WEBVTT - Is Labour Delivering on Its Promises? 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio News. 0:00:12.320 --> 0:00:13.880 Welcome to the City of. 0:00:13.800 --> 0:00:19.799 London, the City of the City of London. Beleave mine 0:00:19.880 --> 0:00:31.080 the gap between the and the financial heart of the country. 0:00:29.440 --> 0:00:30.720 The City, the City. 0:00:31.160 --> 0:00:32.879 Welcome to in the City. 0:00:34.600 --> 0:00:39.800 And clear of the doors. Pe Welcome to in the City. 0:00:39.880 --> 0:00:42.239 Each week we unpack a story that's crucial to the 0:00:42.240 --> 0:00:43.640 world's financial capitals. 0:00:43.640 --> 0:00:47.120 I'm Francis Laqua and I'm Alecra Stratton. What, Fran can 0:00:47.159 --> 0:00:49.960 you believe it's only been eight months since the change 0:00:49.960 --> 0:00:50.400 of government. 0:00:50.760 --> 0:00:53.640 Back then it felt like a much simpler time for Cures, 0:00:53.680 --> 0:00:54.960 Darmer and probably everyone else. 0:00:55.480 --> 0:00:58.160 Back then, public support for Kissed Arma and his party 0:00:58.400 --> 0:01:01.560 was higher. The US elect felt like a distant reality, 0:01:01.760 --> 0:01:05.520 and with the clear intent to reset relations with businesses, 0:01:05.920 --> 0:01:09.160 the Labor Party's promise of tangible improvements to Britain's quality 0:01:09.200 --> 0:01:10.680 of life felt achievable. 0:01:10.959 --> 0:01:13.720 So here we are in March, popularity of the government sleeping. 0:01:13.920 --> 0:01:16.280 Of course, we have the US President Donald Trump firmly 0:01:16.319 --> 0:01:19.679 in office, which brings its own challenges, and those key 0:01:19.680 --> 0:01:21.520 election pledges, well, are they on. 0:01:21.520 --> 0:01:24.240 Track, Legra well, indeed, So we're going to try and 0:01:24.280 --> 0:01:27.600 answer that in the city this week. And to do that, 0:01:27.640 --> 0:01:30.840 we've got the team here at Bloomberg who just in 0:01:30.840 --> 0:01:33.640 the last few days have published a scorecard on how 0:01:33.680 --> 0:01:36.040 the government's doing. And we've got the two brilliant minds 0:01:36.080 --> 0:01:39.240 who put it together, Phil Aldrich, Senior UK Economy reporter 0:01:39.600 --> 0:01:44.200 and Dan Hansen, UK economist on the Bloomberg Economics team. 0:01:44.480 --> 0:01:48.320 So do we want to do methodology or not? Why? 0:01:48.560 --> 0:01:49.560 Why the score a card? 0:01:49.800 --> 0:01:50.560 Why or not not? 0:01:50.680 --> 0:01:54.760 How? We picked five key measures, basically the economic measures 0:01:54.800 --> 0:01:58.400 that the Labor government has set itself again. So those 0:01:58.400 --> 0:02:01.680 are the ambitions it as this said, it wants to 0:02:01.680 --> 0:02:04.760 have the highest growth in the G seven and they've 0:02:04.760 --> 0:02:08.320 put a nominal two point five percent and your growth 0:02:08.400 --> 0:02:10.720 rate on that. And they also have an additional one, 0:02:10.720 --> 0:02:14.680 which was raising living standards by real household disposable income. 0:02:14.760 --> 0:02:19.480 Ahead there as an eighty percent employment target. There's a 0:02:19.480 --> 0:02:22.400 pledge that we're going to have fiscal stability and economic stability. 