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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Day BAQ podcast. Good morning, It's Monday,

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Speaker 2: the first of December. I'm Caroline Hepcitt in London.

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Speaker 3: And I'm Stephen Caroline Brussels. Coming up today, the UK's

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Speaker 3: Chancellor Rachel Reeves is forced to deny she was dishonest

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Speaker 3: with the public about the state of the government finances

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Speaker 3: ahead of last week's budget.

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Speaker 2: US and Ukrainian negotiators talk up productive discussions on ending

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Speaker 2: the war with Russia.

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Speaker 3: Plus holding on to peak net worth in the Alps.

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Speaker 3: Switzerland votes to reject a fifty percent inheritance tax on

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Speaker 3: the super rich.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 3: The UK's Chancellor, Rachel Reeves is facing calls to resign

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Speaker 3: following accusations she misled the public about the state of

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Speaker 3: the country's public finances ahead of her budget. The controversy

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Speaker 3: erupted after the head of Economic analysis of the Office

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Speaker 3: for Budget Responsibility told Bloomberg Radio that the underlying forecasts

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Speaker 3: presented to the Chancellor had not changed after she raised

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Speaker 3: the prospect of an income tax hike in a highly

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Speaker 3: unusual pre budget speech and interview. Following that revelation, the

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Speaker 3: OBR on Friday released the forecast that had provided to

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Speaker 3: the Chancellor and the lead up to the budget, showing

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Speaker 3: that she already knew she was on course to meet

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Speaker 3: her fiscal rules at the time of the speech. Yesterday'

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Speaker 3: skuynese as Trevor Phillips asked Reeves whether Conservative leader Kemmi

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Speaker 3: Badenock's accusation that she lied to the public head of

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Speaker 3: the budget to justify increasing taxes to fund welfare spending

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Speaker 3: was accurate.

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Speaker 4: Look, I'm a labor chancellor. I want to reduce child poverty.

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Speaker 4: I might no apologies for that. This will be the

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Speaker 4: biggest ever reduction in child poverty in a parliament ever,

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Speaker 4: and I'm proud to be the chancellor that lifts half

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Speaker 4: a million kids out of poverty. That means kids not

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Speaker 4: going to bed hungry. It means kids not waking up

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Speaker 4: in cold and damp homes. I am proud and I'm

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Speaker 4: very happy.

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Speaker 5: In the timeline, I just asked you, did you lie?

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Speaker 5: And I have to say the antage looking for was known.

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Speaker 5: I didn't hear the word no.

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Speaker 4: You also asked about welfare In that.

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Speaker 5: No, I just asked you, did you lie. Of course,

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Speaker 5: I didn't Reeves are speaking is.

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Speaker 3: Initial polling from Yugo of showed that only twenty one

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Speaker 3: percent of the British public see her budget as fair.

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Speaker 2: The fallout from the budget comes as the Prime Minister

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Speaker 2: Kiss Starmer is signaling a renewed push to curb welfare

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Speaker 2: spending in the UK in exerts release the head of

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Speaker 2: a speech that he'll deliver later today. Starmer is expected

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Speaker 2: to pledge to cut Briton's rising benefits bill, which climbed

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Speaker 2: further in the budget after the decision to lift the

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Speaker 2: two child benefits cap. The party is now scrambling to

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Speaker 2: blunt criticism that the budget increase welfare spending whilst raising

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Speaker 2: taxes on working people. Meanwhile, the Office for Budget Responsibility

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Speaker 2: says that total welfare spending is forecast to reach three

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Speaker 2: hundred and thirty to eat billion pounds this year and

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Speaker 2: rise to four hundred and six billion by twenty thirty.

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Speaker 3: US and Ukrainian negotiators say they had productive discussions about

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Speaker 3: a framework for a peace deal with Russia, but there

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Speaker 3: was no final breakthrough. As President Donald Trump continues to

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Speaker 3: push for a end to the war, US Secretary of

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Speaker 3: State Marko Rubio spoke to reporters in Florida after the talks.

