Andy Haldane: we can fix the cost of living crisis. But will we?

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The Guardian

Andy Haldane has a simple but stark message for those seeking to replace Boris Johnson as prime minister: Britain has serious economic problems and they won’t be solved by massive tax cuts.

Nor, according to the man who until last year was chief economist at the Bank of England, does the solution to Britain’s cost of living crisis lie with the decisions Threadneedle Street makes about interest rates.

Haldane has moved on to run the Royal Society of Arts (RSA) thinktank, via a stint at the Cabinet Office, helping put together Johnson’s levelling up white paper. Although there will soon be a new face in No 10, Haldane says the next prime minister must not just stick with the levelling up agenda but turbocharge it.

Speaking before Johnson announced that he was stepping down, Haldane said: “The solution to the growth conundrum and the solution to the cost of living crisis both lie squarely on the supply side of the economy.”

He says Britain has “longstanding, deep-seated and structural” economic problems, and warns that regularly chopping and changing the programme for restarting the country’s sputtering growth engine is not helping.

“What we need is scale, duration and coordination of a plan. This has never been more needed – and currently we don’t really have it.”

Regional economic rebirth is at the heart of what makes Haldane tick. Whether it’s called levelling up or given another name isn’t important to the economist, who grew up in the Leeds suburb of Guiseley, a former mill town known as the home of Harry Ramsden’s fish and chips and Silver Cross prams.

“When I was growing up, Bradford and Leeds were not quite level pegging but not far off. But over the past 40 years, Leeds has hit the afterburners while Bradford has sort of got stuck,” he says. “There are stirrings now in Bradford. It is moving, and city of culture status [in 2025] will put the rocket boosters behind that.”

Haldane criticises the government for not putting more oomph behind one of its flagship policies. “You won’t be surprised to hear I was nudging for going further, faster,” he says of his time helping develop the strategy for Michael Gove, the former levelling up secretary, while on a six-month loan from the RSA.

With a growth slowdown across the economy and inflation at its highest for four decades, calls for new ideas that can pull Britain out of a downward spiral are about the only thing not in short supply. With a severe lack of workers and raw materials weighing on growth, Haldane’s analysis of where things are going wrong is stark.

Rising employment – helped by migrant labour, people staying in work longer and more women participating in the workforce – was the sole engine of economic growth after the 2008 financial crisis. Meanwhile, productivity gains – when companies boost output with fewer or the same inputs – stalled as business investment dried up.

However, the growth engine is stalling because of disruption to the labour market – by older people quitting the workforce during the pandemic, and by Brexit hitting EU migration. “That’s among the reasons for the cost of living crisis. It’s a key source of the supply-side shocks we’ve seen. If the labour supply – that workforce engine – has gone, we need the productivity engine to fire. The growth arithmetic really is that simple.”


CV

Age 54
Family Lives in south London with his wife, Emma Hardaker-Jones, who is HR director at Legal & General. They have three children and a dog.
Education BA in economics, Sheffield University; MA in economics, Warwick University.
Last holiday Deal, on the Kent coast.
Best advice he has been given “Early on in my Bank career, I was lamenting the way it did things. The person told me: ‘What are you on about? You are part of the Bank. If it doesn’t work, just change the Bank’. It was such an obvious point, but of course absolutely right.”
Biggest career mistake “I’ve made plenty, and I make no apologies for that. I hope I learned from them.”
Words he overuses “White paper.”
How he relaxes Walking the dog and watching cricket, his favourite sport. “There is no better way of relaxing than sitting and watching cricket on a sunny summer evening.”


Haldane was born in Sunderland and is proud of his roots. At home he has a signed picture of the wonder save made by Jim Montgomery, Sunderland’s goalkeeper, in their shock 1973 cup final win over Leeds. More recently, his home city was a bellwether of the 2016 Brexit vote, a subject on which Haldane is unusually tight-lipped.

Asked whether Brexit is a threat or an opportunity, he says: “It depends what you make of it. It is prospectively both. I have chosen conspicuously not to opine.”

But failure to confront Britain’s problems and get productivity moving after a decade of falling behind economic rivals – and with deep regional divisions – will have serious consequences: “Without a supply-side strategy, the economy won’t grow and the cost of living crisis won’t be solved. It is that simple.”

Haldane spotted that this would drive up inflation earlier than most economists, warning last year in characteristically colourful terms that the “beast of inflation” was back after a sleepy few decades. Just over a year ago, his optimistic view of economic growth led the Daily Mail to label him “Mr Boom”, as he warned of “Chicken Licken” pessimism dragging the country down.

Despite Haldane’s warning then that this was the “most dangerous moment” since the UK dropped out of the European exchange rate mechanism in 1992, his colleagues on the monetary policy committee didn’t heed his calls for higher borrowing costs.

Although touted as a possible successor to Mark Carney as Bank governor, Haldane says he never aimed for the top job at Threadneedle Street. “I’d done everything at the Bank I wanted to do, basically. I had done most things, other than print the notes. The job I most wanted was, fortuitously, the one I was doing when I left.”

After spending most of his career looking at big-picture issues, the 54-year-old will, at the RSA, focus more on nitty-gritty issues: skills, investment and devolution – where he feels the big challenges facing the economy lie.

“I haven’t missed it at all. What I’m doing right now is, I think, where the focus of policy needs to be.”

July 16, 2022 at 08:54PM Larry Elliott and Richard Partington

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