Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, we're recording this August twenty six, twenty twenty five.
Speaker 2: There's a lot going on right now, particularly in I guess,
Speaker 2: many big questions about macro and governance and all kinds
Speaker 2: of things in some of the richest countries in the world.
Speaker 3: That is certainly one way to put it. So just
Speaker 3: overnight we had headlines saying that Trump was going to
Speaker 3: fire Lisa Cook from the FED, and this obviously fits
Speaker 3: into the whole debate around central bank independence and how
Speaker 3: much influenced governments should actually have on central banks. And
Speaker 3: it turns out this is a debate that we've had
Speaker 3: before in other countries totally.
Speaker 2: And part of the reason I think is focused on
Speaker 2: the FED is the high level of interest payments and
Speaker 2: you'd like to see them come down. Speaking of interest payments,
Speaker 2: this morning, I saw the headline that the UK thirty
Speaker 2: year guilt is like at the highest in nineteen eighty nine,
Speaker 2: it continues to elevate. So for all the stress that
Speaker 2: we have here, all the fiscal pressure, inflationary pressure. It
Speaker 2: actually seems potentially worse elsewhere, although yes.
Speaker 3: I will say the pound is up against the dollar, right,
Speaker 3: so from a currency perspective, we're kind of doing worse.
Speaker 2: From a currency perspective. But there's a lot these things
Speaker 2: are global, is I think the point, and all of
Speaker 2: these anxieties and stresses. It's not just a US story.
Speaker 3: No, And obviously it's feeding into ball markets. And I
Speaker 3: cannot tell you how many notes we get on a
Speaker 3: daily basis about how governments can reduce the debt, how
Speaker 3: they deal with deficits and things like that.
Speaker 2: Right now, everyone to talk about this these days here
Speaker 2: in twenty twenty five, it got a lot of interest.
Speaker 2: Of course in twenty twenty two, after there is a
Speaker 2: famous spike in yields in UK guilt and maybe this
Speaker 2: sort of premonition of what a lot of rich countries
Speaker 2: would be dealing with. So I'm very excited to say,
Speaker 2: we really do have the perfect guest to speak about
Speaker 2: all of this today to understand some of the pressures
Speaker 2: facing rich developed economies. We're speaking with the right Honorable
Speaker 2: Liz Trust, former Prime Minister of the UK, author of
Speaker 2: the recent book ten years to save the West. Liz Trust,
Speaker 2: thank you so much for coming on odd lots, thrilled
Speaker 2: to have you here.
Speaker 4: Good to be on.
Speaker 2: I have a question. You know, when you see like
Speaker 2: thirty year guilt yields higher substantially than when you were
Speaker 2: the Prime minister and whenever one attacked you over the
Speaker 2: mini budget, do you feel some sense of like sort
Speaker 2: of vindication or happiness or is it all like despair
Speaker 2: for the state of your country.
Speaker 5: Well, I do feel despair for this date of my country,
Speaker 5: and it's in fact why I tried to do what
Speaker 5: I tried to do in twenty twenty two, because I
Speaker 5: could see the way things were going. I could see
Speaker 5: our economy was stagnant, that the tax revenue being generated
Speaker 5: wasn't enough to cover the amount of money the state
Speaker 5: was spending, and we needed to do something different in
Speaker 5: order to get out of a negative spiral. And what
Speaker 5: I see now is we're further down that negative spiral
Speaker 5: and we are heading.
Speaker 4: For a very very serious crisis.
Speaker 5: I said last year, I thought we were headed for
Speaker 5: an IMF bailout as Britain experienced in the nineteen seventies.
Speaker 5: I think that's even truer now. Than it was a
Speaker 5: year ago, and we're in an economic doom loop of
Speaker 5: higher taxes, lower growth, higher debt, and it's very difficult
Speaker 5: now to see the political way out of that.
Speaker 3: So how should governments actually announce or unveil large scale
Speaker 3: policy shifts because there does seem to be a some
Speaker 3: institutional constraint and then be the market reaction. We saw
Speaker 3: that this year in the US after Trump's Liberation Day announced,
Speaker 3: you know a lot of people were saying this was
Speaker 3: Trump's trust moment. How should governments actually go about I
Speaker 3: guess balancing the views of the market with you know,
Speaker 3: big scale change in terms of policy.
Speaker 5: I think the issue that I faced, and it is
Speaker 5: also the issue that Donald Trump faces in the United States,
Speaker 5: is a lot of the mainstream economic establishment do not
Speaker 5: agree with the policies that I was pursuing, and they
Speaker 5: don't agree with the policies that Donald Trump is pursuing.
