Speaker 1: Welcome to In the City, Bloomberg's podcast connecting you to
Speaker 1: the conversations and the stories shaping the world of finance.
Speaker 1: Now with me for this episode is a group that
Speaker 1: you will continue to hear a lot more of on
Speaker 1: in the City. Of course, listeners, no a legra, who's here?
Speaker 2: Hello?
Speaker 1: And recently we also heard the opinion columnist Adrian Woolridge.
Speaker 2: Good afternoon, this is fun.
Speaker 1: We all got dragged in here at two pm on
Speaker 1: a Wednesday because Jeremy Hunt has just finished delivering his budget,
Speaker 1: maybe his last one before we go to the elections,
Speaker 1: and I don't know what we've actually make of it.
Speaker 1: All budget day he confirmed a lot of widely expected things.
Speaker 2: Absolutely, I think everything big in that had been very
Speaker 2: very widely trialed. There was nothing really exciting or new
Speaker 2: in it.
Speaker 1: Is this a good or a bad thing? So Marcus Ashworth,
Speaker 1: also from Bloomberg Opinion said, look, he was outraged because
Speaker 1: it's really Parliament that should have heard about this first.
Speaker 1: Does it make a difference or is it just to
Speaker 1: try and make sure that the markets they are not
Speaker 1: surprised and they kind of get a sense of the voter.
Speaker 2: So how modern media management works? I mean, you can
Speaker 2: be as outraged as you want, but it's the newspapers
Speaker 2: that hear first in Parliament that he has last.
Speaker 3: As a former Treasury head of communications, I've had a
Speaker 3: strategic communications. I hate it. I really hate it. And
Speaker 3: I tried to do when I was in the Treasury.
Speaker 3: I tried to do a budget where nothing leaked because
Speaker 3: it so you've got leaking and then you've got pre
Speaker 3: managed briefing, which is mostly this. But I think some
Speaker 3: of the managed briefing is because you assume it's going
Speaker 3: to leak, so you're kind of trickling out what you
Speaker 3: want and the narrative you want. This is not me
Speaker 3: as my former treasury self, but rather the people in
Speaker 3: there right now and in the recent budgets, they're managing
Speaker 3: the narrative so they can try and manage their people,
Speaker 3: and otherwise something gets lead and they can't manage that story.
Speaker 3: So it's sort of the tour in goes hand in hand,
Speaker 3: but you are ending up with a situation like today
Speaker 3: where you almost have nothing left. And Marcus, dear Marcus
Speaker 3: is getting outraged on behalf of Hansard and parliamentarians, and
Speaker 3: rightly so. But there's also a sort of sense for
Speaker 3: the rest of us around where is that kind of
Speaker 3: stake craft where we are used to budgets and not
Speaker 3: so long ago where it was real surprise. There was
Speaker 3: one though, which was the child benefit, which was not
Speaker 3: quite so extensively, and I think I think that is
Speaker 3: something that's potentially interesting around the kind of voters they
Speaker 3: still want to be trying to connect with.
Speaker 2: I get a sense it was a big problem with
Speaker 2: expectations management over this budget. A month or so ago,
Speaker 2: the expectations that their arose were quite big, that this
Speaker 2: would be quite a big budget, that they had quite
Speaker 2: a lot of headroom for maneuvering, and then the OBR
Speaker 2: came back, wait a bitute, I don't think you've got
Speaker 2: that money. And the money available for giveaways seem to
Speaker 2: contract over the last month, and the government was then
Speaker 2: caught in ketchup trying to brief the manage expectations down
Speaker 2: a bit.
Speaker 1: And what was this a budget for? Is it really
Speaker 1: to get voters? The fiscal head room was so small
Speaker 1: that actually there's not you know, they couldn't really have
Speaker 1: done a bazooka or anything like that.
