New PM Inherits £110bn Debt Bill and a Stalled Economy
Mr Burnham takes office facing acute fiscal constraints. The government spent £110bn on debt interest in 2025-26 — about 8 per cent of all public spending — while taxes are forecast to reach their highest share of the economy since the Second World War by the end of the decade. Borrowing has run higher than planned this year, and the economy he inherits has barely grown in two decades.
Anand Menon, director of UK in a Changing Europe, said Mr Burnham had “relatively little fiscal room for manoeuvre”, with new spending needing to be funded through taxation rather than borrowing. The new Prime Minister has bound himself to Labour’s manifesto “tax lock” on income tax, VAT and national insurance, narrowing his options further. On living standards, Mr Menon warned that “people don’t just want to listen to what you’re saying, they want to see changes for the better”. Watch whether costly cost-of-living pledges survive contact with the Treasury or slip to an autumn Budget.