The Prime Minister risks a Liz Truss-style crisis that will undermine the Government's popularity and 'crater' the economy if public spending is not slashed in the Budget, a key Labour ally has warned.

Former Bank of England chief economist Andy Haldane cautioned the PM that his Government risked delivering a 'mañana' Autumn Budget which does not 'speak to the urgency of now' and delays decisions on public spending.

Mr Haldane - who acted as an informal aid to Mr Burnham when he served as mayor of Manchester – warned the Government has failed to acknowledge the 'precarious' fiscal position it is in, saying Britain is 'close' to being 'being taxed out and maxed out in terms of borrowing.'

Speaking to The Times, Mr Haldane urged the government to reduce taxes and bring down the size of the state if it is to generate growth.

He also stressed the Government's decision to increase taxes on banks proves it lacked the fortitude to cut public spending, labelling the move as 'penny wise, pound foolish' and sent a wider message the 'taxman cometh' if businesses make profits.

While Burnham has the potential to be a 'great Prime Minister,' he said the economy was his 'blind spot' - meaning Britain's fiscal future could be 'precarious'.

Mr Haldane warned: 'The penny has not yet fully dropped, including in Downing Street. You see that in us having the highest borrowing costs in the G7, despite not having the highest debts and deficits.

'It's not those who sit behind him. It's probably not even those who sit opposite him in Westminster. Keir [Starmer] lost the dressing room. Andy's biggest risk is that he loses the dealing room. And then that's an even more painful way to go, as Liz Truss would tell you.'

The warnings come as Mr Haldane recently branded Labour's plan for a £2 billion tax raid on banks as 'delusional'.

He said that while lenders may be able to afford to pay more, the impact will end up being felt by ordinary households and businesses.

The City is fighting a last-ditch battle to stop Chancellor John Healey raising bank taxes in next week's Budget. The Confederation of British Industry has said it would be an 'own goal' and banks say they are already paying higher levels of tax than in other financial centres such as New York and Frankfurt.

But as the Chancellor looks for cash to repair the public finances and fund cost-of-living support, Labour's union backers say that, as lenders enjoy bumper profits thanks to rising interest rates, they should be made to pay more.

This week, Barclays revealed a 12 per cent increase in quarterly profits to £2.3billion. Mr Healey is widely expected to increase the surcharge that banks pay on corporation tax, which stands at three per cent.

Mr Haldane told The Spectator: 'If you said the effect of this was just to take a few billion out of the bottom line of banks, you might say, 'they can afford it'.

'And they can afford it. My cautionary points around that will be twofold. Who do you think really is paying for that tax rise on the banks?

'I will give you a clue, it will not be the banks, it will be you and me as customers of banks. It's slightly delusional to think this isn't a tax on us rather than a tax on them.'