Speaker 3: Yeah, it was. It was not as a Jeremy Hunt
Speaker 3: fan it was not brilliantly handled because, as you say, Adrian,
Speaker 3: you went from a situation where almost as soon as
Speaker 3: the last fiscal event finished, they were briefing there'll be more,
Speaker 3: there'll be more, there'll be more. And then they've been
Speaker 3: in a situation where they've kind of kind of pair
Speaker 3: back what the more is. And that is in the
Speaker 3: context of you know, a set of back benches who
Speaker 3: were just desperate for more, and so they you know,
Speaker 3: potentially they'll be quite happy today because they'll think the
Speaker 3: job is done of you know, another tax cut has
Speaker 3: been achieved, and you know that is fundamentally Sunakan Hunt's
Speaker 3: kind of loadstar, philosophical creed, etc. So I think they
Speaker 3: won't be too focused on Eeke, we kind of got
Speaker 3: ahead of ourselves there and we got away with it.
Speaker 3: And whether or not they did get away with it,
Speaker 3: I mean, we've yet to see, as we're recording this
Speaker 3: so early, but we've yet to see what the backbench
Speaker 3: opinion will be, whether it was a nothing burger or
Speaker 3: whether actually they feel he's done enough.
Speaker 2: Against that, I'd say two things. One is that it
Speaker 2: was quite a political budget in the sense that he
Speaker 2: was quite constantly trying to draw red lines between himself
Speaker 2: and the opposition. You're the high tax party, you're the
Speaker 2: undisciplined spending party, where the low tax party riskal responsibility.
Speaker 2: And he also got to dig at the Liberal Democrats,
Speaker 2: which I thought was quite interesting since they're quite an
Speaker 2: important opponent. And the second thing was the issue of
Speaker 2: trying to cut National insurance even further. There were promises
Speaker 2: that double taxation of income is a very bad thing.
Speaker 2: We want to get rid of it, or at least
Speaker 2: reduce it. I can think of two impossible interpretations of that.
Speaker 2: One is that there's going to be another significant fiscal
Speaker 2: event before the next election. This was indicating that the
Speaker 2: election would be some time off, or the other was
Speaker 2: just throwing a bit of red meat at the backbenches
Speaker 2: to make sure upset.
Speaker 1: But I wonder also whether the Chanceller was really speaking
Speaker 1: to the markets. Right the memory of Liz Truss frankly
Speaker 1: lives on, and so maybe it was better not to
Speaker 1: royal or panic the markets, then, you know, deliver an
Speaker 1: underwhelming speech.
Speaker 2: One of Labour's better sort of barracks, I thought, was
Speaker 2: where's Liz? Some new was shouting, because.
Speaker 3: In the chamber but I think the thing I was
Speaker 3: most interested to see was that they didn't pay for
Speaker 3: it by reducing spending into the next parliament, but it's
Speaker 3: due to increase by one And the rumor that was
Speaker 3: quite quite again probably pre briefed by Hunt's advisors, was
Speaker 3: around do you pay for that, which is what many
Speaker 3: backbenchers would like, by reducing public spending, And he was
Speaker 3: quite keen to to make heavy weather of the fact
Speaker 3: he'd not chosen to do that because I think you know,
Speaker 3: we've talked about it on this pod. In fact, we've
Speaker 3: the three of us together have talked about this just
Speaker 3: last week, this idea that they that the evidences, the
Speaker 3: polling and people are against tax cuts over reducing public spending.
Speaker 3: So him sort of swerving that, like clearly looking at it,
Speaker 3: contemplating it because it would have appealed to some of
Speaker 3: his people, but deciding not to do it, I think
Speaker 3: was probably the right decision. I think that it would
Speaker 3: have it wouldn't have been very Jeremy Hunt.
Speaker 1: I mean, the guild sales are a little bit. I mean,
Speaker 1: he did and this is something that Alex Wickham put
Speaker 1: in the in the blog that if you look at
Speaker 1: it from a rational point of view. I think there
Speaker 1: are seven points where actually taxes are more or less
Speaker 1: going up. And there's you know, the non darm system
Speaker 1: is abolished, there's a new vape tax, so one off
Speaker 1: increase in tobacco duty, business class air duty is going up,
Speaker 1: Holiday home lendings regime will be abolished, and multiple dwellings
Speaker 1: relief will be abolished. So all of that is money
Speaker 1: coming in absolutely.
