Speaker 1: Welcome to Bloomberg Opinion. I'm Vonnie Quinn. This week we
Speaker 1: have a period of writing taxes and squeezed expenditure as
Speaker 1: we moved towards an election. He will start cutting taxes.
Speaker 1: Adrian Woodridge on newly minted British Prime Minister Richie suonacs
Speaker 1: plans to stabilize UK markets and the economy. I will
Speaker 1: deliver on its promise that embraces the opportunities of Brexit
Speaker 1: where businesses invest, innovate and create jobs. We'll also speak
Speaker 1: with Alexis Leanders on stage shopping for tax purposes. That
Speaker 1: is first though to the sentiment shift in China markets
Speaker 1: this week. Stocks dived Monday, the un weekend, and foreign
Speaker 1: investors dumped everything, such that rebounds on subsequent days paled
Speaker 1: in comparison with Monday's moves. I spoke with Bloomberg Opinions
Speaker 1: Shulely wren So Shui what changed exactly post Party Congress.
Speaker 1: We didn't get a reversal of COVID zero, but by
Speaker 1: last week we weren't really expecting that anyway. Global markets
Speaker 1: have been questioning china Is so called investibility since late
Speaker 1: last year, when they Ching's regulatory crackdown on big tech
Speaker 1: and real estate companies whipe trillions of dollars off of
Speaker 1: investors books. But this time they are really worried because
Speaker 1: it does seem like President she Jinping is solidifying his
Speaker 1: power and packing the future Chinese leadership with all his
Speaker 1: long time aids, and they're worried that she's so called
Speaker 1: new economic development model. It's just not good for financial market.
Speaker 1: And the last few months we've seen investors look at
Speaker 1: various parts of the China market very differently. So each
Speaker 1: time there was a crackdown on internet gaming, for example,
Speaker 1: or on education stocks, they sold off for the rest
Speaker 1: of the market held up. That's not happening this time around.
Speaker 1: The whole market is selling off as one. Is that
Speaker 1: warranted or should investors be taking a pick and choose
Speaker 1: approach here? I think it's interesting. It's really a verdict
Speaker 1: um the entire Chinese political landscape, right, It's no longer
Speaker 1: spector specific. So so yeah, I think the market has spoken.
Speaker 1: Chinese companies traded in the US are now trading it
Speaker 1: under six times forward earnings, so somebody and that many
Speaker 1: people are valuing these companies really cheaply. Are these valuations
Speaker 1: are founded right now. That's the thing. Chinese companies are cheap,
Speaker 1: but do you want to buy in too? Sometimes you know,
Speaker 1: things are cheap for a good reason, right Like do
Speaker 1: you want to buying to cheap goods? Do they have
Speaker 1: good shelf life? That's the big question right now. So
Speaker 1: you're talking about my do dot Com, Pendo, Door, JD
Speaker 1: dot Com. I mean it's not just one type of company.
Speaker 1: These are across the board. Yes, Actually they tend to
Speaker 1: be consumer tech companies that e commerce, social media. And
Speaker 1: the problem is that these companies they are no longer
Speaker 1: favored by Beijing. Beijing these days they want to develop
Speaker 1: so called industrial teching, aerospace, easy supply chain or like
Speaker 1: trip manufacturing, quantum computing, and all these companies that are
Speaker 1: in consumer tech, they're just not in it and also
Speaker 1: shooting things. Likes to talk about this slogan of common prosperity,
Speaker 1: basically to broaden the middle class and narrow the world scap.
Speaker 1: But global investors associate the phrase common prosperity with wealth
Speaker 1: destruction because the phrase was coming out late last year
Speaker 1: during the crackdowns, so they get scared when this phrase
Speaker 1: gets mentioned again. At the Party Congress, you mentioned a
Speaker 1: moment ago that she has solidified his power, and he
Speaker 1: has also packed the Standing Committee with allies. I don't
Speaker 1: want to make too much of a comparison, but one
Speaker 1: of the things I do, and Wildridge mentioned when talking
Speaker 1: about the UK, is that markets will like Rigi Sunac
Speaker 1: because he's no nonsense and he'll run number ten and
Speaker 1: his chancellor will run number eleven very well. Obviously, not
Speaker 1: to make a directing merison, but you do mention in
Speaker 1: a recent piece that financial markets tend to prefer a
Speaker 1: focused administrative team to in fighting and competing objectives among politicians.
Speaker 1: Surely that's a positive and not a negative in some ways. Yeah.
