Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Marin
Speaker 1: Dogs Money Market Rap, where we break down the biggest
Speaker 1: moves in the markets this week and what has been
Speaker 1: driving them. I am Marinsum's at Web Bloomberg's UK Money's
Speaker 1: Editor at Large.
Speaker 2: And I'm joined stay we Senior report on North out
Speaker 2: of the money Distilled newsletter.
Speaker 1: Welcome back from yet another holiday, John, Thank you nice time.
Speaker 2: It was wonderful. It was great. It was actually much
Speaker 2: cooler than London as well. Really okay, a couple of
Speaker 2: degrees cooler on lying was in Greece, okay.
Speaker 1: And while you were away lots of stuff happened.
Speaker 2: It did unusually normally. I come back and I just
Speaker 2: read a big call about who nothing's changed?
Speaker 1: And true every time you sw away something happened.
Speaker 2: Every time what happened? The last name was a week?
Speaker 1: Can't probably some kind of another prime miniege. Most definitely
Speaker 1: another prime minister. What else would it be? One a week? Right?
Speaker 1: You only have to go on holiday for two weeks
Speaker 1: and you've got a couple of your belt. Anyway, the
Speaker 1: interesting stuff that has happened while you've been away to
Speaker 1: the e send that any of this stuff is actually
Speaker 1: deeply interesting, is that we have this new candidate for
Speaker 1: prime minister who's acting as though he is prime minister already,
Speaker 1: which I have said, I'm mildly irritating, but that's just me.
Speaker 1: And he has given us a speech no questions allowed
Speaker 1: at the end of about roughly what his policies might
Speaker 1: or might not be, and some people would say word salad.
Speaker 1: Some people find it very inspiring. I don't know, what
Speaker 1: did you think, John, I.
Speaker 2: I'm going to go away, mostly walked Salid. I feel
Speaker 2: that I feel that I said he was just he
Speaker 2: was repeating a lord to stuff which seems like common
Speaker 2: sense and that everyone says when they get in it
Speaker 2: pout and it's like, why can't we do this? Why
Speaker 2: isn't this easier? But actually not then explaining how he
Speaker 2: was going to do any of it, because clearly these
Speaker 2: common sense things can't be easy or else they have
Speaker 2: been done by they have.
Speaker 1: Been down already exactly. I'm particularly enjoying on social media
Speaker 1: the not the Messiah posts. I don't know if you've
Speaker 1: seen this.
Speaker 2: This is a life that's very good.
Speaker 1: And I'm also looking forward to from being properly dressed.
Speaker 1: I know I've had this conversation before. With the love
Speaker 1: of God, my politicians dressed properly world stage and all
Speaker 1: that not dignified, and I want author I want dignified.
Speaker 1: So this week we're going to do things a little
Speaker 1: bit differently. It's less of an immediate market wrap and
Speaker 1: more of a sort of deep diver and largely everything
Speaker 1: that happens in UK politics is relevant for markets, so
Speaker 1: we're going to talk about that. And we have asked
Speaker 1: onto the show one of our previous guests, Roger Lee,
Speaker 1: who's the head of equity strategy at Cavendish, because we
Speaker 1: want to talk a little bit more about what exactly
Speaker 1: is now becoming known as Manchester Rism if you haven't.
Speaker 3: Come across it before.
Speaker 1: This apparently is the governing philosophy which is associated with
Speaker 1: Andy Burnham, who as you know, is the former mayor
Speaker 1: of Greater Manchester and seems to be looking to move
Speaker 1: a lot of government function to Manchester. So whether you
Speaker 1: agree with all this or not, it is an idea
Speaker 1: that people are talking about, is that we think it's
Speaker 1: worth unpacking a little bit. So Roger, very kindly, thank you.
Speaker 1: Roger has come into the London studio to explain how
Speaker 1: he understands Manchesterism. I don't think this is going to
Speaker 1: take off because it's quite a difficult word to say,
Speaker 1: what it is, where it comes from, and what it
Speaker 1: could mean for investors and the UK economy.
