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Burnham's budget crisis: markets demand spending cuts
Former Bank of England economist Andy Haldane warns the PM that bond market chaos requires hard choices on public spending, not just better social media.
In brief
Former Bank of England economist Andy Haldane warns the PM that bond market chaos requires hard choices on public spending, not just better social media. Bond market investors will keep pushing up UK borrowing costs unless the government cuts spending rather than raising taxes. Originally reported by Dailymail.
Haldane attacks Burnham's approach
Former Bank of England chief economist Andy Haldane told LBC that Burnham is running 'a traditional tax and spend socialist government with better TikTok videos'.
“'a traditional tax and spend socialist government with better TikTok videos'”
UK borrowing costs hit G7 high
The UK now pays more to borrow than any other major developed nation in the G7, with 30-year bond yields at a 28-year high.
Bond market investors losing confidence
Markets have shifted from cautious optimism in summer to studied scepticism in September, suspecting the government won't make tough spending cuts.
Budget headroom wiped out
Rising bond yields have eliminated much of the government's fiscal headroom ahead of the October 28 Budget, forcing difficult choices.
Tax hikes or spending cuts looming
Experts fear the government will choose more tax hikes and borrowing rather than spending restraint to balance the Budget.
Haldane's spending cut targets
Haldane suggests cuts could come from welfare, the triple lock on pensions, the NHS, or productivity improvements across the public sector.
Cuts would lower borrowing costs
Haldane argues that spending cuts would buy credibility with markets, lower borrowing costs, and potentially pay for themselves through economic growth.
“'Each of those individually would buy you, one, a lot of money, and two even more in instant credibility.'”
Political cost of spending cuts
Haldane concedes that spending cuts would face fierce opposition from Labour MPs, but only politically costly actions convince markets the government is serious.
“'Ultimately, it's only by taking actions that come with a political cost, that you convince financial markets that you are serious.'”
Burnham's TikTok Prime Minister image
Burnham has nearly three million followers across social media platforms and is dubbed the first TikTok PM for his casual approach compared to Keir Starmer.
Low drama Budget plan derailed
Haldane says the government's plan for a low drama Budget has been torpedoed by recent events, forcing hard choices on October 28.
“'I think that's been torpedoed by events over the past couple of weeks'”
In short
Bond market investors will keep pushing up UK borrowing costs unless the government cuts spending rather than raising taxes.