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Speaker 5: So this is not just about ending a war.

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Speaker 1: This is about ending a war in a way that

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Speaker 1: creates a mechanism and a way forward that will allow

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Speaker 1: them to be independent and sovereign, never have another war again,

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Speaker 1: and create tremendous prosperity for its people, not just rebuild

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Speaker 1: the country, but to enter an era of extraordinary economic progress.

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Speaker 1: It's a country with Ukraine has tremendous economic potential. Ukraine

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Speaker 1: has tremendous opportunity for true prosperity.

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Speaker 3: Marco Rubia was speaking ahead of a trip to Moscow

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Speaker 3: by US Envoy Steve Whitcoff this week for further discussions

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Speaker 3: with Russia. It comes as the US is reducing its

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Speaker 3: military presence in Europe, asking other NATO countries to step

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Speaker 3: up for the continent's defense.

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Speaker 2: Now, President Trump says that he has made his choice

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Speaker 2: for the next chair of the Federal Reserve. Without giving

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Speaker 2: a name or a timeline, Trump told reporters on Air

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Speaker 2: Force one that he will be making an announcement. Whitehouse

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Speaker 2: Economic Council Director Kevin Hassard is seen as the likely

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Speaker 2: choice to succeed current FED chair Jerown Powell. Speaking to

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Speaker 2: CBS over the weekend, has It declined to address whether

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Speaker 2: he was the front runner, but said that markets are

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Speaker 2: ready for the President's decision.

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Speaker 6: We had a great treasury auction, interest rates went down,

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Speaker 6: and so I think that the American people could expect

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Speaker 6: President Trump to pick somebody who's going to help them

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Speaker 6: have cheaper car loans and easier access to mortgages at

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Speaker 6: lower rates. And that's what we saw in the market response.

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Speaker 2: White House Economic Council Director Kevin Hassett. There, President Trump

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Speaker 2: has criticized your own Powell repeatedly and made clear that

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Speaker 2: he expects his nominee to forcefully pursue interest rate cuts.

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Speaker 3: Switzerland voted to reject a fifty percent inheritance tax on

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Speaker 3: super rich residents after wealthy entrepreneurs threatened to leave the country.

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Speaker 3: Official figures show more than three quarters of the electorate

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Speaker 3: opposed the measure. Bloomberg's freddie Fulston has more.

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Speaker 7: Switzerland's Young Socialists had proposed the levee as a way

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Speaker 7: of raising funds to fight climate change. The plan had

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Speaker 7: been to tax all inherited or gifted assets exceeding fifty

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Speaker 7: million francs, but it faced staunch opposition over the weekend,

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Speaker 7: critics arguing the departure of the wealthy would offset any

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Speaker 7: tax gains and leave the country worse off. For now,

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Speaker 7: at least, the vote has eased any concerns about switzerland

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Speaker 7: status as a haven for the global rich. In London,

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Speaker 7: Freddie Fulston, Bloomberg Radio.

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Speaker 2: Those are our top stories for you this morning. Looking

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Speaker 2: at the markets, it looks like a difficult start to December.

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Speaker 2: S and P five hundred EVENI futures are currently down

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Speaker 2: by seven tenths of one percent. Eurostox futures are also

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Speaker 2: down three tenths, the Nikket two to five declining almost

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Speaker 2: two percent in a sell off in Japan. TENNY. US

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Speaker 2: treasury yields up three basis points of four spot zero four.

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Speaker 2: We are expecting important data out this week for the US,

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Speaker 2: including inflation and consumer demand, so that's likely to shape

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Speaker 2: the expectations for the rate cutting cycle from the Fed.

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Speaker 2: The dollar is a bit firmer. The pound is down

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Speaker 2: a tenth of one percent. Gold is also lower, and

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Speaker 2: bitcoin taking another hit this Monday morning, trading just above

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Speaker 2: eighty six thousand dollars, dropping five and a half percent.

