Andy Burnham risks a Liz Truss-style financial crisis unless the Government cuts public spending in next week’s Budget, former Bank of England chief economist Andy Haldane has warned.
Mr Haldane, who acted as an informal adviser to Mr Burnham when he was mayor of Manchester, said the Government had yet to confront Britain’s “precarious” fiscal position.
He cautioned against an Autumn Budget that merely delayed difficult decisions, warning that it could fail to “speak to the urgency of now”. Britain was “close” to being “taxed out and maxed out in terms of borrowing”, he said.
Speaking to The Times, Mr Haldane argued that the Government should reduce taxes and shrink the size of the state if it wanted to generate economic growth.
He also criticised plans to raise taxes on banks, describing the approach as “penny wise, pound foolish”. The proposal, he said, risked sending businesses the message that “the taxman cometh” whenever they made profits.
Mr Haldane said Mr Burnham had the potential to become a “great Prime Minister”, but claimed the economy was his “blind spot” and could leave the country’s financial future precarious.
“The penny has not yet fully dropped, including in Downing Street,” he said, pointing to Britain having the highest borrowing costs in the G7 despite not having the highest debts and deficits.
Mr Haldane said the Prime Minister’s greatest danger was losing the confidence of financial markets. “Keir [Starmer] lost the dressing room. Andy’s biggest risk is that he loses the dealing room. And then that’s an even more painful way to go, as Liz Truss would tell you,” he said.
Bank tax rise under pressure
The warning comes as Mr Haldane attacks Labour’s proposed £2 billion tax raid on banks as “delusional”. He said lenders might be able to afford the increase, but argued that the eventual cost would be passed on to households and businesses.
The City is mounting a last-ditch effort to stop Chancellor John Healey increasing bank taxes in the Budget on 28 October. The Confederation of British Industry has described the move as an “own goal”, while banks argue that they already pay more tax than lenders in financial centres including New York and Frankfurt.
Labour’s union backers say banks should contribute more because they have benefited from bumper profits amid higher interest rates. Barclays reported a 12 per cent rise in quarterly profits this week, taking the figure to £2.3 billion.
Mr Healey is widely expected to increase the bank surcharge on corporation tax, which currently stands at 3 per cent.
“Who do you think really is paying for that tax rise on the banks?” Mr Haldane told The Spectator. “It will not be the banks, it will be you and me as customers of banks. It’s slightly delusional to think this isn’t a tax on us rather than a tax on them.”
