Kemi Badenoch took aim at Andy Burnham today, branding him a “people-pleaser” over his refusal to rein in benefits as he comes under growing pressure from a deepening markets crisis.

The Conservative leader accused Mr Burnham of being unwilling to reject spending demands from Labour MPs on his own benches.

During her first Prime Minister’s Questions, she said investors were plainly “worried” as interest rates rise on the Government’s mounting debt burden.

Mrs Badenoch described Mr Burnham as a “spendthrift” premier who “wants to say yes to everyone”. She added: “I think it’s delightful that he wants to make everyone happy. But a prime minister needs to be a leader, not a people pleaser.”

The Prime Minister once again declined to rule out tax rises in next month’s Budget, while insisting he still wanted to bring down the welfare bill.

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. They continued to climb this morning.  

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. 

The US and Tehran exchanged fire again overnight, putting more pressure on oil and gas prices. 

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.

Challenged by Mrs Badenoch to name a spending request he had knocked back so far, Mr Burnham said: ‘I do not want to be a Prime Minister that sees a situation where we have so many people in their 20s not in education, employment or training.

‘I can’t defend that, and I want to change that by giving more support to young people so that we start investing in their success rather than paying for failure, as we have done for many years under successive governments.’

Mrs Badenoch persisted: ‘The markets are clearly worried that we now have a spendthrift Prime Minister who wants to say yes to everyone but cannot tell us where the money is coming from.

‘He needs to pay for all his new promises, and he has a choice: higher taxes, more borrowing or spending cuts.

‘Yesterday, he said change begins with honesty. So, will he be honest and tell us? Is he preparing to raise taxes again? Yes or no?’

Mr Burnham replied: ‘I’ve already indicated my first moves were to cut tax, but I’m not going to do what any prime minister has done and write the Budget here. That will be the matter for (Chancellor John Healey).

‘But can I also say to her that he and I took a deliberate decision to set an early date for the Budget so that we reduce the period for prolonged speculation of the kind that she is wanting us to indulge in today.’

Confronted with Lord O’Neill’s concerns about his approach, Mr Burnham said: ‘I’ve worked with Jim O’Neill for 10 years. Jim O’Neill always gives me candid advice.

‘We don’t always agree, but he and I worked together to turn Greater Manchester from a former industrial heartland to the fastest-growing city region in the country.’

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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.’