WEBVTT - UK Chancellor Rachel Reeves Talks Targeting Increased US Trade Despite Trump Tariffs Threat

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. The Prime Minister was

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<v Speaker 1>saying that he wants to restore the aid budget to

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<v Speaker 1>zero point seven percent of GDP and to get defense

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<v Speaker 1>back up to or to get defense up to three

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<v Speaker 1>percent of GDP. This implies a much bigger state, and

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<v Speaker 1>even with strong growth, it seems not remotely possible within

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<v Speaker 1>the fiscal rules without big tax cut rises or big

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<v Speaker 1>spending cuts. Do you agree.

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<v Speaker 2>We set out a clear plan for taking defense spending

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<v Speaker 2>to two point five percent of a GDP by twenty

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<v Speaker 2>twenty seven, and that will be funded by cuts in

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<v Speaker 2>overseas development assistance. That is the right thing to do

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<v Speaker 2>given the threats we face from Russia on the continents

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<v Speaker 2>of Europe. As strong economy depends on strong national security

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<v Speaker 2>and strong defense, which is why we've made that decision

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<v Speaker 2>to invest in our defense capability.

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<v Speaker 1>But beyond for the next parliament would be three percent

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<v Speaker 1>of defense spending is the ambition, and that's when it

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<v Speaker 1>would get more difficult within the fiscal rules and without

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<v Speaker 1>big cuts or big tax races.

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<v Speaker 2>The Prime Minister was really clear yesterday, Yes, we want

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<v Speaker 2>to take defense spending to three percent of GDP. Given

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<v Speaker 2>the threats that we face, but that will be dependent

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<v Speaker 2>on economic and fiscal circumstances and also military need. But

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<v Speaker 2>we've set out that fully funded, fully costed plan in

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<v Speaker 2>the next two years to take defense spending to two

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<v Speaker 2>and a half percent of GDP, to improve our national

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<v Speaker 2>security and to make our economy and our country stronger.

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<v Speaker 1>The promise is going to be meeting President Trump on Thursday.

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<v Speaker 1>You have just increased defense spending, which is obviously what

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<v Speaker 1>he would like. Do we hope to get anything in return?

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<v Speaker 1>Do we hope, for example, for him to withdraw the

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<v Speaker 1>threats of twenty percent tariffs possible?

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<v Speaker 2>We've increased defense spending to improve the security of Britain

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<v Speaker 2>and it's in our national interests to do that. The

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<v Speaker 2>Prime Minister will be meeting President Trump to discuss a

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<v Speaker 2>range of issues. But it is important that right across

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<v Speaker 2>Europe we increase spending on defense to play our full

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<v Speaker 2>part within NATO and to keep the consonants of Europe

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<v Speaker 2>safe against Russian aggression. In terms of the future trading

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<v Speaker 2>relationship between the UK and the US, last time that

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<v Speaker 2>President Trump was in the White House, trade and investment

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<v Speaker 2>between our two countries increase, and I have every confidence

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<v Speaker 2>that that can happen again, and I know that the

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<v Speaker 2>Prime Minister looks forward to talking about those issues and

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<v Speaker 2>many others in his meetings with Donald Trump tomorrow.

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<v Speaker 1>Obviously there is talk about peace deal in Ukraine within weeks.

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<v Speaker 1>The US hope would be would that be good for

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<v Speaker 1>growth globally? Would it be good for growth in the UK?

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<v Speaker 1>Is this something you'd be hoping for?

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<v Speaker 2>I set out in my G twenty contribution at the

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<v Speaker 2>Finance Minister's meeting today the importance of peace. But are

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<v Speaker 2>just and durable at peace and that is what the

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<v Speaker 2>people of Ukraine need and deserve, and that is what

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<v Speaker 2>will contribute to a stronger economy. The human sacrifice in

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<v Speaker 2>Ukraine has been immense. But of course Russia's illegal invasion

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<v Speaker 2>of Ukraine has also placed a heavy burden on the

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<v Speaker 2>global economy, with higher energy prices, higher food prices, and

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<v Speaker 2>destruction to a global trade. But first and foremost, this

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<v Speaker 2>is about protecting the sovereignty of Ukraine and protecting the

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<v Speaker 2>security of Europe.

