Andy Burnham has been skewered by one of his own financial advisers. Andy Haldane, the former Bank of England chief economist, has written a piece for the Financial Times setting out what chancellor John Healey must do in the autumn Budget. It is completely the opposite of what Burnham and Healey plan to do.
Haldane's warning on Budget speculation
Haldane wrote: “Britain’s last two Budgets were presaged by drawn-out and messy speculation about tax rises. Amid the uncertainty, consumers and businesses paused spending and growth slowed.” He warned that another bout of pre-Budget speculation about spending, taxes and borrowing risk disaster at a time when gilt yields are soaring and “bond markets are only a hiccup away from a heart attack”.
Haldane said public sector finances are “in a parlous state”: “Debt is close to 100% of GDP, annual debt servicing in excess of £100billion and borrowing costs at their highest this century.” He also noted that “the UK has not run a fiscal surplus, nor generated a percentage point of productivity growth, since 2001”.
No more tax or borrowing
His conclusion is that Britain should not tax or borrow a penny more, as it will only crush economic growth by crowding out the private sector. That is exactly what Burnham is planning, with Healey considering fiddling with fiscal rules to borrow an extra £9billion a year by the end of the parliament.
Instead, Haldane wants the chancellor to announce “a moratorium on further rises in the tax and regulatory burden on consumers and businesses for the remainder of this parliament”. This would allow the private sector to start investing and spending again, generating growth.
Will Healey listen?
It is unlikely Healey will take the advice, as Labour wants to tax and spend, even if it means crushing the growth needed to keep the state alive. Burnham's advisers are now letting rip, and the country could be left skewered.