Speaker 3: Roger, welcome back, thank you and thank you for having
Speaker 3: me back.
Speaker 1: Well, you're not going to be saying that when I've
Speaker 1: asked you to explain what Manchesterism is.
Speaker 3: If I can say it, or you'll edit it out appropriately.
Speaker 3: What is Manchesterism? Given that we've only been fully aware
Speaker 3: of it for the last twenty four hours, obviously whatever
Speaker 3: I'm about to say is clearly subject to change. But
Speaker 3: my understanding, and I think most commentator is understanding of Manchesterism.
Speaker 3: It's just it's an extension of state intervention. It's an
Speaker 3: extension of state intervention, but this time, instead of it
Speaker 3: being the state intervening in the economy at a national level,
Speaker 3: it's an attempt to intervene at a local level. And
Speaker 3: the hope is that the outcome of that will be
Speaker 3: better than the outcome when the state has tried to
Speaker 3: intervene in a national level. And then Andy Burnham was
Speaker 3: quite explicit of this. I mean there's a direct quote
Speaker 3: from him where he says that intervention at a national
Speaker 3: state government level has not worked and earn this needs
Speaker 3: to be applied more locally. And I think that really
Speaker 3: is the point here, is that we're not changing any
Speaker 3: philosophy here in terms of an economic philosophy. This is
Speaker 3: merely more state of intervention applied differently, and I think
Speaker 3: that is absolutely the key to understanding what manchester Ism
Speaker 3: is now. I think it's as I say, I stress,
Speaker 3: it's an extension of what we have already seen. And
Speaker 3: I think John was mentioning this. So a lot of
Speaker 3: these ideas are floated around. You could cut and pay
Speaker 3: and you'll have seen these comments from other commentators, but
Speaker 3: you could cut and pay George Osborne's the Northern Powerhouse.
Speaker 3: You could cut and pace leveling up his attack on
Speaker 3: the civil service. That could have been Dominic Cummings standing there.
Speaker 3: A lot of this is not different. It's just expressed
Speaker 3: perhaps in a more charismatic, authentic way, but it really
Speaker 3: is just an extension of the state intervention that we've
Speaker 3: seen really since the financial crisis. And if I may
Speaker 3: just step back a bit and why I am not
Speaker 3: only convinced that it is merely an extension of the
Speaker 3: existing state interventionism that we see at the moment, or statism.
Speaker 3: It won't work. But let's put this into some sort
Speaker 3: of historical context. Marrin if I may, now, I wish
Speaker 3: i'd written this, I haven't. It's I think it's smile Ferguson. Now, certainly,
Speaker 3: Professor Ferguson, I think he had this great insight and
Speaker 3: he talks about the great arcs of politic political thinking
Speaker 3: in the UK, and he talks about, you know, we
Speaker 3: came off the Second World War. We'd had this titanic
Speaker 3: victory and basically delivered by a state controlled economy. The
Speaker 3: state had beaten the enemy, and then obviously in the
Speaker 3: immediate post war period, the state then decided it was
Speaker 3: going to protect its individuals and establish a welfare state
Speaker 3: and social services. Now, so this idea of statism, the
Speaker 3: idea that the state can deliver everything, was enshrined really
Speaker 3: in those post war areas, and that carried on all
Speaker 3: the way through through the sixties. We had this one
Speaker 3: nation conservatism and that was not arguably it wasn't actually
Speaker 3: that different to what the Labor Party were crowsing in
Speaker 3: the sixties and of course this came to a fruition
Speaker 3: in the nineteen seventies where we had where we obviously
Speaker 3: had a lot of state intervention. This idea then in
Speaker 3: that Ted Heath had in the early seventies that he
Speaker 3: couldn't allow unemployment to go over a million people, and
Speaker 3: so therefore he ended up buying the Clyde Shipyards and
Speaker 3: bailing out rolls, rocks, et cetera, et cetera. And of
Speaker 3: course this culminated in the grim economic reality that we
Speaker 3: could not afford this level of state intervention, and it culminated,
