Simon French

Chief Economist & Head of Research @panmureliberum Former @cabinetofficeuk @dwp. 🏏 @hmtreasury. @thetimes columnist. 🚴‍♀️ tours & 🐝-keeping. Views are my own

[Simon French @Frencheconomics]

@kpkppkpk Agree. But in the absence of more timely official data we are largely relying on anecdotes

[Simon French @Frencheconomics]

A typically punchy interview from Andy Haldane and full of his trademark soundbites. “Penny wise, Pound foolish”, I think, is a new one unless I haven’t been keeping up. Three substantive thoughts…

- Andy is dead right that financial markets are looking for an excuse to reward, or penalise, good financial management. The prize here of getting the UK back to the middle of the G7 pack on its sovereign interest rates is ~£20bn/year. But that prize requires some tough calls on welfare and wider public spending. Waiting till “manana” when your political capital is likely diluted is a bearish signal for those who are watching.

- Interesting rhetorical flourish on the UK being taxed out. Playing on the more regularly use maxed out (for borrowing). Whilst this is contested by many on the left, I wonder whether Andy is getting ahead of January 2027 tax receipts data when we may get the first official data to observe whether the anecdotes of capital/wealth flight translate to the tax take. That would make a tough spending review, fiendishly hard. Tax revenues growing at 2x NGDP this parliament is clearly unsustainable.

- Andy sounds quite hawkish on inflation as you might expect from a former central banker. With CPI “going through the gears” over the next few months does indeed look inevitable. And because of “tough comps” next April the role of the Budget in fanning (or dousing) those flames is key. Reeves’ last Budget was actually quite disinflationary (-40bp in 2026) - to her credit. That makes price decisions by HMT going into Q2 27 (the indexation quarter) key. It will be one of the tests the market will set government at the Budget - whether Healey is a firestarter or a fireman when it comes to inflation (oh god, I’m at it now…!)

Overall a very readable interview and lots of market wisdom and tough love if no.10/no.11 are in listening mode.

[Steven Swinford @Steven_Swinford]

EXCLUSIVE:

Andy Burnham must “take the knife” to public spending in the budget or risk a Liz Truss-style crisis that will “crater” the economy and the government’s popularity, an ally of the prime minister has warned

Andy Haldane, a former chief economist at the Bank of England, said he feared the government would deliver a “mañana budget” that deferred the difficult decisions on public spending and “doesn’t speak to the urgency of now”

In an interview with The Times, he said that Britain was “close to being taxed out and maxed out in terms of borrowing”. He spoke of concerns that the government was failing to grasp how “precarious” the fiscal position was

He said that the government needs to cut the size of the state and reduce taxes if it were to “unleash the animal spirits and generate growth”

Haldane warned Burnham that he cannot “vibe-code” his way to growth, and raised concerns about the gap between the government’s rhetoric and the reality. He said that the government was effectively deferring the “day of reckoning”

He also said that the decision to increase taxes on banks could show that the government lacked the courage to cut public spending. He said the move was “penny wise, pound foolish” and sent a broader economic message that if businesses make profits “the taxman cometh”

Haldane said that while Burnham had the potential to be a “great prime minister” who could serve two terms, the economy was his “blind spot”. He said that the fiscal situation facing Britain was “precarious”

“The penny has not yet fully dropped, including in Downing Street,” he said. “You see that in us having the highest borrowing costs in the G7, despite not having the highest debts and deficits.

“It’s the old Hemingway [Ernest Hemingway, the author] thing, isn’t it? How do you go bankrupt? First slowly, then very quickly. The biggest risk to Andy not transforming Britain, to not serving two terms, to not being seen in the history books as a great prime minister, is not political risk.

“It’s not those who sit behind him. It’s probably not even those who sit opposite him in Westminster. Keir [Starmer] lost the dressing room. Andy’s biggest risk is that he loses the dealing room. And then that’s an even more painful way to go, as Liz Truss would tell you.”

Andy Haldane: PM risks Truss-style crisis if he dodges tough choices

https://t.co/a4Mx8QDtNC

[Simon French @Frencheconomics]

@OssieAkushie Of a type (rail fares) - but others were levy based.

[Simon French @Frencheconomics]

Rationing: Efficiency.

[BBC Wales News @BBCWalesNews]

Wales plans to ban steel pylons as government launches consultation https://t.co/PF8w3ZcIyK

[Simon French @Frencheconomics]

Now run all these scenarios with a Labour manifesto that takes out the tax lock commitments from the 2024 version, and social care, defence funding pathways…

Any other versions feel as reliable as May vs Corbyn - pre dementia tax…

[Duncan Robinson @duncanrobinson]

the big obvious thing in British politics right now

[Simon French @Frencheconomics]

@JeremyWarnerUK @Sam1Fleming No apology needed. Indeed I am reassured our minds landed on the same metaphor!

[Simon French @Frencheconomics]

Given today’s sharp fall in consumer confidence I don’t think the two are unrelated. The H2 2024 negative vibes from govt was self defeating for growth - and messaging about “prepping” (I’ve got my wind up radio, and honey 🍯 stores!) does risk doing this again - albeit from a more noble starting point….

[Sky News @SkyNews]

The national resilience moment that almost barely happened https://t.co/NHaiArUcjH

[Simon French @Frencheconomics]

@TorbenSchust I think it’s “the” test of Labour’s economic competency. Having so vigorously celebrated the IMF’s praise about consolidation plans if they fail to deliver by 2029 then it confirms your suspicion. If they do deliver it, they deserve genuine praise.

[Simon French @Frencheconomics]

This is beautiful writing. And well worth a read - with the sign-off particularly apt.

[Patrick Maguire @patrickkmaguire]

Healey* and the ageing Crosland: a Labour love story until now untold

*not Denis

https://t.co/MaEDqsN5HH

[Simon French @Frencheconomics]

Hessle’s finest says the quiet bit out loud…👏👏

[Simon French @Frencheconomics]

Yes. But, with respect, this whole parallel is being made by govt to justify the new energy wealth fund (and trying to shoehorn some 40y of neoliberalism nonsense comms). The parallel only holds if you also match Norges - that has a mandate to maximise NAV.

The EWF is nothing like comparable to Norges - at best is a strategic investor that looks like NWF mk2….

[Simon French @Frencheconomics]

Anyone drawing parallels with Norway off the back of this story should do so fully aware of the investment mandate of Norges (below).

If UK wants to start now then it shouldn’t be buying green energy assets (which is this new fund’s mandate) but, probably, a global equity ETF, a global bond fund, and buyback some of that gold sold 25y ago….

[Faisal Islam @faisalislam]

NEW

Britain’s missing sovereign wealth fund… Treasury officials have modelled that had the UK done what Norway did with North Sea revenues, there would be a £1 trillion fund…

As Chancellor sets up Energy Wealth Fund, a look at the long historical argument about where the oil windfall went, including from interviews with those who have run Norways $2.4 trillion fund, now the biggest in the world, filled from the proceeds of the same North Sea.

https://t.co/VcuA0DDWT1

[Simon French @Frencheconomics]

@JonathanRaym I didn’t include my MelaniaCoin holdings which are somewhat underwater….

[Simon French @Frencheconomics]

@wombata36 Ah. That’s fine to call it a strategic investment fund where maximising economic value is not primary goal. Although we already have that with the NWF so why the need for two?!

[Simon French @Frencheconomics]

@dominicoc Trying to help that peak time problem (and arb off peak prices) with adding some batteries. And the DNO wait time is 8-10 weeks! And I’m not exactly adding Hornsdale-style quantities. Frictions to doing the right thing to “flatten the curve” are still a problem.