Speaker 2: And again I think you know a political budget in
Speaker 2: that it was drawing lines with labor. But in fact
Speaker 2: what's so interesting is that both Labor and the Conservatives
Speaker 2: are quite close together on all sorts of things. And
Speaker 2: you know, the stealing of Labour's clothes on the non
Speaker 2: dom was one interesting example of that. But we have
Speaker 2: a sort of generally fairly managerial, sensible approach by both
Speaker 2: the Labor Party and the Conservative budget. This is not
Speaker 2: the world of Corbyn or the world of Liz Trast.
Speaker 2: It's the world of centrist politicians. One thing I did
Speaker 2: think was interesting in the in the budget, and I
Speaker 2: think is worthy of conversation is the issue of productivity improvement,
Speaker 2: Because on the one hand, productivity improvement can sound like nothing.
Speaker 2: You might say, all we want greater efficiencies. Everybody wants
Speaker 2: greater efficiencies. What's wrong with that. But on the other hand,
Speaker 2: we do have to get a productivity increase from the
Speaker 2: public sector if we're not going to tax ourselves to death,
Speaker 2: or if the public sector isn't going to fall apart.
Speaker 2: And the worst and quite interesting ideas mentioned about the
Speaker 2: use of it and various other things about particularly in
Speaker 2: the National health services and trying to spread that we
Speaker 2: have had a fall in productivity since the pandemic and
Speaker 2: we do need to drive productivity growth in the public sector.
Speaker 2: So that that was an attempt to talk about it seriously.
Speaker 3: I think, yeah, I felt to me like that was
Speaker 3: almost the sort of Jeremy Hunt legacy item that he
Speaker 3: wanted to say. This is distinctively me. This isn't something
Speaker 3: you'd have heard soon act. I mean, I'm sure you
Speaker 3: know fairly kind of out of his textbook too, but
Speaker 3: sort of this is the thing, the one thing that
Speaker 3: he will have done in depth, because it wasn't. Normally
Speaker 3: in budgets, you hear these things and they're just glancing references.
Speaker 3: But actually this one he went through all the different
Speaker 3: public services and listed how they could be used in
Speaker 3: granual detail, granular detail.
Speaker 2: And he was in charge of the National Health Service
Speaker 2: for five years, so he knows just how much money
Speaker 2: is not efficiently used, and there is a potential with
Speaker 2: it and the rest of it to improve form filling
Speaker 2: and bureaucracy and things like that. So well, if we
Speaker 2: can't improve the productivity of the public sector, we're in
Speaker 2: a real mess.
Speaker 1: The US, of course, have done it really differently. I mean,
Speaker 1: They're product activity is kind of going through the roof
Speaker 1: thanks to also immigrating.
Speaker 2: In the private sector. In the public I mean, the
Speaker 2: world's most wasteful, wasteful health service is the United States
Speaker 2: Health Service is incredibly bureaucratic because of so much duplication.
Speaker 2: The other thing I thought was quite interesting politically, and
Speaker 2: he kept making this point, was that we want to
Speaker 2: boost national productivity without just relying on lots of cheap immigrants.
Speaker 2: He made that point over and over and over again,
Speaker 2: almost as if to say, the central offer from the
Speaker 2: Labor Party is just bringing in more immigrants and boosting
Speaker 2: the overall size of the economy rather than boosting productivity.
Speaker 2: I'm not quite sure why he was doing that, but
Speaker 2: it was a point that he made at least three times.
Speaker 3: Yeah, and no, I agree with that. I think it's
Speaker 3: also interesting because he was you described it earlier, Adrian,
Speaker 3: as you know, stealing the labor clothes. It's interesting because
Speaker 3: it's not just that he's stolen labor clothes, but he's
Speaker 3: also stolen their money because they were going to be
Speaker 3: doing certain things and you know, you know, we can
Speaker 3: do this sort of little extra labor things that make
Speaker 3: it worth a labor government because we're going to have
Speaker 3: done non doms and and other measures, and he's now
Speaker 3: taken that, and so it changes the baseline as everyone
Speaker 3: will know.