0:02:22.560 --> 0:02:24.880 They're saying ending austerity and they want to build one 0:02:24.919 --> 0:02:26.840 point five million homes. So we just took what their 0:02:27.960 --> 0:02:30.720 ambitions were and then we said. 0:02:30.520 --> 0:02:30.919 How they do. 0:02:32.200 --> 0:02:34.720 I mean, eight months is a good timeframe because it's 0:02:34.760 --> 0:02:38.680 eight months into a five year fixed term parliament, and 0:02:38.800 --> 0:02:39.840 there's a lot going on. 0:02:40.240 --> 0:02:42.079 Obviously, when you say in a five year term, you 0:02:42.160 --> 0:02:43.960 might argue it's probably a bit unfair to give them 0:02:43.960 --> 0:02:47.560 a mark at the moment. But actually these things, they 0:02:47.600 --> 0:02:50.760 are very stretching targets. I think that's the thing first 0:02:50.800 --> 0:02:53.000 to sort of pick out with this. Perhaps raising living 0:02:53.040 --> 0:02:54.760 standard is in the very stretching target, but two and 0:02:54.800 --> 0:02:56.760 a half percent growth year is a very stretching target. 0:02:56.800 --> 0:03:00.240 Building that many homes is very stretching targets. Obviously, feel 0:03:00.240 --> 0:03:03.720 said about the employment target. These are all very as 0:03:03.760 --> 0:03:06.160 I say, stretching things to achieve, and it's important I 0:03:06.200 --> 0:03:08.640 think that the government not just held account internally, but 0:03:08.680 --> 0:03:10.720 we're here to sort of cast our eye over it 0:03:10.800 --> 0:03:12.880 and look at these things. As you've both said at 0:03:12.919 --> 0:03:14.760 the top of the show there the world has changed 0:03:14.800 --> 0:03:17.720 dramatically now they're going to have to adapt labor as 0:03:17.720 --> 0:03:21.200 well as we go forward. But I think at least 0:03:21.200 --> 0:03:23.160 the top line of this that we've Phil and I 0:03:23.160 --> 0:03:25.919 looked at the sort of living standards piece, I mean, 0:03:26.160 --> 0:03:28.600 surely it's every government's goal to raise living standard over 0:03:28.639 --> 0:03:31.800 at Parliament, right, and actually when we looked at it, 0:03:31.919 --> 0:03:33.760 we think they'll probably do it, but it's not going 0:03:33.800 --> 0:03:35.200 to be as convincing as they'd like it to be. 0:03:35.280 --> 0:03:36.560 We don't think, at least it. 0:03:36.480 --> 0:03:38.360 Doesn't really matter that it does it if they've got 0:03:38.400 --> 0:03:39.600 a numerical increase. 0:03:40.080 --> 0:03:42.680 No. I think it would matter though if they turned 0:03:42.680 --> 0:03:45.880 around in twenty twenty nine and said, yes, we've raised 0:03:45.880 --> 0:03:48.920 living stands, but it's not as fast as the last government. Okay, yeah, 0:03:49.120 --> 0:03:51.200 that was one of the big economic reasons at least 0:03:51.240 --> 0:03:54.200 why didn't do particularly well in the elections. So I 0:03:54.240 --> 0:03:57.520 think people want to feel richard, don't they. They don't 0:03:57.600 --> 0:03:59.600 want to see a number higher. You want to actually. 0:03:59.400 --> 0:04:02.200 Feel better off than you are five years Yeah, exactly. 0:04:02.520 --> 0:04:04.080 Do you feel like there's more money in your pocket? 0:04:04.240 --> 0:04:06.520 And also I was struck at the growth event that 0:04:06.600 --> 0:04:08.920 Rachel Reeves did some weeks ago. I think you were there, 0:04:09.000 --> 0:04:12.320 phil In is it Seamen's factory where she was asked 0:04:12.360 --> 0:04:15.480 what is the metric and she chose to say increase 0:04:15.520 --> 0:04:16.520 in living standards. 