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Speaker 2: Those are the markets.

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Speaker 3: In a moment, we'll bring you more in how our

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Speaker 3: interview with the UK's Office for Budget Responsibility has sparked

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Speaker 3: a political storm. Plus we'll have the latest on the

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Speaker 3: Ukraine peace talks. Another story I've been reading this morning.

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Speaker 3: In case, on this Monday morning you're tempted to pull

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Speaker 3: the covers over the head and ignore everything that might

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Speaker 3: be happening in the outside world, You're not alone. There's

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Speaker 3: a theory it's the ostroge effect. We're all ignoring more things,

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Speaker 3: and in particular the news. That's something that Alex Stone

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Speaker 3: has been writing about on Bloomberg Weekend. I mean, this

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Speaker 3: is a conversation I'm hearing more and more of people

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Speaker 3: saying they love saying it to journalists.

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Speaker 5: Obviously I don't read the news anymore.

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Speaker 3: Great, but it's something that's, you know, a broader psychological effect.

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Speaker 3: And actually Alex has been digging some of the research

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Speaker 3: by psychologists around this as well, and how because of

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Speaker 3: people having problems essentially being exhausted by the endless flood

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Speaker 3: of headlines, that this is selective ignorance as essential as

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Speaker 3: critical thinking.

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Speaker 2: Maybe, well, I think it's just surprising that apparently four

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Speaker 2: out of ten people are not really tuned into the news,

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Speaker 2: according to this Reuter's survey. Apparently, yes, I do hear

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Speaker 2: that also from you know, friends and acquaintances. You'll say,

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Speaker 2: you know, I don't listen to the news, and I

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Speaker 2: never know what to do, Steven. I never know whether

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Speaker 2: to try to convince them that they should be and

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Speaker 2: that there's a reason to be well informed or not.

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Speaker 5: Well.

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Speaker 3: Look, it's I think the point that Alex kind of

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Speaker 3: comes to at the end of this as well is

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Speaker 3: that it's about picking what you choose to engage with,

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Speaker 3: and we hope you'll continue listening to us as well.

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Speaker 5: But something to think about as well.

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Speaker 3: This is perhaps one of the reasons that older people

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Speaker 3: are often happier, because despite having perhaps a greater exposure

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Speaker 3: to bad news, people are simply more selective about what

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Speaker 3: they've taken, right.

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Speaker 2: I think that's sort of great story. We're going to

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Speaker 2: put a link to it in our show notes. But

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Speaker 2: if you were listening last week you might have heard

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Speaker 2: our interview with David Miles of the Office for Budget

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Speaker 2: Responsibility after the UK budget on Thursday. There was one

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Speaker 2: key question in that conversation about the revised forecast for

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Speaker 2: the UK's fiscal watchdog, the OBR, that they provided to

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Speaker 2: the Chancellor and how that influenced her pre budget speech

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Speaker 2: and her decisions running up to Budget Day, and I

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Speaker 2: want you to listen to it now. Here is what

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Speaker 2: David Miles told us.

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Speaker 8: Well, the pre measure's estimate, that is, you know, how

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Speaker 8: much is the balance between government spending and tax revenues

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Speaker 8: before the government has implemented any new policies. That number

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Speaker 8: was for just being on the right side of the target,

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Speaker 8: but by a wafer thin amount of about four billion pounds,

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Speaker 8: which is very small in the context of an economy

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Speaker 8: that's three trillion billion large. So that forecast was not

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Speaker 8: that there would be an obvious miss on the government target,

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Speaker 8: but that most of the headroom had essentially gone and

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Speaker 8: that was there back in toward the end of October,

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Speaker 8: because that meant that in order to rebuild headroom there

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Speaker 8: had to be a sort of net tightening in policy. Obviously,

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Speaker 8: there are many ways that the government could choose to

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Speaker 8: fill the gap, if you.

