Speculation and leaks surrounding the upcoming Budget have been directly blamed for Britain's disappointing economic growth figures, according to a former top Bank of England economist.
The Growth Slowdown and Budget 'Circus'
Official data released last week showed the UK's economic growth slowed significantly to just 0.1% in the third quarter, a sharp decline from the 0.3% growth recorded in the previous three months. This performance was worse than most economists had predicted.
Andy Haldane, who served as the Bank of England's chief economist until 2021, told Sky News that the prolonged build-up to the Budget has become a "real circus that's been in town for months and months now." He stated that the constant Budget rumours have "without any shadow of a doubt" had a direct impact on growth by causing both businesses and consumers to become cautious.
How Speculation is Damaging the Economy
Mr Haldane explained that the uncertainty about potential tax rises has created a climate of fear. "It's caused businesses and consumers to hunker down," he said. "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."
He elaborated further: "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."
Call for Treasury Process Overhaul
The former chief economist called for decisive action from the Treasury to end what he described as "pernicious speculation that is dampening growth." He criticised the current system of daily speculation about the next tax rise and called for a complete overhaul of the process.
"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," Mr Haldane urged. "Right now, we have this halfway house of leaks and speculation which serves absolutely no one. Least of all the economy."
While Chancellor Rachel Reeves had attributed the weaker economic performance to the Jaguar Land Rover production shutdown following a cyber attack - which saw GDP decline by 0.1% during September alone - Mr Haldane's comments point to broader structural issues with how fiscal policy is communicated.
On the Chancellor's performance generally, Mr Haldane offered a mixed assessment, suggesting Ms Reeves has been dealt a "bad hand, played, in truth, pretty poorly." The Treasury has been approached for comment on these significant criticisms.