0:04:16.720 --> 0:04:20.240 Yeah, it's effectively a downgrade in their ambitions because no 0:04:20.400 --> 0:04:23.320 government since records began in nineteen fifty five has failed 0:04:23.320 --> 0:04:26.960 to improve living standards, and so Dan's measure he adjusts 0:04:26.960 --> 0:04:30.240 the OBR outlook for productivity to something which is a 0:04:30.240 --> 0:04:32.880 bit more in line with the consensus forecasts, and on 0:04:32.920 --> 0:04:35.840 that measure, the forecast would suggest that they are going 0:04:35.880 --> 0:04:38.839 to have the smallest increase in living standards since nineteen 0:04:38.880 --> 0:04:42.320 fifty five, which would be a failure. Basically, if you 0:04:42.360 --> 0:04:44.680 delivered the smallest uplift in real let me stand that 0:04:44.920 --> 0:04:46.160 that's not something to celebrate, is. 0:04:46.080 --> 0:04:48.880 It, phil I think for boosting growth and living standards 0:04:48.960 --> 0:04:51.680 you give them a five out of ten. Yeah, And 0:04:51.720 --> 0:04:54.240 this is also because basically you know that you measure 0:04:54.240 --> 0:04:57.040 it by a real household disposable income for ahead, Why 0:04:57.120 --> 0:04:59.360 is it five out of ten? Why are they not 0:04:59.400 --> 0:05:00.520 doing better on metric? 0:05:01.080 --> 0:05:03.680 Because you're starting with just eight months of the five 0:05:03.760 --> 0:05:05.880 years having gone. So you've got to look at what 0:05:05.920 --> 0:05:08.840 policies they're putting in place and make a judgment on 0:05:09.440 --> 0:05:11.919 what they've been able to achieve so far. And so 0:05:12.480 --> 0:05:15.240 the outlook is not particularly good if you take that 0:05:15.279 --> 0:05:18.719 those measures just mentioned, but what they've done so far 0:05:18.839 --> 0:05:22.120 to boost growth. On the downside, one thing they're doing 0:05:22.120 --> 0:05:24.320 which doesn't help growth is the Knicks rise, So the 0:05:24.480 --> 0:05:27.160 payer all tax, which obviously everyone is saying is damaging 0:05:27.160 --> 0:05:29.479 for growth. But on the upside, they've got this longer 0:05:29.560 --> 0:05:33.800 term plan to basically invest much more in a public infrastructure, 0:05:34.279 --> 0:05:36.760 and the OBR did score that as a net growth 0:05:36.800 --> 0:05:40.640 enhancing investment. It takes time to deliver, though, and that 0:05:40.800 --> 0:05:43.520 was something missing from the last few governments. They are 0:05:43.520 --> 0:05:45.640 delivering on that, So it's a bit of a mixed bag, 0:05:45.640 --> 0:05:47.039 which is why kind of put them and bang in 0:05:47.040 --> 0:05:47.400 the middle. 0:05:47.440 --> 0:05:50.240 Basically, I think that's important the point that film's made 0:05:50.279 --> 0:05:53.080 about the timing. Time's not on their side with this, 0:05:53.160 --> 0:05:55.320 because the policies they need to put in place just 0:05:55.360 --> 0:05:59.440 will not yield results immediately. So investing loads more, building bridges, 0:05:59.440 --> 0:06:02.560 building school they take time, and the economic benefits accruing 0:06:02.600 --> 0:06:04.640 from those things take a long time to come through. 0:06:04.680 --> 0:06:07.480 Planning reform as well. It's a really positive thing. If 0:06:07.480 --> 0:06:09.920 they're successful in doing it, it will be a positive thing. 