immigration policies are also still developing.
For Burnham, therefore, the immediate task is less dramatic than the headline suggests but arguably more consequential.
He needs to turn political promises into detailed policy while convincing voters, Parliament and financial markets that the numbers add up.
The October Budget will be the first major test of whether that strategy can be sustained.
Until then, claims that Burnham has either found a winning formula or suffered an irreversible setback remain political interpretations rather than established facts.
What is clear is that the new prime minister has entered a period in which every major decision — particularly on taxation, spending and immigration — is likely to receive intense scrutiny.
The coming Budget will provide the clearest indication yet of how Burnham intends to govern when political ambition meets fiscal reality.