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Speaker 2: Will, So sorry are you saying that there wasn't an

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Speaker 2: improved forecast offered?

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Speaker 8: Well, the pre measure's estimate, which is you know what

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Speaker 8: the government would look at and see, well, how much

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Speaker 8: have we got.

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Speaker 5: To play with?

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Speaker 8: What do we need to do if they decided to

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Speaker 8: try and build a bedroom that was just about the

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Speaker 8: right side of hitting the target that buy a wifer

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Speaker 8: thin margin.

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Speaker 3: So that was David Miles, head of Economic allows as

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Speaker 3: at the OBR, speaking to you Caroline last week. And

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Speaker 3: I saw the headlines from this story from the Canary

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Speaker 3: Islands where I was last week as well. Why was

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Speaker 3: this such a key moment?

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Speaker 2: So this was the revealing moment from the Officer Budget

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Speaker 2: Responsibility because it shows that the chancell Rachel Reeves had

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Speaker 2: consistently favorable economic forecast before she made both her budget

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Speaker 2: speech but also the unusual pre budget speech that she

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Speaker 2: made that we played for you here live on Bloomberg ragious.

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Speaker 2: So basically it left a lot of people, including our

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Speaker 2: own report of Phil Aldrick, with questions about what was

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Speaker 2: the reason then for delivering a major tax increasing budget

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Speaker 2: if actually the full cast were a little bit rosier

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Speaker 2: than a lot of economists had been expecting. And that

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Speaker 2: was what David Miles was saying when he was sitting

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Speaker 2: down in the radio studio with me in the run

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Speaker 2: up to the budget. You'll remember on the twenty sixth

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Speaker 2: of November, there was just constant media speculation about what

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Speaker 2: the chancell was going to do. There was a concern

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Speaker 2: that there would be another big budget black hole, as

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Speaker 2: there was last time. Around this time, the worry was

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Speaker 2: around whether there'd be a big productivity downgrade. The Chancellor

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Speaker 2: chose to make this unusual pre budget speech where she

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Speaker 2: hinted at an income tax increase and she talked about

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Speaker 2: hard choices. She spoke to the media about this, but

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Speaker 2: actually we now know from what David Miles said and

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Speaker 2: then from what the correspondence was from the Ober after

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Speaker 2: that interview that the Chancellor privately knew and was told

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Speaker 2: by the budget watchdog that the fiscal position was actual

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Speaker 2: bit better than had expected. In the meantime, she actually

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Speaker 2: dropped the idea of that big tax increase. And so

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Speaker 2: the conclusion is really that the Chancellor chose to spend

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Speaker 2: on welfare, both in the U turns earlier this year,

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Speaker 2: but also scrapping that limit on benefits for larger families.

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Speaker 2: You also spent on increasing her fiscal headroom. Sixteen billion

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Speaker 2: pounds was the uplift overall in terms of welfare spending.

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Speaker 2: And you also have to remember that there was a

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Speaker 2: financial markets issue. There was a guilt rally around that

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Speaker 2: idea that there could be an income tax increase. Investors

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Speaker 2: backed the idea of that rise. In early November. There

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Speaker 2: was a guilt rally that then unwound and it all

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Speaker 2: basically falls Downing Street on Friday to reject the idea

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Speaker 2: that the Chancellor had misled the public and financial markets

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Speaker 2: over the course of that whole period running up to

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Speaker 2: the budget and so over the weekend. This was the

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Speaker 2: sort of question that Rachel Reeves got and this is

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Speaker 2: what she said, tackling the cost.

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Speaker 4: Of livery, which is why I took one hundred and

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Speaker 4: fifty pounds off of energy bills and froze prescription charges.

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Speaker 4: I wanted to continue to cut NHS waiting lists, and

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Speaker 4: I wanted to bring borrowing down four billion pounds the

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Speaker 4: head room would not have been enough.