Speaker 1: What's the first thing that labor would actually reverse if
Speaker 1: they came into power in this budget?
Speaker 2: Is there anything hard to think actually hard for them
Speaker 2: to come into power and increase national insurance or something
Speaker 2: like that. And again, central to Rachel Reeves's policy is
Speaker 2: addressing the making work pay, which she's been talking about
Speaker 2: a lot very recently. And the other thing about making
Speaker 2: work pay is trying to reduce the number of people
Speaker 2: who are a working agement not working. Again, that's another
Speaker 2: area where both parties singing from the same hymn styt
Speaker 2: rightly so, I think.
Speaker 3: So while we've been speaking what they've gone on. Is
Speaker 3: that Richie Sunac in his leadership manifesto in twenty twenty two,
Speaker 3: remember that he promised an income tax cut, so a
Speaker 3: more vanilla straightforward rather than you know this this this
Speaker 3: making work pay next cut.
Speaker 1: Now.
Speaker 3: Of course it's powerful because I think that's where the
Speaker 3: Conservative politics is going to come in the next few weeks,
Speaker 3: which is they will grumble that they have you know,
Speaker 3: yes they've got this, but they wanted more, and so
Speaker 3: Starmer is having fun on that front. It's difficult because
Speaker 3: is it necessarily something that labor would would do better?
Speaker 3: So it's you know, he's just having fun making the
Speaker 3: pain for the internal party Conservative politics even even more painful.
Speaker 1: I mean, I want to ask, you know, how do
Speaker 1: you want elections in this case? Is it actually just
Speaker 1: making sure that the budget is not inflationary so that
Speaker 1: the Bank of England can get on with cutting rates,
Speaker 1: which would help with mortgages and make people feel a
Speaker 1: bit richer.
Speaker 2: I don't think this makes much difficient in the election.
Speaker 2: I think basically people are exhausted by the Conservative Party
Speaker 2: and they want to change. I think that they're trying
Speaker 2: to change the narrative. I mean that the Conservatives are
Speaker 2: I don't think there's much room to do. It's people
Speaker 2: have made up their mind.
Speaker 3: So I think a slightly different thing which is in
Speaker 3: the same room, which is I think it's necessary but
Speaker 3: not sufficient in that old phrase, in that you know,
Speaker 3: they needed to not drive the car into the wall today,
Speaker 3: but equally they've got you know, they've got a lot
Speaker 3: of work ahead of them whenever that next general election is.
Speaker 1: The British isa I thought was really I mean, we knew,
Speaker 1: but actually I don't know whether I mean we knew
Speaker 1: because the chances we're told us, but homebuilders got a
Speaker 1: little bit of a lift on the back of it.
Speaker 1: I mean, does it make a difference to the British psyche.
Speaker 3: Well, I'm interested, you're probably interested in.
Speaker 2: What I think. We're all interested. But it is a
Speaker 2: fundamental break with free market economics or Thatcherism and other
Speaker 2: countries have it right. Oh yeah, absolutely, I can other
Speaker 2: countries are moving in a similar sort of direction. But
Speaker 2: it does just show how different the world is now
Speaker 2: from the nineteen eighties that instead of you know, deregulating
Speaker 2: the flow of money, we're trying to encourage the flow
Speaker 2: of money. Of bension schemes into our own economy.
Speaker 1: But is that the only way you get growth? In
Speaker 1: a way, but it's the most assured way.
Speaker 2: A way.
Speaker 3: It's it's a kind of you did see, you know,
Speaker 3: like an arsenal or a range of measures today. I'm
Speaker 3: not saying it was, you know, necessarily going to going
Speaker 3: to kind of pep up growth by you know, the
Speaker 3: rates we were used to seeing years ago. But but
Speaker 3: but you did, you know, the British iSER is part
Speaker 3: of that raft of you know, what they're doing in
Speaker 3: the City of London, how they're changing listing, et cetera.
Speaker 3: I don't know how long this stuff takes to turn around, right, like,
Speaker 3: you know, how long whether it if we think that
Speaker 3: there's a general election this year, whether or not any
Speaker 3: of this is going to be tickling up growth that quickly.
