Starmer hits back at Andy Burnham's 'personal ambitions' to be party leader

In a series of interventions which have been widely seen as a pitch for a future leadership bid, Mr Burnham proposed a 50p top rate of income tax and a tax cut for lower earners.

The Prime Minister appeared to attack his potential leadership rival’s economic agenda by drawing parallels with Liz Truss, adding that he is “not prepared to let a Labour government ever inflict that harm on working people”.

Sir Keir insisted he will “lead from the front” into the next general election at the party’s annual conference in Liverpool this weekend.

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"I’m not going to get drawn in to commenting on the personal ambitions of the mayor, but I do want to be really clear about our fiscal rules because economic stability is the foundation stone of this Government," he said.

“It was three years this week ago that we had the Liz Truss experiment where she abandoned fiscal rules, in her case for tax cuts, and the result was a disaster for working people.

“The same would be true if you abandoned fiscal rules in favour of spending. And I’m not prepared to ever have that inflicted on working people again.”

Asked whether he was to blame for a sense among some that Labour was a sinking ship, Sir Keir told ITV Meridian: “Let me take a different view, because in the first year of a Labour Government, we’ve delivered five million extra NHS appointments.

“We had an ambition for two million. We’ve done five million.

“We just rolled out childcare. This is from nine months to four years: very good for parents and carers who can get back to work.”

He said the Government was “cutting through” challenges in education as well as working on plans to “build the houses we need for our country, better rights for workers”.

“We’ve got four interest rate cuts in a row, three trade deals that we’ve struck which other governments couldn’t do.

“So we’ve made real progress in the first year of a Labour Government,” the Prime Minister said.

“I accept the challenge that we need to continue, and we need to do more, but there’s a considerable amount that has already been achieved and I’m very proud of it.”

The Manchester 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.

Meanwhile, Sacha Lord, a former Labour donor and Mr Burnham’s former night-time economy tsar for Greater Manchester, said Sir Keir and Chancellor Rachel Reeves had lost his support and new leadership was needed.

“I think somebody really needs to take leadership. Somebody needs to start being what the Labour Party is all about,” he told Times Radio.

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.