Market alarm at the prospect of an Andy Burnham premiership is already set to cost families an average £300, the Conservatives have warned.

Shadow chancellor Sir Mel Stride said taxpayers face a 'Burnham premium' as markets push up government borrowing costs because of concerns that he will drag Labour further to the Left.

Gilt yields, which reflect the government's borrowing costs, rose sharply after the Greater Manchester Mayor announced he will fight the Makerfield by-election to pave the way for an expected leadership challenge.

New Tory analysis has suggested that if the jump in borrowing costs seen in the wake of Mr Burnham's announcement is sustained over a five-year parliament, it would cost the taxpayer £5.4 billion, equal to almost £300 for every working family.

The UK is now paying more to borrow than any other major western economy, with rates persistently over five per cent.

In a speech on Tuesday, Sir Mel will describe the situation as a 'damning verdict by the markets on the current government'.

Mr Burnham is yet to set out a detailed manifesto. But he has signalled a shift to higher spending and last year said it was time to 'get beyond this thing of being in hock to the bond markets'.

'Andy Burnham is already costing us all money before the by-election writ has even been served,' Sir Mel will say.

'Markets do not care about personalities - they care about the fundamentals. And there are two important fundamental factors here.

'One is the prospect of a new Prime Minister coming in with a plan to borrow even more, to raise anti-growth taxes even higher than those baked into existing plans, and with an insufficient understanding of the connection between these actions and market movements.

'Investors are rational. If they see people who they think will borrow more or mismanage the economy taking the reins of power, they price that in.'

Sir Mel will warn that Britain is likely to face an economic penalty even if Sir Keir Starmer 'struggles on' in office., as he risks being 'pulled to the Left' to appease mutinous Labour MPs.

'Policy is being shaped by backbench pressures rather than economic reality, leading to more borrowing, more taxes and higher inflation,' he will say. 

On Monday night, Mr Burnham signalled he will not now junk Labour's fiscal rules if he becomes leader. Officials insisted he would stand by the rules set out by Rachel Reeves to avoid further spooking the financial markets.

Meanwhile, Mr Burnham also faced criticism for his stance on immigration. He has distanced himself from Shabana Mahmood's plan to raise the qualifying period for indefinite leave to remain from five years to as many as 10, suggesting the idea is 'un-British'.

Robert Jenrick, home affairs spokesman for Reform UK, said the comments showed Mr Burnham was not serious about controlling the UK's borders.

'If Burnham wins, a million low skilled migrants will be allowed to stay and get British citizenship in the next few years,' he said. 'And he won't stop the boats. Instead he will put them in bedsits on your street. To pay for it all? He'll have to hike your taxes.'