Andy Burnham has declined to rule out tax increases in the upcoming Budget, stating he "won’t be unrealistic" about the state of the public finances.

Speaking during his inaugural visit to Ukraine, the Prime Minister acknowledged the UK was in a "challenging position" but insisted he would adopt a "careful approach" to managing the economy.

Mr Burnham defended key policy pledges, including lowering VAT on household electricity bills and capping bus fares at £2, as being "funded commitments".

However, uncertainty remains over how several promises will be paid for, such as £5 billion in defence spending announced prior to his arrival at No 10 and plans for sweeping social care reforms.

Doubts have also been raised over his plan to finance the VAT reduction by scrapping the former Labour administration’s digital ID scheme, after former minister Darren Jones stated the policy was not costed.

Asked whether the public should accept they will have to pay more in tax rises for some policies, the Prime Minister told ITV News: “They don’t necessarily need to accept that.

“What I have put out so far, I wouldn’t say is everything, but they are the first steps and they are significant.”

Pressed on whether he would need to fill in spending gaps with tax hikes, he said: “I will always take a careful approach to things. I ran Greater Manchester for 10 years and we ran a very tight ship with rock solid finances.

“Nothing will change as I come into this role as Prime Minister. I won’t take risks with people’s jobs or their livelihoods or their family finances.

“I will try to help them in whatever way I can, I have already done some things that will help them.”

He added: “I will do what I can but I won’t be unrealistic and people really need to understand that.

“We are in a challenging position, whatever I do will be carefully thought through, it will be funded and there will be more to come as we go into the autumn.”

The fiscal squeeze facing new Chancellor John Healey ahead of his inaugural Budget has been laid bare as official figures showed government borrowing unexpectedly rose to £1.8 billion last month.

The Office for National Statistics (ONS) said government borrowing stood at £1.8 billion in July, £700 million or 68.7% higher than a year ago and confounding expectations.

The hike came despite a record July for income tax receipts.

Inflation also surged to a four-month high of 2.9% in July amid the fallout from the Iran war.

Experts, including the National Institute of Economic and Social Research (Niesr), have warned Mr Healey that he will need to either raise taxes or cut spending elsewhere as pressure on the public finances has left no room for extra borrowing.

The Chancellor has told the Cabinet they must be prepared to make cuts to finance some of the new pledges, and promised his economic plans would be “built on fiscal discipline” and meet the fiscal rules set by his predecessor Rachel Reeves.

Full analysis here.