Key facts
- Andy Haldane warned that the UK government appears to be a 'traditional tax and spend socialist government with better TikTok videos'.
- Haldane stated the government's 'Achilles heel' is its unwillingness and/or inability to cut public spending.
- He advised that spending cuts would provide significant funds and instant credibility, lowering borrowing costs.
- UK bond yields are at 28-year highs ahead of the October 28 Budget.
- Haldane believes hard choices are looming on the horizon regarding budget headroom.
Former Bank of England chief economist Andy Haldane has warned that the UK government risks alienating bond market investors with its current fiscal approach. Speaking to LBC, Haldane described the government as appearing to be a 'traditional tax and spend socialist government with better TikTok videos'. He identified the government's 'Achilles heel' as its 'unwillingness and/or inability to cut public spending'.
Haldane suggested that significant spending cuts in areas such as welfare, pensions, the NHS, or through across-the-board public sector productivity improvements, would not only generate substantial funds but also provide crucial credibility with financial markets. He believes such actions are necessary to lower borrowing costs, especially with UK bond yields currently at 28-year highs ahead of the Budget on October 28.
The economist noted that the recent surge in borrowing costs has torpedoed the plan for a 'low drama, no drama Budget', indicating that hard choices are imminent. He conceded that spending cuts would face opposition from Labour MPs but argued that demonstrating seriousness to the markets requires actions that come with a political cost.