Haldane warns of a Truss-style crisis as Healey’s Budget adds £1bn for social housing

Andy Haldane, the former chief economist at the Bank of England, has warned the government not to risk a Truss-style budget⁶. He said the Prime Minister could risk a collapse of the sort associated with Liz Truss¹¹.

Haldane, who informally advised Burnham on his campaign to become Prime Minister, issued his warning last week⁸. He cited Truss as a warning to Burnham¹⁰. “How do you go bankrupt? First slowly, then very quickly,” Haldane said⁹.

He also described plans to raise taxes on the banks as “penny wise, pound foolish”⁷. Chancellor John Healey is finalising his first Budget⁴, and he was hit by a resignation days before it⁹.

What the Budget will include

The Budget will include £1bn for social and affordable housing, taking funding for the 10-year programme to more than £40bn². Because the money sits inside a 10-year programme, it adds to commitments that run well beyond this Budget². The additional borrowing to support the lending is expected to begin in 2028⁶.

Healey may need to raise money to boost his fiscal headroom, and options exist that would not involve raising income tax¹. Businesses are pressing for relief: some firms say they are holding back on new jobs and want employment costs to come down in the Budget³. One account describes bosses as being in revolt against Labour⁸.

Haldane said firms have faced a “huge squeeze”⁵. As the Chancellor finalises his plans, households in the “squeezed middle” say there is no more fat to trim from their budgets⁴.

Why it matters to investors

The Truss comparison goes to the heart of how gilt investors will judge the Budget. Truss herself now insists that her radical mini-Budget measures would have worked¹⁰, while Haldane’s warning treats that episode as the risk to avoid¹¹.

Investors will weigh three pressures in the same document: higher taxes on the banks⁷, new borrowing to support housing lending from 2028^2,6, and limited fiscal headroom¹. Haldane’s warning is that a loss of confidence can build slowly and then arrive very quickly⁹.

What to watch

When the Budget lands, the key numbers will be the size of Healey’s headroom¹, the scale of the bank tax rise Haldane criticised⁷, and whether business gets the cut in employment costs it has asked for³.