'There is a deal to be done' between Trump, Musk and the UK, former Bank of England Chief Economist tells LBC
9 January 2025, 07:40
A former Bank of England chief has told LBC the Labour government have a "mixed scorecard" where the economy is concerned - and predicts "there is a deal to be done" between Donald Trump, Elon Musk and the UK.
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Andy Haldane, former Chief Economist of the Bank of England, worked at the central bank for 32 years and believes Labour affected consumer and business confidence by "overdoing" talk of the £22bn "black hole" in the country's finances.
He added the party have failed to communicate how last year's Budget will stimulate financial growth.
In an exclusive interview for LBC, David Buik, Markets Commentator from Aquis Exchange, quizzed Mr Haldane over Labour's record to-date - and said "foundations were being laid" by Chancellor Rachel Reeves towards growth.
He added that it was not all "doom and gloom".
Mr Haldane gave his assessment of the last six months, saying the results of the Budget weren't yet visible.
He said: "My sense is that the underlying economic position, while not as we would wish, is not as bad as being made out and that some of the policy measures that have been announced and put in place right now, which might be seen as blunting or damping growth in the near term, will nonetheless bear fruit over a medium term horizon in a way that the public, businesses and financial markets probably haven't fully given credit for so far.
"So you know there's been a bunch of areas where in policy terms there has been progress. Planning and housing.... industrial strategy... devolution, the labour market and inactivity - and health just this week."
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"Now, none of this has yet shown up in the lived experience of people in improved public services.
"I think the laying of the foundations has begun and the government, maybe understandably, is not yet being given full credit for that. But it's a mixed scorecard. Let's be clear."
Mr Haldane, who stepped down from his Bank of England post in 2021 and is now chief executive of the Royal Society for Arts, believes Labour had also made a mistake by giving so much airtime to the £22bn 'black hole', creating negativity in the economy and among consumers.
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He said: "It's one thing to identify a hole, but if you are to provide confidence, you need to fill it. Otherwise it just sits there absorbing light. And that has plainly happened to confidence.
"And then, when the budget finally did come, that too was a bit of a shock to the senses ...in particular among businesses.
"Now, I actually think the government's now acknowledged that it overdid the gloom around the black hole. I also think that the communication around the budget itself wasn't as sure as it might have been in terms of switching the narrative towards growth, beginning to build confidence."
Mr Haldane, who was also quizzed by Simon French, Chief Economist at Panmure Liberum, remained optimistic about the UK's possible future relationship with the USA once President-elect Donald Trump takes power on January 21.
He said he wouldn't "write off" Elon Musk's new role to drive efficiencies in the American government - and said both Trump and the Space X boss could work with Keir Starmer.
He predicted: "Elon Musk may indeed mediate the productivity problems of the U.S. government. I mean, I wouldn't write that off as being a zero to do that. And then there's prospective tax cuts and the like, and they would nudge in the other direction.
"So I think it's a much more nuanced picture when it comes to our role within this. I would hope, given that special relationship. I think both Elon Musk and Trump do have UK grandparents, don't they? There's a deal to be done. He's a man that likes doing deals."
