Britain ‘taxing itself to death,’ Burnham warned
One of the US’ leading economists has warned Andy Burnham that Britain is “taxing itself to death” in a major intervention ahead of the October Budget.
Arthur Laffer, a former economic adviser to three presidents, has warned that the UK is in a “death spiral” ahead of his visit to the country.
He wrote in The Telegraph: “I would love to see Britain become prosperous. That’s my dream. [But] your record is not illustrating a good set of policies. It’s really indicating exactly what you see when [an] economy gets in the death spiral.
“I have never heard of an economy being taxed into prosperity. What’s happening is, Britain is taxing itself into death. Your problem is not too little revenue. Your problem is too little growth, too little prosperity.”
Laffer advised Ronald Reagan, Bill Clinton and Donald Trump on economic policy and is best-known for coining the ‘Laffer Curve,” a theory that income from taxes will fall once rates are raised too high.
The economist warned the Prime Minister that a fresh tax raid in next month’s Budget would only worsen the perception that the government is losing its grip on the public finances.
Borrowing costs surge
Global borrowing costs soared to record levels in recent weeks as investors acted on fears over inflation caused by the Iran war and rampant spending on artificial intelligence.
Soaring yields on government bonds first rocked the US Treasury in mid-August, pushing Treasury secretary Scott Bessent into an emergency measure to double the volume of government bond buybacks.
A borrowing costs rout hit the UK last week, as the yield on the 10-year gilt soared to 5.294 per cent – the highest level since the 2008 global financial crisis.
The bond rout threatened to overshadow the beginning of Andy Burnham’s first parliamentary session as Prime Minister, prompting him to promise that his government would be “grounded in fiscal responsibility”.
Lord Jim O’Neill, a former economic adviser to Burnham who turned down a formal role in his government, urged the Prime Minister to take immediate measures to soothe investor fears.
Bond markets would respond positively if Burnham took “credible action to deal with the excesses of the triple lock or the excesses of welfare spending,” he said.