Andy Burnham is being urged to tear up Labour's tax pledges to fund his costly spending plans.

The challenger to Sir Keir Starmer's leadership made a series of expensive commitments during his by-election campaign – but is yet to set out how he will fund them. 

While fighting for the Makerfield seat, Mr Burnham said he would honour Labour's manifesto tax pledges, which include not raising income tax, National Insurance or VAT. 

But allies of the new MP are now pushing him to drop the pledge or risk being 'hamstrung' in office.

The Prime Minister's position was hanging by a thread last night and an announcement that Sir Keir will step down to make way for Mr Burnham could come as soon as today.

Labour ministers and MPs on the Left of the party have rallied around Mr Burnham – including his right-hand woman Louise Haigh, Anneliese Midgley, who helped to run his campaign, and Energy Secretary Ed Miliband.

One pro-Burnham minister told the Daily Mail: 'That manifesto was written at a certain point in time but so much has changed. I think Andy has an opportunity to say he's a new PM and in order to bring about real change, it is going to require some big changes.

'That includes on tax, where he is going to need to raise revenues to deal with the huge pressures in defence, in the NHS, in getting our high streets where they need to be... I think if we stick to those tax pledges he is going to be hamstrung from the start and people could become disillusioned very quickly.'

The outgoing Greater Manchester mayor has committed to slashing business rates for pubs and hospitality venues, nationalising water, energy and transport, a massive investment in council housing and a revival of the northern leg of HS2.

Mr Burnham is yet to outline how he will pay for these promises, made in the heat of his by-election campaign, which could cost taxpayers tens of billions of pounds.

Government estimates put the cost of nationalising the water industry alone at about £100billion – meaning Mr Burnham could have to look again at the tax commitments Labour was elected on in order to find cash for his economic agenda. Last night the Tories warned Mr Burnham's spending plans will damage the economy, as they said that he has 'high taxes, high borrowing in his DNA'.

Shadow Chancellor Sir Mel Stride told this newspaper: 'Andy Burnham wants to tear up Labour's already disastrous economic legacy and go even further. This will punish hard-working people who do the right thing.

'Rachel Reeves has raised taxes by over £60billion while letting the welfare bill spiral out of control. Burnham wants to double down on all her mistakes, with yet more taxes and more reckless spending and borrowing.'

Mr Burnham, photographed in Cheshire yesterday wearing Birkenstock sandals ahead of his return to Westminster today, spooked the financial markets last year when he said the Government should be less 'in hock' to the bond markets. But during his by-election campaign, he said he supported the Chancellor's fiscal rules – U-turning just weeks after suggesting they could be changed to fund defence spending.

There are those around Mr Burnham still advocating for such a move. On Friday Lord O'Neill, a former Treasury minister, said the Government should be 'bolder about borrowing to invest'.

The economist, who Mr Burnham has drafted in to boost his team of advisers, suggested more could be done to 'explore' Rachel Reeves's fiscal rules in order to boost spending.

UK gilt yields, which determine the cost of government borrowing, rose after Mr Burnham's victory cleared the way for his bid to oust Sir Keir. During his campaign he was likened to Robin Hood's 'Sheriff of Nottingham' after he boasted of hitting Manchester with the highest tax of any mayor.

Reform UK's Treasury spokesman Robert Jenrick last night warned that 'Burnham will show his true colours' upon entering No 10. 'Higher taxes to fund wasteful Net Zero spending, houses for illegal migrants, and benefits for those who don't need them,' he said. 'Labour never changes and working Britons will be forced to pay for it all.'

Meanwhile, Business Secretary Peter Kyle told Sky News that Mr Burnham must maintain 'fiscal discipline'. Ms Reeves's fiscal rules state that day-to-day spending must be matched by tax revenues, so that Labour can only borrow to invest and not to fund spending.