The chaotic build-up to the UK's upcoming Budget has been accused of severely damaging the country's economic prospects, according to a stark warning from a former top official at the Bank of England.
A Scathing Verdict on Budget Chaos
Andy Haldane, who served as the Bank's Chief Economist, delivered a scathing assessment of the political turmoil following the government's humiliating U-turn on proposed income tax hikes. He described the protracted period of rumours and briefings as a 'real circus that's been in town for months and months now'.
Mr Haldane stated 'without any shadow of a doubt' that the intense speculation has negatively impacted the UK's economic growth. He explained that the uncertainty has caused both businesses and consumers to 'hunker down', saving their money rather than spending or investing, which has effectively taken 'the legs from beneath growth in the economy'.
The Economic Fallout in Numbers
Official figures released last week provided concrete evidence of the UK's stuttering economy. Data showed that GDP effectively stalled in the third quarter, rising by a mere 0.1 per cent. The situation looked even worse for September alone, which saw the economy slip into negative territory with a 0.1 per cent contraction.
This weaker-than-expected performance coincided with financial markets adding a risk premium on the UK, a reaction to Chancellor Rachel Reeves and Prime Minister Keir Starmer facing a mounting Labour rebellion over breaking an election manifesto pledge.
While the Chancellor attempted to attribute the poor performance to the Jaguar Land Rover hacking incident, Mr Haldane was clear that the primary culprit was the Budget speculation dampening people's willingness to spend.
Call for an End to 'Pernicious Speculation'
Mr Haldane issued a direct plea to the Treasury, urging them to act 'decisively to end that speculation, that pernicious speculation that is dampening growth'. He criticised the current process of 'daily speculation about the next tax rise' as a 'halfway house of leaks and speculation which serves absolutely no one'.
He proposed a re-engineering of the process to either make it watertight, similar to the Bank of England's monetary policy decisions, or to hold a genuinely open consultation.
The economic uncertainty was also reflected in the government's borrowing costs. The interest rate on 10-year gilts, a key measure of government debt, spiked on Friday before easing slightly. On the Chancellor's performance to date, Mr Haldane offered a grim analogy, suggesting she has been dealt a 'bad hand, played, in truth, pretty poorly'.