Speaker 5: So you're operating in a hostile environment. In the UK's case,
Speaker 5: we have institutions that have become very divorced from government policy.
Speaker 5: In nineteen ninety eight, the Bank of England was made
Speaker 5: independent by Gordon Brown. Since then, I believe it has
Speaker 5: been pretty much unaccountable, So politicians have very little control
Speaker 5: over monetary policy, and what has happened is monetary policy
Speaker 5: has driven fiscal policy. It's very hard to coordinate between
Speaker 5: those two policies as a government because you don't have
Speaker 5: control of the leavers. Even more so, back in twenty ten,
Speaker 5: George Osborne established the Office of Budget Responsibility, which handed
Speaker 5: over huge powers to another unelected authority. It's a bit
Speaker 5: like the Congressional Budget Office, but it has more power
Speaker 5: within the British system. So what I was facing back
Speaker 5: in twenty twenty two was powerful institutions that didn't share
Speaker 5: my policy objectives. Now I believed, as the democratically selected
Speaker 5: leader of the country that I should be able to
Speaker 5: pursue those policies. It was what I was elected on it,
Speaker 5: in fact, it was what the Conservative Party elected on.
Speaker 5: But what I faced was resistant. So when you're talking
Speaker 5: about timing of policy announcements, it's not like you're operating
Speaker 5: on a clear creating in a stormy see where there
Speaker 5: are people out there who want you to fail, not
Speaker 5: just your political opponents, but also.
Speaker 4: The institutional opponents.
Speaker 5: And that is what Donald Trump faced with his tariff
Speaker 5: policies that he announced on Liberation Day. A lot of
Speaker 5: economists said they wouldn't work. A lot of people say
Speaker 5: said it would make the budget deficits in the US worse.
Speaker 5: And those policy makers are very influential with the markets.
Speaker 5: So in the case of the Bank of England, or
Speaker 5: the case of the people sitting on the Federal Reserve
Speaker 5: or civil servants within the Treasury, these people are out
Speaker 5: there creating their own waves. So I think that's the
Speaker 5: context you have to see what I was trying to do.
Speaker 2: First of all, I totally take your point about the
Speaker 2: sort of limitations of many mainstream economists, the bias of
Speaker 2: many mainstream economists, and we have many critics of mainstream
Speaker 2: economics regularly on the show. So that's a point well taken.
Speaker 2: When you unveiled your or mini budget, given the fiscal
Speaker 2: constraints or the perceived fiscal constraints, why tax cuts specifically
Speaker 2: and not also spending cuts. You know, there's so many
Speaker 2: different aspects of the UK spending situation, whether it's the
Speaker 2: triple lock pension. There's this thing that goes viral Twitter
Speaker 2: a lot about like how easy it is to get
Speaker 2: a free car, etc. Like why not first take aim
Speaker 2: at potentially low hanging fruit, or at least in combination,
Speaker 2: you know, spending cuts.
Speaker 5: Well, that is exactly what I sought to do. The
Speaker 5: package we were putting forward was a combination. It was
Speaker 5: actually not tax cuts, it was reversing a tax rice
Speaker 5: and I think that's a very important distinction. The biggest
Speaker 5: measure we wanted to take was keeping corporation tax at
Speaker 5: nineteen percent, not raising it to twenty five percent. And
Speaker 5: I believed, and I've since been proven right, that if
Speaker 5: you raise corporation tax to that level, you get less
Speaker 5: business activity, you get lower growth. Combined with the non
Speaker 5: dom tax that's been put in place or the removal
Speaker 5: of the non dom benefits, we've seen more millionaires leave
Speaker 5: Britain than any other country in the world per capita.
Speaker 4: So what we were.
Speaker 5: Doing, just on its own account, raising taxes at that
Speaker 5: juncture back in twenty twenty two was a bad idea.
Speaker 5: I believe that it would lead to lower economic growth
Speaker 5: and a higher deficit in the long term, and some
Speaker 5: economists agreed with me, But the economists working for the government,
Speaker 5: the Office of Budget Responsibility of the Bank of England
Speaker 5: did not agree with me, and they were keen on
Speaker 5: that policy, and in fact they forced me to reverse
Speaker 5: that policy.
Speaker 4: So that's one point.
Speaker 5: Second point on spending is we did try to reign
Speaker 5: in spending.
Speaker 4: So a particular thing I sought to.
Speaker 5: Do was increased welfare by wages not prices, because we
Speaker 5: were a very high inflation year in twenty twenty two.