Speaker 3: of course in nineteen seventy six with an IMF intervention,
Speaker 3: which was the largest bailout the IMF had ever done
Speaker 3: at that point. And then of course we start the
Speaker 3: next great arc, which obviously is the competing theory that
Speaker 3: actually it's not the state that delivers growth, its free markets,
Speaker 3: obviously founded by Anthony Fisher at the IEA, championed by
Speaker 3: Keith Joseph and obviously the greatest exponents politically with Missus
Speaker 3: Snatcher and Ronald Reagan. And then that overarching philosophy then
Speaker 3: was applied through the eighties and obviously then through the nineties,
Speaker 3: and that begrudgingly was adopted by New labor perhaps or
Speaker 3: they accepted the need of that in the two thousands,
Speaker 3: but that came to a crushing hold in the financial crisis,
Speaker 3: because it was quite clear that free markets, unbridled free markets,
Speaker 3: unregulated free markets in the financial system effectively bankrupted the world,
Speaker 3: and the state in the UK and in Europe and
Speaker 3: in the United States then had to intervene again. And
Speaker 3: so we start the next great arc of history, which
Speaker 3: is what we are seeing now, which is the ever
Speaker 3: increasing role of the state in our lives, to the
Speaker 3: extent that the state thought it control a virus, to
Speaker 3: what we have now is the state will deliver growth.
Speaker 3: And so what we are seeing here I think I
Speaker 3: would suggest is perhaps I don't know whether it's the
Speaker 3: final but it's certainly the latest iteration of statism in
Speaker 3: practice as part of this great arc of politics, this
Speaker 3: competition between these two competing ideologies. I think that is
Speaker 3: the context of what we're looking at. It is the
Speaker 3: eatst iteration of statism in an attempt to drive growth,
Speaker 3: and the evidence would suggest that that growth is going
Speaker 3: to be elusive.
Speaker 1: Yeah, to us, that sounds like doubling down on stuff
Speaker 1: that already hasn't worked in that I think we would
Speaker 1: say being more of a free market I'm sorry speaking
Speaker 1: for you again, John, we've being more of a free
Speaker 1: marketeered mind. We would say that if you were to
Speaker 1: remove all the state sponsored policies that are paralyzing the
Speaker 1: private sector, you would get your growth.
Speaker 3: It's genuinely accepted by most economists that you need three
Speaker 3: economic pillars to grow an economy. You need low regulation,
Speaker 3: low tax burden, and low energy prices. We, of course
Speaker 3: in the UK have got the complete opposite of those three.
Speaker 3: And so then why are we surprised when we struggle
Speaker 3: to grow, we increase the regulatory burden, we increase the
Speaker 3: tax burden, we increase the energy burden, and why are
Speaker 3: we surprised that growth slows even more? Who then look
Speaker 3: at the United States, who are doing what would genuinely
Speaker 3: be accepted as pro growth supply side and fiscal economics.
Speaker 3: They're reducing the regulatory burden, they're reducing the tax burden,
Speaker 3: and of course they've got some of the lowest energy
Speaker 3: prices in the Western world. And there is no surprise
Speaker 3: therefore that they are growing quicker than anyone else in
Speaker 3: the Western world. So what Andy Burnham is doing, I'm
Speaker 3: afraid is we are having another go. And I think
Speaker 3: this is an idea to me anyway, that this is
Speaker 3: statism applied harder and applied differently, and I fear the
Speaker 3: outcome will be exactly the same as other forms of
Speaker 3: status and that we've seen over the last few years.
Speaker 2: Just be clear, it's not someone. It's devolution on this
Speaker 2: sell of the idea of pushing poles more locally. That's
Speaker 2: the issue so much. It's just this is basically just
Speaker 2: and de way of painting. It looks like he's going
Speaker 2: in a different direction. Bactly, he's just doing the same
Speaker 2: thing as Stalin has already been doing.
Speaker 3: Yes, it's an extension of that. Again, I don't mean
Speaker 3: to be flippant, but he is literally moving the desks around.
