‘Breathing room’ promises have squeezed fiscal headroom, says think tank

Andy Burnham’s effort to give families “breathing room” over the cost of living has squeezed the fiscal headroom to as little as £8 billion, a think tank has estimated.But as he begins his first weekend in the top job, the Prime Minister and his pick for Chancellor John Healey are under pressure to say how they will sustain a raft of support packages they announced for bus passengers, energy billpayers and pub punters.The Resolution Foundation has estimated that this week’s pledges will cost a total of more than £2 billion in 2029/30.Its estimate of the fiscal headroom – the leeway the Government has against the Chancellor’s day-to-day spending rules – has fallen to £8 billion.This has plunged from the £23.6 billion estimate in early March, before the costs linked to the war in Iran began to set in.“The funding debate has focused on both the flimsy detail of where the money is coming from, and the ambiguity about whether the measures are permanent,” the Resolution Foundation’s chief executive Ruth Curtice said.“The upshot is that either John Healey needs to find more money in the budget, or he needs to put up energy bills back up by 5%.”Mr Burnham this week said he would knock VAT off electricity bills in England, Scotland and Wales from October 1.The Government has estimated the move will cost around £850 million in 2026-27.It would be paid for by cancelling the digital ID programme, which was expected to cost £1.8 billion over three years.Read MoreThe Prime Minister also went to Bath, Somerset, to celebrate his plan to bring the £3 bus fare cap down to £2 throughout 2027.This will be funded by turning international climate grants into loans, raising around £400 million, and raising a further £54 million from savings in the Department for Energy Security and Net Zero budget.Mr Burnham spent Thursday morning at The Hare pub in Harlow, Essex, where he unveiled business rates for pubs, clubs and live music venues would be cut by 20% from April next year.The move will cost the Treasury around £100 million.But the discount will apply to nearly 32,000 hospitality businesses and is expected to save a typical pub approximately £1,100 annually.“I don’t think I’ll do the John Prescott,” he told Mr Healey with a pint in hand, referring to a famous video of the late former deputy prime minister downing a pint in one go.Mr Burnham has also launched No 10 North this week, hosting a meeting in Manchester with Cabinet ministers and devolved mayors, including Mr Healey, First Secretary of State Louise Haigh, Reform UK Mayor of Greater Lincolnshire Andrea Jenkyns and Conservative Mayor of the Tees Valley Lord Houchen of High Leven.He said: “I just want to assure everyone around the table from all of the different parts of England that No 10 North is at your service, here for you to empower you more than that, empower the people that you represent, the places where they live to make it feel as though we’re all part of a national story where everyone is pulling in the same direction and we’re all beginning to feel positive change in our community.“We can see positive change on our high streets and that’s what No 10 North is all about.”Conservative leader Kemi Badenoch earlier this week said Mr Burnham had gone on a “spending spree”.She said: “Andy Burnham’s answer is to cap one price and send the bill somewhere else.”Mrs Badenoch added: “Andy Burnham needs to rule out tax rises to pay for his spending spree.”