Prime Minister Andy Burnham is facing mounting pressure to raise taxes in his first Autumn Budget as a surge in UK borrowing costs threatens to deepen a £14bn gap in the public finances.
Burnham repeatedly declined to say whether he would increase taxes, as investors pushed gilt yields sharply higher and threatened to constrain his plans for increased public spending.
The rise in borrowing costs has come just as the prime minister prepares for his first Prime Minister’s Questions, with the UK experiencing one of the fastest increases in sovereign yields among major economies.
The yield on 10-year gilts has reached its highest level since 2008, while the cost of borrowing over 20 years has climbed to its highest level since 1998, underscoring heightened concern among investors over the government’s fiscal position.
The market moves threaten to narrow the room available to Chancellor John Healey to fund new spending or tax cuts while maintaining confidence in the sustainability of the UK’s debt.
With financial markets increasingly unsettled, Burnham is due to face Conservative leader Kemi Badenoch in the Commons on Wednesday for his first PMQs as prime minister.
He was already under scrutiny in the chamber on Tuesday, when he blamed Brexit and Margaret Thatcher for Britain’s “low growth and stalled regeneration”.
Burnham has pledged to continue the work begun by his predecessor, Sir Keir Starmer, but said he “will not hesitate to make changes”.
The prime minister said: “None of this is easy, but I did what I always do, and that is to apply my values to a challenging situation and a care for people, which I spoke about in Downing Street.
“I believe the public will support me in recognising the clear difference between those who have served their time and more, and those who have not.
“We will bring forward legislation soon, but we can find a solution to end this injustice, which balances public safety and basic fairness, and I urge colleagues on all sides of the House to help us do that.”
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