Speaker 3: Yeah yeah, Now's just the thing.
Speaker 2: Britain is heavily centralized and I think this is the
Speaker 2: point lots people make is the likes of compare to
Speaker 2: other countries. So much of the taxi because administered centrally,
Speaker 2: wouldn't to be a good idea if local regions had
Speaker 2: more ability to can take account of what's going on
Speaker 2: in their areas and administered according it has.
Speaker 1: Devolution actually worked in Manchester and we hear a lot
Speaker 1: about it relatively fast growth rate and everything that's been
Speaker 1: done there, but it's also got massive amounts of debt.
Speaker 1: Is that growth or is that debt?
Speaker 3: I don't know the Manchester economy well enough mirror. It's
Speaker 3: quite difficult to unpack whether devolution in Edinburgh, Wales has
Speaker 3: worked at alone, with a devolution in a metropolitan area's
Speaker 3: work and telly where it has worked, we will talk
Speaker 3: about where it has worked. So if anyone asks you
Speaker 3: where has devolution worked now, devolution tends to work from
Speaker 3: an economic perspective or where they have what they call
Speaker 3: as competitive federalism, And some people talk about this as
Speaker 3: competitive devolution, but I think the economic term is competitive federalism.
Speaker 3: This is some very clear examples of this. Florida and
Speaker 3: Texas in the United States would be seen to have
Speaker 3: very successful economies relative to the other United States because
Speaker 3: they are able to effectively set their own tax rates,
Speaker 3: both corporate and personal, and they have well known attracted
Speaker 3: a significant number of inward investment as a result of that.
Speaker 3: A bit closer to home, Switzerland is a classic example
Speaker 3: of competitive federalism amongst the cantons. Now, of course there
Speaker 3: is the famous canton which is perhaps the most attractive
Speaker 3: for inward investment, and that's Zug. And I have to
Speaker 3: confess I'm not totally sure where Zug is, but it does.
Speaker 3: What is a common feature of this competitive federalism is
Speaker 3: that devolved regions are able to set a regularity burden,
Speaker 3: and most importantly they're able to set a fiscal tax burden.
Speaker 3: And so the competitive federalism comes as being a great example, Florida,
Speaker 3: Texas being example as well of setting low taxation and
Speaker 3: low regulatory burden. Now, if devolution and we stressed our again,
Speaker 3: so I'm not being dismissive about if devolution was let's say,
Speaker 3: we were going to set up Whales as the zug
Speaker 3: of the UK and the Welsh National Assembly were going
Speaker 3: to slash corporation tax to zero, and they were going
Speaker 3: to slash personal income tax to fifteen percent, and they
Speaker 3: were going to remove a lot of the corporate regulatory
Speaker 3: burden that the rest of the UK suffers from. I
Speaker 3: could strongly predict that the Welsh economy would grow very quickly.
Speaker 3: I didn't sense in Andy Burden speech that was the
Speaker 3: direction of travel, because he actually talks about tax raising
Speaker 3: powers amongst the regents tax raising I don't sense that
Speaker 3: the good Burghers of Zug would be talking about tax
Speaker 3: raising powers.
Speaker 1: We did. We often talk about this in the context
Speaker 1: of Scotland, saying they have all these tax powers and
Speaker 1: wouldn't it be great if they used it to compete
Speaker 1: with the rest of the UK on taxes, et cetera.
Speaker 1: But they don't seem to want to do that, So
Speaker 1: federalism doesn't seem to be natural to the UK.
Speaker 3: Well, yes, this is the other interesting and again s
Speaker 3: got job. There weren't any questions yesterday because if you're
Speaker 3: if you are thinking about devolution in terms of establishing
Speaker 3: competing metropolitan regions, then that sounds like awfully similar to
Speaker 3: Singapore on Thames. That was the fantasy or the objective,
Speaker 3: depending on where you sit in the Brexit debate. Of course,
Speaker 3: this idea of competitive federalism devolution really only works outside
Speaker 3: the EU anyway. I think there's a couple of observations here,
Speaker 3: a couple of risks that I'm not sure he addressed.
