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Speaker 1: Good morning. It's Monday, the second of October in London.

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Speaker 1: This is the Bloomberg Daybreak Europe podcast. I'm Stephen Carroll.

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Speaker 1: Coming up today, the Chancellor prepares to offer a wage

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Speaker 1: boost to the lowest paid, as has party colleagues call

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Speaker 1: for tax cuts.

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Speaker 2: And I'm Caroline Hepget on location at the Conservative conference

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Speaker 2: in Manchester where the party is outlining its pitch to voters.

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Speaker 2: But is anyone listening?

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Speaker 1: And elsewhere in the news, a stream of cash new

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Speaker 1: investment plans mean water bills in England will rise by

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Speaker 1: thirty five percent by the end of the decade. Let's

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Speaker 1: start with a roundup of our top stories. The UK

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Speaker 1: Chancellor is to use his speech to the Conservative Party

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Speaker 1: conference to announce plans to raise wages for the country's

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Speaker 1: lowest paid workers. Jeremy Hunt will today say he's increasing

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Speaker 1: the national living wage by around six percent to at

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Speaker 1: least eleven pounds an hour. The increase comes amid growing

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Speaker 1: discontent within the Conservatives over Britain's record tax burden, but

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Speaker 1: the Prime Minister she soon told the BBC that changing

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Speaker 1: that isn't his top priority.

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Speaker 3: I'm a Conservative, of course, I want to cut taxes

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Speaker 3: The best tax cut that I can deliver for the

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Speaker 3: British people right now is to have inflation. Inflation is

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Speaker 3: a tax. It's a tax that impacts the poorest people

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Speaker 3: the most.

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Speaker 1: Consumer price inflation currently stands at six point seven percent

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Speaker 1: in the UK, where Schismac has pledged to get up

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Speaker 1: below five percent by the end of the year. But

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Speaker 1: not everyone is entirely on side with that view. On taxes,

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Speaker 1: The Secretary of State for Leveling Up, Michael Gove, says

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Speaker 1: he wants to see cuts soon. Here's what he had

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Speaker 1: to say when pushed on the issue.

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Speaker 4: The discussion about where the tax burden should fall, I

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Speaker 4: think is one that we need to take not now

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Speaker 4: but in a little bit of time. Should there be

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Speaker 4: a reduction in the tax burden on individuals before the

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Speaker 4: next election? Are we talking the next year? Are we

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Speaker 4: talking three years? Are we talking five years? Yes? I

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Speaker 4: would like to see the tax burdon reduced before the

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Speaker 4: next election.

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Speaker 1: Those comments from Michael Gove come as the Prime Minister's predecessor,

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Speaker 1: Liz Truss, also gets set up to make an intervention

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Speaker 1: on the issue later today. She's expected to call for

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Speaker 1: cuts to corporation tax, something she's previously targeted during the

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Speaker 1: ill fated mini budget. In the United States, the government

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Speaker 1: has avoided a shutdown. A stop gap spending bill passed

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Speaker 1: by Congress over the weekend will keep government open until

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Speaker 1: the seventeenth of November, but it doesn't include more funding

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Speaker 1: for Ukraine. President Biden's budget director Shalanda Jung says she's

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Speaker 1: sure it will be passed later.

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Speaker 5: Those votes are there, we know there's a willing coalition,

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Speaker 5: and I certainly expect members in the speaker to keep

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Speaker 5: their commitment not to us, but the Ukrainian people.

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Speaker 3: We told we would be there.

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Speaker 1: That's slanda young. The deal also gives financial markets some

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Speaker 1: breathing room. Some analysts had warned that an extended closure

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Speaker 1: of federal agencies would spur fresh gyrations in the treasury

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Speaker 1: curve and hit stocks that rely on government spending. Household

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Speaker 1: water bills in the UK are set to rise by

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Speaker 1: an average of thirty five percent by TIX twenty thirty.

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Speaker 1: That says water companies plan to ramp up investment to

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Speaker 1: ninety six billion pounds in the five years two twenty

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Speaker 1: thirty for a series of projects, including new reservoirs and

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Speaker 1: fixing leaks. Industry. Body Water UK says the investment program

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Speaker 1: would double current levels and will be the largest ever

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Speaker 1: in the sector. The CEO of Microsoft will testify today

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Speaker 1: in a major case against one of the tech giant's

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Speaker 1: biggest rivals. The US government is seeking to prove that

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Speaker 1: Google engaged in anti competitive tactics to maintain its market dominance.

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Speaker 1: More from Bloomberg's Doug Krisner.

