Burnham at first PMQs after blaming Brexit for UK woes in Commons address - as borrowing costs spike following speech

Want LBC stories before everyone else? Set us as your Preferred Source on Google

The newly appointed PM returned to the Commons for a marathon address on Tuesday, where he told colleagues that the UK's stagnant growth was a result of the nation's exit from the European Union and the policies of his longest-serving predecessor.

In a first Commons appearance in over a decade, Mr Burnham suggested that a "series of wrong turns" in the last 40 years had left Britain in a predicament.

But he insisted, despite the need to be "brutally honest" about the failures of the past, that the government can "make this next decade better than the last".

Read More: Burnham's hard launch will reassure backbenchers an election U-turn is still on the cards for Labour, writes Natasha Clark

Read More: Burnham vows to reform 'unfair' leasehold system impacting millions of homeowners

“Political power was centralised, economic power privatised, the country de-industrialised. Austerity followed, hollowing out councils and depriving them of the agency to act to reverse any of this,” he said during a three-hour stint in the Commons.

“And then Brexit compounded the damage, ushering in a decade of low growth and stalled regeneration. Change begins with honesty … Unless we are blunt about what went wrong, we won’t turn things around.

“Far from taking back control, the combination of these policies took control out of the hands of communities up and down Britain for 40 years. Too many places have been drifting.”

He added: “The government I lead will be relentless in giving people and places what they were promised 10 years ago: ownership and control, and from that control over their destiny comes change and growth.”

According to Bank of England analysis, the UK's GDP has taken a 6% hit since the Brexit referendum in June 2016.

However, the Prime Minister, whose Makerfield constituency voted for Brexit, has previously poured cold water on the possibility of a rerun of the Brexit referendum.

But he has insisted he wants the UK to rejoin the bloc in his lifetime.

Mr Burnham also confirmed that a UK-EU summit is set to take place in November.

But Mr Burnham's speech has made the economic task at hand more difficult, as borrowing costs spiked in the wake of his address to the House.

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 10-year gilts stretched to 5.22% from 5.15% on Friday, while the 30-year hit 5.85%, up from 5.79% on Friday.

The 10-year gilt had earlier traded as high as 5.25%, an 18-year high, and the 30-year at 5.89%, a level last seen in 1998.

Kathleen Brooks, research director at XTB, said the rise in bond yields poses a “major challenge” for the Chancellor ahead of next month’s Budget.

She said: “Every basis point increase in the cost of borrowing in the UK adds to debt servicing costs, which needs to be paid by the public purse. Since the spring, the UK’s interest-only bill has risen by up to £6 billion by the end of this parliament. This is a large hole for the Chancellor to fill next month."

Speaking to LBC, Burnham ally Lord Jim O'Neill said that the rise in rates would lead to higher mortgage rates for homeowners as soon as this autumn.

He told Tonight with Andrew Marr: “Tough day today. 10-year gilt yields, or 10-year interest rates, risen by a quarter of a percent, which for debt in one day is a lot. We’ve not had that since Liz Truss days, really. […]

"And it was when I woke up this morning, I thought, ‘Uh-oh, this is going to be tough.’ I didn’t think it’d be quite this tough, but it’s been a tough day.”

Despite the pessimism, Lord O'Neill did stress that much of the rise was not due to UK policy.

He told Andrew: “I mean, I would say 80% of this has got nothing to do with the UK, except for the fact we’re in a tough starting position.

"For something, some of the discussion I had on the weekend, I checked last Friday’s levels compared to one year ago. Our 10-year yields had risen slightly less than both Germany and the U.S. So it wasn’t about us at all.

"However, the scale of the move today changes that a little bit. But the underlying issue is there are many governments all over the world, and it’s persisted since COVID and it’s got worse with Donald Trump, think they can just spend whatever, and eventually this miraculous growth is going to appear. And it’s a fantasy.”

In a long-winded address on Tuesday afternoon, the PM also recognised cross-party calls for a devolution deal, and understood concerns about the potential emergence of a two-tier England between those with devolved power and those without.

Mr Burnham told MPs he has asked Number 10 North to start working with Cornwall Council on a devolution deal “with or without an elected mayor”.

He was also seen to extend the offer to other areas of the country, as the Labour leader moved forward with his pledge to move power away from centralised government.

"In July, we published a statement on the next stage of English devolution," Mr Burnham said.

"And it will include powers long requested by mayors, such as post-16 technical education, employment support, and fiscal devolution, starting with the ability to set an overnight visitor levy to commence towards the end of financial year 27/28."

The Prime Minister said the driving force behind his devolution plans would be Number 10 North. The northern branch of the Prime Minister's official office was launched in Manchester to move political power and decision-making away from London.

Mr Burnham said Number 10 North will "oversee the rewiring of the British state, the rebuilding of resilience in our communities, and the reindustrialisation of our regions".

He continued: "Its creation was one of the first acts of this administration, and I believe that in time it will be seen as one of its most significant.

"It is a clear answer to the question with which this country has long wrestled: who in government drives growth?"

Mr Burnham said the state that has grown "too large at a national level", now needs to redirect civil service capacity regionally and locally.

In July, Mr Burnham announced that English mayors will be allowed to keep a share of the taxes collected in their area.

The Prime Minister said by letting mayors keep a slice of income tax and business rates, he will “make good” on his pledge to “take power out of Westminster and carry it into every postcode in the country”.

Details of the reforms are expected to be announced in a white paper, published when Chancellor John Healey presents his first budget in the autumn.

But Mr Burnham, who was mayor of Greater Manchester for about nine years, said the policy would be designed so that “every local leader will have the power and resources to improve public transport, build homes and create jobs”.

Tuesday's Commons address marked the first major test for the PM, with Burnham also confirming prisoners convicted of manslaughter, death by dangerous driving and indecent assault will remain ineligible for early release.

The government previously announced that people convicted of manslaughter, death by drunk or dangerous driving, rape, grooming and historic child sexual offences will now be exempt from the scheme.

The Prime Minister was also seen to commit to bringing forward legislation within this parliamentary session that will allow people to move from leasehold to commonhold home ownership.

Reforming what Burnham described as an "unfair system”, the move could impact millions of homeowners across England and Wales.