Andy Burnham has been warned by the National Institute of Economic and Social Research (NIESR) that he faces "very difficult trade-offs" in the autumn budget, as the ongoing Iran war keeps oil prices and inflation elevated. The thinktank said the new prime minister has inherited a "challenging" economic position, with his plans to overhaul public services likely to face severe pressure from persistently higher prices, forcing Chancellor John Healey to find billions more to sustain services and welfare payments.

With oil briefly topping $100 a barrel and the strait of Hormuz largely closed since March, NIESR expects inflation to reach 3.8% over the next seven months, requiring an extra £24bn by the end of the decade. It has cut its forecast for the chancellor's budget headroom from over £7bn to around £3bn, downgraded UK growth to 1.1% for this year and next (£28bn in lost growth over two years), and warned against funding new pledges — such as an £18.5bn social care overhaul — through further borrowing, urging tax rises or savings instead as national debt nears £3tn, or 95% of GDP.