After conference and by-election wins, Andy Burnham faces difficult winter

I t did not go down well. On Thursday Andrew Bailey, the governor of the Bank of England, made an unexpected intervention ahead of the budget, using a speech in Turkey to issue what was described as a Liz Truss warning. He said that any significant increase in spending to cushion the impact of a cost of living crisis risked losing market confidence , feeding back into higher borrowing costs and higher levels of government debt. It was ultimately, he suggested, unsustainable. While he did not mention the budget in just under three weeks, his intervention was seen in government as a very unwelcome shot across the bows. Most commented 1 Labour risks losing working class over net zero, says business secretary Politics 109 comments 2 The flag that gives moral licence to hatred Columnists 87 comments 3 Kemi Badenoch’s Disraeli vibes are mighty tempting Columnists 32 comments 4 Peter Brookes’s Times cartoon: October 10, 2026 Cartoons 22 comments 5 UK AI safety law to stop ‘loss of control’ over autonomous agents Technology 11 comments “Andrew Bailey needs to focus on doing his job,” a government source said. “The Bank of England has an important role to play in keeping inflation under control and supporting economic stability, but it is not the governor’s job to play politics or pile pressure on the government. He should focus on his responsibilities and leave the civil service to get on with delivering.” Andrew Bailey in Turkey on Thursday Bunyamin Celik/Anadolu/Getty Images It is a taste of what is to come. Part of the anger in the government over Bailey’s intervention was the fact that ministers are under no illusions — the cost of living package in the budget on October 28 is expected to be modest at best, and even that will require difficult decisions. Top stories 1 Trump Jr’s ex-fiancée ‘asked donor to pay 0k credit card bill’ US politics 2 Starbucks ‘explores takeover’ of Chipotle Mexican Grill US business It is a source of increasing tension both within government and without after higher borrowing costs decimated the government’s fiscal headroom. Economists believe that tax rises are inevitable. What ministers had hoped would be a steady as she goes fiscal event is rapidly turning into something much more challenging. Advertisement For Andy Burnham, who is riding high on the back of a successful conference and victory against Zack Polanski in the Holborn & St Pancras by-election, it threatens to be his most challenging moment as prime minister ahead of a winter likely to be dominated by the cost of living. Zack Polanski after the by-election result on Friday TOBY SHEPHEARD/REUTERS Energy bills will hit £2,000 in January, mortgage rates are over 6 per cent, petrol prices have soared and inflation is steadily rising. Burnham’s conference speech was predicated on the future and included a suite of policies for after the next election on Brexit, electoral reform and the pensions triple lock. But the challenges today are stark. Top stories 1 Mortgage rates dip after weeks of painful rises Mortgages 2 ‘My husband’s family want us to pay £500 towards his sister’s holiday’ Ask Times Money On Monday Burnham hosted a cabinet away day at Chequers, his grace-and-favour home, where he thanked colleagues for their contributions to Labour’s conference. Labour, he said, was making the “big arguments” and their opponents were “losing their footing”. “Politics has become too suffocating, we need greater ambition,” he said during a discussion about his ten-year plan, which will be unveiled later this year. “The country is not where it should be and nothing simple gets us out of that. We need to show a journey and a longer-term plan.” Reality, however, is about to bite. John Healey, the chancellor, was the only cabinet minister to wear a suit for the occasion and urged colleagues to demonstrate fiscal restraint. “We need to make sure every pound of public money is spent where it can have the greatest impact,” he said. “I recognise the work departments are doing to respond to that challenge, reprioritising within their existing budgets to focus on what matters most, while maintaining the fiscal discipline that underpins economic stability.” Advertisement Ministers are beginning to discover exactly what that means. Yvette Cooper, the health secretary, recently went to the Treasury to request additional funding to help fund a pay rise for nurses and other health staff. She was rebuffed. In a classic Whitehall manoeuvre she appealed directly to No 10. Yvette Cooper ADAM VAUGHAN/EPA In response she received a letter from both Burnham and Healey making clear that there would be no new money. The additional funding, thought to be about £1bn a year, would have to come from within existing budgets. Burnham after delivering his speech at the Labour conference OLI SCARFF/AFP/GETTY IMAGES Healey wants to deliver a “breathing space” budget, which will give households and businesses more support. A targeted cost of living package is being drawn up to help poorer households with increases in energy prices this winter, although the scale of it is the subject of debate in government. The Department for Energy Security and Net Zero has put forward plans for a £1bn package to give poorer households £150 off their bills. This approach has yet to be agreed with the Treasury. But Healey