Speaker 1: Interestingly enough, financial markets don't mind dictators. They think it's
Speaker 1: good to have a focus at administrative team. And actually
Speaker 1: they liked it in twenty twelve when she first came
Speaker 1: into tower and seventeen when he flexed his muscles to
Speaker 1: solidify his power. But this time around they're worried that
Speaker 1: his vision is wrong. So they're worried that his age,
Speaker 1: long time age, are just going to drive China's economy
Speaker 1: and the financial markets to the ground. What's the basis
Speaker 1: for that, Because yes, narrowing the wealth gap and the
Speaker 1: role of the state and the economy is paramount to see.
Speaker 1: But that doesn't have to spell financial market trouble, does it. Well.
Speaker 1: The problem with the financial markets these days is that
Speaker 1: they are packed with companies that are not in policy priorities.
Speaker 1: For instance, Ali Baba pintot So. These stocks which used
Speaker 1: to be well loved by global investors because they were
Speaker 1: played directly to China's rising middle class. These stocks are
Speaker 1: getting dumped. And another problem is that after the party reshuffled,
Speaker 1: basically the economic team is being hollowed out. We know
Speaker 1: that China will have a new central bank governor, a
Speaker 1: new banking regulator, and a new finance minister. We don't
Speaker 1: know who is going to run the national team, so
Speaker 1: that is not reassuring to financial markets. Will she have
Speaker 1: been surprised by the market reaction enough to cause him
Speaker 1: to do something to come or support markets in some way?
Speaker 1: I think she doesn't care about how much money investors
Speaker 1: have lost. I don't think he cares. I mean he
Speaker 1: didn't care about optics right and if he did, he
Speaker 1: will pack the politeberal with just one woman. Right now,
Speaker 1: there is zero or like help cooking. How his predecessor
Speaker 1: to leave the congress in the nicer way, but like
Speaker 1: he didn't seem to care about the optics. But I
Speaker 1: think at some point he will care because China still
Speaker 1: needs the financial markets to be open to finance the
Speaker 1: fiscal deficits and to raise funds for companies such as
Speaker 1: Evy and chip manufacturing, which he will need in order
Speaker 1: to support young people coming into the labor market as well. Surely,
Speaker 1: for those who hadn't seen it or hadn't noticed, just
Speaker 1: explained the hoosion to how episode that happened at the
Speaker 1: Party congress. It was extraordinarily surprising, and we'll never fully
Speaker 1: know what happened, as Kara Ferra Marquez says in Bloomberg Opinion,
Speaker 1: but will you explain to us what happened? It seems
Speaker 1: like coaching how. He didn't look very well. He looked
Speaker 1: quite freel and somehow two men were trying to escort
Speaker 1: him out of the big Hare and one of the
Speaker 1: politicians Leach and Shue, he used to be president, shooting
Speaker 1: Kings chief first stuff, he's retiring. He tried to stand
Speaker 1: up and aid hooching how and shooting Kings strategist one
Speaker 1: who in basically padded le chansu and they stand down,
Speaker 1: it's none of your business. Just don't get involved. And
Speaker 1: then shooting, how God escorted out and Shi King just
Speaker 1: look down, didn't say a thing, and on his way
Speaker 1: out hooching, how had likud chongs shoulder and Li Ku
Speaker 1: Choun looked like he almost recoiled. So it was a
Speaker 1: very very strange scene. And I guess my take is
Speaker 1: that it's just a real glimpse into China's top political circles,
Speaker 1: how rigid and nervous all the politicians are. Now we
Speaker 1: learned that before we got the execuities and you and Slump,
Speaker 1: the Foreign Exchange Regulator and the BBOC vowed to maintain
Speaker 1: the healthy development of the country's stock and bond markets
Speaker 1: and keep the new unstable. Obviously they weren't expecting this
Speaker 1: kind of reaction. Just you know, a day or two later,
Speaker 1: what can they do in order to stabilize the bond
Speaker 1: markets on the un Well, that's a very good question
Speaker 1: because if you read the p BOC statement that the
Speaker 1: pledge to stabilize the markets is not at the friend
Speaker 1: and center of their statement. It's like weigh in the
Speaker 1: back and then like the friend and center is all
Speaker 1: about that. In present, she's fought following the party's leave,
Speaker 1: and I just feel like there's so much power, vacuum
Speaker 1: and uncertainty that bureau quests are not doing anything right now,
Speaker 1: They're not going to do anything for while it's really
Speaker 1: quite phenomenal. Suddenly the market thinks that China is completely opaque,
Speaker 1: and seemingly a few months ago it seems to think
Speaker 1: it was transparent. Okay, so let's move on to what
Speaker 1: she does have in terms of economic priorities. He has
Speaker 1: a new development model, and you go into this in
Speaker 1: your column. First of all, tell us what you think
Speaker 1: common prosperity will turn out to be. So she actually
Speaker 1: wrote about what common prosperity is and it's not late
