is ‘in cahoots’ with the , and taxpayers will be the ones who suffer in the long run, a financial expert has warned.
Tax consultant Bob Lyddon has outlined his concerns about the Chancellor in a , a month after her controversial Budget, in which she unveiled plans to tax farming assets over £1 million, and increases to Employer National Insurance Contributions (NICs).
Mr Lyddon, founder of Lyddon Consulting Services, is concerned at what he sees as the cosy relationship which Labour enjoys with the Bank, accusing Ms Reeves of bending fiscal rules with the Bank of England’s assistance through a controversial change in how public debt is measured.
Reeves proposed switching from “public sector net debt excluding the Bank of England” (PSND ex BoE) to “public sector net financial liabilities” (PSNFL), effectively reducing the reported debt levels and creating additional “headroom” for borrowing – estimated at £50 billion.
Mr Lyddon believes it is all a far cry from the days of previous , telling Express.co.uk: “Rachel Reeves is in cahoots with her Bank of England pals – and we’ll all pay the price.
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Rachel Reeves has been accused of being ‘in cahoots with the Bank of England’ (Image: GETTY)
“The Bank usurped the running of economic policy during the Tory years by pursuing policies on and money supply that contradicted the Tory platform of ‘sound money’.
“‘Sound money’ means above inflation and controlled money supply. Instead the Bank pulled below inflation and flooded the UK with cheap money.”
“Now there is no longer any need to pretend. The Bank and the Starmer/Reeves combination are on the same page.”
The Bank had already cut twice, even there was reason to believe inflation would rebound, which it had done, “not least because of Reeves awarding above-inflation pay rises to public sector workers”, Mr Lyddon pointed out.
He continued: “Cutting reduced what savers earn on National Savings. That has delivered Labour a windfall saving on its interest payments to blaze away on spending.”
Bank of England Governor Andrew Bailey (Image: Getty)
In cutting by 0.5% in total, £9 million per day has been released to Labour with which to increase government spending, Mr Lyddon explained.
He said: “Naturally the Bank goes quietly along with Labour’s re-writing of the fiscal rules, and how the UK’s national debt is to be reported: the new measure – Public Sector Net Liabilities – will conceal the Asset Purchase Facility and put the evidence of the Bank’s mismanagement of the money supply out of view.”
Mr Lyddon further highlighted the fact that the Bank was also going along with Labour’s intention of keeping Great
British Energy and the National Wealth Fund “off-balance-sheet”.
He added: “This means all the money borrowed by the government to set up these new quangos, all the money these quangos borrow themselves, and all the money borrowed by their Net Zero schemes (from BlackRock and pension megafunds) can be disappeared within the measure of Public Sector Net Liabilities.
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Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer (Image: Getty)
As a result, Net Zero Financing could then become another version of the Asset Purchase Facility (APF), a monetary policy tool operated by the Bank of England, primarily used to implement quantitative easing, Mr Lyddon stressed.
He said: “All the money gets spent and now, and that all gets piled onto the figure for the UK’s Gross Domestic Product (GDP). The debt that enabled the spending is hidden. This falsely reduces the ratio of the UK’s GDP to its debt. It creates the false growth, growth, growth that
“Labour are fixated on and which is exactly the type of false growth that the Bank has been supporting since Labour blew up the UK economy the last time they were in power, between 2007 and 2010.
“The Bank also reduced the amount of capital that banks have to hold when they lend into Net Zero projects, helping Starmer, Reeves and Miliband get bank money into their follies as well.”
However, there was one thing the Government and the Bank would not be able to control, Mr Lyddon argued, namely the financial markets themselves.
The Bank of England in Threadneedle Street (Image: Getty)
He emphasised: “The Bank plans to sell off a smaller portion of the APF bonds than they did under the : £100 billion of bonds instead of £110 billion, another freebie for Labour as the sale crystallises a loss and the government has to pick up the loss. But the Bank had also hoped to do this at a much lower loss-per-billion than they managed for the .
“This should have released £11.4 billion for Labour to spend compared to what was available to the , but those financial markets have reduced this to £7.9 billion, because they have taken fright at Labour’s financial ineptitude.”
Therefore on government bonds had shot up to nearer 5% than the 4% where they stood in July “frustrating the full realisation of this other freebie for Labour”, Mr Lyddon warned.
He concluded: ” in financial markets on UK government bonds are going up, at the same time as the Bank and Labour claim they are coming down.
“That encapsulates the alt-reality in which the Bank and Labour are living in their wedded bliss.”
Express.co.uk has contacted the Bank of England, the Treasury and Ms Reeves for comment.