Andy Burnham must rule out tax hikes, ex-Bank of England economist warns

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Andy Haldane is urging the new Prime Minister to avoid introducing further tax raids in the upcoming Autumn Budget

A former Bank of England economist has strongly advised Prime Minister Andy Burnham to rule out tax rises in this year's Budget.

Andy Haldane, the former chief economist at the central bank who informally counselled the new Labour leader on economic matters during his rise to Downing Street, has urged Mr Burnham to pledge no further tax increases for the rest of this parliament.

Ahead of the October 28 fiscal statement, Mr Haldane argued that any future "fiscal shortfalls" ought to be addressed through reductions in public expenditure rather than through higher taxes or additional borrowing.

The intervention is particularly significant as Chancellor John Healey prepares for his inaugural Budget in October, with economists warning of a multi-billion-pound fiscal gap linked to the Iran war.

It is understood that despite his informal advisory role, Mr Haldane will not be taking up an official position within the Government.

Mr Haldane was sharply critical of how Rachel Reeves's tenure as Chancellor was characterised by prolonged and chaotic tax speculation ahead of each Budget, which he said had undermined Britain's economic growth.

To prevent a repeat, he proposed introducing a "growth delivery test" applied to every fiscal decision, assessing whether it would encourage private sector spending, risk-taking and recruitment.

He shared: "If you had applied that test to recent Budgets, the majority of whose measures were either too small to be macro-economically significant or outright harmful to private sector sentiment, it would have radically slimmed them and meant fewer policy own-goals."

He likened his approach, a "fiscal Hippocratic Oath to 'do no harm' to private sector sentiment", to Lionel Messi's World Cup strategy, where the Argentine topped performance rankings despite spending two-thirds of match time walking or stationary.

For the last two Budgets, Mr Haldane argued, "less would have been more, Messi-style".

Office for National Statistics (ONS) jobs market figures released found that private sector payrolled employees have declined by 110,000 since January.

Pay growth in the private sector also decelerated markedly, falling to 2.8 per cent in the three months to June — a stark contrast to the 6.1 per cent rise enjoyed by public sector workers over the same period.

Economists attributed the weakening labour market to the combined effect of tax increases imposed on businesses under Labour and above-inflation hikes to the minimum wage.

A Treasury said: "The Chancellor is fully focused on his priorities, to boost business, help with the cost of living and support people in every postcode."

The spokesman added that Mr Healey would outline decisions at fiscal events rather than engage with rumour or speculation.

Mr Haldane's call for a tax moratorium also carries echoes of pledges made before the 2024 general election, when Sir Keir Starmer, the former prime minister, committed Labour to holding rates of VAT, income tax and National Insurance contributions for workers steady.