Speaker 1: last year he basically said that it's not egail and terrnism,
Speaker 1: and then you know, he wants the whole economic pipe
Speaker 1: to be bigger and everyone to be richer. But he
Speaker 1: did one against the exorbitant wealth that's collected by a
Speaker 1: few people at the top. So what the market this
Speaker 1: is that she will at one point launch a major
Speaker 1: wealth redistribution, perhaps taxing the very rich at a much
Speaker 1: higher rate than before. And they feel that common prosperity
Speaker 1: is just a nicer name for wealth redistribution. You have
Speaker 1: some suggestions for what season things could do in order
Speaker 1: to make China quote unquote investable. Again, this has been
Speaker 1: such a watchword over the last year in terms of
Speaker 1: Wall Street notes and so on. But at the moment,
Speaker 1: I guess the market things China is uninvestable. What are
Speaker 1: your suggestions. I think optics mended. President Shimki needs to
Speaker 1: show what common prosperity is not, so one thing that
Speaker 1: he could do is to invite those type billionaires such
Speaker 1: as Ali Baba's Checkma tens for Migma and made one
Speaker 1: launching to Beijing, not to summoner, but to invite them
Speaker 1: to attack conference to talk about how the private sector
Speaker 1: can help push China's take front here, just to show
Speaker 1: to the world that China is not against entrepreneurship or
Speaker 1: self made billionaire. That's one thing. And another thing is
Speaker 1: that I think global investors are worried that China is
Speaker 1: closing herself to the world because President Sinking. He has
Speaker 1: another economic slogan called duo circulation. Basically, he wants to
Speaker 1: boost China's domestic economy and explort goods and services that
Speaker 1: are of higher value adds such as eb supply chain,
Speaker 1: and along with three years of COVID zero and the
Speaker 1: close borders, people rightfully think that China is closing herself
Speaker 1: to the world and it's going back to chain dynasty.
Speaker 1: So one thing that Beijing could do is to reopen
Speaker 1: the border as soon as possible, lower the number of
Speaker 1: quarantine days for foreign travelers so that foreign business can
Speaker 1: come to China to see for themselves what China is like,
Speaker 1: and overseas Chinese to come home to visit their families.
Speaker 1: I mean, it has been three years. So these are
Speaker 1: the optics and gestures he can make to stabilize the market,
Speaker 1: and they would be pretty cheap gestures in many ways.
Speaker 1: So the other thing is COVID zero is going to
Speaker 1: get reversed at some point. Wall Street is talking about
Speaker 1: March of next year. It's not that far away. I mean,
Speaker 1: investors could possibly hang on until March. If COVID zero
Speaker 1: was suddenly reversed, would that make a huge difference. I
Speaker 1: think if COVID zero was suddenly reversed earlier the next March,
Speaker 1: it will make a huge difference, right because the investors
Speaker 1: are still trying to figure out whether they should stick
Speaker 1: around or just sell everything. But next March it's still
Speaker 1: quite a few months away, and COVID zero is very
Speaker 1: very expensive. According to Morgan Stanley estimates, COVID zero costs
Speaker 1: the Chinese government to trillion un this year alone. And
Speaker 1: how that's going to be sustainable. It's a big question market,
Speaker 1: and it's going to create a huge track on China's
Speaker 1: fiscal deficits right now. We also had, of course, the
Speaker 1: delay of some economic data. Speaking of economic data this
Speaker 1: week and GDP then finally came out and it was
Speaker 1: actually better than forecast. It was, you know, an anemic
Speaker 1: enough in China terms at three point, but we don't
Speaker 1: have the full years GDP figures yet. Even that wasn't
Speaker 1: enough to cheer the market. What does the market want
Speaker 1: to see in terms of China growth? See, that's the
Speaker 1: interesting thing that the rosier economic data is just not
Speaker 1: going to cheer the market, right Like the GDP data
Speaker 1: is better than expected, but investors to brush that away.
Speaker 1: Housing numbers starting to take up a little bit, they
Speaker 1: still brush that away as well, and I think they're
Speaker 1: just more worried about optics. You know that Shi Jinking
Speaker 1: is going to do wealth destruction, and that he's going
Speaker 1: to close China to the rest of the world, and
Speaker 1: possibly he's even going to invade Taiwant. They're just worried
Speaker 1: about those big picture topics. Yes, the time. One question
Speaker 1: is death early on investor's minds, and if that were
Speaker 1: to happen, I guess investors would completely flee China, right, yes, correct,
Speaker 1: So right now they are trying to figure out what
Speaker 1: to do because China is cheap and if there's a rebound,
Speaker 1: it could be a very very big one. Right. But
Speaker 1: on the other hand, if Taiwan conflict play us up
Speaker 1: a lot of investors, they will have no choice but
Speaker 1: to sof And then we have seen that with Russia exactly.