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Speaker 5: The DOJ has accused Google of paying ten billion dollars

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Speaker 5: a year to rivals, as well as smartphone manufacturers and

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Speaker 5: wireless carriers to make Google Search the default option. Prosecutors

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Speaker 5: hope to use the testimony of Microsoft CEO Satnya and

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Speaker 5: Ladella to show how his company couldn't unlock Google's hold

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Speaker 5: on the search market. Last week, a Microsoft executive said

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Speaker 5: the company failed to secure a deal to put its

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Speaker 5: bing search app on Apple's products, even though Microsoft was

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Speaker 5: willing to offer far better terms. Nadella was personally involved

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Speaker 5: and spoke with Google CEO Sundor Pachai. Nadella will probably

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Speaker 5: be asked about those conversations in New York Time. Doug Prisoner,

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Speaker 5: Bloomberg Radio.

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Speaker 1: New research suggests that almost three quarters of British businesses

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Speaker 1: have reduced the amount they spend on offices. A survey

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Speaker 1: more than five hundred buses by the real estate firm

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Speaker 1: IWG also found that only one in five UK companies

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Speaker 1: have not reconfigured their working space to suit hybrid working.

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Speaker 1: High rise financial districts have been hit by the turmoil

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Speaker 1: sweeping office markets around the world, and with the interest

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Speaker 1: rates soaring and valuations plunging, the pain is set to

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Speaker 1: intensify for many. According to Bloomberg's latest Markets Live Pulse survey,

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Speaker 1: office prices in the US are due for a crash

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Speaker 1: and the commercial real estate market faces at least another

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Speaker 1: nine months of declines. And the billionaire Bill Ackman is

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Speaker 1: said to be interested in pursuing a deal with Elon

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Speaker 1: Musk's ex Corporation as part of a new investment vehicle.

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Speaker 1: Ackman's and investment fun Pershing Square his regulatory approval for

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Speaker 1: a new vehicle that targets private companies seeking to raise

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Speaker 1: one and a half billion dollars or more. Akman told

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Speaker 1: The Wall Street Journal that X is absolutely one of

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Speaker 1: the options that he's considering. So those are our top

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Speaker 1: stories this morning. The focus this week though at politics

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Speaker 1: in the UK, with the Conservative Party's annual gathering underway

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Speaker 1: in Manchester, Rishi Sinac's first conference as Prime Minister and

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Speaker 1: perhaps his last before the next UK general election, at

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Speaker 1: a time when the Tories are trailing Labor on average

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Speaker 1: by eighteen points in the opinion polls. Carlin Hepker's out

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Speaker 1: the Tory Party conference for us this morning, Carol, and

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Speaker 1: good morning to you.

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Speaker 2: Good morning now, this is of.

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Speaker 1: Course a big test for Rishisunak Our opinion columnist Adrian

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Speaker 1: Woodridge reporting this morning that we'll get the real Rishi

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Speaker 1: at conference. What should we be expecting?

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Speaker 2: Well, I think if last year in Birmingham felt chaotic

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Speaker 2: under the short lived Liz Trust administration, this year feels

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Speaker 2: really fraught. Rishi Suna is hoping to unite his party,

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Speaker 2: get them ready to fight the general election, perhaps in

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Speaker 2: October next year. But amid a very difficult economic backdrop,

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Speaker 2: Sunac has shifted gear. He's sounding a bit more combative.

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Speaker 2: He's talked about being the change candidate despite thirteen years

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Speaker 2: of Conservative rule. But ill discipline Stephen really does seem

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Speaker 2: to be creeping in MPs, even ministers pursuing their own agendas.

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Speaker 2: Yesterday was dominated by a battle a discussion it would

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Speaker 2: seem over who potentially would replace Richie Sunac if he

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Speaker 2: loses the next general election. I'm thinking Home Secretary Sweller Bravaman,

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Speaker 2: Business and Trade Secretary Kemy Badenock. And then also, of

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Speaker 2: course the maths looks very daunting given that Labor has

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Speaker 2: largely enjoyed a double digit lead over the Conservatives for

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Speaker 2: some time now. So it's about picking policies, trying to

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Speaker 2: unite MPs and Conservative activists who are all here in

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Speaker 2: Manchester so that they have impact within the next year,

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Speaker 2: to convince voters to give the party another go.

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Speaker 1: Current on policies, then, I mean, how easy will it

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Speaker 1: be to create unerity around these issues? What are the

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Speaker 1: key issues that we need to be watching out for

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Speaker 1: the discussions over look.