Speaker 5: That would have saved seven billion pounds on the government budget,
Speaker 5: which has a significant amount. What I found was that
Speaker 5: conservative MPs were not prepared to vote for that. So
Speaker 5: even a relatively minor change which was simply not raising
Speaker 5: welfare as much as it was going to be raised,
Speaker 5: created a massive outcry on the conservative benches. So the
Speaker 5: answer on spending is it was politically not possible. Now,
Speaker 5: personally I would have liked to be even tougher on spending.
Speaker 5: I think we could have done that over time, but
Speaker 5: I had to think about what was politically realistic, and
Speaker 5: so what we had is spending constraint, not raising spending
Speaker 5: as much as was previously planned, keeping taxes low rather
Speaker 5: than raising them and choking off economic growth, which is
Speaker 5: what I thought it would do and was what actually happened.
Speaker 5: And then also supply side measures such as legalizing fracking
Speaker 5: in the UK making it easier to drill in the
Speaker 5: North Sea so that you stimulate the economy with supply
Speaker 5: side reforms. That was the overall package, and you know
Speaker 5: what happened. And you can compare my fiscal package with
Speaker 5: packages that Richie Soon acted during COVID or packages that
Speaker 5: Rachel Reves did, since my package was smaller even according
Speaker 5: to the estimates of the Office of Budget Responsibility, and
Speaker 5: yet it got a very different reaction. And this is
Speaker 5: because the economic establishment, the key figures in the treasurer
Speaker 5: in the Bank of England, have a bias towards a
Speaker 5: more Canesian approach. So I think it's important to note
Speaker 5: that this physical package was not any bigger than packages
Speaker 5: before or after. It just got a different reaction. I
Speaker 5: think the other important point to note about what happened
Speaker 5: in September and October twenty twenty two is the night
Speaker 5: before the mini budget, the Bank of England announced the
Speaker 5: sale of forty billion pounds worth of guilts. So I
Speaker 5: had a central bank who were making announcements that made
Speaker 5: our lives a lot more difficult the day before the
Speaker 5: mini budget, and since the guilt spike in twenty twenty two,
Speaker 5: the Bank of England have actually produced a paper saying
Speaker 5: that two thirds of that spiking gilts was down to
Speaker 5: their failure to regulate the pensions market. So there were
Speaker 5: lots of other things going on at the same time,
Speaker 5: but it was very, very convenient for the mini budget
Speaker 5: to be blamed for what happened. And as you pointed
Speaker 5: out at the beginning of the show, the guilt spike
Speaker 5: wasn't as high as it is now. So what I
Speaker 5: think is going on now is you can see the
Speaker 5: different treatment of a tax spending, high spending labor government
Speaker 5: from a conservative politician who's trying to pursue in my view,
Speaker 5: Laffer friendly tax freezes, supply side reforms, and spending restrain.
Speaker 3: If there's an institutional and market bias towards economic orthodoxy
Speaker 3: or Knesianism, as you just pointed out, why not try
Speaker 3: to adapt your budget or your economic policy to that
Speaker 3: reality because it did seem like, you know, you were
Speaker 3: sort of expecting the markets to adapt to your policy
Speaker 3: rather than vice versa. I guess I'm asking it's just
Speaker 3: is there a better way to try to communicate what
Speaker 3: you were doing at the time.
Speaker 5: Well, I'm a believer in democracy and I think it's
Speaker 5: democratically elected politicians that should decide policy, not unelected central
Speaker 5: banks and a network there's the IMF for World Bank,
Speaker 5: the central banks meeting regularly. They are far too powerful
Speaker 5: in my view at deciding what countries economic policy should
Speaker 5: be and they.
Speaker 4: Have not been effective.
Speaker 5: You know, if you look at the Bank of England's
Speaker 5: record over the past ten years on things like inflation,
Speaker 5: on economic growth, it's been extremely poor. And I fundamentally,
Speaker 5: you know, why should democratically elected politicians cow tao to
Speaker 5: what unelected officials want when we're the people who are
Speaker 5: held to account for the success of failures of the policy.
Speaker 5: And what is happening now is Rachel Reeves is very orthodox.
Speaker 5: She's a former Bank of England employee. She's essentially taking
Speaker 5: dictation from the Bank of England and the Treasury about
Speaker 5: what she should do and we can see the results
Speaker 5: of that. And what is happening is we are going
Speaker 5: to reach an end point where the country runs out
Speaker 5: of money and then we will have a major crisis
Speaker 5: and we will have to think differently. I just think
Speaker 5: it's very sad it's got to that point. This was
Speaker 5: obvious from where we were in twenty twenty two. But
Speaker 5: as I've said, the economic orthodoxy proved very powerful and Frankie,
Speaker 5: what is the point of wanting to become Prime minister
Speaker 5: if you're simply going to go along with the failing
Speaker 5: orthodoxy that has put your country in the problems it
Speaker 5: is already, which is where we were.
