A former Bank of England chief economist has told Sky News that “repeated mistakes” by the government have been “sucking all life” from the economy ahead of the budget.
Andy Haldane said the country had to find a new way of treating the build-up to the annual fiscal event, as budget rumour and speculation – initiated in part by ministers and via leaks – had fed acts of self-harm for the past two years.
“It’s been a bad hand played, in truth, pretty poorly,” he said of the chancellor’s stewardship during his appearance on Mornings with Ridge and Frost.
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“So mistakes have been made and repeated mistakes. And the worst of that, I would say, is it’s repeated mistakes.”
The build up to this budget, and Rachel Reeves‘s first speech last October, have each been dominated by talk of crisis for the public finances.
Mr Haldane told Sophy Ridge: “The black hole narrative that you and I discussed a year ago, sucking all life or energy and light from the economy, has been a mistake repeated this time as well.
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“So not enough has been done to give growth a chance to create that stability. It’s only 16 months since Keir Starmer said I want to tread more lightly on our lives. That has singularly not happened. That speculation is proof positive of that.”
Mr Haldane, who served on the Bank’s rate-setting committee for seven years, was speaking after official figures last week showed a bigger than expected climb in the UK’s unemployment rate to 5% – a level not seen since the COVID pandemic.
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The Office for National Statistics also reported weaker than forecast economic growth during the third quarter of the year, slowing to 0.1%.
He argued there was a clear link between the data and the looming budget, which takes place next week.
“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”, he said.
Asked if that was the government’s fault or inevitable, he replied: “The process has become far too elongated and far too leaky, to be honest.
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“You know, we have this pretty much daily speculation about the next tax rise… 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.”
He made his remarks after the events of last Friday that saw the chancellor apparently rule out a Labour manifesto-breaking hike to income tax.
That was despite Ms Reeves using a speech earlier this month to prepare the ground for such a move – to the horror of many Labour MPs.
Treasury sources insisted the U-turn could be explained by better than expected economic forecasts by the Office for Budget Responsibility.
