Andy Haldane, the former chief economist at the Bank of England, has warned Andy Burnham that his government looks like "a traditional tax and spend socialist government with better TikTok videos," and has called for spending cuts to calm turmoil in the bond markets.
Haldane, who has advised the Prime Minister on the economy, told LBC that bond market investors would keep driving up borrowing costs unless the government cut public spending. "The fiscal Achilles' heel of this government, thus far, has been its unwillingness and/or inability to cut public spending," he said.
With UK borrowing costs now the highest in the G7 ahead of next month's Budget, Haldane added that "a few hard choices are looming on the horizon."
Haldane was among the high-profile economists Burnham turned to for advice before taking power, as he sought to win fiscal credibility with the markets.
The first TikTok Prime Minister
Burnham, the former mayor of Greater Manchester, has been dubbed "the first TikTok Prime Minister" as he moves away from Keir Starmer's more formal style and takes a more casual approach on social media to build support.
He has nearly three million followers across platforms, including 804,000 on Instagram, 750,000 on X, 716,000 on Facebook and 608,000 on TikTok.
Fears over the Budget
There are growing fears that the Budget next month will include further borrowing and another round of tax rises to fund Burnham's spending plans.
Speaking to LBC on Tuesday, Haldane warned that the recent surge in bond yields poses a major headache for the Prime Minister and Chancellor John Healey ahead of the Budget on October 28.
With much of their fiscal headroom wiped out, it is feared they will turn to further tax rises and extra borrowing rather than spending restraint to make the numbers add up. Experts believe that risks an adverse reaction in bond markets, where the UK already pays more to borrow than any other major developed nation in the G7.
The yield on UK 30-year bonds is at a 28-year high, while the interest rate on ten-year debt is at its highest level since 2007.
'Hard choices' ahead
Commenting on the scale of the challenge facing the Prime Minister and Chancellor, Haldane said: "Well, it's got a lot steeper over the past two weeks given what's happened to borrowing costs."
He continued: "I think the plan had been a low drama, no drama Budget. I think that's been torpedoed by events over the past couple of weeks, and that will make next month on the 28th for some hard choices from this government."
"A few hard choices so far, but one is looming on the horizon now about how any hole to the Budget headroom is made good on. Is that a question of tax rises, or is it a question of taking the knife to public spending?"
Political cost of cuts
Haldane conceded that public spending cuts would be met with fierce opposition from Labour MPs, but said they would also show markets that the government was serious.
"Any step in that direction would cost you something in political capital, with the backbenchers and beyond possibly," he said.
"Ultimately, it's only by taking actions that come with a political cost, that you convince financial markets that you are serious. Within financial markets, we've gone from the cautious optimism of the summer months to the studied scepticism of September."
'Better TikTok videos'
Haldane said markets now suspected the government was "a traditional tax and spend socialist government with better TikTok videos."
He said action on one of the big spending departments, whether welfare, the pensions triple lock, the NHS, or a productivity drive across the public sector, would deliver both savings and credibility.
"Each of those individually would buy you, one, a lot of money, and two even more in instant credibility. That would lower borrowing costs. It would almost pay for itself as a growth dividend," he said.
