Labour’s £22bn black hole gloom ‘unnecessary and unhelpful’, former BoE chief economist warns

Chancellor’s warnings hampered post-election ‘sense of refresh’, says Andy Haldane

Chancellor Rachel Reeves’ gloomy warnings of a £22bn “black hole” in the public finances were “unnecessary and probably economically unhelpful”, a former chief economist at the Bank of England has warned.

Labour frontbenchers have issued a series of warnings about the financial mess they inherited from their Conservative predecessors upon winning the July election, widely interpreted as paving the way for tax rises and tight public spending decisions in the upcoming Budget.

But Andy Haldane, who served as Threadneedle Street’s chief economist and sat on the Bank’s nine-member interest rate-setting body until 2021, was critical of Ms Reeves’ July statement in which she warned of the “black hole” and vowed to end winter fuel payments for millions of pensioners.

Andy Haldane was the Bank of England’s chief economist until 2021 (Adrian Dennis/AFP via Getty Images)

“It’s one thing to reveal a ‘black hole’, if that is what it is, but just leaving that to sit for three months, I think, was a bad idea,” he told Sky News, adding: “I think it would have been much better to say nothing until you provide solutions to filling the black hole as well as revealing it.

“As it was, that’s generated a fear and foreboding, an uncertainty among consumers, among businesses, among investors in UK PLC, which is unfortunate – because just after the election there was a sense of refresh, of renewal, a confidence about the UK both domestically and internationally.

“And that just set it back on its heels a bit, which I felt was unnecessary, alongside the partial measures which were taken which I think have aroused some concern about what might come next.”

Mr Haldane – who made global headlines in 2012 when he said that Occupy protesters were right to criticise the global financial system – warned against a return to austerity under Labour.

“That’s a path I think we can’t afford to go down if we are to fix these NHS problems and the well-known, rather too long list of other areas where we have chronically underinvested as a country for too long,” said Mr Haldane, who is now chief executive of the Royal Society of Arts.

But he warned that Sir Keir Starmer should “tread carefully” when it came to wealth taxes to raise money at a time when ministers will need to do a lot of “heavy lifting from the private sector” to drive growth.