Speaker 3: The danger is as if you are literally just moving
Speaker 3: desks from Whitehall to town Hall, then you double up
Speaker 3: the bureaucratic burden. There is a cost to devolution, So
Speaker 3: how is that going to be paid for? There must
Speaker 3: be extra layers of regulation that will be applied. Here
Speaker 3: he's already talking about trying to get value for money,
Speaker 3: broader value criteria for assigning government contracts, and that sounds
Speaker 3: to me like more regulations. Where we're actually heading here
Speaker 3: where I said at the outset, we're actually increasing the
Speaker 3: amount of regulatory burden. We're probably going to have to
Speaker 3: increase the fiscal burden to pay for it all, and
Speaker 3: that will weigh on growth. And then there's the third
Speaker 3: element of this that I don't think has been properly
Speaker 3: talked about, is that yet again the market is faced
Speaker 3: with this fiscal uncertainty over what Burnham is going to
Speaker 3: do in his first budget. And this is the third
Speaker 3: time in this administration the market and corporates and individuals
Speaker 3: have had to second guess. And we've already seen them
Speaker 3: sort of the number of commentary about which taxes are
Speaker 3: going up and where the tax burden is going to fall,
Speaker 3: and so we end up with just more of the same.
Speaker 3: And that's really I'm afraid the prognosis I hope it works.
Speaker 3: I sincerely hope it does work. I hope this will
Speaker 3: be the exception to the rule. But I struggle to
Speaker 3: see where this sort of devolution has worked in the past.
Speaker 3: France has thirty five thousand mares, and France is faced
Speaker 3: with a fiscal potentially a fiscal certainly fiscal issues, shall
Speaker 3: we say not a crisis. Germany obviously has an ex
Speaker 3: very extensive federal system, and Germany is growing less than
Speaker 3: the UK is. It is difficult to cite examples where
Speaker 3: this devolution has worked without significant fiscal, tax and regulatory adjustments.
Speaker 1: Yeah, and a willingness to compete. I want to come
Speaker 1: back in a minute to the guilt market and the
Speaker 1: extent to which you think we can continue to bear
Speaker 1: this increase spending in the UK. But before that, one
Speaker 1: of the things that keeps popping into my head whenever
Speaker 1: we'd hear about Manchesterism and about the you had London
Speaker 1: can't be allowed to continue to be this giant, successful
Speaker 1: money producing how that than the South of England without
Speaker 1: everywhere else being pulled up along with it. What perhaps
Speaker 1: into my head is the what they call the Birmingham problem.
Speaker 1: Back in the nineteen sixties, when it was Birmingham that
Speaker 1: was considered to be far too successful, not okay, expanding
Speaker 1: too far, drawing in too many people, creating too many jobs,
Speaker 1: simply not okay. So instead of saying, let's look at
Speaker 1: Birmingham and see why they're doing so brilliantly and try
Speaker 1: and do the same and the rest of the country,
Speaker 1: the government put in place a series of policies deliberately
Speaker 1: designed to prevent Birmingham expanding any further. So there were
Speaker 1: various acts and policies. It means you couldn't get can
Speaker 1: get planning permits if you wanted to expand in the region,
Speaker 1: for example, then more commercial buildings allowed in the city center.
Speaker 1: So the instinct then, which seems feels a little Burnham
Speaker 1: to me, the instinct then was not to say, what
Speaker 1: are they doing, well, let's do that everywhere else, but
Speaker 1: to say this must be stopped. There.
Speaker 3: Of course, arithmetically two ways to reduce it equality, aren't
Speaker 3: they are the numerator or the denominator.
Speaker 2: That's toll popy evolution.