Speaker 3: You know, you mentioned that the Bank of England wasn't
Speaker 3: really independent from HM Treasury until Gordon Brown's chancellorship in
Speaker 3: the nineteen nineties. Do you think that arrangement still works
Speaker 3: or would you perhaps call for reform where maybe the
Speaker 3: Treasury regains some of its influence over the central bank.
Speaker 5: I think the Bank of England needs to be accountable
Speaker 5: to politicians. I think the current system doesn't work. This
Speaker 5: is why I'm very sympathetic to what Donald Trump is
Speaker 5: saying about the Fed. Monetary policy is incredibly important. It
Speaker 5: determines the allocation of assets within society. And what we've
Speaker 5: seen in Britain is we've seen people who have property,
Speaker 5: who have capital have done very well out of the
Speaker 5: low interest rates that the Bank of England and the
Speaker 5: easy money the Bank of England has created over the
Speaker 5: past fifteen years, and we're seeing young people struggle to
Speaker 5: get on the housing market. We are seeing it real
Speaker 5: effects in the economy of the Bank of England's policies,
Speaker 5: and as a Democrat, somebody at leaves in democracy, I
Speaker 5: just think it's wrong that people should be making those
Speaker 5: decisions and not accountable to the elector. And it's also
Speaker 5: very difficult, as I found as Prime Minister, to combine
Speaker 5: fiscal and monetary policy if you don't hold one.
Speaker 4: Of the leavers.
Speaker 5: So yes, I think it's got to change, and I
Speaker 5: think there is a reckoning coming for the central banks,
Speaker 5: not just in Britain but also in the United States,
Speaker 5: also the ECB. The current system does not work, and
Speaker 5: I think one of the reasons that the Bank of England,
Speaker 5: I would say sabotaged what I was trying to do
Speaker 5: is I was a critic of central banks before I
Speaker 5: became Prime Minister. I'd been very clear that I thought
Speaker 5: the Bank of English record was not good, that the
Speaker 5: Treasury should have much more of a role in setting
Speaker 5: the mandate for the Bank of England, and they didn't
Speaker 5: like their power being challenged.
Speaker 2: First of all, I want to say, I think your
Speaker 2: point about the sort of the political impossibility of or
Speaker 2: the political at least difficulty of spending cuts is really
Speaker 2: important that you had the Tory majority obviously, and even
Speaker 2: what you described as sort of modest cuts to the
Speaker 2: rate of growth is spending, couldn't get the votes. Like,
Speaker 2: I think there's a very telling issue and raise a
Speaker 2: stress about the ability of any democracies to do difficult things.
Speaker 2: Sitting aside, maybe what's politically capable in the next parliament.
Speaker 2: Should the next parliament revisit questions such as either the
Speaker 2: triple pensions or free point of use at the NHS.
Speaker 5: So, just on your point about political possibility, I think
Speaker 5: the only thing that is politically possible at present, or
Speaker 5: certainly was in twenty twenty two, was to try and
Speaker 5: restrain the growth of spending and to grow the economy
Speaker 5: faster than that. And I think that is what just
Speaker 5: that is my Trumpite strategy is in the US you've
Speaker 5: got to outpace the growth of public spending sure with
Speaker 5: economic growth. I think that is only possible. What you've
Speaker 5: just said about actually spending cuts is when there is
Speaker 5: some kind of well, so this.
Speaker 2: Is what I'm saying. So you mentioned you said last
Speaker 2: year that you were worried that the UK could need
Speaker 2: another IMF bailout. There were headlines I think of the
Speaker 2: news just in the last week of some economists talking
Speaker 2: about that again. Okay, like, if this is what we're
Speaker 2: talking about, I mean, if this is real and we're
Speaker 2: talking about the UK essentially being at the point of
Speaker 2: needing an IMF bailout, is it time to look at
Speaker 2: these sort of core pillars of existing spending levels.
Speaker 5: Well, you can see what's been going on in Parliament,
Speaker 5: which is the Labor Party tried to put through some
Speaker 5: modest welfare cuts and there was a massive rebellion by
Speaker 5: Labor MPs. Even though they have a huge majority in parliament,
Speaker 5: they could not get through some pretty minor changes, smaller
Speaker 5: by the way, than the amount I was proposing in
Speaker 5: twenty twenty two. I think it was only worth about
Speaker 5: four billion pounds. They could not get that through their
Speaker 5: current parliamentary party. And all of the evidence what happened
Speaker 5: in Greece, what happened in Ireland where spending cup programs
Speaker 5: have been achieved, or Argentina is another good example, have
Speaker 5: come after a crisis. I think that's deeply regrettable. But
Speaker 5: I can't see certainly with the current parliament serious spending
Speaker 5: cuts happening until Britain runs out of money.
