Speculation over the upcoming Budget is partly to blame for weaker-than-expected economic growth figures as worries over tax hikes hit business and consumer spending, the former top economist at the Bank of England has warned.
Andy Haldane, who was chief economist at the Bank until 2021, told Sky News’s Mornings With Ridge And Frost that the build-up ahead of the Budget has been a “circus” and called for the process to be overhauled to prevent leaks that can damage the economy.
It follows official figures last week that revealed economic growth slowed to 0.1 per cent in the third quarter, down from 0.3 per cent in the previous three months and worse than most economists predicted.
Chancellor Rachel Reeves blamed the weaker performance on the Jaguar Land Rover production shutdown in the wake of its cyber attack, with gross domestic product (GDP) declining by 0.1 per cent during September after the fallout hit activity in the manufacturing sector.
But Mr Haldane said the Budget rumours had “without any shadow of a doubt” had a direct impact on growth.
He told Sky News the upcoming Budget has been a “real circus that’s been in town for months and months now”.
He said: “It’s caused businesses and consumers to hunker down.
“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.
“And first and foremost, we need to stop that speculation.”
He added: “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.”
He urged the Treasury to “decisively to end that speculation, that pernicious speculation that is dampening growth”.
Mr Haldane said: “We have this pretty much daily speculation about the next tax rise.
“And 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.
“Right now, we have this halfway house of leaks and speculation which serves absolutely no one. Least of all the economy.”
On her performance so far, Mr Haldane said Ms Reeves has been dealt a “bad hand, played, in truth, pretty poorly”.
The Treasury has been approached for comment.
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