Former Bank of England chief economist Andy Haldane has said there is “without a shadow of a doubt” a direct link between feverish Budget speculation and sluggish growth in the UK economy.
In an interview on Sky News on Monday morning, the incoming president of the British Chamber of Commerce (BCC) told Sophy Ridge that “the process has become far too elongated, and far too leaky”.
He slammed the “pretty much daily speculation about the next tax rise”, which he describes as a “half-way house” between a genuinely secret process – like the Bank of England’s monetary policy decisions – and an open consultation.
The economist said: “One of the reasons we had a very weak growth number last week was because Budget speculation has dampened people’s willingness to spend.
“First and foremost, we must stop that speculation.”
In light of the government’s U-turn on raising income tax at the Budget on 26 November, Haldane criticised the prospect of a “smorgasbord of small measures”.
“Make it fundamental root and branch reform, that gives us a chance of getting growth going.”
Budget speculation damaging confidence
Andy Haldane said of business confidence that “fearfulness about where the axe will fall is causing them, not unreasonably, to save rather than spend”, which has “caused businesses and consumers to hunker down”.
“All of these give cause for pause, if you are a business making decisions, if you’re a household making spending choices, and gum up the works of our economy, take the legs from growth.”
The Bank of England’s monetary policy report for November said that part of the “softness” in growth “may reflect uncertainty ahead of the upcoming Autumn Budget, which appears to have weighed on some survey indicators”.
Elsewhere, that report pointed to “weak” growth in household consumption, with “a limited recovery expected in the near term”.
Haldane called for spending cuts alongside tax raids, something he says the markets will “require”, in a “one in, one out” system – with one pound of cuts required to allow for a pound of tax hikes.