Incoming Prime Minister Burnham's Immediate Policy Challenges

1. Easing the cost of living

Burnham has said the government needs to be “serious about putting more money back in people’s pockets”; while his policy adviser, Miatta Fahnbulleh, says the prime minister will be focused on “dealing with the cost of living in the short term”.

Ideas floating around Burnham’s team include introducing a year-long rent freeze for the private sector, a reduced cap on bus fares, and removing green levies from energy bills and funding them through tax instead.

All this would cost money. While some in his team are urging the next prime minister to fund his commitments by taxing wealth, he seemed to signal earlier this week this would not be something he would pursue in the immediate term.

2. Funding defence

Starmer has left Burnham with a £4.7bn black hole in his defence investment plans.

Downing Street and Treasury officials suggest that the incoming prime minister funds this through increasing borrowing, given there is still headroom against the government’s debt targets.

But Burnham will already see the headroom depleted by inflation triggered by the Iran war, and also needs to find money for his cost of living measures and the possible de-privatisation of the utilities sector.

3. What to do with Thames Water

The creditors to the stricken water company are trying to negotiate a £10bn rescue package.

Emma Reynolds, the environment secretary under Starmer, recently wrote to regulators spelling out her opposition to such a deal, saying it would represent poor value for taxpayers.

But Burnham will have to decide whether to go further and ask the high court to put the company into special administration, which could be a first step towards putting it under public control.

4. Political funding

Shortly before recess the government postponed the next stage of the elections bill to make space to pass the Hillsborough law instead.

This had the effect off putting several internal policy disputes into Burnham’s hands. Labour MPs have proposed a number of amendments to the legislation, including ones to introduce a donations cap, to bring in a ban on cryptocurrency donations and set up a commission on electoral reform.

Burnham has talked in the past about the need to do politics differently – this will be an immediate test of the scope of his ambition.

5. The EU reset

The UK and EU were due to hold a joint summit last month to confirm the long-running “reset” in relations, which was due to include new deals on agriculture and energy trading andan agreement to increase the number of visas issued to young people.

One of the sticking points on this agreement was that Brussels wanted the UK to offer European students the same fees as domestic ones – a proposal that could cost the sector (or the government, depending on who footed the bill) more than £100m.

Once EU officials realised Starmer was on his way out, they postponed the summit to talk to Burnham before finalising an agreement.

That will leave Burnham having to make the final decision on potentially contentious issues such as fees.

6. The US-UK relationship

Starmer put great stock in staying close to the US president, Donald Trump, for much of his premiership.

The Iran war, however, which the prime minister publicly criticised, caused a serious rift in the transatlantic relationship. It will be up to Burnham to decide whether to try to heal it, or to take the advice of many of his own MPs and seek some distance from the volatile US administration.