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Speaker 2: I think today is going to be all about Chancellor

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Speaker 2: Jeremy Hunt and his speech. I think the pledge to

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Speaker 2: raise wages for the lowest paid workers are you to

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Speaker 2: raise them in and wage is going to be a

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Speaker 2: big one today, up from ten pounds forty two to

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Speaker 2: eleven pounds, that's the expectation. But also returning to some

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Speaker 2: conservative rhetoric cracking down on welfare claimants, the government does

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Speaker 2: want to boost the number of people working by a million,

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Speaker 2: so I think taxes and benefits are going to be

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Speaker 2: front and center. Hunters said in the past that it

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Speaker 2: would be virtually impossible to cut taxes until the UK

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Speaker 2: economy improves, and yesterday withhisunak, the Prime Minister talked a

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Speaker 2: lot about inflation being the main goal, bringing inflation down,

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Speaker 2: that that in and of itself is effectively a tax

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Speaker 2: on people. And yet at the same time time you

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Speaker 2: have very vocal MPs, including Liz Truss, the former Prime Minister,

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Speaker 2: who is also here in Manchester. She's going to be

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Speaker 2: speaking at the Growth Rally event alongside other former ministers.

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Speaker 2: That's that help us twelve today. She is pushing for

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Speaker 2: tax cuts ahead of the next general election and that

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Speaker 2: is a big, a big focus for MPs and for

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Speaker 2: Conservatives who are worried that with the highest tax level

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Speaker 2: since World War Two, the Conservatives you know, are going

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Speaker 2: to lose votes on that issue alone.

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Speaker 1: Yeah, I mean, it's it's almost seeing Conservatives returning to

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Speaker 1: type that we have the focus again back on tax cuts.

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Speaker 1: So lots of interesting moves behind the scenes. We heard

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Speaker 1: from Michael Gove there a few moments ago and as

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Speaker 1: you say, Liz, trust someone that we're looking forward to

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Speaker 1: hearing from later as well. What's the atmosphere though, like

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Speaker 1: at this conference current it feels like a world apart

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Speaker 1: compared to where we were a year ago.

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Speaker 2: Yeah, look, we're here at six in the morning. I

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Speaker 2: can't say that the hall is full yet, but we

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Speaker 2: were here yesterday surely not.

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Speaker 1: Bad early to get their first coffee in.

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Speaker 2: Well, there are quite a few TV crews around us,

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Speaker 2: so yes, there are journalists here, but others are not here.

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Speaker 2: We were milling around yesterday. We did certainly bump into

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Speaker 2: some ministers. I think that there is not much excitement.

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Speaker 2: That is mainly what I took away. I think that

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Speaker 2: the feeling is a little bit cagy. Forty six or

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Speaker 2: forty seven Tory MPs are not going to be here,

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Speaker 2: you know. And again, quite bizarrely, the focus yesterday on

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Speaker 2: perhaps who would take over if the Conservatives did not win.

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Speaker 2: It seemed to be a lot of positioning certainly for that,

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Speaker 2: even if it wasn't said outrightly. So I think it's

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Speaker 2: a very difficult moment. Having said that, the economy is brightening,

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Speaker 2: there is some good news for the Prime Minister in

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Speaker 2: the sense that we've had better GDP growth in the

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Speaker 2: second quarter, falling inflation, business investment is going up, so

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Speaker 2: there are some good things that the Conservatives can point to,

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Speaker 2: and of course thats always in politics. Year between this

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Speaker 2: event and potentially the next general election, it's a long time.

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Speaker 1: Yeah, It certainly isn't if we think of where we

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Speaker 1: were last year and where we could be a year

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Speaker 1: from now. This has a certainly an extremely interesting time

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Speaker 1: in British politics and great to have you there in

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Speaker 1: Manchester at the Conservative Party conference this morning, and with

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Speaker 1: plenty more to come in our coverage of that event

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Speaker 1: as well on Bloomberg, Caroline for now, thank you very much.

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Speaker 1: This interesting to reflect on where we are with the

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Speaker 1: British economy. A story on the Bloomberg terminal this morning

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Speaker 1: is that London stock market is in the cusp of

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Speaker 1: becoming the biggest in Europe again. This was something, of course,

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Speaker 1: we talked about an awful lot of the time when

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Speaker 1: Paris overtook London party thanks to a rally in luxury

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Speaker 1: shares as well, and what we're watching now is because

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Speaker 1: of the resurgence, particularly in energy shares, helped by higher

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Speaker 1: oil prices, of course, we are seeing a bit of

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Speaker 1: a reversal on that trend, London stock market getting inching

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Speaker 1: closer to that level that France. Is that if we

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Speaker 1: look at the dollar based market capitalization, two point nine

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Speaker 1: trillion dollars for the London market versus two point nine

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Speaker 1: to three for the French market. So that is something

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Speaker 1: that we'll be watching closer to the time as well.

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Speaker 2: Well.

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Speaker 1: Let's turn to talk from UK politics to US politics. Next,

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Speaker 1: President Joe Biden urging House Speaker Kevin McCarthy to ensure

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Speaker 1: additional aid money for Ukraine. That's after the stop gap

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Speaker 1: bill passed over the weekend avoided a government shutdown but

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Speaker 1: didn't include extra money. For Keive Bloomberg Stark Worldbank has

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Speaker 1: been following the story for US and joins US now Derek. First,

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Speaker 1: of all, the shutdown has been avoided, but at what

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Speaker 1: political cost are we talking about?