0:06:11.080 --> 0:06:13.880 But sort of the cloud hanging over it all, as 0:06:14.080 --> 0:06:16.960 Phil just said again, is this Nicks rise which happens immediately, 0:06:17.040 --> 0:06:20.400 that's happening in April, and it's that balance between this 0:06:20.480 --> 0:06:24.719 sort of near term cloud and actually this longer term vision, 0:06:24.720 --> 0:06:27.600 which I think they've said a lot of good things 0:06:27.640 --> 0:06:30.200 and some of the right things, but time is just 0:06:30.240 --> 0:06:32.560 not on their side. So you have this really tricky 0:06:32.680 --> 0:06:35.320 balance between and I think that's where the five out 0:06:35.320 --> 0:06:37.800 of ten comes from. Between this sort of doing the 0:06:37.839 --> 0:06:40.640 right things and waiting for them to read benefits for 0:06:40.680 --> 0:06:42.479 the economy. That's a really tricky place to be. 0:06:42.720 --> 0:06:44.560 How much when you were both doing this, did you 0:06:44.600 --> 0:06:46.160 think that this is about them wanting to be a 0:06:46.200 --> 0:06:48.960 two to you know? Really twenty nine it's the halfway point. 0:06:49.200 --> 0:06:51.440 I think that's a really important point. When I write stuff, 0:06:51.440 --> 0:06:53.719 I think what would an investiget from this note that 0:06:53.760 --> 0:06:56.360 I've just written, and what would they think? And it's 0:06:56.680 --> 0:06:59.360 I'd read it and think maybe twenty twenty nine isn't 0:06:59.360 --> 0:07:01.640 it given for them? In terms of if you look 0:07:01.640 --> 0:07:03.599 at living standards, if they come to the Electric with 0:07:03.680 --> 0:07:06.880 that performance on living standards, maybe twenty twenty nine isn't 0:07:06.880 --> 0:07:09.040 they given for them? I think you're right Allegra though, 0:07:09.040 --> 0:07:11.440 that this is like a ten year plan for them. 0:07:11.720 --> 0:07:14.480 That's how they view it. But if they turn got. 0:07:14.400 --> 0:07:22.400 To get reelected standards, it's all inter linked. And then 0:07:22.440 --> 0:07:25.360 if you're tacking to the right, for want of a 0:07:25.400 --> 0:07:29.600 better phrase, to try and head off reform slash. Yeah, exactly, 0:07:29.680 --> 0:07:31.680 because a lot of those new MPs they've got are 0:07:31.720 --> 0:07:34.880 in traditional them there's nothing traditional anymore. But they're doing 0:07:34.880 --> 0:07:37.240 a bunch of shape shifting right now in order to 0:07:37.280 --> 0:07:39.840 head off that reform threat, if indeed it is a threat, 0:07:39.960 --> 0:07:41.760 because obviously there's a lot going on with the reform 0:07:41.800 --> 0:07:44.640 party right now. It's just they've got to at that 0:07:44.680 --> 0:07:47.240 twenty nine. They've got to keep a large number of 0:07:47.280 --> 0:07:49.680 the huge landslide they have right now. 0:07:50.200 --> 0:07:50.760 Yeah, they do. 0:07:50.880 --> 0:07:53.640 It's really interesting you're saying sacking to the right, defense spending. 0:07:53.960 --> 0:07:56.480 We're going to hear about potentially welfare cuts in the 0:07:56.520 --> 0:07:59.280 next week or so. You know, they aren't classic labor 0:07:59.280 --> 0:08:01.600 policies at all. One thing I have heard from people 0:08:01.720 --> 0:08:04.000 is what do they really stand for? What's the strategy? 0:08:04.080 --> 0:08:06.880 Is it supply side reform? Is it classic labor sort 0:08:06.920 --> 0:08:09.560 of tax and spend policy, And it feels like it's 0:08:09.560 --> 0:08:12.360 a bit of everything at the moment, and there's there's 0:08:12.360 --> 0:08:15.480 a real question mark about the sort of overall strategy. 0:08:16.320 --> 0:08:19.000 All of that said, you know, I think that's the 0:08:19.360 --> 0:08:21.520 score of the five out of ten. I think they've 0:08:21.520 --> 0:08:24.160 done some sensible things they're just going to say time 0:08:24.200 --> 0:08:24.680 to come through. 0:08:24.960 --> 0:08:26.840 And so that's kind of what the budget felt like 0:08:27.160 --> 0:08:28.960 in the autumn, that it was a bit to throw 0:08:29.000 --> 0:08:31.960 everything at it and see what sticks. Are they going 0:08:32.000 --> 0:08:34.080 to change? I know a lot of it is on regulation. 