Speaker 1: And as you say, China may not want to close
Speaker 1: itself off, but some of that is not China's choice
Speaker 1: at this point. Obviously we're seeing a lot of export
Speaker 1: controls from the United States and so on that's also
Speaker 1: having an impact on China's choices. Yes, absolutely, that actually
Speaker 1: ends the investing China story as well. Is there anybody
Speaker 1: understanding committee that we should be aware of? I think
Speaker 1: Lee Chiang is interesting. He's already number two of the
Speaker 1: standing committee. He used to be shinking ship of stuff
Speaker 1: when she was party secretary at Georgian Province. He is
Speaker 1: currently Shanghai's party secretary and he's going to be the
Speaker 1: future premier. Another person that I think global investors don't
Speaker 1: look at it enough is one who Yan. He is
Speaker 1: basically the Stebandon of China. He he is basically president,
Speaker 1: she's strategist, and he is very left leaning. It's interesting
Speaker 1: to see what he's saying in public because he appears
Speaker 1: to influence. She's thought quite a bit. Give us a
Speaker 1: rundown of what we know about how he thinks. Well,
Speaker 1: he basically didn't like United States America and he is
Speaker 1: very eloquent. He was on debating as early as ninety
Speaker 1: nineties and actually he was very very talented. But that
Speaker 1: he's very very left leaning, and he thinks the US
Speaker 1: democracy is not working at all, and that the US
Speaker 1: is in decline and what will it mean for china
Speaker 1: domestic policies. It's interesting because now she is talking about,
Speaker 1: like her, China offering an alternative path to modernization. Perhaps
Speaker 1: she was being influenced by one winning thinking that US
Speaker 1: is in evitable decline and China has a past towards
Speaker 1: being the top global economy, so that perhaps gives drinking
Speaker 1: a lot of confidence. Shuley ran, there, don't forget. We're
Speaker 1: also available as a podcast on Apple, Spotify or your
Speaker 1: favorite podcast platform, and do get in touch. We love
Speaker 1: to hear from you. I'm at Vanni quent on Twitter
Speaker 1: or email vequin at Bloomberg dot net. People moved states
Speaker 1: mid and post pandemic for lots of reasons, but one
Speaker 1: reason people consider moving even in non pandemic times is
Speaker 1: obviously state income tax. But what evidence do we have
Speaker 1: that people move to say Florida or Texas primarily because
Speaker 1: those dates don't tax at the state level. Well, Bloomberg Opinions,
Speaker 1: Alexis Leander's has been looking at some data. We do
Speaker 1: have to figure it all out, So, Alexis, we all
Speaker 1: noticed when a hedge fund or a big investment firm
Speaker 1: moves Alliance Bernstein for example, moving to Nashville back into
Speaker 1: thousand eighteen, which is obviously nothing to do with pandemic.
Speaker 1: It was pre pandemic. Citadel announced this summer it's moving
Speaker 1: it's HQ to Miami from Chicago, which was a big deal.
Speaker 1: But what about individuals? Right? It feels like you can
Speaker 1: always find research supporting one side or the other. There
Speaker 1: was a recent report from the Tax Foundation that actually
Speaker 1: did provide some pretty compelling evidence that not only do
Speaker 1: just wealthy people move for tax reasons because they are
Speaker 1: The evidence seems to be a bit clearer. If you
Speaker 1: really pay a lot in taxes, then perhaps you are
Speaker 1: much more conscious of where you're living, and especially if
Speaker 1: you're retiring. But across the board, we are seeing that taxes,
Speaker 1: especially as of late, are driving people's decisions to relocate.
Speaker 1: What are the states that are accepting incoming A residents.
Speaker 1: The most popular states right now seem to be Florida, Texas,
Speaker 1: and Arizona. And that's true at all income levels. And
Speaker 1: I should say that the tax Foundation data is based
Speaker 1: on I R S data, So this is some of
Speaker 1: the most comprehensive data we're seeing. This covers, you know,
Speaker 1: hundreds of millions of taxpayers their returns, and it also
Speaker 1: includes their adjusted gross income. The tax Foundation, we know
Speaker 1: is right leaning. I guess it's fair to say, but
Speaker 1: this data steaks for itself, right And they looked at
Speaker 1: three different factors when they were trying to figure out
Speaker 1: is their correlation and the first thing they looked at
Speaker 1: is their top marginal tax rate. They're also looking at
Speaker 1: the struct sure of the tax code in that state.
