Speculation over the next budget is partly to blame for weaker-than-expected economic growth figures as concerns about tax rises hit business and consumer spending, the Bank of England's former chief economist has warned.
Andy Haldane, who was the Bank's chief economist until 2021, told Sky News' Mornings With Ridge And Frost program that pre-Budget preparation has been a “circus” and called for the process to be reviewed to avoid leaks that could damage the economy.
This follows official figures last week which 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 attributed the weaker performance to Jaguar Land Rover shutting down production in the wake of its cyber attack, with gross domestic product (GDP) falling 0.1 per cent during September after the fallout hit activity in the manufacturing sector.
But Haldane said the budget rumors had “without a doubt” had a direct impact on growth.
He told Sky News that the upcoming budget has been a “real circus that has been going on in the city for months and months”.
He said: “It has caused businesses and consumers to protect themselves.
“One of the reasons we had a very weak growth number last week is because there is this budget speculation… (it has) decreased people's willingness to spend.
“And above all, we must stop such speculation.”
And he added: “If you talk to companies, talk to consumers, their fear about where the ax will fall is causing them, not without reason, to save instead of spend, not to put their balance sheet to work.
“And that has weakened the growth of the economy.”
He urged the Treasury to “decisively put an end to that speculation, that pernicious speculation that is holding back growth.”
Haldane said: “We have this speculation practically daily about the next tax increase.
“And we need to redesign that process to make it airtight, like the Bank of England's monetary policy decisions, or a genuinely open consultation.
“Right now, we have this middle ground of leaks and speculation that benefits no one at all. Let alone the economy.”
Regarding his performance so far, Haldane said that Reeves has been dealt “a bad hand, the truth is that he has played it quite badly.”
Treasury has been contacted for comment.
