Transportation Secretary Heidi Alexander denies budget leaks hurt the economy

Transport Secretary Heidi Alexander has denied that pre-Budget leaks have damaged the economy, following criticism that speculation has “caused paralysis among businesses and consumers”.

Recent months have been dominated by media reports about what taxes could rise, with multiple potential measures proposed by the government.

Former Bank of England chief economist Andy Haldane said on the BBC’s Sunday program with Laura Kuenssberg that this was “the main reason why [economic] growth has stagnated.”

In response, Alexander said there was always speculation in the run-up to the budget, but the chancellor had been clear about her priorities.

Chancellor Rachel Reeves is expected to raise taxes in her budget on Wednesday to help fill a multi-million pound shortfall in her spending plans.

Ministers had given strong indications that the government planned to increase income tax rates.

Anonymous media reports from government sources also suggested Reeves was considering the move, which would have been a clear breach of Labour’s election promise not to increase “basic, higher or additional rates of income tax”.

However, government sources said last week that Reeves had decided not to do so after economic forecasts came in better than expected.

Governments sometimes choose to leak aspects of their budget plans to the media, either to test public reaction or to prepare the ground for measures that will not surprise financial markets or voters.

Haldane called months of speculation about possible budget measures a “fiscal fandango.”

“That has been costly for the economy,” he told the program.

“It has caused paralysis between businesses and consumers.”

He said the budget process was “too long, with too many leaks and too many real costs.”

Haldane acknowledged that this “pantomime” had also occurred under previous governments, adding that “the budget process has been degraded for many years.”

Asked whether the leaks had damaged the economy, Alexander told the programme: “People always speculate before the budget and we have always said ‘wait until the budget’.”

Defending the government’s approach, he said the budget process was developed “on shifting sands,” with a downgrade in productivity forecasts and “a very challenging global economic environment.”

The Conservatives have called for an investigation into the pre-Budget leaks, saying they have “real-world consequences, including for financial markets.”

In a letter to the Treasury’s most senior official, shadow chancellor Mel Stride said: “Either ministers have approved the widespread submission of confidential information about the Budget, or there have been serious unauthorized leaks within your department.”

The chancellor is expected to set out a series of smaller tax increases in her budget, after stopping raising income tax rates.

However, the government has not ruled out extending the freeze on income tax thresholds – the level at which people start paying tax or have to pay higher rates.

The freeze means that any wage increase would cause people to pay more taxes, dragging more people into a higher tax band or having to pay taxes on their income for the first time.

Reeves has also said the focus will be on reducing the cost of living, with the government announcing that rail fares in England will be frozen next year for the first time in decades.

Other priorities set by the chancellor include reducing NHS waiting lists and the national debt.

Meanwhile, it is also expected to remove the limit on two-child benefit, a limit that means parents can only claim universal credit or tax credits for their first two children.

Labor MPs have pushed to scrap the cap, which was introduced by the Conservatives, a move that could cost more than £3bn.

While he declined to confirm the cap would be removed, Alexander said tackling child poverty was “in the DNA of the Labor Party”.

“For me, one of the defining elements of this Government is what we can do to ensure that children’s chances in life are not determined by the size of their parents’ bank balance,” he added.

Conservatives have opposed removing the cap, with Stride telling the BBC it was “a matter of fairness” that parents on benefits should have to make the same decisions about whether they can afford a larger family as those who don’t.

The shadow chancellor told Kuenssberg: “The big choice in this budget now is whether the chancellor has the backbone to control government spending, particularly in the area of ​​social welfare, where some of those costs are getting out of control, make those difficult decisions and therefore not have to start raising taxes again in areas that are going to damage the economy.”

However, Green Party leader Zack Polanski said removing the cap would be a “victory” and it was “outrageous that it has taken the Labor government so long to do so”.

He called on the government to “tax the rich,” instead of hitting “people without jobs or workers who work very hard while their wages don’t increase.”