Speaker 3: I'm going to ask Joe's question just in a slightly
Speaker 3: different way. But if you were back in government today
Speaker 3: and guilt yields are where they are, what specific tradeoffs
Speaker 3: between spending and taxes tax cuts would you be willing
Speaker 3: to make and what trade offs do you think are
Speaker 3: actually politically realistic.
Speaker 5: Well, the issue now is that taxes have got so
Speaker 5: high that they're checking off economic growth, and we're seeing
Speaker 5: millionaires leaving the country, We're seeing businesses closing down. I
Speaker 5: think the easiest thing and the most sensible thing to
Speaker 5: do straight away is all the supply side stuff, abolishing
Speaker 5: planning regulations, taking on the environ our mental NGOs, getting
Speaker 5: on with fracking, using north sea oil, maybe using our
Speaker 5: coal reserves. I think those are the types of things
Speaker 5: that can be done relatively quickly and would have an
Speaker 5: impact in terms of spending. Of course, our welfare state
Speaker 5: needs to be reformed. I think something like over sixty
Speaker 5: percent of Britain's budget is a combination of the National
Speaker 5: Health Service and welfare and those are the.
Speaker 4: Two areas that need to be fixed.
Speaker 5: But I don't think there's any room for maneuver now
Speaker 5: on taxes. I think that raising taxes has proved already
Speaker 5: to be counterproductive. Doing it even more will simply make
Speaker 5: the UK even more unattractive for investors. So you've got
Speaker 5: to focus on supply side. Make it much easier to
Speaker 5: build things, make it much easier to frack, make it
Speaker 5: much easier to hire people, all of those kind of things.
Speaker 5: And you have to have spending cuts where you can.
Speaker 5: But as I've said, I've tried myself to get spending
Speaker 5: through Parliament.
Speaker 4: It's it's not easy.
Speaker 2: I'm going to ask the really ignorant American question that's
Speaker 2: sometimes so forgive me if this comes off as blind,
Speaker 2: just so I'm just getting it out there. But is
Speaker 2: there a cult of the any trust in the UK?
Speaker 4: There has been.
Speaker 5: I think the cult is wearing thin, but you know
Speaker 5: there has been a cult. I think people are recognizing
Speaker 5: though that the outcomes are not good. You know, if
Speaker 5: you compare British health outcomes with other countries, I don't
Speaker 5: think the American system is anything to aspire to. But
Speaker 5: if you look at countries Germany, if you look at
Speaker 5: countries like Germany, France, Japan, you know they managed to
Speaker 5: achieve better outcomes with similar levels of funding. So I
Speaker 5: think everybody in Britain recognizes that it's not working as
Speaker 5: it's currently constituted. But it is such a big and
Speaker 5: deep issue to resolve.
Speaker 4: It really is.
Speaker 3: Joe, Remind me to tell you my NHS horror story
Speaker 3: later on. Everyone has one. On the plus side, it's free, right,
Speaker 3: all right?
Speaker 4: You know, I want to go.
Speaker 5: Back to cost you it costs you in other ways?
Speaker 3: True, I agree, say true, I want to go back
Speaker 3: to something you said about the economic orthodoxy leaning towards Keynesianism.
Speaker 3: Why do you think that is? Like, why is that
Speaker 3: the dominant economic policy framework at the moment, given that,
Speaker 3: as you keep pointing out, you know, a lot of
Speaker 3: people would argue that it hasn't actually yielded good outcomes
Speaker 3: for the developed world.
Speaker 5: In the eighties, we had some very successful supply side
Speaker 5: policies both Thatcher and Reagan increased economic growth, increase the
Speaker 5: strength of our respective economies, And when the Soviet Union collapsed,
Speaker 5: I think we all thought free market capitalism had won
Speaker 5: low taxes, restrained spending, supply side economics, and I think
Speaker 5: people in favor of those policies took their foot off
Speaker 5: the pedal, and that allowed more left wing economics to
Speaker 5: gain traction. And since then, I think we've seen it
Speaker 5: in universities, in the Treasury, in the Bank of England,
Speaker 5: but the Kanesian economics has become much more prevalent. And
Speaker 5: whether it's the Office of Budget Responsibility or the CBO,
Speaker 5: they're looking at economics through a Kinesian lens. And I
Speaker 5: think it is a big question about how on Earth,
Speaker 5: after seeing the success of those policies and now seeing
Speaker 5: the failure of Kanesian policies, anyone could possibly think these
Speaker 5: policies are right. But they proved very hard to shift.
