Merryn Talks Money Andy Haldane on Britain’s Fiscal Squeeze and Growth Problem
Apr 27, 2026
Andy Haldane, former Bank of England chief economist known for fiscal and growth expertise, tackles Britain’s tight public finances and trade-offs on defence, pensions and NHS. He highlights the need to re‑plumb finance so pension capital backs scale‑ups, argues tax and regulatory complexity saps investment, and urges lifelong learning and devolution to unlock growth.
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Cut Spending To Fund Defence Not Raise Taxes
- Cut public spending to create fiscal room for defence because taxes are near their practical limit around 35–40% of GDP.
- Andy recommends revisiting the triple lock and welfare/pension allocations as the only realistic sources for tens of billions needed for defence.
Use Defence Bonds To Mobilise Idle Cash
- Use hypothecated instruments like a labelled 'defence bond' to attract private savings rather than substitute for spending cuts.
- Andy suggests tax sweeteners (e.g., ISA or inheritance tweaks) could mobilise £2tn in household cash earning negative real returns.
Private Balance Sheets Give Growth Potential
- Public finances are weak but private sector balance sheets are in surprisingly good shape, with households and firms running surpluses and modest debt.
- Andy calls this 'fuel in the tank' meaning the UK has the private resources to finance a growth turnaround if deployed.