will need money. Most economists suggest that as much as half of the £23bn worth of fiscal headroom left by Rachel Reeves, his predecessor, has already been swallowed up by higher government borrowing costs. Advertisement He also needs to fund existing cost of living measures already announced by Burnham along with those that are going to be confirmed in the budget. The banks are increasingly convinced that Healey is coming for them. Burnham, John Healey and Angela Rayner STEFAN ROUSSEAU/PA On Tuesday Healey summoned the chief executives of Britain’s biggest banks — Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society and Natwest — for a pre-budget meeting. Healey gave nothing away, but privately the banks made clear their concerns amid warnings that increasing the windfall tax on banks will damage economic growth. In a joint letter TheCityUK, which represents financial services, UK Finance, a trade association, the Confederation of British Industry and the Association for Financial Markets in Europe made clear their concerns in a letter to the chancellor. “As well as weakening investor confidence and damaging UK attractiveness, a higher tax burden may not necessarily generate higher tax receipts if capital, people and businesses move elsewhere,” they said. “It could reduce the availability of finance and protection for households and businesses, and risk undermining the growth that both you and the prime minister have rightly identified as the key to the country’s long-term success.” Advertisement Given the fiscal challenges it is perhaps unsurprising that Burnham has elected to delay many of the most difficult decisions. The Times disclosed this week that the spending review, which the government will use to set out plans to increase defence spending to 3 per cent of GDP, could be pushed back to next autumn. A review on welfare reform by Alan Milburn, a former Labour health secretary, will also now come after the budget . In short the challenges are piling up, and the hope appears to be that the economic outlook will improve enough over the next year to make a difference. But there are some within Labour who are concerned that, against the tough fiscal background, Burnham’s whole electoral strategy could backfire. At Labour’s conference he deliberately positioned himself firmly at the head of the progressive left — there were pledges on Brexit, electoral reform and a new national care service. Advertisement But a week later at the Tory gathering in Birmingham, Kemi Badenoch took senior Labour figures by surprise by herself pivoting to the centre ground with an offer to more “traditional small c” conservative voters on inheritance tax and childcare costs — paid for by cutting the welfare bill. Kemi Badenoch before giving her speech at the Tory party conference TOLGA AKMEN/EPA One senior Labour figure said the risk for Burnham was that he was abandoning the centre — where elections have tended to be won and lost — to appeal to left-of-centre Liberal Democrat and Green voters. They pointed out that of Labour’s 100 most marginal seats the Tories are in second place in more than 80 per cent of them. And many of these — in places like Hendon, Poole, Cambridge and Somerset — are in parts of the country where a centre ground Tory pitch on tax cuts paid for by welfare savings could be decisive. “There is a risk that he is making a strategic mistake by taking positions now on things that could come back to haunt him,” they said. A government spokesperson said: “This government is backing the NHS with record investment to get it back on its feet, cut waiting lists and ensure hardworking NHS staff are fairly rewarded. Politics newsletter Get our daily insider’s guide to Westminster, plus a rundown of PMQs every Wednesday. Sign up with one click You’ve successfully signed up to the Politics newsletter Explore our newsletters An error occurred. Please use the link below. Politics newsletter Explore our newsletters “Since July 2024, waiting lists are down by over 251,000, and behind those numbers are hundreds of thousands of patients getting treated faster and no longer waiting in pain or uncertainty. “This year we accepted the independent NHS Pay Review Body’s recommendation, delivering a 3.3 per cent pay rise for Agenda for Change staff from April, and we continue to work constructively with unions on improvements to the pay structure in addition to the pay award.” Separately, the chairman of John Lewis and Waitrose warned Burnham on Friday against a tax raid on department stores and supermarkets. Jason Tarry said concern was mounting among retailers that Burnham will fund his promise to cut business rates for pubs and music venues by “piling more costs” on to large stores with a so-called warehouse tax. Jason Tarry VICKI COUCHMAN FOR THE TIMES Reeves introduced a higher rate surcharge for larger commercial properties in last year’s budget. It came into force in April. Burnham has since signalled it could be ramped up further on warehouses in the upcoming budget. Writing in The Telegraph, Tarry said of the potential budget raid: “[It] would reveal a fundamental misunderstanding of how modern high streets work”. He said it would hit “a far greater number of high street shops than warehouses”. Tarry added: “In our case, the higher charge applies to just 18 distribution centres, but over 200 John Lewis and Waitrose stores.”