John Healey's Budget will aim to please Labour backbenchers rather than businesses or the bond markets, an ex-adviser to the Prime Minister has said.

Andy Haldane warned that the Chancellor will risk growth and deter investors if he announces tax rises and further borrowing a week today.

In another blow to Andy Burnham – who sounded him out for advice before entering Downing Street – the former Bank of England chief economist raised the alarm over Labour's plan to make the state even bigger. 

He said he preferred the Conservatives' proposals for improving growth by slashing spending and red tape.

As fears grow over Mr Healey's first Budget, with Kemi Badenoch warning he could do more harm than his predecessor Rachel Reeves, Mr Haldane said yesterday: 'My hope is this is a Budget for business and bond markets.

'In other words, the Government signals voluntary restraint on spending and chooses not to raise taxes on households or businesses. 

'That would be the best thing to get growth going. That is my hope. It is not my expectation.

'My expectation is we will see some further borrowing, and that we will see some further tax rises. 

'Neither, I think, are good from a growth perspective. In a nutshell, I expect a Budget for the backbenches rather than for business or the bond markets.'

Mr Burnham, who was spotted on an early morning run yesterday, is under pressure from the Left of his party to spend big.

While Mr Haldane admitted the economy had 'significantly outperformed' expectations, he said 'things are about to turn stickier' with the cost of living rising as well as Government borrowing.

He said the 'acid test' of any party's economic plan was whether it would make the UK an attractive place to do business and create jobs. 

Highlighting the rumoured tax raid on banks in the Budget, he warned: 'A world in which the taxman takes the upside and investors take the downside is not an environment where investors will want to invest more money.'

He also said it would be 'short-sighted' for Mr Healey to leave just £15billion of fiscal headroom.

Mr Haldane said a greater buffer was needed partly to 'demonstrate a willingness to take tough political action to rein in public spending', which would reassure financial markets and lead to borrowing costs falling.

Mr Haldane – who turned down a formal role in Mr Burnham's administration – wrote: 'The Labour Party's plan for an expansive (and expensive) state sits uncomfortably with this precarious fiscal backdrop.'

He backed Tory plans to bring in 'cuts to business and employment taxes and regulation to unleash animal spirits' as well as 'slimming Government spending to lower borrowing costs'.

Last night the Conservatives urged Mr Healey to take action on soaring prices, as official figures today are expected to show inflation rising again from the 3.1 per cent recorded in August.

The September figure is used to decide next year's benefits rises for many claimants, which the Tories say could mean the cost of welfare rising by £4billion.