'Get real': Andy Burnham must heed dire warnings about UK's eye-watering £3 trillion national debt

Andy Burnham, seen leaving 10 Downing Street for his first Prime Minister's Questions, must take warnings about government debt costs seriously (Picture: Carlos Jasso) | AFP via Getty Images

In this financial year, the UK government is expected to spend some £135 billion on debt interest, but only £90 billion on defence. Reducing the country’s eye-watering national debt of nearly £3 trillion should, therefore, be a priority for Andy Burnham’s government, even in these straitened times.

Of perhaps even greater importance is preserving the confidence of the bond market. The government’s long-term borrowing costs, on 30-year bonds, have just hit their highest level in 28 years, while the yield on 10-year bonds rose to the highest rate since June 2008 – the height of the financial crash.

This is partly because of global factors that are also affecting other countries, including concerns about an escalation in the US-Iran conflict and the prospect of higher inflation that could lead central banks to raise interest rates. However, Burnham’s recent remarks in the Commons about greater state ownership of public services may have made the UK’s situation worse.

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Putin’s sabre-rattling

As the leading economist Jim O’Neill said, “the tone of it, about implying a lot more government spending to take control of X, Y and Z, is the last thing that investors want to hear. The underlying issue is there are many governments all over the world [who] think they can just spend whatever... and eventually this miraculous growth is going to appear… Who’s going to get real in this country about the challenge of getting debt down and controlling our spending?”

This is the task facing Chancellor John Healey as he prepares for the first Budget of the Burnham era next month. The man who resigned as Keir Starmer’s Defence Secretary over an insufficiently large increase to Armed Forces spending, also needs to find more money to counter the threat posed by Vladimir Putin, who continues sabre-rattling towards the UK.

Whether left-wing Labour MPs like it or not, spooking the bond markets means the cost of our national debt increases, while reassuring them reduces it. With relatively small percentage movements in the market worth billions, it should be a no-brainer to keep them onside. This is a key test for Burnham and Healey, and one they simply must pass.