Speaker 3: I'm not sure if the Chancellor was here he would
Speaker 3: say it is when we have been the Minister City
Speaker 3: Minister Bi Mafalami on this podcast must be a month ago, now,
Speaker 3: you know, he sort of acknowledged that, didn't he found
Speaker 3: that this is long term stuff.
Speaker 2: I think also that they would say that pension funds
Speaker 2: are unnecessarily and unreasonably nervous about investing in the in
Speaker 2: Britain and I think that maybe some truth about that.
Speaker 1: It's definitely actually just tweeted an obi Ar NuGet, which
Speaker 1: is that the spending numbers from twenty twenty five onwards.
Speaker 1: She says may not have changed much, but real spending
Speaker 1: per head will be flatter filing after this year, so
Speaker 1: watch for headlines on that that actually it's not you know,
Speaker 1: spending because of the population increase is going to diminish
Speaker 1: per person, which.
Speaker 3: Is partly why you're starting to hear more and more
Speaker 3: on the immigration debate from as Adrian said earlier, three
Speaker 3: mentions or more from the Chancellor. But I think I
Speaker 3: think they will. I mean, you know, if we think
Speaker 3: that Jeremy Hunt was the safe pair of hands Chancellor,
Speaker 3: I think that that is unchanged today.
Speaker 1: Do you just right?
Speaker 3: Okay? And there was you know, if we think about
Speaker 3: earlier in the week, Bloomberg pieces around traders being nervous, thinking,
Speaker 3: oh my god, what is he going to do because
Speaker 3: he's at the poll this week that showed the Conservatives
Speaker 3: going to the lower ever level, lowest ever level since
Speaker 3: ipsos Mori started recording in nineteen seventy so you know,
Speaker 3: traders thought he's going to be so nervous contemplating those
Speaker 3: kind of numbers, He's going to try and inhale mary Well,
Speaker 3: I don't think he really did that.
Speaker 2: Now where does this leave Labor. I heard two things
Speaker 2: from Labor. One is that they think they've got quite
Speaker 2: a number of hidden pockets of money, a certain amount
Speaker 2: hidden pockets of money that they will be able to
Speaker 2: get hold of and use which would be very interable.
Speaker 2: I don't know the answers to that. Then, they haven't
Speaker 2: told me that, but that's interesting since the Tory Party
Speaker 2: has tried so hard to find these things. But they
Speaker 2: will talk about that. And the second thing I think
Speaker 2: is the reorganization of the machinery of central government, the
Speaker 2: sort of things that the Dominic Cummings talked about and
Speaker 2: then annoyed of, probably so much that nothing really happened.
Speaker 2: We haven't had much actual reform of the central machinery
Speaker 2: of government. I think you might, but a new government
Speaker 2: might come in and starn't try to try to do
Speaker 2: that sort of thing. So I think that Labor it
Speaker 2: won't have a lot of extra money. It may have
Speaker 2: a bit more than we think, and it may have
Speaker 2: an agenda for sort of institutional reform which will be
Speaker 2: used to try and drive our government productivity and efficiency.
Speaker 1: But it is hard. It take very long time. It's
Speaker 1: like moving an oil tanker.
Speaker 3: If we have a labor budget at some point soon
Speaker 3: it's going to be a tricky budget. And all of these,
Speaker 3: all the politics that we're looking at with the kind
Speaker 3: of the fringe of the party will be flipped. They
Speaker 3: have the same dynamic going on. It's not going to
Speaker 3: be kind of kumbay our.
Speaker 2: That's a long time ago by our politics.
Speaker 3: My daughters just recorder. It's very much in my life
Speaker 3: right now. Cracking chuin.
Speaker 1: Perfect way to end the party. Thanks for listening to
Speaker 1: this week's in the City. We'll be back next week,
Speaker 1: but in the meantime, if you like our show, please
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Speaker 1: and subscribe. It does help people find the show. This
Speaker 1: episode featured me Francin Laqua with like Rostratton and Adrian Woolridge.
Speaker 1: It was produced by Someersadi and Moses Handham. Additional editing
Speaker 1: by Rishi bou Jakol.