Prime Minister Andy Burnham faced his first parliamentary confrontation with Conservative leader Kemi Badenoch on 2 September 2026, as the UK's government borrowing costs climbed to their highest level in 18 years amid market turbulence. Burnham rejected comparisons to the economic turmoil that engulfed Liz Truss's administration, instead attributing current market pressure to the fiscal vulnerabilities inherited from 14 years of Conservative governance. He stressed that his government would be "grounded in fiscal responsibility" while working to reduce cost-of-living pressures on constituents.
The clash came as 10-year government bonds surged by four basis points at the start of trading on Wednesday, reaching their highest level since June 2008. According to financial reporting on gilt yields, the 10-year gilt yield had risen to 5.25 per cent, while 20-year gilts hit 5.82 per cent and 30-year bonds reached 5.9 per cent. The 30-year bond yield marked its highest level since 1998. The spike in borrowing costs has narrowed the fiscal room available to Chancellor John Healey for the autumn budget scheduled for 28 October 2026.
Badenoch challenged Burnham to commit to honesty regarding whether tax rises would feature in October's budget and to specify where spending would be cut and how he would address the UK's increasing debt. The prime minister acknowledged his first action in office had been to reduce VAT on energy bills and cut business rates for hospitality, but declined to rule out future tax increases, instead deferring the matter to the chancellor.
The market turbulence has been attributed by some economists to Burnham's reaffirmation of his commitment to public control of utilities during his statement to the Commons on Tuesday. However, most market strategists have linked the movement primarily to a jump in oil prices and international market upheaval, particularly concerning the Iran conflict, rather than policy announcements. One of Burnham's close advisers, economist Jim O'Neill, warned on Tuesday evening that the prime minister's statement had been
"the last thing that investors want to hear on a day where all of this is going on in the background"and suggested traders were questioning
"Who's going to get real in this country about the challenges of getting our debt down and controlling spending?"However, O'Neill also praised the PM for
"a great first five weeks"which he said had helped lift consumer and business confidence.
What did Badenoch say about Burnham's approach?
Badenoch criticised Burnham's three-hour Commons statement on Tuesday for failing to decline any spending requests, describing his approach as that of a people-pleaser rather than a leader. She said:
"He did not say no to a single spending request … And personally, I think it's delightful that he wants to make everyone happy. But a prime minister needs to be a leader, not a people pleaser."
The Conservative leader highlighted that Burnham had set out plenty of spending plans but provided no detail of how he would pay for them.
"The markets are clearly worried that we now have a spendthrift prime minister who wants to say yes to everyone but cannot tell us where the money is coming from,"she said. She pressed him directly:
"He needs to pay for all his new promises and he has a choice - higher taxes, more borrowing, or spending cuts. Yesterday he said change begins with honesty, so will he be honest and tell us: is he preparing to raise taxes again, yes or no?"
Badenoch drew a direct parallel to the Truss administration's fiscal missteps, noting that
"gilt yields now, the cost of borrowing is far more than it ever was under [Truss]. That budget failed because spending was announced before the money to pay for it, which is exactly what he is doing right now."
She also raised comments from O'Neill, noting that
"Lord O'Neill, a close friend of the prime minister, said yesterday's statement in the Commons was the last thing investors wanted to hear. Lord O'Neill is a serious economist. He knows what he's talking about and, sure enough, yesterday the cost of government borrowing rose to its highest in 18 years. How does he plan to tackle the government's rising debt costs?"
How did Burnham respond to the criticism?
Burnham defended his government's fiscal position, asserting that his summer commitments had been properly funded and that the administration would maintain fiscal discipline. He attributed current market turbulence to the structural vulnerabilities left by the previous Conservative government rather than his own policies.
"The turbulence on global markets are because of that exposure that they [the Tories] left behind. We've had the fastest growth in the G7. Borrowing fell to its lowest level in six years. We're cutting the deficit faster than any other G7 country. That is problem solving rather than point scoring,"he said.