Speaker 3: I think again, what I'm concerned about and very curious,
Speaker 3: shall we say euphemistically about Andy Burnham's speech, was his
Speaker 3: nostalgia is clear nostalgia for the nineteen seventies. Now, I'm
Speaker 3: old enough to have lived through all the way through
Speaker 3: the nineteen seventies. I was quite young at the start,
Speaker 3: he used to say. But I do find it rather
Speaker 3: curious that Roburnham seems to have this nostalgia for the seventies,
Speaker 3: which was of course categorized characterized rather by a period
Speaker 3: of stagflation, the only time we've ever experienced real stagflation
Speaker 3: in the UK. It was the first time we've ever
Speaker 3: experienced mass unemployment since the Great Depression, and of course,
Speaker 3: as I've just mentioned, it's the first time and that
Speaker 3: the UK had to be bailed out by the IMF.
Speaker 3: It just seems to me odd that the seventies isn't
Speaker 3: the usual template for economic renewal and regeneration. In fact,
Speaker 3: most people would say it is the example of not
Speaker 3: what to do, and of course actually using that as
Speaker 3: the EXAs, I find that curious.
Speaker 1: Yeah, okay, so let's talk markets. Then we're already in
Speaker 1: a big part of trouble debt wise in the UK.
Speaker 1: Spending simply doesn't seem to come down every time we
Speaker 1: get new fiscal rules, which we seem to get all
Speaker 1: the time. It's obvious from the beginning that they're not
Speaker 1: going to be kept, because it's always we spend upfront
Speaker 1: and promise we'll cut it later. We'll cut it later. Everything.
Speaker 1: I'll be fine later, we'll meet those fiscal rules. So
Speaker 1: I think we already knew that Rachel Reaves wasn't going
Speaker 1: to comply with her own fiscal rules, and now we're
Speaker 1: worried that Burnham might introduce some new fiscal rules, or
Speaker 1: change the terms of the existing physical rules, or have
Speaker 1: more exemptions, whatever it is that he does. But one
Speaker 1: thing that I think we're all reasonably clear on is
Speaker 1: that this spending binge is not ending. How much more
Speaker 1: will the market tolerate? Where does this come to any
Speaker 1: sort of end.
Speaker 3: That's a sort of really interesting question. I'm going to
Speaker 3: start by making a positive comment about burnham speech. I think,
Speaker 3: as again in we do try and be balanced, we
Speaker 3: do try and be objective, but we also can't ignore
Speaker 3: the historical and economic facts. But clearly one of the
Speaker 3: very positives that the market took from this is the
Speaker 3: Burdam said on a number of occasions that he was
Speaker 3: going to stick to the fiscal rules. So that is
Speaker 3: a very clear and demonstrable positive that the market took
Speaker 3: at face value. Now you and I have seen various
Speaker 3: commentaries subsequent to that about whether the fiscal rules will
Speaker 3: be extended over the ten year time horizon that he's
Speaker 3: talking about. I don't know whether that's he certainly didn't
Speaker 3: hint at that in the speech, so that's just purely speculation.
Speaker 3: I think any change to the fiscal rules would probably
Speaker 3: be received badly by the bomb market. Not that there
Speaker 3: isn't merit in extending the time horizon of the fiscal rules,
Speaker 3: it's just that we're coming at this from a position
Speaker 3: where I fear the credibility of the UK's fiscal position
Speaker 3: is very poor. And that's not me saying that. That
Speaker 3: is evidenced by the fact that, Okay, borrowing costs still
Speaker 3: the highest in the G seven. So I think we're
Speaker 3: coming at this from position of weakness in terms of
Speaker 3: our international credibility if you just basically just look at
Speaker 3: the bond spreads at the moment. So I think any
Speaker 3: sort of changes the fiscal rules could would probably be
Speaker 3: taken badly. So where are we as we stand at
Speaker 3: the moment, And again we come back to this thorny
Speaker 3: subject of the deficit, which is such a mystery to
Speaker 3: a lot of people, but is just it's just so important.
Speaker 3: And of course the deficit is the difference between what
Speaker 3: the government spends, which is about one point four trillion
Speaker 3: pounds a year, and what it generates, which is about
Speaker 3: one point three trillion in an ideal world. And then
Speaker 3: we take the difference of that and use that as
Speaker 3: a percentage over the size of the UK economic which
Speaker 3: is about three trillion pounds. So the numbers actually are
Speaker 3: quite simple. The makeup of those numbers is incredibly complicated.