0:08:34.200 --> 0:08:37.320 If you look at financial and planning regulation, will that 0:08:37.360 --> 0:08:39.959 be torn up to finally unleash the animal spirits? 0:08:40.000 --> 0:08:42.839 They're talking, well bonfire are the regulations? Yeah, that's certainly 0:08:42.880 --> 0:08:44.920 the way they're going. They did always say that they 0:08:44.920 --> 0:08:48.839 were going to make us a better regulated country, and 0:08:49.200 --> 0:08:51.040 they are pushing ahead with that. I think the planning 0:08:51.120 --> 0:08:52.720 reforms we all knew that they were going to they 0:08:52.720 --> 0:08:55.200 were going to really try and push through a complete 0:08:55.240 --> 0:09:01.120 supply side delivering that. And actually one of our scores 0:09:01.280 --> 0:09:03.920 to seven out of ten is the one point five 0:09:03.960 --> 0:09:06.000 million homes. It's a stretch target. They're never going to 0:09:06.000 --> 0:09:07.959 get to one point five million, but I think they 0:09:08.000 --> 0:09:10.040 know that, but they're pushing for that. And they get 0:09:10.160 --> 0:09:12.920 one point two that would be a massive success. And 0:09:12.960 --> 0:09:14.840 so that would be huge. And what they're doing on 0:09:14.920 --> 0:09:18.560 planning just simplifying some of the environmental measures, removing the 0:09:18.679 --> 0:09:22.600 right for smaller quangos to interfere in the planning process 0:09:22.880 --> 0:09:26.040 CPO with no hope values. If your land is just 0:09:26.080 --> 0:09:27.880 a piece of derelic lands, you can't claim it to 0:09:28.080 --> 0:09:30.360 have residential value. So there's all sorts of things in 0:09:30.360 --> 0:09:32.240 a new Town's commitments. There's all sorts of things in 0:09:32.280 --> 0:09:34.760 there which everyone in the policy was says, this is 0:09:34.800 --> 0:09:35.439 what needs. 0:09:35.240 --> 0:09:35.720 To be done. 0:09:35.760 --> 0:09:39.840 Will they get it through or unchanged with no legislative adjustments, 0:09:39.880 --> 0:09:42.520 then that's a big test. But fundamentally what they've done 0:09:42.640 --> 0:09:46.079 is so far has been pretty good. So the general 0:09:46.200 --> 0:09:50.040 bonfire of regulations is some of it feels a little 0:09:50.040 --> 0:09:53.199 bit like they're just desperately trying to claw any kind 0:09:53.240 --> 0:09:55.320 of growth measure. They want to send this message that 0:09:55.400 --> 0:09:58.120 we are the growth party, and it feels like they're 0:09:58.120 --> 0:10:00.760 trying to fix the problems created by the budget where 0:10:00.760 --> 0:10:03.480 we had lingering fiscal uncertainty which raises the prospect of 0:10:03.480 --> 0:10:08.000 further growth damaging tax rises down the line. They need 0:10:08.080 --> 0:10:10.920 to get growth going. Some of these things you would 0:10:10.960 --> 0:10:13.360 not have expected, like heat throw you never would have 0:10:13.400 --> 0:10:17.120 expected that. And then the financial deregulation they're pushing card 0:10:17.240 --> 0:10:19.560 on that and other areas. You can see the idea 0:10:19.640 --> 0:10:20.120 behind it. 0:10:20.240 --> 0:10:21.520 I also see a one out of ten. 0:10:21.720 --> 0:10:24.720 There is a one that's terrible, one out of but yes, 0:10:24.720 --> 0:10:27.000 employment only gets a one out of ten. That's because 0:10:27.000 --> 0:10:29.520 they said this eighty percent employment target, which would require 0:10:29.559 --> 0:10:32.880 