By GB News (Politics) | Created at 2026-10-09 02:53:34 | Updated at 2026-10-10 04:48:16
1 day ago
The Governor of the Bank of England has issued a "Liz Truss" warning to Chancellor John Healey ahead of his first Budget.
With just under three weeks to go until Mr Healey delivers his first budget, Andrew Bailey has warned that further damage to Britain’s credibility from rising spending could trigger a repeat of the 2022 crisis.
In an address to fellow central bankers on Thursday, Mr Bailey did not directly mention the Budget but warned of a fragile financial world in which imprudent tax and spending plans can undermine system stability, reports The Telegraph.
Mr Bailey said the "mini-Budget" published by Ms Truss's Government was "an illustration of what can happen in these much-changed conditions".
Mr Bailey said that spending plans from any party must "be directed towards stability and be seen by markets as credible" after Britain absorbed costly shocks, including Covid and the energy crisis caused by the invasion of Ukraine.
He added: "If markets begin to doubt the fiscal trajectory, bond yields can rise further.
"Governments can ordinarily use their balance sheets to cushion a severe downturn and rebuild fiscal space when conditions improve.
"But when shocks become more frequent, underlying growth is weaker, and the succession of shocks leads to a higher level of government debt, this becomes much harder to sustain."
Andrew Bailey has issued a warning
PA
Shadow Chancellor Andrew Griffith said, "Reading between the lines, the Governor is clearly warning Healey about the need for better economic growth and not to reduce the already slender Budget headroom."
This comes as yields on Government bonds, known as gilts, rose to multi-decade highs on Thursday.
The 10-year gilt rose to highs of about 5.53 per cent during the day, the highest level since 2007.
John Healey will deliver his first budget next month
Chancellor John Healey faces less headroom under the Government's fiscal rules ahead of the Budget, as inflation and higher borrowing costs tighten the fiscal space.
EY estimates the Chancellor’s fiscal headroom has narrowed from £23.6billion in March to £11.3billion, and may be wiped out if the Iran war continues to restrict energy supply, push up inflation and weigh on growth.
Mr Griffith, who served as a Treasury minister in ex-prime minister Ms Truss’ short-lived administration, has defended the tax-cutting thrust of the 2022 mini budget since he was appointed to the frontbench role.
He also insisted the Tories would never repeat the error of failing to explain how they would pay for major tax cuts in the future.
Andrew Griffith has defended his record
Asked about his recent claims Ms Truss’ mini budget was not "all bad", Mr Griffith said: "I said in that interview that there was a fatal mistake that we will not make again.
"That was not setting out clearly the choices to actually balance the books and show how if there are tax cuts being made, how they’re going to be paid for.
"That is my pledge, as a former finance director for over a decade. It is second nature to always show where the money is coming from to show our workings.
"That was the mistake of Liz Truss’ mini budget. It’s a mistake the Government is making again today."
Liz Truss was ousted from Downing Street
A Treasury spokesman said: “Fiscal discipline is the bedrock of economic stability and national security.
"The Chancellor and Prime Minister are in lockstep that the Government will meet the fiscal rules, with a buffer against uncertainty and that includes getting debt down."
