Andy Burnham has opened the door to a new era of higher state intervention and increased public spending, warning that further details on how he plans to fund his first cost-of-living measures will be revealed within days.
In his first address as Prime Minister, Burnham promised to bring “life’s essentials back under stronger public control” and pledged immediate action to ease pressure on households.
But his refusal to rule out tax increases has raised early questions over how the incoming Government intends to balance ambitious reforms with already stretched public finances.
Standing outside Downing Street, Burnham said he would unveil measures designed to give families “some breathing space” and promised to explain how they would be paid for.
“I will set out some of those measures tomorrow, including how we will pay for them,” he said.
The comments will fuel speculation that Labour’s new administration could turn towards higher taxation to finance its expanded role for the state.
Burnham has positioned his premiership as a decisive break from the economic settlement of recent decades, arguing that Britain’s previous model allowed too much power and wealth to become concentrated in Westminster and private markets.
He promised what he called a “circuit breaker for Britain” and the biggest political and economic changes in 40 years.
The Prime Minister said his Government would pursue a “new political model and a new economic model”, with greater devolution, expanded social housing and a stronger role for public procurement in supporting British industry.
He argued that economic assets had been sold off and industrial communities left behind, promising to spread decision-making power “into every postcode in the land”.
However, the central question facing investors is whether the scale of ambition matches the reality of Britain’s finances.
Markets offered a muted response to the leadership change, suggesting investors are waiting for concrete policy announcements before reassessing the Government’s direction.
James Smith, a developed markets economist at ING, said Burnham’s arrival had been met with “little more than a shrug” from financial markets.
Bond market pressures have remained contained, with investors appearing to expect caution in the short term. But concerns over long-term borrowing, spending commitments and fiscal discipline remain.
The business community has already begun pressing the new Government for a more competitive approach.
British Airways chief executive Sean Doyle called for reductions in aviation taxes, warning that high costs were damaging the sector’s ability to compete internationally.
The challenge for Burnham is now clear.
He has promised a bigger state, cheaper essentials and a transformed economic model.
The unanswered question is whether Britain is ready to pay the bill.
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