two million people currently aged between sixteen and sixty four 0:10:32.960 --> 0:10:39.160 to be moving into work now effectively to get tricky unemployment. Yeah, 0:10:39.200 --> 0:10:41.520 and then the next exactly in the next cut, so 0:10:41.600 --> 0:10:44.280 that if you were saying, what policy have they done 0:10:44.280 --> 0:10:47.720 to help that, they've done a policy so completely antithetical 0:10:47.800 --> 0:10:50.200 to that. They've said, well, there's two things. They've raised 0:10:50.240 --> 0:10:53.560 the minimum wage and so you can't pass this cost 0:10:53.600 --> 0:10:56.840 down in slower wage growth towards that, and obviously people 0:10:56.960 --> 0:10:58.880 just above the minimum wage are also going to have 0:10:58.880 --> 0:11:02.320 big increases in there wages to keep the differential going. 0:11:02.559 --> 0:11:04.320 And at the same time, you've passed a cost on 0:11:04.360 --> 0:11:07.800 to the employers. They can't pass much down through lower wages, 0:11:07.800 --> 0:11:09.959 so they've got to do more unemployment. You could just 0:11:10.000 --> 0:11:11.760 see economically, that's how it's going to have to go. 0:11:12.400 --> 0:11:15.679 So you give them kind of nothing on policy leaders 0:11:15.720 --> 0:11:18.480 to increase employment, and not an awful lot on anything else. 0:11:18.520 --> 0:11:21.640 The ege percent also is so stretching. Only five countries 0:11:21.640 --> 0:11:25.120 in the world have it, and it seems incredibly unlikely 0:11:25.160 --> 0:11:27.120 we're going to get there. But if you know, again, 0:11:27.160 --> 0:11:28.839 if it's a stretch target and we get to sort 0:11:28.880 --> 0:11:31.400 of seventy eight, that we'd all be celebrating. 0:11:31.800 --> 0:11:33.480 I think in business, what do they call them, big 0:11:33.520 --> 0:11:36.719 hairy audacious targets? What's those bat hags? We have them 0:11:36.720 --> 0:11:39.640 in government all the time, So big hairy audacious goals. 0:11:39.679 --> 0:11:43.360 There's a thing, right right, No, it was a Richie 0:11:43.400 --> 0:11:45.760 Scenac thing, may even have been a Matt Hancock thing, 0:11:45.800 --> 0:11:48.560 which was you have these targets and then if you 0:11:48.720 --> 0:11:50.920 fall slightly short, then you've done better. I think they 0:11:50.960 --> 0:11:53.000 work in business. I'm not sure they work in politics, 0:11:53.000 --> 0:11:56.880 where your opponents can say you felt short. Started this 0:11:56.920 --> 0:11:59.040 podcast by saying, you know, I think I get it 0:11:59.040 --> 0:12:01.200 in business, I don't get it politics. Do you think 0:12:01.240 --> 0:12:03.640 they regret the national insurance increase on employees? 0:12:04.080 --> 0:12:05.760 They figured that they didn't have any choice. 0:12:05.800 --> 0:12:07.760 The reason I'm asking is it does seem to be 0:12:07.880 --> 0:12:10.480 the kind of lead weight that's weighing on everything else. 0:12:11.200 --> 0:12:13.679 I think personally, they found this black hole. Yeah, it 0:12:13.760 --> 0:12:16.559 was later in July, wasn't it found this black hole? 0:12:17.040 --> 0:12:18.680 It feels to me like they could have turned around 0:12:18.679 --> 0:12:22.119 and said this is consistent with the Knicks cuts being unaffordable. 0:12:22.120 --> 0:12:24.120 Even if they'd done half of it on employee, and 0:12:24.160 --> 0:12:25.760 I know you're right, Phil, they would have broken their 0:12:26.120 --> 0:12:29.480 manifesto pledge. But they didn't know this black hole existed. 