Burnham faces first PMQs as UK borrowing costs climb

By Benson Daniel

Prime Minister Andy Burnham will face his first Prime Minister’s Questions on Wednesday as rising government borrowing costs add another layer of pressure to his new administration.

Burnham’s appearance at the despatch box comes just a day after he outlined his economic and political priorities, including reducing the cost of essential goods and services, giving greater powers to regions and bringing parts of the utilities sector back under public control.

The timing could make his first PMQs particularly difficult, with financial markets already showing concern over the economic outlook.

The yield on 10 year UK government bonds has climbed above 5.2 per cent, while the yield on 30 year gilts has risen close to 5.9 per cent. Higher yields mean the government has to pay more to borrow, putting additional pressure on public finances.

The increase has been driven partly by a wider global sell off in government bonds. Rising oil prices linked to renewed conflict in the Middle East have also fuelled concerns about inflation remaining high for longer, raising questions about interest rates and government borrowing.

For Burnham and Chancellor John Healey, the market moves come at an uncomfortable moment. The government is preparing for its October 28 Budget, where it will have to balance ambitious spending plans against increasingly expensive debt servicing costs.

Burnham has promised a different economic direction, arguing that Britain needs to move away from a model that has delivered weak growth and high living costs.

During his first major Commons appearance as prime minister, he blamed decades of economic difficulties on the legacy of policies introduced since the 1980s, the austerity period and Brexit. He also defended plans to increase public control over essential services, particularly water and energy.

Opposition leader Kemi Badenoch is expected to use PMQs to challenge the prime minister over the cost of his plans and the government’s ability to finance them without raising taxes.

The financial market reaction could strengthen those attacks.

Burnham has refused to rule out tax increases at the October Budget, although the government has stressed its commitment to fiscal responsibility. The pressure is likely to intensify if borrowing costs remain elevated because a larger share of government revenue would have to be directed towards debt interest payments.

Economists have already warned that the government may have limited room to finance new commitments while maintaining its fiscal rules.

The rise in borrowing costs is not entirely a reflection of Burnham’s policies. Bond yields have been increasing across major economies as investors respond to inflation fears, high government debt and geopolitical uncertainty.

However, Britain’s relatively narrow fiscal room means the government is particularly exposed to movements in the bond market.

The prime minister therefore enters his first PMQs facing two challenges at once. He must establish his authority in Parliament while convincing investors and voters that his economic programme can be delivered without putting further strain on the public finances.

How Burnham responds to questions on borrowing, taxation, public spending and economic growth could offer an early indication of how his government intends to navigate the difficult months ahead.