Andy Burnham would 'crash the economy' if Labour leader, say Starmer allies

The prime minister's allies have slammed the Mayor of Greater Manchester after he said he would hike council tax on expensive homes and cut income tax cuts for lower earners.

Mr Burnham hinted that he is considering a return to Westminster to challenge Sir Keir for party leadership as he set out manifesto policies in an interview with The Telegraph.

The mayor said he would “turn the country around” by hiking council tax on expensive homes in London and the South East, invest £40 billion of borrowed money to build council houses, and slash income tax for lower earners and a 50p rate for the highest-paid.

A close ally of Sir Keir told Bloomberg Mr Burnham's policies are "irresponsible" and warned that his proposals could spark a market meltdown similar to the crisis triggered by Liz Truss’s mini-budget.

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This comes as Labour’s annual party conference prepares to open in Liverpool.

Chancellor Rachel Reeves is expected to use her conference speech on Monday to stress that government policy “must have the confidence of the market” - a remark that will be widely read as a criticism of Mr Burnham.

On Thursday, Callum Anderson, the Labour MP for Buckingham and Bletchley, accused Mr Burnham of “wishful thinking”.

Mr Anderson wrote on X: “To lead a Labour Government – and a Labour Treasury – you can’t just dismiss the bond markets.

“Every pound spent on schools, hospitals and infrastructure depends on credibility with those who lend to the UK. Real change requires fiscal discipline, not wishful thinking.”

Paul Johnson, a former director of the Institute of Fiscal Studies, argued: “The bond markets are simply the people and institutions who lend government money. We can avoid being ‘in hock’ to them by reducing borrowing.

“We struggle now because our borrowing and debt are extremely high. Mr Burnham wants to increase borrowing.”

Another economist, Simon French, said: “You can ditch fiscal rules, the Office for Budget Responsibility and being ‘in hock’ to the bond market if there is a path to value for money on additional borrowing.

“See HS2, Lower Thames Crossing, public sector productivity and PIP for why there is currently a credibility deficit. If you can’t, you can’t.”

Mr Burnham said that MPs had contacted him to urge him to stand against Sir Keir.

Polling by the More in Common think tank revealed that Labour would overtake Reform UK in the polls if Mr Burnham became leader.

28 per cent of those polled said they would currently vote Reform, with Labour on 25 per cent.

But, with Mr Burnham leading Labour instead of Sir Keir, 30 per cent would vote Labour, and 28 per cent would still vote Reform.

Ms Truss’s ill-fated 2022 mini-budget relied on uncosted tax cuts, sparking a surge in borrowing costs, a collapse in gilt markets and higher mortgage rates for millions of households.

She resigned after just 49 days in Downing Street, and now blames the Bank of England for the crisis.