Speaker 1: Is it considered, you know, very complex and difficult or
Speaker 1: is it more straightforward? And then they're also looking at
Speaker 1: the state and local tax collections per capita. What is
Speaker 1: the state's total tax coffer, the income tax they're collecting,
Speaker 1: the property tax they're collecting, the sales tax that they're collecting,
Speaker 1: divided by the population. So across all three of those boxes,
Speaker 1: it seems as though the states that score well in
Speaker 1: terms of being low tax having good tax structures, have
Speaker 1: low state and local tax collections per capita, those are
Speaker 1: the ones that seem to be attracting the most taxpayers.
Speaker 1: Aside from the Tax Foundation data, I looked at some
Speaker 1: of these other ways that other groups kind of assess
Speaker 1: the overall tax picture for each individual state. And when
Speaker 1: you look at a state like Texas, and I actually
Speaker 1: had a reader email me after reading my column to
Speaker 1: say that she had moved from New Jersey to Texas
Speaker 1: partially because of taxes. Texas obviously has no income tax,
Speaker 1: New Jersey has one of the higher rates in the nation.
Speaker 1: And she said, but with property taxes. She's really feeling
Speaker 1: as though it's not just like a win win on
Speaker 1: the tax front, right exactly. So you may not occlude
Speaker 1: all of the savings that you think you might accrue
Speaker 1: just because you're not paying the state tax. Right. And
Speaker 1: look at a place like Florida where, unfortunately after Hurricane Ian,
Speaker 1: now homeowners down there, especially if they move from New York,
Speaker 1: thinking they would save on taxes, but maybe they're paying
Speaker 1: more on things like insurance or you know, damages now
Speaker 1: from this hurricane. So it's it's really something to think
Speaker 1: about and not just be motivated by the tax picture. Now,
Speaker 1: have we seen states try to change their rate of
Speaker 1: income tax in hurry post pandemic. We actually are seeing
Speaker 1: lots of states do things, and most of them are
Speaker 1: cutting their income tax rates. They're either moving to perhaps
Speaker 1: just a flat tax. They're cutting their rates. Twelve or
Speaker 1: thirteen states have moved in the last year or two
Speaker 1: to change their rates, and it will be very interesting
Speaker 1: again to see for the states that don't make any
Speaker 1: kind of moves, will they see more people leaving? And
Speaker 1: for the states that do cut their rates, will they
Speaker 1: see more people coming there? And some of the tax
Speaker 1: Foundation data also looked at just because you have taxpayers leave,
Speaker 1: that doesn't always mean that the adjusted gross income goes
Speaker 1: up or down exactly. And I'm sure it's not always
Speaker 1: the case that states want an influx of people. They
Speaker 1: want an influx of rich people exactly right. And some
Speaker 1: of the Midwestern states, they saw that in the data
Speaker 1: that we were looking at, showing basically that while more
Speaker 1: taxpayers moved there, their a g I didn't necessarily go
Speaker 1: up because probably what was happening if those people were
Speaker 1: coming from high tax states, they were being paid more.
Speaker 1: When they moved to the Midwestern state, they may have
Speaker 1: been paid less, and as a result, there the a
Speaker 1: g I overall went down. And it's really corporations that
Speaker 1: they want to attract more so than probably individual residents,
Speaker 1: although I guess if you go to micro level, municipalities
Speaker 1: may want to attract residents or what have you. Well,
Speaker 1: I can understand that it might be easier for people
Speaker 1: to move to the next door state, right, So contiguous
Speaker 1: states can maybe buy with each other for different people.
Speaker 1: What are you noticing in terms of individual states and outliers.
Speaker 1: South Carolina is a really good example, So that was
Speaker 1: the state that was number five for attracting wealthy taxpayers,
Speaker 1: and I believe taxpayers overall, but it still imposes a
Speaker 1: graduate individual income tax rate that tops out at seven percent,
Speaker 1: which is relatively high. And on the flip side, Virginia
Speaker 1: lost a lot of high earners, but it has a
Speaker 1: relatively middle of the road run of the mill top
Speaker 1: marginal rate of five point seven. They were always going
Speaker 1: to be states for which, you know, the weather is,
Speaker 1: you know, a bigger attraction, or there are other things
Speaker 1: that are driving people to move there. I mean so
Speaker 1: many times obviously with moving it's based on a personal decision.
