Burnham Announces Cost of Living Support Funded by Tax Rises or Spending Cuts as Borrowing Rates Rise Above 5%

Prime Minister Andy Burnham announced cost of living support measures on Tuesday. The steps will be funded through tax rises or spending cuts, he stated. The UK government's 10-year borrowing rates rose above 5% on Monday.

Markets reacted to signals of flexibility in borrowing rules. Burnham replaced Rachel Reeves as chancellor with John Healey. Healey previously served as defence secretary and resigned last month over funding for the defence settlement.

Healey said he would work in lockstep with the prime minister to meet fiscal rules with a buffer against uncertainty while making life more affordable. He spoke with Bank of England Governor Andrew Bailey after his appointment. Burnham's camp floated the idea of unfreezing income tax thresholds.

The basic rate threshold stands at £12,570 and the higher rate at £50,271. Unfreezing them would cost at least £4 billion depending on inflation. The nine-year freeze was announced by then-chancellor Rishi Sunak and extended by Reeves until 2030-31.

Burnham said his first priority as prime minister would be a national plan to end rough sleeping. He released funds from the housing budget as his first act in office. He plans to publish a 10-year plan for the country and economy later in 2026.