Speaker 5: And I think the left of politics have been very
Speaker 5: successful at capturing institutions. I think they've captured large parts
Speaker 5: the bureaucracy, the university's, large parts of the media. There
Speaker 5: was in Britain there has not just talking about these
Speaker 5: the events of twenty twenty two. There's not been real
Speaker 5: analysis of what happened and what the Bank of England
Speaker 5: did and how the institutions behaved. It's something that is
Speaker 5: not talked about. And I think the level of economic
Speaker 5: literacy in the media has also got lower, and certainly
Speaker 5: British politics just gets reported as a pantomime rather than
Speaker 5: an analysis of the issues.
Speaker 2: There's much you say about the media, the way reporting
Speaker 2: is done that I probably am quite sympathetic with. Actually,
Speaker 2: would you ever join reform if the Conservatives can't pass
Speaker 2: modest slowdowns in the pace of welfare increases, if you
Speaker 2: know labor obviously hesitated issues, would you join reform?
Speaker 5: I'm not really thinking about party politics at the moment
Speaker 5: because my whole experience of being in government, and I
Speaker 5: was a government minister for ten years before I became
Speaker 5: Prime Minister, was that the power was not in the
Speaker 5: hands of the politicians. The power is in the hands
Speaker 5: of the bureaucrats. So even if Nigel Frage gets elected
Speaker 5: in twenty twenty nine, and currently he's the Booky's favorite
Speaker 5: to get elected, if the bureaucracy isn't changed, if there
Speaker 5: isn't fundamental change to the way Britain is run, nothing
Speaker 5: will alter I mean a lot of them.
Speaker 2: Presumably presumably a breakup of the I mean, right, like
Speaker 2: that's the idea, Right, there's no prospect of breaking up
Speaker 2: the bureaucracy unless there's like genuinely something new that happens politically,
Speaker 2: like that would be their argument right, that of brand
Speaker 2: new party taking power is the only way that there
Speaker 2: could be some sort of deep institutional shakeup.
Speaker 5: Yes, in some ways that's true or could be true.
Speaker 5: There's no reason why the Conservative Party couldn't do a
Speaker 5: deep institutional shakeup. But the Conservative Party has to acknowledge
Speaker 5: what went for fourteen years. You know, why didn't we
Speaker 5: solve the immigration problem, Why didn't we solve the growth problem?
Speaker 5: Why didn't we solve things like the free speech problem?
Speaker 5: The answer is we didn't reverse the institutional changes. Tony
Speaker 5: Blair mate and I talked about how he made the
Speaker 5: Bank of England unaccountable. He also made the judiciary unaccountable
Speaker 5: with things like the Human Rights Act and the Constitutional
Speaker 5: Reform Act.
Speaker 4: So until the Conservatives acknowledge that.
Speaker 5: That is why we failed to deliver an office, that
Speaker 5: is true about the Conservative Party. But if you look
Speaker 5: at the two Trump administrations, Trump one and Trump two,
Speaker 5: in Trump won, there was less recognition of the institutional
Speaker 5: change that was required in the US, and we're now
Speaker 5: seeing more of that from Trump. So my point is,
Speaker 5: whoever is in office in twenty twenty nine needs to
Speaker 5: understand that the British state needs to be fundamentally shaken up.
Speaker 5: Otherwise nothing is going to happen. And I make that
Speaker 5: argument to all parties. Interestingly, there are even people in
Speaker 5: the Labor Party backbench MP's who are saying the Bank
Speaker 5: of England's independence needs to be removed. They're saying get
Speaker 5: rid of the Office of Budget Responsibility because they can
Speaker 5: see the types of policies they want pursued are not
Speaker 5: possible with the current setup.
Speaker 3: Since we're talking political parties, and on this note, you
Speaker 3: know there maybe there is some consensus on specific economic policies,
Speaker 3: as you point out, but we've had this back and
Speaker 3: forth between Conservatives and Labor for many, many years now.
Speaker 3: How do you actually go about building consensus around economic policy,
Speaker 3: especially at a time when you know people would describe
Speaker 3: our current environment as relatively turbulent and guilt yields are
Speaker 3: where they are.
Speaker 5: I would say there's a bad economic consensus between Labor
Speaker 5: and the Conservatives at present, which is nobody is saying,
Speaker 5: apart from me a few others, nobody is.
Speaker 4: Saying that the institutions need to change.
Speaker 5: The Conservative Party are also wrapping themselves in we need
Speaker 5: to respect the independent Bank of England. We need to
Speaker 5: listen to the Office of Budget Responsibility. They're not prepared
Speaker 5: to take on the economic establishment. Neither are the Labor Party.