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Speaker 2: So that was Rachel Reeves, the UK Chancellor, effectively saying

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Speaker 2: that even that slightly rosier forecast, that four billion pounds

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Speaker 2: was not enough in her view. She needed a bigger

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Speaker 2: fiscal buffer and she wanted to do various other things,

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Speaker 2: But that was her response.

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Speaker 3: And of course this is a story that seems to

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Speaker 3: be continuing to Rumbalan as well. We're expected to hear

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Speaker 3: from the Prime Minister on this later today too.

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Speaker 2: Yeah, the Prime Minister is going to make a speech

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Speaker 2: today the exert show that he's going to focus on

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Speaker 2: a renewed push to curb welfare spending. I mean it's

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Speaker 2: basically also to revive his leadership. The budget, it must

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Speaker 2: be said, was not well received by voters if you

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Speaker 2: look at the polling. Nigel Faraje of Reform UK has

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Speaker 2: called for an investigation to Rachel Reeves's pre budget comments.

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Speaker 2: He wants Lori Magnus, the Independent Advisor or Ministerial Standards

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Speaker 2: to look at this. And in terms of Kis Starmer,

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Speaker 2: he's going to talk about this benefits bill. If you

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Speaker 2: look at the obr's forecast, three hundred and thirty three

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Speaker 2: billion pounds of spending, that's ten point nine percent of

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Speaker 2: UK GDP and that's expected to rise to more than

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Speaker 2: eleven percent of GDP by twenty thirty. So look, the

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Speaker 2: pressure perhaps is really still on the government.

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Speaker 5: Yeah. Indeed, in a story we'll we get doing to

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Speaker 5: watch as well.

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Speaker 3: Carolyne, thanks for bringing us up to date and how

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Speaker 3: that story of that interview that you did last week

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Speaker 3: is now playing into the political conversation in the UK.

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Speaker 2: Stay with us. More from Bloomberg DAYBAQUB coming up after this.

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Speaker 3: I want to bring the focus though to Brussels here

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Speaker 3: next where you Defense ministers are meeting this morning to

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Speaker 3: discuss support for Ukraine as the Bloc tries to carve

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Speaker 3: out a place for itself in the peace process. We've

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Speaker 3: had those talks between the US and Ukraine over the

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Speaker 3: world weekend. US ENVOYE Steve Whitcoff leading a delegation to

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Speaker 3: Russia in the coming days. Our Chief hev of correspond to.

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Speaker 3: Oliver Crook is with me in the Brussels studio for more. Oliver,

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Speaker 3: let's start down with these talks between the US and

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Speaker 3: the Ukraine Florida over the weekend.

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Speaker 5: What do we know about what was discussed.

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Speaker 9: Well, what we know so far is that, of course

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Speaker 9: they're trying to adapt that plan that was originally put

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Speaker 9: out about a week and a half ago, that twenty

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Speaker 9: eight point plan that really caught the Europeans and the

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Speaker 9: Ukrainians and really much of the world by surprise, probably

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Speaker 9: even the Russians. By surprise or the degree that it

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Speaker 9: was seen as tilted towards the Russian perspective. That has

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Speaker 9: now evolved into what we understand that living document of

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Speaker 9: those nineteen points of what this actual peace proposal could

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Speaker 9: look like. But since then we've not really gotten any

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Speaker 9: transparency in terms of what the actual contents of this planet.

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Speaker 9: So it's very difficult to make an appraisal at how

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Speaker 9: close the two sides between the United States and the

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Speaker 9: Ukrainians are, apart from the fact that we keep hearing

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Speaker 9: from both delegations that they're very encouraged that progress is

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Speaker 9: being made. That being said, you know Marco Rubio over

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Speaker 9: the weekend yesterday in Florida saying there's still a decent

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Speaker 9: amount of work to be done there. So we focus

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Speaker 9: our attention this week on the diplomacy that will be

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Speaker 9: going on Monday. We have Zelenski in Paris meeting with

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Speaker 9: Himnu and Makol as you mentioned, defense ministers here today.

