Labour’s plans risk Truss-style crisis, former Burnham adviser warns

Labour’s drive for a bigger state risks a “Liz Truss-plus” crisis in the bond markets, a former Bank of England chief economist has warned as he backed Kemi Badenoch’s economic plans. Andy Haldane, who was reported to have advised Andy Burnham this year , said that Conservative proposals to cut business taxes and shrink government offered a better route to growth than the agenda set out by the prime minister. Most commented 1 Forgotten particle may hold key to how universe survived big bang Science 241 comments 2 Lily Allen: ‘I felt I was a vehicle for male pleasure — not my own’ Music 229 comments 3 Doctor Who and me — Russell T Davies on his life in TV Books 24 comments 4 ‘We got a call yesterday. Birth mum’s had another baby’ Parenting 32 comments 5 Budget 2026 predictions: when is it and what could be announced? Economics 235 comments Haldane predicted that John Healey would raise taxes and borrowing to satisfy Labour MPs rather than businesses and financial markets in his budget next week and said: “I expect a budget for the backbenchers rather than for business or the bond markets.” John Healey will unveil the budget on October 28 PETER BYRNE/PA Haldane separately wrote in the Financial Times: “Andy Burnham’s conference speech was a homage to 1950s-style state socialism. Kemi Badenoch’s speech was also a throwback, but to the smaller state and lower taxes of the 1980s. Which offers the more likely path to growth? Top stories 1 16 of the best safaris in Africa Africa “In today’s straitened circumstances, the rightward fork is far more likely to succeed. I say that despite being firm in my belief that Conservative austerity in the 2010s was an act of economic vandalism and that the rapid expansion of the social safety net after Covid and the Russia-Ukraine crisis was the correct policy course at the time.” Advertisement Haldane said that austerity was wrong when borrowing was cheap, but the fiscal position had now changed. He said that long-term borrowing costs were four to five percentage points higher and exceeded estimated long-term growth, leaving less room to fund additional spending. Top stories 1 Prepare now for the inheritance tax mess coming for your pension Tax He warned: “The Labour Party’s plan for an expansive (and expensive) state sits uncomfortably with this precarious fiscal backdrop. It also sits oddly with the fact that public sector productivity has failed to rise this century. Both state financial capacity and personnel capability are at present sources of economic weakness, not strength.” Budget 2026 predictions: when is it and what could be announced? He added: “In this debt-laden environment, the pursuit of a larger state is more likely to crowd out than crowd in growth. It also runs the risk of a loss of confidence in bond markets that causes borrowing costs to ratchet — think ‘Liz Truss-plus’.” Haldane said that businesses and households, rather than the Treasury, were best placed to drive investment, and backed cuts to business and employment taxes alongside lighter regulation. Advertisement He wrote: “The Conservatives’ economic plans are better suited to that task: for example, through cuts to business and employment taxes and regulation to unleash animal spirits; and by slimming government spending to lower borrowing costs, as the IMF and Bank of England have recently highlighted. “In today’s hostile environment for borrowers, the route to growth comes from priming the private sector, not pump-priming the public sector. Voluntary government spending restraint is needed today as insurance against the possibility of sharper, involuntary cuts in the teeth of a crisis. Those pennies need to drop if indebted governments are not to live on borrowed time as well as money.” Kemi Badenoch ALISHIA ABODUNDE/GETTY IMAGES At a pre-budget briefing held on Tuesday by Ipsos and the National Institute of Economic and Social Research (Niesr), Haldane also warned against a windfall tax on banks. He said unexpected levies could discourage investment by signalling that companies’ profits could be targeted. He said: “The harm that’s done is that that tells every investor in UK businesses there’s a chance that the taxman’s been for your profits. A world in which the taxman takes the upside and investors take the downside is not an environment where investors will want to invest more money. Political sketch: Badenoch the Bond villain calmly explains she is not Liz Truss Advertisement “That’s why the stakes are high, and that’s why I hope that is the lens that the chancellor and prime minister take to this budget, how to make the UK longer-term more investable, not less — the place to do business rather than the place to repel it.” Meanwhile, joint research from Ipsos and Niesr suggested that 52 per cent of Britons feared that financial markets could severely lose confidence in the next five years in the government’s ability to pay back debt. Sixty-five per cent expected the chancellor to announce tax increases on October 28, alongside 51 per cent who anticipated increased government borrowing, according to the polling published on Tuesday. However, the public were divided on how to tackle debt: 35 per cent preferred a cut in borrowing even if it meant less spending on public services, while another 35 per cent preferred slashing personal taxes even if it meant service reductions, the data suggested. A total of 1,080 adults were polled between October 9 and 13.