Speaker 3: So where we are at the moment, in an ideal
Speaker 3: world economy runs with this deficit at about three percent
Speaker 3: of GDP. So again, just doing the maths, three percent
Speaker 3: of a three trillion economy is about ninety billion, and
Speaker 3: that's usually where most economists would argue it would be
Speaker 3: an optimal place for an economy to operate. So the
Speaker 3: simple maths at the moment, So the Ober forecast for
Speaker 3: this year is around one hundred and twenty billion. That
Speaker 3: has come down from last year for the reasons that
Speaker 3: we can talk about, but it's about one hundred and
Speaker 3: twenty billion. The problem is for the first two months
Speaker 3: of the fiscal year, our debt has exceeded the Ober
Speaker 3: forecast by seven point seven billion pounds. And so if
Speaker 3: you then just basically do some very rude arithmetic and
Speaker 3: just multiply that up by two months is seven point seven.
Speaker 3: If you multiply that by for the twelve months, then
Speaker 3: you get the fiscal deficit in the UK's around one
Speaker 3: hundred and sixty billion. That's just doing them very simple arithmetic.
Speaker 3: A lot of other moving parts I have to stress
Speaker 3: or tax take could be et cetera, et cetera, whether
Speaker 3: the economy slows, If the economy slows further, welfare payments
Speaker 3: goes up. But just merely extrapolating the first two months
Speaker 3: of the public secting neck borrowing over the course of
Speaker 3: the remainder of the year. Now that one hundred and
Speaker 3: sixty billion that translates if we do the maths over
Speaker 3: three trillion pounds of GDP, that translates to about five
Speaker 3: and a half percent deficit. That is what France is
Speaker 3: currently experiencing. The danger zone is said to be six.
Speaker 3: And you know, there are a lot of moving parts
Speaker 3: in this. What happens if the economy slows because of
Speaker 3: this increased burden of regulatory and tax burdens. The Employer
Speaker 3: Rights Act hasn't really fed through yet into into corporate
Speaker 3: profitability and behaviors. Maybe that will slow the UK Unemployment
Speaker 3: is sadly rising at the moment. We've seen this in
Speaker 3: almost every single month since the general election. If unemployment
Speaker 3: goes up, then the cost of welfare goes up and
Speaker 3: the tax take from those unemployed people goes down. Simple arithmetic.
Speaker 3: If the economy starts to slow, we've purchased less goods
Speaker 3: that which is on the largest tax risers tax generators
Speaker 3: in the UK, that comes down. So this is this
Speaker 3: is the sort of the reality that Andy Burnham is inheriting.
Speaker 3: People talk about it as a fiscal vice. It is
Speaker 3: a fiscal vice because he's stuck between. One side of
Speaker 3: the vice is the bomb market that seems very reluctant
Speaker 3: to allow more borrowing, and the other side of the
Speaker 3: vice is a parliamentary Labor Party that seems very reluctant
Speaker 3: to allow spending cuts. And he is called in the
Speaker 3: middle of that vice.
Speaker 2: I mean, Kevin that what do you think are the
Speaker 2: EIDs that he lasts any longer than Kostama Hayes.
Speaker 3: I don't know. I would be betting. If I was
Speaker 3: going to bet on this, I'd be betting that he'd
Speaker 3: be fighting the next election. I think the kind of
Speaker 3: the question behind your question if I made or I'll
Speaker 3: answer the question I wish you'd ask. I think if
Speaker 3: we look at this single most important issue to most voters,
Speaker 3: and you can go back almost to any opinion poll
Speaker 3: now for the last fifteen years, certainly the last five,
Speaker 3: it is usually depending on how people phrase it, is
Speaker 3: the cost of living crisis. It's basically the fact that
Speaker 3: people's incomes aren't going up, or aren't perceived to be
Speaker 3: going up. And it's basically a critique of the economy.