When pressed again on tax rises, Burnham reiterated that his initial actions had involved cutting tax but declined to preview the budget, stating:
"I've already indicated my first moves were to cut tax, but I'm not going to do what any prime minister has done and write the budget here."He explained that he and Chancellor John Healey had agreed on an earlier budget date to reduce the period of market speculation.
According to live parliamentary reporting, Burnham also stated that there would be "no borrowing to fund day to day spending" and that debt would be falling as a percentage of GDP by the end of the parliament. He reiterated his commitment to fiscal responsibility:
"This will be a government grounded in fiscal responsibility. It will stick to the fiscal rules, but at the same time, we will help reduce cost-of-living pressure on our constituents, and that's the approach that we will take."
On O'Neill's concerns, Burnham replied that he and the economist did
"not always agree"before defending their working relationship.
What was Burnham's criticism of Badenoch's leadership?
Burnham turned the focus onto Badenoch's recent personnel decisions within the Conservative shadow cabinet. He criticised her for removing shadow chancellor Mel Stride, who had acknowledged that the Truss mini-budget represented a policy error, and replacing him with Andrew Griffith, a Treasury minister who had helped draft the controversial Truss package.
"[Badenoch] took a decision at the weekend: she removed a shadow chancellor who said that the Truss mini budget was a mistake, and she replaced that shadow chancellor with one that helped to write it."
Burnham characterised the Truss period as
"a short-lived government that crashed confidence in the economy and hammered people's mortgages."He noted that the majority of Badenoch's new shadow cabinet had been part of the government that lasted 49 days.
What other issues were raised at PMQs?
Badenoch also raised the Russian attack on Leipzig airport in Germany, urging Burnham to commit to 3 per cent defence spending. The new government has only committed to meeting the 3.5 per cent spending target for defence by 2035, pushing back the interim 3 per cent spending commitment to spring next year. The previous chancellor quit as defence secretary in June over the last government's failure to commit to a 3 per cent increase.
Burnham responded by emphasising his appointment of the current Chancellor specifically because of his strong commitment to defence.
"The very reason I appointed this Chancellor to his position is because of his strong commitment to the defence of our country and to defence spending. We will fully fund the defence investment plan and at the spending review we will set out a plan to meet the Nato commitments by 2035, there is no problem with our commitment to defence."
What is Burnham's fiscal strategy?
In an attempt to stabilise market sentiment, Burnham outlined his government's commitment to fiscal responsibility. He pledged that his administration would adhere to fiscal rules while simultaneously working to reduce cost-of-living pressures on constituents. Burnham emphasised the Conservative legacy as the root cause of current economic vulnerability, pointing to 14 years of stagnant growth and rising debt as a percentage of GDP under previous governments. He framed his administration's task as reversing this trajectory and turning a corner on the economy.
What is the relationship between Burnham and O'Neill?
Burnham expressed his willingness to continue receiving counsel from O'Neill, acknowledging that while they do not always agree, their collaboration had previously transformed Greater Manchester from a former industrial region into the fastest-growing city region in the country. This history underscores Burnham's track record in regional economic development before his elevation to the premiership. O'Neill had been tipped to become Burnham's chief economic adviser but ruled out joining the government, instead offering counsel from outside.
What happens next?
Burnham's first PMQs as prime minister on 2 September marked the beginning of a critical period in which he must demonstrate his ability to manage both parliamentary scrutiny and market confidence. According to Parliament's official schedule, the Commons session on 2 September included urgent questions or ministerial statements at 12:30 following the PMQs session. Both Houses of Parliament were due to resume normal business on Monday 7 September 2026 after the summer recess.
The autumn budget, scheduled for 28 October 2026, will be the government's first major fiscal test. This budget will be closely watched by markets and opposition parties alike as Burnham attempts to balance his manifesto commitments with fiscal constraints and rising borrowing costs.