Speaker 1: And wonder what it could be from Miami. I guess
Speaker 1: we won't know until we see more of these studies
Speaker 1: come out, but you know, you have to wonder do
Speaker 1: people move and then sort of reverse their decision. It's
Speaker 1: not easy to move, especially if you have families, so
Speaker 1: it's obviously a major decision. But I guess you can
Speaker 1: undo it if you want to as well, and I'm
Speaker 1: sure that happens. It's such a great point. So because
Speaker 1: there was an extension for taxpayers to file their return
Speaker 1: in the midst of the pandemic, you didn't have to
Speaker 1: file in April you had until July. So you're seeing
Speaker 1: that these addresses capture some of the moves that happened
Speaker 1: early on in the pandemic up until July. But obviously
Speaker 1: so many people didn't move right away. So I think
Speaker 1: it will be really interesting to see what ORI Statis
Speaker 1: shows in the coming years. Number opinions. Alexis Leander's UK
Speaker 1: markets stabilized this week after Richie Soonak moved into Number
Speaker 1: ten Downing Street and appointed a cabinet. I will place
Speaker 1: economic stability and confidence at the heart of this government's agenda.
Speaker 1: This will mean difficult decisions to come. I spoke with
Speaker 1: Bloomberg Opinions Adrian Waldridge on what to expect. So Adrian
Speaker 1: the FT's opinion page is questioning so next competence and
Speaker 1: I wonder what you think about that he was Chancellor
Speaker 1: under Boris Johnson and maybe embraced policies he didn't particularly
Speaker 1: believe in. Does he do a you turn now and
Speaker 1: go back to things like small state policies for example.
Speaker 1: I think that the question is competence is very questionable.
Speaker 1: I think he's been extremely competent in every single job
Speaker 1: that he's done, and even when he was working for Boris,
Speaker 1: he may have overspent a little bit and he may
Speaker 1: have undertaxed a little bit. Actually, I mean there is
Speaker 1: a problem with the balancing of the books. That's more
Speaker 1: because Boris was edging him in or pushing him in
Speaker 1: that direction, and he ultimately resigned from his job Deciety
Speaker 1: because he disagreed with Boris on questions of spending. So
Speaker 1: I think he's a competent person, and he has a
Speaker 1: very competent person next door in number eleven as his
Speaker 1: chance with the form of Jeremy Hunt. So I think
Speaker 1: my presumption would be competent rather than incompetent. Well, are
Speaker 1: we looking at austerity for written now? Though? As a
Speaker 1: way of getting inflation under control? I think we're moving
Speaker 1: towards a position of austerity, not out of choice but
Speaker 1: out of necessity party because we have to get inflation
Speaker 1: under control, and partly because we have this enormous black
Speaker 1: hole at the heart of the economy which we need
Speaker 1: to deal with. So we have a period of writing
Speaker 1: taxes and squeezed expenditure which will produce a bit of austerity.
Speaker 1: But this is not elective austerity in the way that
Speaker 1: we had under David Cameron and Osborne when we could
Speaker 1: have had a more expansionary policy. I think it's absolutely
Speaker 1: necessary austerity because without it we will lose the comfort
Speaker 1: of the markets. You know. To restore the confidence of
Speaker 1: the markets, we have to try it very hard to
Speaker 1: live within our means. Well exactly now, so far, guilty
Speaker 1: heels are back at prey mini budget levels, the pounder
Speaker 1: is around. Is all calm or is the market just
Speaker 1: waiting to see what he unveils. I think the presumption
Speaker 1: is that the market will be pretty calm. I think
Speaker 1: they have a lot of confidence in Sunac, Jeremy Hunts
Speaker 1: and beneath that, I think they will tend to be
Speaker 1: confident rather than lacking in confidence. In the British economy.
Speaker 1: It took a lot to shape the markets, you know,
Speaker 1: in the British Coldom, we had Boris with his very
Speaker 1: chaotic leadership and people the markets basically accepted that. Then
Speaker 1: we had, you know, this extraordinary event with Liz Trust
Speaker 1: and quasi quating camiccasi budgets, and that did shape the markets.
Speaker 1: But I think they will be happy with this mixture.
Speaker 1: And it's not just the matter that he's pursuing broadly
Speaker 1: sensible economic policy. When it comes to taxing and spending.
Speaker 1: But he has a very calm, sensible, well organized manner
Speaker 1: down in the streets has not been you know, the
Speaker 1: half of British government has not been well run for
Speaker 1: a very long time. And you know, you now have
Speaker 1: somebody who fit to go on his record in their
Speaker 1: treasury runs things very well. You know, there won't be
Speaker 1: partying in in Downing Street as there was in the partment.
