The ‘circus’ over Rachel Reeves‘ Budget has crushed growth hopes, a former Bank of England boss warned today.
Andy Haldane, who was chief economist at the Bank, delivered a scathing verdict on the shambolic process after the Chancellor’s humiliating U-turn on hiking income tax.
Markets heaped risk premium on the UK last week after Ms Reeves and Keir Starmer bowed to a mounting Labour rebellion against breaking the election manifesto.
With 10 days still to go before the fiscal package, Mr Haldane said that ‘without any shadow of a doubt’ the intense rumours and briefing had impacted growth.
Official figures last week showed GDP effectively stalled in the third quarter, up just 0.1 per cent. The number for September alone slipped into the red, with a 0.1 per cent fall.
Ms Reeves tried to blame the weaker than expected performance on the Jaguar Land Rover hacking episode.
Andy Haldane, who was chief economist at the Bank, delivered a scathing verdict on the shambolic process after the Chancellor’s humiliating U-turn on hiking income tax
Markets heaped risk premium on the UK last week after Rachel Reeves and Keir Starmer bowed to a mounting Labour rebellion against breaking the election manifesto
UK plc eked out a 0.1 per cent GDP expansion in the third quarter of the year, worse than analysts had expected
But Mr Haldane said the Budget rumours had been a ‘real circus that’s been in town for months and months now’.
He said: ‘It’s caused businesses and consumers to hunker down.
‘One of the reasons we had a very weak growth number last week is because there’s that Budget speculation… (it’s) dampened people’s willingness to spend.
‘And first and foremost, we need to stop that speculation.’
He added: ‘If you speak to businesses, speak to consumers, their fearfulness about where the axe will fall is causing them, not unreasonably, to save rather than spend, to not put their balance sheet to work.
‘And that has taken the legs from beneath growth in the economy.’
The interest rate on 10-year gilts – a main way the government borrows money – eased slightly this morning after spiking on Friday.
Mr Haldane urged the Treasury to ‘decisively to end that speculation, that pernicious speculation that is dampening growth’.
The interest rate on 10-year gilts – a main way the government borrows money – eased slightly this morning after spiking on Friday
He said: ‘We have this pretty much daily speculation about the next tax rise.
‘And we need to re-engineer that process to either make it watertight, like the Bank of England’s monetary policy decisions, or a genuinely open consultation.
‘Right now, we have this halfway house of leaks and speculation which serves absolutely no one. Least of all the economy.’
On her performance so far, Mr Haldane said Ms Reeves has been dealt a ‘bad hand, played, in truth, pretty poorly’.
