Rachel Reeves risks entering an economic “doom loop” if she continues to cut spending, a former Bank of England chief economist has warned.
Andy Haldane, who was with the Bank for 32 years until 2021, said the Office for Budget Responsibility’s (OBR) forecast in March could lead to less investment and spending.
He told Sky News’ Politics Hub with Sophy Ridge: “It would be deeply counterproductive to both growth and to the fiscal position if that led to a cutting back on investment and indeed in spending more generally.
“Then I think you really are into a doomed loop between debt and growth. And that’s a situation to avoid at all costs.”
The OBR will publish an economic and fiscal forecast on 26 March, five months after its last forecast, which said the October budget was unlikely to increase economic growth over the next five years.
Mr Haldane, who became well-known for his speeches during COVID, said his concern depends on how much government spending is cut by the chancellor this spring.
“For me, I think some of the gloom and doom about both the economy and in bond markets is slightly overdone,” he added.
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“I think once we get to the second half of the year, the underlying fiscal picture may look somewhat better as might be the underlying growth picture.
“So anything precipitating now, I think, is best avoided.”
Image: The OBR gave a dismal outlook when Rachel Reeves announced her autumn budget. Pic: Reuters
The economist, who is now chief executive of the Royal Society for Arts think tank, added the chancellor should not panic because of market reaction to the budget deficit by cutting spending further.
“Definitely not panic,” he said.
“I think the journey we’ve been on, when the government first came in, if anything expectations were a bit too high.
“And I think we saw those expectations punctured pretty quickly.”
He said he could see pessimism within business and financial markets based on the October budget “being walked back in the remainder of the year as some of the announcements the government has made start to come on stream and be felt, including the fiscal measures in the budget”.
Those fiscal measures are providing “a big boost to growth” this year, exemplified by the International Monetary Fund last week forecasting the UK performing relatively well on the European stage, he said.
Image: The October budget saw taxes rise to the tune of £40bn. Pic: Reuters
Mr Haldane added he thought “there were mistakes in execution” of the autumn budget in October, “but even larger mistakes in the communication around that budget”.
He said: “Personally, I would not have loaded so much onto business at the budget but more importantly still, I would have found a way of communicating that budget in terms that could help businesses see that if not now, then tomorrow, this was a pro-business budget and that wasn’t done and that led to the further breakdown in business confidence.”
In the wide-ranging interview, Mr Haldane also said he thinks Donald Trump “taking an axe to regulation” and thinking “very differently” about how government functions means there is “a chance of real growth and supply side upside from which we will all learn better”.
You can watch the full interview at 7pm on Wednesday on Politics Hub with Sophy Ridge on Sky News.
UK car production fell by more than a quarter (27.1%) last month as a cyberattack at Jaguar Land Rover halted manufacturing at the plant, industry figures show.
The total number of vehicles coming off assembly lines – including cars and vans – fell an even sharper 35.9%, according to September data from the Society of Motor Manufacturers and Traders (SMMT).
“Largely responsible” for the drop was the five-week pause in production at Jaguar Land Rover (JLR) due to a malicious cyber attack, as other car makers reported growth.
JLR’s assembly lines in the West Midlands and Halewood on Merseyside were paused from late August to early October as a result.
During this time, not a single vehicle was made. Production has since restarted, but the attack is believed to have been the “most financially damaging” in UK history at an estimated cost of £1.9bn, according to the security body the Cyber Monitoring Centre.
It was the lowest number of cars made in any September in the UK since 1952, including during the COVID-19 lockdown.
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3:53
Are we in a cyber attack ‘epidemic’?
Despite the restart, the sector remains “under immense pressure”, the SMMT’s chief executive Mike Hawes said.
The phased restart of operations led to a small boost in manufacturing output this month, according to a closely watched survey.
Of the cars that were made, nearly half (47.8%) were battery electric, plug-in hybrid or hybrid.
The vast majority, 76% of the total vehicles output, were made for export.
The top destinations are the European Union, US, Turkey, Japan and South Korea.
JLR was just the latest business to be the subject of a cyberattack.
Harrods, the Co-Op, and Marks and Spencer, are among the companies that have struggled in the past year with such attacks.
Championship club Sheffield Wednesday have filed for administration, according to a court filing, which will result in the already struggling side being hit with a 12-point deduction.
The South Yorkshire club currently sit bottom of the Championship, the second tier of English football, with just six points from 11 games.
Known as The Owls, Wednesday are one of the oldest surviving clubs in world football, with more than 150 years of history.
Court records confirm the club have filed for administration. A notice was filed at a specialist court at 10.01am.
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Sky’s Rob Harris reports on the news that Sheffield Wednesday have filed for administration
What has happened?
The Owls, who host Oxford United on Saturday, have been in turmoil for a long time.
On 3 June, owner Dejphon Chansiri, a Thai canned fish magnate who took over the club in 2015, was charged with breaching EFL regulations regarding payment obligations.
Image: Sheffield Wednesday fans protest the ownership at a game away to Leeds United in January. Pic: Reuters
Weeks later, Mr Chansiri said he was willing to sell the club in a statement on their official website.
Image: Sheffield Wednesday’s troubles have sparked furious protests from fans. Pic: PA
Their crisis deepened just days later when another embargo was imposed on the club relating to payments owed to HMRC, before players and staff were not paid on time on 30 June.
In the months that followed, forwards Josh Windass and Michael Smith left the club by mutual consent. Manager Danny Rohl, now at Rangers, also left by mutual consent.
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2:12
Frustrated Sheffield Wednesday supporters have targeted their embattled club’s owner in a highly-visible protest during their opening match of the season.
The Owls were forced to close the 9,255-capacity North Stand at Hillsborough after a Prohibition Notice was issued by Sheffield City Council.
‘Current uncertainty’
On 6 August, the EFL released a statement, saying: “We are clear that the current owner needs either to fund the club to meet its obligations or make good on his commitment to sell to a well-funded party, for fair market value – ending the current uncertainty and impasse.”
On 13 August, the Prohibition Notice was lifted, but a month later, news emerged of a winding-up petition over £1m owed to HMRC.
Last season, Wednesday finished 12th. They had already been placed under registration embargoes in the last two seasons after being hit by a six-point deduction during the 2020/21 campaign, for breaching profit and sustainability rules.
With a 12-point deduction, the Owls would be 15 points away from safety in the Championship.
Doing well were computer and telecommunications retailers as the iPhone 17 launched in the month, while online jewellers reported strong demand for gold despite the price hovering around record highs.
Gold has been in demand, and in recent days reached a record high, as some investors moved money out of the US dollar and government bonds amid the ongoing government shutdown.
It came despite a rainy month – which typically keeps shoppers at home – and a five-day tube strike in London.
The impact of the rain could be seen, however, in the boost to online spending, which rose to one of the highest levels since the end of the pandemic.
A fall was recorded in food shop sales from August to September, signalling a response to high food price inflation.
A good week for the economy?
Retail sales figures are significant as they measure household consumption, the largest expenditure in the UK economy.
Growing retail sales can mean economic growth, which the government has repeatedly said is its top priority.
Earlier this week, another key economic measure came in better than expected.
Inflation remained at 3.8% rather than rising to the widely expected 4% – double the target rate set by the interest rate-setters at the Bank of England.
Consumers were feeling better about their finances, a closely watched measure of consumer confidence showed on Friday.
Buying sentiment is up from last month, according to market research company GFK, as intentions to buy big-ticket items like electrical goods and furniture rose.
Combined, it suggests people are not feeling too gloomy in the run-up to the November budget.