LABOUR have been urged to heed a former chief economist of the Bank of England who warned that there was only a “lettuce leaf” between their plans and the Tories’ in terms of stimulating growth in the UK economy.
Andy Haldane, who left the Bank of England in 2021 and is now the chief executive of the Royal Society for Arts, said that both the Tory and Labour manifestos outlined plans which “may not be full-fat austerity, but [are] no better than semi-skimmed”.
In an article for the Financial Times (FT), Haldane, who sat on the UK Government’s Economic Advisory Council until it was dissolved by Chancellor Jeremy Hunt in late 2023, said there were four options facing the winners of the July 4 General Election.
“By far the least painful and least likely is a spontaneous growth surge,” he wrote.
Labour have said their number one priority is economic growth, which would allow them to increase revenues and avoid cuts without having to raise taxes.
However, Haldane suggested this was equivalent to hoping for a “growth fairy” and warned: “There is unlikely to be much more than a lettuce leaf between the main parties in aggregate growth terms.
“This is the logical consequence of them committing to near-identical fiscal rules.”
He went on: “The omens are not good. For example, both parties project a fall in public investment as a share of GDP over the next parliament, from a base several percentage points below the UK’s competitors.
“We can hope private investment fills the gap. But hope is not a growth strategy and private investors might be cautious about rushing in where public investment fears to tread.”
Haldane outlined three remaining options for a future UK government: “sharp real-term cuts in public spending across a range of non-protected departments” – which he said amount to “semi-skimmed austerity”; tax rises – although Labour “have ruled out rises in Income Tax, National Insurance, corporation tax and VAT rates, together comprising three-quarters of tax revenue” - and “waiving the UK’s fiscal rules”.
Haldane said that it was likely that Labour would see the “UK’s fiscal rules are junked post-election”, which he argued would be a positive as “existing fiscal rules risk [are] starving the economy of the very investment needed”.
In the wake of the intervention from the former top Bank of England economist, the SNP’s economy spokesperson and candidate for Inverness, Skye and West Ross-Shire, Drew Hendry, urged Labour to heed the warning.
He said: “This analysis from the Bank Of England’s former chief economist is just the latest warning that there is barely a cigarette paper, or indeed a 'lettuce leaf', between Tory and Labour economic policies.
“With both parties now fully signed up to outdated fiscal rules that will inflict yet more eye-watering cuts to funding of public services, only the SNP are offering a positive alternative to the Westminster status quo.
“Andy Haldane’s warning that these self-imposed fiscal constraints risk starving the economy of the investment needed to boost growth comes amid growing warnings from independent experts that the Labour Party plan £18bn of damaging cuts to public service.
"Only the SNP will put Scotland's interests first, and on July 4, voters can ensure there are SNP MPs at Westminster opposing a Tory-lite Labour government and fighting for a future made in Scotland, for Scotland."
The SNP have consistently pointed to estimates from the Institute for Fiscal Studies (IFS) which say that unprotected UK government departments – which oversee services like prisons, courts and councils – are facing cuts of about £20bn on top of an £18bn-a-year real-terms reduction in public investment.
It is these impending cuts which Haldane described as “semi-skimmed” austerity – although Labour have repeatedly insisted there will be no such policy under their watch.
In a phrase referenced by Haldane in his FT article, IFS director Paul Johnson said Labour and the Tories are engaged in a “conspiracy of silence” over the fact that both party’s plans “do involve cuts both to investment spending and to spending on unprotected public services”.
Scottish Green co-leader Lorna Slater said the expert interventions showed that “what Labour and the Tories are offering is fundamentally dishonest”.
She went on: “They may be promising change, but it is based on fantasy economics.
"The fiscal rules they are committed to will mean more pain for households and families across our country and a continued squeeze on living standards.
"We don't just need a change in government, we need a change in our politics and a break from the failed policies that have given us so much inequality and plunged our climate into crisis.”
She added: "The Scottish Greens are clear about where the money needs to come from. We are proposing progressive and fair wealth taxes on polluters and the wealthiest people and families so that we can raise the funds to invest in our schools and our NHS and build a fairer, greener economy."
Labour were approached for comment.