Speaker 1: He's you know, he's a techc he's a teetotaler. It
Speaker 1: would be a very sober atmosphere. The Sinek was a
Speaker 1: leave proponent. He's actually the first real believer given the
Speaker 1: trust was at a commeron and Johnson even too. What
Speaker 1: will his pro growth policies be? I think at the
Speaker 1: moment we won't be thinking about pro growth policies at
Speaker 1: the moment. The most important thing to do is to
Speaker 1: stabilize the economy, reassure the market, because without a stable economy,
Speaker 1: without stability, without a reassured set of markets, you can't
Speaker 1: have any growth whatsoever. Actually, what's interesting about all of
Speaker 1: this is that in the long term he is a
Speaker 1: person who believes in lower taxes and the states as
Speaker 1: a smaller share of GDP. You know, he has mentioned
Speaker 1: the figure of about of GDP as being about the
Speaker 1: right amount. His quarrel with this US was not about
Speaker 1: where they wanted to go, whether the growth was a
Speaker 1: good thing, whether shrinking the state was a necessary way
Speaker 1: or eating to hire growth in the long term. It
Speaker 1: was about timing, and it was about whether you can
Speaker 1: actually cut taxes and raised spending is exactly at the
Speaker 1: same time. So I think as we move towards an election,
Speaker 1: he will start cutting taxes again, which is always what
Speaker 1: he wanted to do as chance to a chance for
Speaker 1: his argument with Bolas agains about speed and paste and timing.
Speaker 1: Narianna Cartacola says also in Bloomberg Opinion that markets didn't
Speaker 1: always trust the Bank of England did, and that's in
Speaker 1: a way the case. Right there was a standoff between
Speaker 1: Quasi quarteng and Andrew Bailey. What will the relationship between
Speaker 1: SUNAC and Bailey be. We haven't heard from Bailey yet.
Speaker 1: Um I don't actually agree with that. I mean I
Speaker 1: I do think that this sudden financial event, sudden budget
Speaker 1: which basically said let's spend more money on energy and
Speaker 1: cut the top rate of taxes and lots of other
Speaker 1: taxes did suddenly send a shock and it was the
Speaker 1: conver nation of the government saying let's putting the foot
Speaker 1: on the accelerator and the Bank of England putting the
Speaker 1: foot on the brake. It was this stop me starting
Speaker 1: sort of thing that really messed things up. I think
Speaker 1: that the relationship between the Treasury and the Bank of
Speaker 1: England will be good. I think, but soon. Act knows Bailey,
Speaker 1: he worked with him, you know, closely when he was
Speaker 1: at the Treasury, and he is a technocrat. He's a
Speaker 1: person who loves the language of economics, the language of
Speaker 1: macro financial management, in the long term economic policy. He
Speaker 1: loves talking about all of that. But as Bailey does,
Speaker 1: so they're both professionals, they're both technocrats, and they're both
Speaker 1: not political German. So I think that we have we
Speaker 1: established I hate the fans are optimistic, but we have
Speaker 1: re established sensible people at the heart of the British
Speaker 1: government that we have. As he said that we have
Speaker 1: got lots of problems ahead, but I don't see the
Speaker 1: Bank of England and the Treasury moving in in in
Speaker 1: different directions. It will be difficult as ahead, but there
Speaker 1: won't be chaos of the heart of government. Well, in
Speaker 1: terms of who soon like appointed and fired, it was
Speaker 1: a little bit of a purge. You got rid of
Speaker 1: anyone who wasn't a supporter all along and appointed or
Speaker 1: reappointed supporters, for example, Suella Braverman. Now slightly off topic
Speaker 1: to markets, but how should we think about the fact
Speaker 1: that he reappointed someone accused of a security breach which
Speaker 1: had called her to resign. Well, I you know, I
Speaker 1: was very disappointed by the appointment of Braveman, partly because
Speaker 1: of the security breach, partly because I don't think she's
Speaker 1: a very distinguished or successful government figure. I don't think
Speaker 1: it's got a very good career. I think a lot
Speaker 1: of her rhetoric is is rather appalling. Also, you know,
Speaker 1: she's been making a huge amount of the frog about
Speaker 1: Indians overstaying their visas, which has enormously annoyed the Indian
Speaker 1: government because it seems a very she's she's tingling them
Speaker 1: the house. And a's a time when Anglo Indian relations
Speaker 1: to net as the first Hindu prime minister in the
Speaker 1: origin prime minister retor, it couldn't be better. It seemed unnecessary.
Speaker 1: So it wasn't as though she's share a towering talent
Speaker 1: or towering figure within the party that he had to
Speaker 1: appoint hers. So you know, I don't know what deal
Speaker 1: was concocted between the two of them. It maybe the price,
Speaker 1: but he had to pay for the right of the
Speaker 1: party that Brexit right is the party being queercent or acquiescing,
Speaker 1: but it's it's it's not the best start. He's got
Speaker 1: rid of people who need to be got rid of,
Speaker 1: either because they're weird or because they're not all that good.