Speaker 5: And we're in a situation where the policies these institutions
Speaker 5: believe in are failing, and they're manifestly failing. Guilt rates
Speaker 5: are now much higher than they were back in twenty
Speaker 5: twenty two, Unemployment is up, our energy prices are the
Speaker 5: highest in the world, and the industry is closing down.
Speaker 5: These policies are manifestly failing, yet nobody is challenging the
Speaker 5: fundamentals of the economic institutions.
Speaker 2: You know, I'm gladly brought up free speech because I'm
Speaker 2: interested in that as well. And of course, you know,
Speaker 2: again in the West, I think free speech, liberal speech
Speaker 2: norms are good, and so I worry about when I
Speaker 2: see them failing in various countries or friends and neighbors.
Speaker 2: Palestine Action seems like a bunch of like crusty old hippies,
Speaker 2: And I know they defaced a plane, but they're listed
Speaker 2: as a terrorist group in your country. People can get
Speaker 2: arrested even just for saying support them, And I think
Speaker 2: they're like a terrorist group basically, like on the same
Speaker 2: level of as like isis which I think most people take, yes,
Speaker 2: that is a genuine terrorist group, like what is going
Speaker 2: on there?
Speaker 5: Well, they did attack a military base and they are
Speaker 5: advocating for terrorism in the UK.
Speaker 2: They deface a plane and then also people get arrested
Speaker 2: or in trouble for saying that they support them.
Speaker 5: They are clearly a problematic organization. And there are lots
Speaker 5: of organizations in Britain that are allowed in the UK
Speaker 5: that aren't actually allowed in many Arab countries. So I
Speaker 5: think it's right that we down on these organizations. I
Speaker 5: do think when people you know, I am a pro
Speaker 5: free speech person. I'd love to have the First Amendment
Speaker 5: here in Britain. I support both people I agree with
Speaker 5: and people I don't agree with having a lot more
Speaker 5: free speech. And it is a travesty that we've just
Speaker 5: seen Lucy Connolly released from jail who put out a tweet,
Speaker 5: deleted it four hours later and was sentenced to thirty
Speaker 5: one months in prison.
Speaker 4: That is absolutely ludicrous and.
Speaker 5: I think we've become an international laughing stock. And it
Speaker 5: is an attempt and Kirs Starmer is very clear about this.
Speaker 5: It is an attempt by the authorities to suppress what
Speaker 5: people are talking about and I think that's a very
Speaker 5: dangerous thing for a society, For a society to go down.
Speaker 2: All of these things really worry me. In the Lucy
Speaker 2: Connolly example, so she tweeted and I understand that she
Speaker 2: deleted it, but she tweeted about setting a hotel on fire.
Speaker 2: I mean that is our arguably a call to violent action.
Speaker 2: Like how would that be different? Would you feel the
Speaker 2: same way if someone said, look, you know, we should
Speaker 2: set a synagogue on fire. Is that free speech? Well?
Speaker 5: I think what she said would not have been deemed
Speaker 5: a violation in the US because it wasn't. I don't
Speaker 5: believe she was talking about a specific you go out
Speaker 5: and do this now, it was a general statement. It
Speaker 5: was obviously a terrible thing to say, and she has
Speaker 5: said sorry for that. I think there's a question about
Speaker 5: whether or not in the US that would have even
Speaker 5: been a crime at all, and even if it is
Speaker 5: a crime, whether it merits a thirty one month prison sentence.
Speaker 5: When we have people caught with child pornography being let
Speaker 5: off with no jail time at all, I mean you
Speaker 5: probably heard the expression two tier Britain. But what is
Speaker 5: happening is people are being let out very early for
Speaker 5: crimes like child rape, and yet put in prison for
Speaker 5: things that they write on Twitter, and those are two
Speaker 5: different categories in my opinion.
Speaker 3: You mentioned the first mention, then how would you reform
Speaker 3: I guess speech rights in the UK if you were
Speaker 3: in power again.
Speaker 5: We came up with free speech, freedom of the press
Speaker 5: back in sixteen ninety five, and it was a historic
Speaker 5: British liberty. We had the Bill of Rights of course
Speaker 5: sixty to eighty nine, which then the United States built
Speaker 5: on that with your Bill of Rights and so on.
