Andy Burnham’s promise of “breathing space” for households is threatened by the prospect of higher Bank of England interest rates. Although the Bank held rates at 3.75%, Governor Andrew Bailey warned that prolonged conflict in the Middle East could force policymakers to tighten monetary policy as rising oil prices drive inflation higher.

UK inflation reached 3.1% in August, while the Bank expects it to exceed 4% in early 2027. Energy costs have already pushed up mortgage rates, and higher government borrowing costs could limit future measures such as fare caps and reduced electricity VAT, while weak employment may temporarily restrain broader inflationary pressures.