Andy Burnham has blamed the rising cost of borrowing and market turbulence on the Tory record on rising debt and declared “we are turning that corner”.
He took his first Prime Minister’s Questions after Government long-term borrowing costs were sent soaring to their highest levels for 28 years.
Kemi Badenoch pointed to a warning from Lord Jim O’Neill that the Prime Minister’s tone during his Tuesday Commons debut would have unsettled investors.
The Conservative said: “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?”
Mr Burnham replied that he and Lord O’Neill did “not always agree” before turning to the Tory legacy.
He said: “When they were in government, we saw 14 years of stagnant growth. We saw 14 years of debt rising as a percentage of GDP.
“I would say to her that the turbulence on global markets are because of that exposure that they left behind.”
Mr Burnham added: “We are turning that corner, Mr Speaker. In the first half of this year, 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.”
The Labour leader’s ambitions for overhauling how the UK state operates are likely to be curtailed by the economic headwinds caused by the Iran war.
Government long-term borrowing costs have been sent soaring to their highest levels for 28 years amid a global bond sell-off partly linked to signs of escalation in the Middle East conflict and the concern that inflation could follow.
The yield on UK Government bonds – also known as gilts – edged higher once again on Wednesday, compounding the headache facing Chancellor John Healey as he prepares his first Budget.
The Prime Minister sought to stress his administration’s fiscal responsibility and said ministers were taking the action needed to reduce debt.
He said: “We are taking the action needed to get debt down.
“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.”
Lord O’Neill, a former minister and Goldman Sachs economist, told Times Radio the Budget would have to include either spending cuts or “some form of tax increases” in order to restore the Government’s “headroom”.
Mr Burnham declined “write the Budget” at the despatch box as he was pressed about whether he plans to raise taxes.
Mrs Badenoch said: “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.
“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?”
Mr Burnham said: “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. That will be the matter for my Right Honourable friend (Chancellor John Healey).
“But can I also say to her that he and I took a deliberate decision to set an early date for the Budget so that we reduce the period for prolonged speculation of the kind that she is wanting us to indulge in today?”
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