0:12:29.760 --> 0:12:31.719 What we're turning around and saying is this employee Nicks 0:12:31.920 --> 0:12:34.200 cuts just not not affordable. And then they could have 0:12:34.200 --> 0:12:36.480 split it between even if they wanted to do a 0:12:36.520 --> 0:12:38.480 bit on employer next, it just wouldn't have been as bad. 0:12:38.840 --> 0:12:41.280 So you've got the two issues, which is the business community. 0:12:41.280 --> 0:12:45.200 It feels totally betrayed, very very angry. These taxes are 0:12:45.240 --> 0:12:48.560 going to be passed in large part through to prices 0:12:48.600 --> 0:12:53.800 and to you know, employ smaller wage rises and higher unemployment. 0:12:53.920 --> 0:12:56.240 So there's some damage coming down the line from this. 0:12:56.679 --> 0:12:59.840 To repair the public finances, there was always going to 0:12:59.840 --> 0:13:03.400 be difficult decision. They tied their hands too much beforehand, 0:13:03.480 --> 0:13:06.480 and they left themselves so little fiscal headroom. There's belief 0:13:06.520 --> 0:13:09.960 that they were establishing economic stability with this with the 0:13:10.000 --> 0:13:12.840 October budget has been proved demonstrably not to be the case, 0:13:12.840 --> 0:13:14.920 because they're coming back in six months and they're having 0:13:14.920 --> 0:13:17.040 to do welfare cuts, they're having to do public spending 0:13:17.080 --> 0:13:19.800 cuts because they just need to re establish them. 0:13:19.880 --> 0:13:22.040 He so Dane, what's the way forward for them? 0:13:22.120 --> 0:13:24.480 There are sort of three elements in this upcoming fiscal 0:13:24.520 --> 0:13:26.280 event that we're going to sort of I think they 0:13:26.320 --> 0:13:28.680 are worth watching. One is how much is the OBRE 0:13:28.679 --> 0:13:31.840 going to change its forecast, because that, I think at 0:13:31.880 --> 0:13:33.960 least is a source of some of the concern around 0:13:34.000 --> 0:13:37.520 the UK's fiscal position. The optimism in the obr's forecast, 0:13:37.559 --> 0:13:39.640 so when investors look at it, they're like, you know what, 0:13:39.640 --> 0:13:41.000 you're going to borrow a lot more than the obl 0:13:41.000 --> 0:13:42.360 says you're going to borrow it as gross not going 0:13:42.440 --> 0:13:45.480 to be as strong. The second thing is obviously how 0:13:45.480 --> 0:13:47.559 big of the fiscal hold does that leave and how 0:13:47.640 --> 0:13:49.800 much does Rachel Reeve think she needs to repair the 0:13:49.840 --> 0:13:53.040 public finances because as Phil's just said, ten billion pounds 0:13:53.640 --> 0:13:56.720 in terms of headroom is just peanuts, and we are 0:13:56.720 --> 0:13:58.920 now in a much more volatile world than we were 0:13:59.160 --> 0:14:01.280 in October, in a much more volatile world, so we 0:14:01.320 --> 0:14:03.240 need much more head room. And then three is it's 0:14:03.280 --> 0:14:06.080 the policy leaver that you pull, so is it benefits spending? 0:14:06.600 --> 0:14:09.520 Do you run the gauntlet on spending cuts again and 0:14:09.760 --> 0:14:12.200 do what Jeremy Hunt did and pencil spending cuts in 0:14:12.200 --> 0:14:13.080 at the end of the forecast. 