Speaker 1: Chloe Smith and it was all that good she's been
Speaker 1: got rid of. I think be Small was eccentric and toxifying.
Speaker 1: He's got rid of. I think all of that is good.
Speaker 1: It's not the perfect administration. That it's better than it was.
Speaker 1: Well the segue from there, Michael Gove, Secretary of Stage
Speaker 1: for leveling up Housing and communities, I mean, which community
Speaker 1: is a rich Ta has a different, slightly different set
Speaker 1: of beliefs about leveling up from his predecessor. He thinks that,
Speaker 1: you know, the North of England is a sort of
Speaker 1: a nascent patch right country, that what it needs is
Speaker 1: not an enormous amount of money being spent on it,
Speaker 1: but a removal of some of the restrictions to economic growth.
Speaker 1: He's always said that the North of England has coming
Speaker 1: to Patrism a bit late, but it's coming to Tachrism.
Speaker 1: It was really people who would have voted for Mrs
Speaker 1: Sacher in the who came to Tachrism more recently because
Speaker 1: of a legacy of cultural dislike for the Conservative Party.
Speaker 1: So he I think he won't be as much leveling
Speaker 1: up about spending. He'd be more leveling up about creating
Speaker 1: enterprise and encouraging enterprise and encouraging entrepreneurial classes in the
Speaker 1: North of England. But I think that that is a
Speaker 1: policy which leveling up, as Boris Johnson conceived of it
Speaker 1: was a policy that required a lot of public spending
Speaker 1: and we just don't have that much public money to
Speaker 1: spend at the moment. Well, that's the other thing. He
Speaker 1: doesn't have a war test. So for how long do
Speaker 1: you think Adrian is the UK now politically stable? Is
Speaker 1: just more than two years enough time for Sunach assuming
Speaker 1: he stays to engineer a popular Conservative party again, um,
Speaker 1: there are two different questions there. Whether we have um stability.
Speaker 1: I think that um, I think that we have a
Speaker 1: stable person in charge, whereas we've we've had unstable people
Speaker 1: in charge. We have somebody who has supporters right across
Speaker 1: the party, on the left and the right party, which
Speaker 1: we didn't have before. We have something who was actually
Speaker 1: a prexiteer, you know, he as you said, he's supported
Speaker 1: Brexit long before his trust came around to the idea.
Speaker 1: So I and we do have a general election coming up,
Speaker 1: so I think that you know, he is well positioned
Speaker 1: to stabilize the Conservative Party. Whether that's enough to get
Speaker 1: rid of the memories of the absolute absurdities of you know,
Speaker 1: the Tory Party destroyed its reputation for economic competence. It
Speaker 1: looked like, you know, it was turning the country into
Speaker 1: a complete laughing stock. Um and you know it's been
Speaker 1: changing its leaders without having a general election. So I
Speaker 1: think all of that, I would presume that we'll have
Speaker 1: a Labor party, you know, a labor government next time,
Speaker 1: even if he can stay babilize things. I mean, the
Speaker 1: other question is who will emerge as the anti Sunak
Speaker 1: Conservative leader in parliament, mingled Boris Johnson or Liz trus
Speaker 1: or any of the previous leaders play a significant roles
Speaker 1: from here. That's a very good question, But I think
Speaker 1: that people are really sick of these um people, you know, grandstanding.
Speaker 1: They recognized that the country is in direstration that needs
Speaker 1: a period of stability, and a lot of Tory MPs
Speaker 1: realize that if you've got some rebellious faction and that
Speaker 1: rebellious faction shakes the government tries to bring it down,
Speaker 1: it might mean that the party is completely wiped out
Speaker 1: in the next election. So even if it's just a
Speaker 1: case of limiting the losses of the Conservative parts in
Speaker 1: the next election, I think that's a powerful way in
Speaker 1: which MPs will be disciplined and will discipline each other.
Speaker 1: So I don't think anybody would be very popular if
Speaker 1: they decide to cause yet more trouble over the next
Speaker 1: two years, although it must be said that the Conservative
Speaker 1: Party's appetite trouble has been quite extraordinary. We're gonna nian's
Speaker 1: Adrian Wooldridge there that doesn't for this week's opinion. Do
Speaker 1: get in touch though. We love to hear your comments
Speaker 1: and opinions. I'm at Bonney Quinn on Twitter or email
Speaker 1: v Quinn at Bloomberg dot net. We're produced by Eric
Speaker 1: mollow Till next time on Bloomberg Opinion