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Speaker 6: Well, the simple math for Kevin McCarthy, the House Speaker

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Speaker 6: through this entire exercise has been that he has had

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Speaker 6: the votes to be able to move forward on a

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Speaker 6: bipartisan government funding bill at roughly existing levels, but that

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Speaker 6: doing so could cost him a chan said, his keeping

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Speaker 6: his job. Eventually after exhausting all other opportunities, McCarthy took

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Speaker 6: that so he put through a stopgap spending bill for

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Speaker 6: a month and a half. It did pass with a

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Speaker 6: healthy bipartisan measure you backing. But here we sit walking

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Speaker 6: into Monday morning, and Matt Gates, who bills himself as

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Speaker 6: the trumpiest member of Congress, is talking about putting a

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Speaker 6: motion to vacate on the floor this week to have

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Speaker 6: the whole House decide whether or not Kevin McCarthy should

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Speaker 6: still be the Speaker of the House. If Gates can

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Speaker 6: pull a significant number of his colleagues, and he really

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Speaker 6: only needs somewhere in the neighborhood of about like five

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Speaker 6: to ten of them to go do it, then McCarthy

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Speaker 6: would have to rely on Democrats to save his job

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Speaker 6: in some form, either voting for him or voting present,

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Speaker 6: and that might extract a cast. Democrats might have a

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Speaker 6: cost to do that, because they have so far been

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Speaker 6: very gleefully running against the House and its dysfunctions, and

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Speaker 6: the cost of buying into saving McCarthy's hide here could

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Speaker 6: be substantial for the speaker.

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Speaker 1: So that's one of the political ramifications to watch as well.

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Speaker 1: This funding bill that was passed, though only goes until

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Speaker 1: the seventeenth of November. Does that set us up for

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Speaker 1: another cliff edge moment?

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Speaker 6: Well, it does. I mean, you know, that's the fun

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Speaker 6: thing with Washington. If you got bored of the last

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Speaker 6: cliff just wait a minute, there'll be another one coming up.

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Speaker 6: But this one here, I think is actually going to

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Speaker 6: be a little bit different for investors. And the reason

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Speaker 6: that I think that it's going to be different for

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Speaker 6: investors is because you have a baseline scenario question right

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Speaker 6: going into this one, all of the talk was ninety

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Speaker 6: nine percent shut down odds or higher. No one was

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Speaker 6: really thinking. I mean, I know I said on air

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Speaker 6: that there was a chance if McCarthy did this, but

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Speaker 6: I think the preponderant view was that he wouldn't. Now

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Speaker 6: you've got an example in this Congress of McCarthy taking

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Speaker 6: the way out. So what I think is probably gonna

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Speaker 6: happen is you're gonna have a lot of investors adjusting

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Speaker 6: their baseline scenario back to the idea of this will

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Speaker 6: probably work out somewhere. Let's go with that until proven wrong,

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Speaker 6: rather than where we were, which is this is probably

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Speaker 6: not going to work. Let's just sort of assume it

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Speaker 6: won't work, and we'll all be happily surprised if it does.

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Speaker 6: That's a different baseline scenario. It shows up in different

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Speaker 6: ways in terms of dollar, in terms of treasury, in

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Speaker 6: terms of equity, outlooks, all this sort of thing. And candidly,

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Speaker 6: you know, we had been sitting there staring all around

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Speaker 6: the world at a whole bunch of negative headlines. It

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Speaker 6: was nice to get a positive red out there somewhere, right.

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Speaker 6: It's nice to start the week out with a positive

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Speaker 6: sounding red headline on your terminal. There's something to that idea.

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Speaker 1: Yeah, briefly though, the issue of Ukraine now, you know,

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Speaker 1: part of where the conversation is going there. How much

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Speaker 1: support is there in Congress to extend more a to Ukraine.

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Speaker 6: Tons, There's tons of support to do something for Ukraine.

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Speaker 6: The problem is right now is that it's become more

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Speaker 6: of an issue on the right, especially about funding Ukraine.

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Speaker 6: There are some people who are agitators in the conservative

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Speaker 6: media ecosystem who have raised a lot of skepticism. Donald

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Speaker 6: Trump is raising, you know, some amount of He's not

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Speaker 6: the most enthusiastic backer of a lot of different things,

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Speaker 6: and so there's this sort of rising restiveness on the right.

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Speaker 6: The way that this gets done is going to be interesting.

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Speaker 6: There's some thought that having one big vote is going

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Speaker 6: to be preferable to having a bunch of smaller votes,

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Speaker 6: which had been kind of the idea before.

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