Speaker 3: And this is seventy percent. This is by far and
Speaker 3: away the most important issue, followed by immigration from the NHS.
Speaker 3: But we don't need to go to we do those
Speaker 3: subjects now. But the economy is the most important issue
Speaker 3: facing most voters and they express that as the cost
Speaker 3: of living. Will Andy Burnham's Manchesterism improve the economic outlook
Speaker 3: of the UK? I find it difficult. I think at
Speaker 3: best it will be merely an extension of what we
Speaker 3: have seen to date. At worst, I think, as I've
Speaker 3: already mentioned, it will be increased the regulatory burden further
Speaker 3: and it will increase the fiscal burden. So the risk,
Speaker 3: I stress the risk, it's not necessarily our forecast. The
Speaker 3: risk is the economy slows further from here and that
Speaker 3: is not going to be electorally popular for whoever is
Speaker 3: sitting in the number ten, even if they are more charismatic,
Speaker 3: more personable and more authentic. The reality is it's about
Speaker 3: the economy, yea.
Speaker 1: And I suppose the other thing to say is that
Speaker 1: even if Manchesterism was the right policy, which it could be,
Speaker 1: I mean, let's not be too judge you right, could be,
Speaker 1: it's very hard to imagine that it can be implemented
Speaker 1: successfully in time for the next election. These are long
Speaker 1: term policies and even if they are the right, policies
Speaker 1: that are difficult to put in place and not immediate it.
Speaker 3: I think that's a great point, Marin. It's time and
Speaker 3: what you could end up with. Let's assume that it works.
Speaker 3: Let's assume that it works, as you just said hypothetically,
Speaker 3: Let's assume that it works. The immediate issue now facing
Speaker 3: the UK is this fiscal uncertainty until the next budget.
Speaker 3: So We've already got that to deal with. That's going
Speaker 3: to be a hangover. We know how the markets responded that.
Speaker 3: Because we've been here twice before, we know that there
Speaker 3: will be There has to be cost associated with this.
Speaker 3: There has to be cost and that you would think
Speaker 3: that would be some sort of drag on the economy
Speaker 3: before you get the benefits at some point in the future.
Speaker 3: So I think it will all be difficult to see
Speaker 3: how this could this could start to bear fruit, even
Speaker 3: if it were to bear fruit by July twenty twenty nine,
Speaker 3: which I think is the latest state for the next election,
Speaker 3: but yes, it will be. It will be very interesting
Speaker 3: when maybe that begs the question of whether Burnham does
Speaker 3: go for an earlier election or not. If I was
Speaker 3: part of one of his strategy teams, I might be
Speaker 3: thinking about the timing of this.
Speaker 1: I would decision I would do it. I would definitely
Speaker 1: do it. Would you go for an early election? John,
Speaker 1: if you're Andy Burnham, I need a yes or a no,
Speaker 1: because we're about to wrap. I'm going to see yes, yes, yes,
Speaker 1: And with you Roger, if you were actually Andy Burnham,
Speaker 1: yes or no? Would you go for an early election?
Speaker 3: Oh? Definitely not.
Speaker 1: No, definitely not okay, all right.
Speaker 3: Definitely they're definitely not risk a hung parliament.
Speaker 1: No, okay, irritating, I felt something exciting might happen. Never mind,
Speaker 1: So on that happy note, Roger, thank you very much.
Speaker 2: Indeed, and thank you John, Thanks Milan.
Speaker 1: Thanks for listening for this week's Marin Talks Money, Markets Rap.
Speaker 1: If you like our show, rate review and subscribe wherever
Speaker 1: you listen to podcast ors. If you should follow me
Speaker 1: in John on ex or Twitter at marins w and
Speaker 1: John Underscore step Back. This episode was produced by Some
Speaker 1: Anxiety and Jennifer Seeley's sound designed by Blake Maples and
Speaker 1: Aaron Casper. Questions and concenters on this show and all
Speaker 1: our shows are always welcome. Our show email is Merror
Speaker 1: Money at Bloomberg dot net