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<v Speaker 1>But you think a peace dividend might bring a growth

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<v Speaker 1>dividend as well.

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<v Speaker 2>Well. There's no doubt been the case that Russia's invasion

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<v Speaker 2>of Ukraine has played a role in the higher inflation

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<v Speaker 2>and the weaker growth that we've seen, but it is

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<v Speaker 2>essential that it's a just and a durable piece if

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<v Speaker 2>we are to get the benefits both the Ukraine and

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<v Speaker 2>indeed for the global economy.

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<v Speaker 1>We've had to slash our aid budget to afford the

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<v Speaker 1>defense spending. The US are doing the same, Sweden, France,

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<v Speaker 1>Germany they're also reducing their aid spending. Does this mean

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<v Speaker 1>that the test has given up on the developing world?

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<v Speaker 2>The world has changed hugely in just the last few

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<v Speaker 2>years since Russia's invasion of Ukraine. It's a wake up

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<v Speaker 2>call to countries around the world, but particularly in Europe.

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<v Speaker 2>And it's right that we have increased spending on defense.

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<v Speaker 2>To take us to two point five percent of a

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<v Speaker 2>GDP is a fully costed and a fully funded plan.

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<v Speaker 2>It's in our national interest to do so, and that

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<v Speaker 2>is why we're taking that action.

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<v Speaker 1>Do you think it's a risk that China and Russia

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<v Speaker 1>possibly could fill the gap if we leave, if we

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<v Speaker 1>take our foot off the pedal for development assistance in

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<v Speaker 1>the developing world.

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<v Speaker 2>I think it's important that countries play their full role

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<v Speaker 2>in both providing defense and in providing aid. Britain has

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<v Speaker 2>made the decision, the right decision, to protect our national security,

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<v Speaker 2>to strengthen our defense in the face of Russian aggression,

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<v Speaker 2>and that's why we've increased defense spending. Our increasing defense

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<v Speaker 2>spending to two and a half percent of GDP. That's

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<v Speaker 2>the choice that we have made. It's in the national interest.

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<v Speaker 2>It's also good for the economy because a strong economy

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<v Speaker 2>depends on strong defense and strong.

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<v Speaker 1>Security, and which just finally, then you've had two OBR

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<v Speaker 1>forecast rounds. Can you confirm that the March twenty sixth

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<v Speaker 1>fiscal event will not be the fiscal event It will

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<v Speaker 1>just be a group of OBR forecasts.

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<v Speaker 2>As you as you originally said it would be, but

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<v Speaker 2>the Officer Budget Responsibility going through their process at the

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<v Speaker 2>moment in terms of providing a forecast. I'm not going

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<v Speaker 2>to give a running commentary on that, but I will

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<v Speaker 2>respond to it on the twenty sixth of March. And

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<v Speaker 2>the fiscal rules that I set out in the budget

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<v Speaker 2>in October that Parliament have endorsed a non negotiable and

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<v Speaker 2>we will take whatever action is necessary to continue to

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<v Speaker 2>meet those fiscal rules.

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<v Speaker 1>So not ruling out a possible fiscal event.

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<v Speaker 2>I'm not going to provide a running commentary on the

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<v Speaker 2>ongoing OBR forecast. We took the action that was necessary

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<v Speaker 2>in October to put our public finances on a firm footing.

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<v Speaker 2>But whatever the OBI say in March, I am very

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<v Speaker 2>clear we need to go further and faster to grow

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<v Speaker 2>our economy, and further and faster to improve and reform

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<v Speaker 2>our public services, including improving productivity in our public services.