Andy Burnham is struggling to rein in a markets crisis today amid fears more painful tax rises are looming at the Budget.

Government borrowing costs have continued to rise this morning ahead of a potentially stormy PMQs.

Even allies were dismayed by Mr Burnham's blustering debut in the House yesterday, where he blamed Brexit and even Thatcher for Britain's problems but offered little policy substance.

Long-term supporter Jim O'Neill, a former minister and Goldman Sachs economist who recently turned down a job advising the PM, warned that the UK would be punished for the lack of a 'sensible fiscal strategy'.

He insisted Mr Burnham must 'get real' on issues such as welfare and state pensions and his speech had been the 'last thing' markets wanted to hear. 

Lord O'Neill told LBC: 'If your country is under the focus of ''can they come up with a sensible fiscal strategy'' on a day when the markets think ''well no, you're not showing any sign of it'' you're going to have a tough day… if it stays like this your mortgage rate is going up.' 

Interest rates on gilts - one of the main ways the Government borrows money - rose during Mr Burnham's statement, having hit multi-decade highs during the day.

It has continued to climb this morning, with 30-year gilts now around 10 basis points above the level they were when the PM started speaking.  

The flare-up in the Iran war, persistent inflation, and nerves about a potential AI correction have been pushing up the costs of state debt around the world, but the UK is seen as particularly vulnerable. 

Experts have warned that Chancellor John Healey might now need to find tax hikes - or, less likely, spending cuts - worth up to £14billion to stabilise the finances at the Budget on October 28.

Mr Burnham has vowed that the Government will stick to fiscal rules, but also made a series of spending commitments and dismissed 'crude cuts' to benefits.

He hinted last night that a council tax revaluation - effectively a huge raid on residents of London and the South East - is still on the table.

Mr Healey has vowed to set out a path for defence spending reaching 3 per cent and then 3.5 per cent of GDP, although that schedule will not be revealed until next year. 

Left-wing think-tank the Resolution Foundation claimed in a report today that UK taxpayers contribute relatively little compared to other major economies - and could pay more.

'There is a strong case that any benefits of increased defence spending will be broadly shared, so the tax rises needed to find this should be too, including higher rates on middle-earners,' chief economist James Smith said.

Asked about comments by Lord O'Neill's criticism as she toured broadcast studios this morning, Cabinet Office minister Sally Jameson said she disagreed.

She told Sky News: 'I think it's important we don't over-read into individual comments people make, because I think Andy Burnham has been really clear that we are going to stick to those fiscal rules rigidly, and that fiscal responsibility is absolutely imperative.'

She added: 'We've got to have controls on spending, and I don't think Andy or anyone else has said any different to that.

'But I think the key thing is having growth and bringing optimism back into this country.'

The former chairman of NatWest has said the UK faces 'a very dicky period' leading up to the Budget.

Sir Howard Davies told BBC Radio 4's Today programme that the bond sell-off did not represent 'a major crisis of confidence in the UK Government', pointing to problems with rising private debt and America's 'ballooning deficit'.

But when asked whether concern about Mr Burnham's approach to public spending was causing 'market jitters', he said: 'Yes, I think it is.

'Unfortunately, we do have a circus built around out budgets, which actually does not happen in many other countries.

'There is a whole industry of people… to create expectations and then dash those expectations, and I think we are going to face a very dicky period between now and the Budget.'

He added: 'I think we're going to see a very uncertain period for the next three or four weeks, and it would be helpful if the Government could make some signs about their overall approach to the fiscal balance, which I think could calm things down a bit.'

Sir Howard also called for the pension triple lock to be changed, saying the country 'can't afford it', adding: 'If a Government does not grasp that nettle at some point, then I think its credibility is going to be on the rack.'

Chris Beauchamp, Chief Market Analyst at IG, said: 'Governments around the world are feeling the pressure from bond markets, but the situation is particularly acute for the UK, where Andy Burnham's grand promises about reforming the economy are about to meet the cold reality of high debt levels and rocketing borrowing costs. 

'UK taxpayers face the likelihood of paying more for his grand ambitions, while also having to worry about a BoE rate hike that becomes more likely with each $1 on the price of oil.' 

The new PM used his first statement to Parliament to set out a Left-wing vision for the country involving greater state control of the economy.

He said the Government would be 'relentless' in taking more control over nationalised utilities such as water and energy. And he claimed a new wave of devolution could drive economic growth.

Instead, Mr Burnham suggested he will try to reverse Thatcher's reforms, widely credited with lifting Britain out of the economic stagnation of the 1970s.

Kemi Badenoch said the plans would take the country backwards, adding that Labour's £70billion of tax rises had 'crushed the economy'.

She ridiculed him for 'still complaining about Margaret Thatcher', adding: 'He is living in the past. He wants to take us back to the 1970s.'