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New British PM faces budget reckoning as first major test

by Reuters

LONDON Aug 27, 2026 - 12:06 pm GMT+3
British Prime Minister Andy Burnham reacts as he is shown the rubble and wreckage left on the buildings and site of a strike near the Lukanivska market, Kyiv, Ukraine, Aug. 24, 2026. (Reuters Photo)
British Prime Minister Andy Burnham reacts as he is shown the rubble and wreckage left on the buildings and site of a strike near the Lukanivska market, Kyiv, Ukraine, Aug. 24, 2026. (Reuters Photo)
by Reuters Aug 27, 2026 12:06 pm

British Prime Minister Andy Burnham heads into the fall season with a busy agenda and a key question of how to fund some of his ambitious policies after enjoying a couple of well-received weeks and promising to give "people some breathing space now."

Burnham, who entered Number 10 Downing Street in July, two months earlier than he might have liked, has focused almost exclusively on ⁠domestic issues, tweaking a system he wants his premiership to deliver ⁠a "circuit breaker" to.

Now, he must go some way to honoring the bigger commitments he made on the steps of Number 10, and set out a 10-year program, expected to offer more detail to his promise to reform social care and end rough sleeping ​in Britain, while sticking to fiscal rules that limit his room for maneuver.

He enters September from ​a ⁠position of power – he is enjoying higher popularity ratings than his two closest rivals, populist Reform U.K. leader Nigel Farage and head of the opposition Conservative Party, Kemi Badenoch.

But as Britain's seventh prime minister in a decade, he will be acutely aware that those ratings could slide quickly if his approach alienates voters.

Burnham, the 56-year-old former mayor of Greater Manchester, says he will not pull his punches with his 10-year plan.

First problem: How to fund policies?

"I will give this my all, and I ask you all to pull with me," he said on July 20 as he took power. "Let us make this the moment when Britain starts to believe again. The moment we bring back hope."

But he faces a similar problem to his predecessor, Keir Starmer – his Labour government has few levers to raise funds for a policy agenda, which hopes to tackle some expensive areas, such as the provision of social care to the elderly.

With a budget set for Oct. 28, Treasury chief John Healey has said he will honor ⁠the fiscal ⁠rules, which include a pledge to balance day-to-day spending with tax revenues by the end of the decade. But both have hinted at using the "flexibility" within them.

That could mean more borrowing for investment, and possible tax rises, despite the Labour manifesto promising not to increase the burden on "working people."

Two reviews on welfare, one looking at youth unemployment and the other on disability benefits, will most probably come after the budget. Burnham has said he is against any sort of "crude cuts."

Yet, something will have to give to fund changes to social care, which economists say could cost the government billions of pounds a year.

And while that might take some time, there are more immediate problems on the horizon.

Immediate problems

Burnham and Healey need to fill a 4.7 billion pound ($6.4 billion) gap in the Defence Investment Plan, a blueprint that several defense experts say ⁠does not go far enough in meeting Britain's promise to bolster both NATO and Ukraine as support from the U.S. is waning.

Richard Dannatt, a parliamentary peer who was head of the British Army between 2006 and 2009, said he believed that Healey, having served as defence minister under Starmer, would find a way to raise the money he ​had previously resigned over.

"John Healey ... having had many years immersed in defence, actually knows the detail, knows the issues, and officials can't bamboozle him," ​Dannatt told Reuters.

Burnham's government must also decide whether to approve oil and gas drilling projects that have the backing of U.S. President Donald Trump but risk alienating some voters.

And he has to implement the politically difficult decision of allowing some serious offenders to leave ⁠jail early to ‌reduce prison overcrowding.

He has ‌twice changed position on who will be released, charging Justice Minister Alex Norris to find a ⁠way of blocking the release of those convicted in 2020 of killing a police officer after ‌a public outcry.

Housing illegal immigrants

Then there's the arrival of illegal immigrants over the summer – the numbers are down on last year, but they are still high – and where they live ​poses a threat to Burnham's popularity.

He has said their ⁠accommodation should be spread more evenly across Britain and more in wealthier areas, a message that did little ⁠to stem protests outside possible new sites.

Burnham will hope he can take the public with him as he enters the more precarious part ⁠of his premiership.

"Once he's done the ​big picture stuff ... he will absolutely delegate to operational teams and trust that they're able to deliver," said Rose Marley, a mayoral adviser in Manchester and the head of Co-operatives U.K., a not-for-profit body.

"He'll make sure that they're facing the right direction."

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  • Last Update: Aug 27, 2026 3:06 pm
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