Burnham has no scope to increase borrowing, think tank warns
Prime Minister Andy Burnham has announced a series of new measures to address the cost of living, but a major think tank has warned that he will have to raise taxes or cut spending to meet his pledges.
Intelligence analysis by Llama
A think tank has warned that Prime Minister Andy Burnham will have to raise taxes or cut spending to meet his pledges on defence and the cost of living, as the public finances continue to be squeezed by persistent inflation.
Imagine you have a big jar of money that you use to pay for things like electricity and bus fares. But the money in the jar is getting smaller because of a war in Iran. The new Prime Minister, Andy Burnham, wants to help people by making the money in the jar bigger again. But the think tank says he will have to either take more money from people through taxes or cut back on other things to make it work.
Analysis
A £60B Vote of Confidence
The National Institute of Economic and Social Research (Niesr) has warned that Prime Minister Andy Burnham will have to raise taxes or cut spending to meet his pledges on defence and the cost of living. This is because the public finances will continue to be squeezed by more persistent inflation as a result of the Iran war. The think tank has questioned whether Burnham has 'fully thought through' how his promises would be paid for, but said the prime minister will have to make choices to fund his cost-of-living measures.
Why Cursor?
The think tank has suggested that cost-of-living measures could be funded through higher taxes or spending cuts. They have advocated for tax reform rather than higher marginal rates, and have pointed to potentially reforming council tax to move towards a land value tax system, or scrapping some VAT exemptions. They have also suggested that the welfare bill could be an obvious place to look for spending cuts.
The Road Ahead
The think tank has also warned that inflation is expected to keep rising until February 2027, peaking at 3.8% before falling back to the Bank of England's 2% target. They do not believe the central bank will cut interest rates until 2028, and have said that 'treading water is not enough' to prevent the national debt from rising. The Treasury has said that the government will stick to its fiscal rules while investing in 'the public services people rely on'.
Key points
- Prime Minister Andy Burnham has announced a series of new measures to address the cost of living.
- A major think tank has warned that Burnham will have to raise taxes or cut spending to meet his pledges.
- The think tank has suggested that cost-of-living measures could be funded through higher taxes or spending cuts.
- Inflation is expected to keep rising until February 2027, peaking at 3.8% before falling back to the Bank of England's 2% target.
- The central bank does not believe it will cut interest rates until 2028.
If Prime Minister Andy Burnham can implement his cost-of-living measures effectively, it could lead to a reduction in poverty and an improvement in living standards for many people. Additionally, if the government can stick to its fiscal rules and invest in public services, it could lead to a more stable economy and improved national security.
If the government is unable to implement its cost-of-living measures effectively, it could lead to a further increase in poverty and a worsening of living standards for many people. Additionally, if the government is unable to stick to its fiscal rules and invest in public services, it could lead to a more unstable economy and a decrease in national security.
