Andy Burnham, the newly elected Prime Minister, faces a financial squeeze due to persistent inflation resulting from the Iran war, according to the National Institute of Economic and Social Research (Niesr). Niesr's deputy director Stephen Millard warns that there is "no scope for increasing borrowing", forcing Burnham to choose between raising taxes or cutting spending. To fund cost-of-living measures, Niesr advocates for higher taxes through tax reform or increased council tax with a land value tax system. The think tank expects inflation to peak at 3.8% in February 2027 before falling back to the Bank of England's target rate.
Written by the local model on 2026-08-21,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
Story summary
Prime Minister Andy Burnham, who assumed office last week, is facing financial challenges in meeting his pledges on defence and the cost of living. A major think tank, the National Institute of Economic and Social Research (Niesr), has warned that Burnham will have to raise taxes or cut spending to fund these promises. The Niesr argues that there is no scope for increasing borrowing due to persistent inflation caused by the Iran war, which is squeezing public finances. This would require Burnham to break Labour's manifesto pledge of not raising taxes for working people, including income tax, VAT, and national insurance contributions.
Written for “Manchester Council Finances” on 2026-08-31,
grounded in this article and the 0 other(s) covering the same event.
Why this leaning score
The article presents criticisms from the think tank's perspective as facts, using phrases like 'warned the public finances' and 'questioned whether Burnham had fully thought through'. Additionally, the think tank's suggestions for cost-of-living measures are presented as neutral or even favorable alternatives to breaking the manifesto promise on income tax rates.
Written under an earlier scoring contract, which gave a paragraph
rather than checkable quotes. Re-analysing this article replaces it.
Leaning score -0.55 for article 77 · logged 2026-07-30
- Published
Prime Minister Andy Burnham will have to raise taxes or cut spending to meet his pledges on defence and the cost of living, a major think tank has said.
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tank → publish → living
Burnham has announced a series of new measures since assuming office last week, including cuts to electricity bills and bringing the bus fare cap in most parts of England back down to £2.
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Burnham → announce → 2
But the National Institute of Economic and Social Research (Niesr) warned the public finances will continue to be squeezed by more persistent inflation as a result of the Iran war.
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finances → warn → war
It questioned whether Burnham had "fully thought through" how his promises would be paid for, but said the prime minister will have to raise taxes or cut spending elsewhere.
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minister → question → spending
Stephen Millard, Niesr's deputy director for macroeconomics, said: "There's clearly no scope for increasing borrowing, so it is about choices."
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it → say → choices
Labour's manifesto pledge was to not increase taxes for working people - including income tax, VAT and national insurance contributions - which Burnham has said he will uphold.
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he → increase → which
Millard said Niesr was advocating for cost-of-living measures to be funded through higher taxes – "which could involve tax reform rather than higher marginal rates" – or spending cuts.
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which → say → rates
He said: "People have talked a lot about the welfare bill – that is an obvious place to look.
"
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that → say → bill
The triple lock on pensions, that is very, very expensive, and will get more expensive as we age."
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we → get → pensions
He also pointed to potentially reforming council tax to move towards a land value tax system, or scrapping some VAT exemptions.
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He → point → exemptions
"Once you've done all of that, then I'm afraid I would break the manifesto promise and would be looking at the income tax rate."
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I → do → rate
Niesr also said on Wednesday it expects inflation to keep rising until February 2027, peaking at 3.8% before falling back to the Bank of England's 2% target.
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inflation → say → target
The think tank said in its latest economic outlook that it does not believe the central bank will cut interest rates until 2028.
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bank → say → 2028
Its Director David Aikman said that "treading water is not enough" to prevent the national debt from rising.
"Every major shock this century has ratcheted the debt ratio higher, and none of that increase has been reversed," he said.
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he → say → increase
The Treasury said the government will stick to its fiscal rules while investing in "the public services people rely on".
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people → say → services
"Fiscal discipline is the bedrock of economic stability and national security," a spokesperson said.
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spokesperson → say → stability
