A former adviser to the Prime Minister has put forward the view that John Healey's Budget is designed to satisfy Labour backbenchers rather than address the concerns of businesses or bond markets.
Haldane put forward the view that tax increases and additional borrowing, should the Chancellor choose either path, could put economic expansion at risk and make the country a less attractive destination for investment. Questions about a government proposal to broaden state involvement drew a public response from the economist who previously held the top advisory post at the Bank of England.
Cuts to spending and regulatory requirements were the approach Haldane voiced a preference for when discussing ways to lift economic growth. Amid mounting apprehension about Healey's forthcoming Budget, with Badenoch contending that he risks inflicting greater economic damage than his predecessor Rachel Reeves, Haldane expressed the view that the fiscal statement should serve both the business community and bond markets.
The administration has indicated it will hold back on expenditure while leaving tax rates for individuals and companies unchanged. A move in that direction has been put forward as a way to lift economic activity.
Additional borrowing and further increases to taxation are both anticipated in the period ahead. From a growth standpoint, Haldane indicated neither option appears to offer a strong path forward.
Burnham, describing the forthcoming Budget as one oriented toward backbenchers rather than the business community or bond markets, faces calls from the left wing of his party to increase public spending. Haldane noted that while the economy had performed better than forecast, both living costs and government borrowing were now set to make conditions more difficult going forward.
The benchmark Haldane put forward for judging any party's economic proposals centred on whether the UK would become a more appealing destination for business investment and job creation. Pointing to the Budget's anticipated levy on banks, he argued that a tax structure under which the government captures gains while investors absorb losses would deter further capital commitment, and added that leaving Healey with only £15 billion in fiscal headroom would amount to a short-sighted approach.
Haldane's position centred on the idea that building a larger fiscal buffer would demonstrate a willingness to take hard choices on public spending — and that this, in his view, would reassure financial markets while easing pressure on the cost of government debt.
Haldane, who chose not to take up a formal post in Burnham's administration, wrote that Labour's vision of an enlarged and costly state sat uneasily against a fragile fiscal environment, and he put his weight behind proposals to trim business and employment taxes, ease regulation, and pull back government expenditure in order to bring borrowing costs down.
Opposition politicians pressed Healey to address a climb in the cost of living, with government statistics due out shortly anticipated to put the annual rate above the 3.1 per cent posted the previous month. That inflation reading from September feeds into the formula that sets benefit uprates for the following year — a calculation the Conservatives put at around £4 billion in additional welfare expenditure.
