Andy Haldane, formerly the chief economist at the Bank of England and a respected economic voice, has urged Prime Minister Andy Burnham to reconsider his government's approach to taxation. Haldane, who was part of a group of economic advisors to Burnham upon his installation as Prime Minister on July 20, argues that recent budgets have been 'outright harmful' to the private sector.
Haldane, known for his past warnings about inflation when others deemed it transitory, has expressed significant concern over what he perceives as an escalating tax burden. He stated that current policies could lead to a third consecutive budget focused on tax increases, a prospect he believes is damaging to economic growth. This warning comes amidst reports that the Burnham government, alongside Chancellor John Healey, is contemplating further tax hikes, potentially exacerbated by the financial implications of Thames Water's situation.
Haladane advocates for a moratorium on additional tax rises and regulatory burdens on consumers and businesses in the upcoming budget on October 28. He suggests that the government should explore alternative avenues for funding, such as reducing welfare spending and curbing the growth of the public sector, rather than imposing further taxes. The freeze on personal allowances, a key policy from former Chancellor Rachel Reeves, is noted to remain in effect until the end of the decade, contributing to the existing tax pressure.
Reports suggest that Prime Minister Burnham's initiatives, including a cap on bus fares and a VAT cut on household energy bills, have been implemented without clear costing, with City economists estimating their expense at around £25 billion. Haldane's stance, alongside that of former Tory minister and Goldman Sachs economist Lord O’Neill of Gatley, who reportedly left the advisory group over wealth tax disputes, indicates a divergence of opinion within Burnham's economic council. Both O'Neill and Haldane have reportedly concluded that the saturation point for higher taxes has been reached.