0:14:13.160 --> 0:14:15.120 Not many options for them. 0:14:15.280 --> 0:14:18.560 This is the issue that on departmental spending, the plans 0:14:18.559 --> 0:14:21.800 are already so tight they can't go further benefits spending year. 0:14:21.840 --> 0:14:23.200 There's some stuff you can do there, but it's not 0:14:23.280 --> 0:14:25.880 very labor like. And then you've got tax risers, which 0:14:25.880 --> 0:14:27.680 they just don't want to talk about. The last one 0:14:27.720 --> 0:14:29.600 is more borrowing, but they know what's going to happen 0:14:29.720 --> 0:14:31.720 in terms of how the market is going to respond 0:14:31.800 --> 0:14:32.040 to that. 0:14:32.120 --> 0:14:36.000 So I do I envy them. 0:14:36.640 --> 0:14:38.480 Used to work in the treasury, didn't you Dad did? 0:14:41.480 --> 0:14:43.520 What would I do? I'd raise taxes? 0:14:44.040 --> 0:14:45.720 Would you have done it in July? Well, in the 0:14:46.520 --> 0:14:47.280 last fiscal. 0:14:47.240 --> 0:14:49.560 I say that as a as a sort of yeah, well, 0:14:49.600 --> 0:14:51.200 I don't say that as a politician. I say that 0:14:51.240 --> 0:14:54.120 as a being just completely analytical about it. And there 0:14:54.160 --> 0:14:56.520 are things they can do, like you know, the freezers 0:14:56.560 --> 0:14:58.800 on the personal allowances they can continue to put and 0:14:58.800 --> 0:15:00.760 that raises them and it people don't feel that in 0:15:00.800 --> 0:15:03.160 their pocket right now. It's one of these. It's a 0:15:03.160 --> 0:15:05.720 bit like cutting spending in the future. You know, it's 0:15:05.720 --> 0:15:07.680 one of these that you just delay the difficult decision, 0:15:08.240 --> 0:15:11.000 but actually it feels like taxes are the only thing 0:15:11.040 --> 0:15:13.320 that really you can do. The other thing you can do, 0:15:13.400 --> 0:15:17.280 of course, is decide to completely change what public service 0:15:17.320 --> 0:15:20.960 provision looks like. Think about the NHS, think about not 0:15:21.120 --> 0:15:24.760 education or they've chosen on defense, but the NHS in particular. 0:15:24.960 --> 0:15:27.520 Does the NHS have to just look different going forward? 0:15:27.760 --> 0:15:30.680 There is a huge question around that. But as things stand, 0:15:30.720 --> 0:15:34.040 if they're not willing to really change how things look 0:15:34.040 --> 0:15:36.960 in the NHS, then it everyone's just going to have 0:15:37.000 --> 0:15:38.840 to pay more tax And I know that's not a 0:15:38.840 --> 0:15:42.560 particularly positive message, but that's the world we find ourselves in. 0:15:42.600 --> 0:15:45.320 And that's not just a UK specific thing either. That's 0:15:45.360 --> 0:15:49.800 a European that's a European European question that is hanging 0:15:49.800 --> 0:15:52.360 over every government now with what's going on with defense spending. 0:15:52.520 --> 0:15:54.680 It's a really tricky situation. But I think the world 0:15:54.680 --> 0:15:58.160 has changed dramatically since October and I think it's going 0:15:58.200 --> 0:16:01.960 to be really interesting to see how Rachel Reeves perceives 0:16:02.600 --> 0:16:05.120 what needs to be done with the UK fiscal policy 0:16:05.200 --> 0:16:08.720 to make sure it's able to stand up to this 0:16:08.880 --> 0:16:10.400 volatility and shocks. 0:16:10.600 --> 0:16:12.880 Phil, Dan, thank you so much, Thanks very much, no 0:16:12.920 --> 0:16:20.320 problem at all. Thanks for listening to this week's In 0:16:20.400 --> 0:16:23.000 the City from Bloomberg. This episode was hosted by me 0:16:23.120 --> 0:16:26.840 Francis Laqua and Allegra Stratton. It was produced by Sersaudi 0:16:27.000 --> 0:16:30.280 and Moses and App with sound design by Blake Maples. 0:16:30.560 --> 0:16:34.120 Brendan Francis Newnam is our executive producer. Special thanks to 0:16:34.160 --> 0:16:38.640 Phil Aldrich and Dan Hansen. Please subscribe, rate, and review 0:16:38.960 --> 0:16:40.560 wherever you listen to podcasts.