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Speaker 9: On Wednesday, Marco Rubio will actually make his way over

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Speaker 9: to Brussels where he'll be meeting with foreign ministers from Europe,

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Speaker 9: and of course we await Steve Witkoff heading out there

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Speaker 9: to Moscow we should say, what is drastically different this

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Speaker 9: week from last week. Andre Yurmak is no longer leading

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Speaker 9: the Ukrainian negotiation dere At delegation, the number two within

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Speaker 9: the Ukrainian President's office, resigning on Friday as he was

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Speaker 9: sort of being ensnared in this corruption investigation. We should

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Speaker 9: say he's not been charged with anything, but his home

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Speaker 9: and his offices have been rated. That of course, is

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Speaker 9: massively damaging to the Ukrainian position.

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Speaker 2: How does then this all set us up for the

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Speaker 2: talks in Russia this week?

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Speaker 9: I think it's very difficult to appraise at this point.

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Speaker 9: I think that we've seen that reports at Witcoff himself

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Speaker 9: could potentially be going as early as today. We don't

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Speaker 9: know if that will actually happen today. There actually needs

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Speaker 9: to be more time for these things to be fleshed

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Speaker 9: out from the US and the Ukrainian side before being

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Speaker 9: presented to the Russians. But again, this is going to

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Speaker 9: be a crucial week, I think also for the europe

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Speaker 9: Opeans who get the opportunity to get in front of

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Speaker 9: Marco Rubio and Wednesday to try to lay out their position.

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Speaker 9: Remember that twenty eight point plan included a huge amount

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Speaker 9: of things, not just about Ukraine, but about the charter

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Speaker 9: to NATO, about what the NATO would agree to, what

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Speaker 9: the European sort of defense architecture would look like. I

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Speaker 9: think from the European perspective, it's absolutely crucial to get

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Speaker 9: in front of Marco Rubio, try to get their position

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Speaker 9: sort of exposed and maybe you can get a collective

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Speaker 9: front here with the United States and Europe.

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Speaker 3: Well, of course, ahead of that meeting on Wednesday, we

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Speaker 3: have a meeting happening this morning, which is those defense

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Speaker 3: ministers gathering here in Brussels. What would we be expecting

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Speaker 3: to come out of beast. I think there's going to

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Speaker 3: be a lot of reassuring words.

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Speaker 9: We expect the Ukrainian Defense Minister to be in attendance

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Speaker 9: in some manner in that meeting, Dennish Mihal, who will

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Speaker 9: be discussing with them. But listen, the reality of the

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Speaker 9: situation is the sort of European impact since that plan

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Speaker 9: dropped about a week and a half ago, has been

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Speaker 9: basically completely negligible. There's been a lot of sort of

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Speaker 9: encouraging rhetoric as usual, but as you know, Prime Minister

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Speaker 9: Tusk said a while ago, if all the positive words

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Speaker 9: had been committed, had been transferred into ammunition. That is

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Speaker 9: the kind of thing that's actually going to make a

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Speaker 9: difference for Ukraine. That being said, we should also say

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Speaker 9: that over the weekend Victor Orbond was where he was

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Speaker 9: in Moscow meeting with Vladimir Putin. We should also say

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Speaker 9: that the Belgians who hold those frozen Russian assets have

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Speaker 9: now dug into that position saying that you know what,

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Speaker 9: maybe this is not the time to actually touch those

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Speaker 9: assets and to figure out what to do with them.

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Speaker 9: Let's let the peace process play out. So those are

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Speaker 9: two actually quite painful and quite negative stories for the

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Speaker 9: Ukrainians from the European side.

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Speaker 3: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 3: stories making news from London to Wall Street and beyond.

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Speaker 2: I'm Caroline Hepka.

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Speaker 5: Europe