Speaker 5: So these liberties are there in the British constitution. The
Speaker 5: problem is all of the laws that have been passed since,
Speaker 5: most notably the Online Safety Act. So what we need
Speaker 5: to do is restore Britain's historic liberties with a great
Speaker 5: restoration bill that sweeps away all of this legislation that
Speaker 5: has tied the country and knots. And I've talked about
Speaker 5: our problematic institutions, the problems with the judiciary, the problems
Speaker 5: with free speech. This is all down to very poor
Speaker 5: quality legislation that is essentially handed power that used to
Speaker 5: sit in the hands of the individual British citizen or
Speaker 5: the British Parliament. It's handed those power to unelected bureaucrats.
Speaker 2: Basically, my entire professional career, your party has been in
Speaker 2: power except for you know, the last ten minutes or
Speaker 2: so in Labor and Cure Star mar.
Speaker 4: Doesn't feel like ten minutes.
Speaker 2: Maybe it just feels like it over here because it
Speaker 2: feels like a lot of the rot. You describe the
Speaker 2: route that you perceive in your country, Almost so much
Speaker 2: of it seems to have taken place under Conservative government.
Speaker 2: Why is that? And why would anyone, you know, and
Speaker 2: they're thinking about the next election, why would anyone think
Speaker 2: that if there's so much route was allowed to happen
Speaker 2: under the Tories, that the Tories should be given another
Speaker 2: chance power.
Speaker 5: So I think the rots has sort of built up
Speaker 5: over time. So I talked about the development of the bureaucracy.
Speaker 5: You had the Atle government which socialized Land, which created
Speaker 5: the NHS, which created the welfare state. A lot of
Speaker 5: our problems go back to that government. But what was
Speaker 5: very important about the Blair government is this taking power
Speaker 5: that was in the hands of Parliament and putting it
Speaker 5: in the hands of unelected bodies, bureaucracies, the Bank of England,
Speaker 5: the judicial appointments, Commission, all of this plethora of people
Speaker 5: offcom who are now making the decisions about free speech,
Speaker 5: These pleasure of people who have not been elected now
Speaker 5: de facto run our country. And the big mistake the
Speaker 5: Conservative Party made was not reversing that. And this was
Speaker 5: because at the time David Cameron said he wanted to
Speaker 5: be the heir to Blair, you know, who wanted to
Speaker 5: be fashion of all the Conservatives, be modern. But I
Speaker 5: think it was a huge error and the Conservative Party
Speaker 5: lost its soul. That's what happened in the pursuit of power,
Speaker 5: in the pursuit of trying to be modern, the Conservative
Speaker 5: Party lost its soul. And I think it's an open
Speaker 5: question about whether or not the Conservative Party can get
Speaker 5: it sold back or be replaced. But certainly you know
Speaker 5: where we are now. Not enough people are saying what
Speaker 5: really went wrong over those fourteen years, But the Conservative
Speaker 5: Party failed to take on the bureaucracy. These were not
Speaker 5: the Conservative Party's policies. They were just policies that we
Speaker 5: didn't object to.
Speaker 3: Related to Joe's point, when you think back to certain
Speaker 3: moments in Britain's economic history, so for instance Brexit, the
Speaker 3: argument then was that if we get rid of all
Speaker 3: this EU regulation, the UK economy will be free to
Speaker 3: flourish and prosper. And I think in the nineteen seventies,
Speaker 3: you know, Anthony Barber instituted some tax cuts as well,
Speaker 3: right before inflation hit, I think twenty five percent or
Speaker 3: something like that. Why should the UK population have confidence
Speaker 3: that a growth focused economic policy, one that features you know,
Speaker 3: big tax cuts and deregulation, will actually drive economic growth.
Speaker 5: Well, I think the important thing to note about Brexit
Speaker 5: is we haven't got rid of any of those European laws.
Speaker 5: They're still on the British statute books. So laws that
Speaker 5: protect bats and news still on the statute books. Laws
Speaker 5: that tell you how your can opener should work are
Speaker 5: still on the statute books. We still have the working
Speaker 5: time Directive, we still got all of those laws. So
Speaker 5: this goes back to the problem you were talking about
Speaker 5: the Conservative Party. The Conservative Party is fundamentally split between
Speaker 5: people who want Britain to be you know, Singapore on TEMs,
Speaker 5: you know, a free trading go getting country, people who
Speaker 5: wanted it to be part of Europe and want to
Speaker 5: be part of the you know, European lots of labor
Speaker 5: laws protecting people environmental red tape, all of that stuff,
Speaker 5: and that issue has never resolved within the Conservative Party,
Speaker 5: which is why you know, you saw prime ministers being deposed,
Speaker 5: why you have the debate within the Conservative Party. And
Speaker 5: I think if you look at the Brexit vote in Britain,
Speaker 5: fifty two percent voted for Brexit, forty eight percent didn't,
Speaker 5: so Brexit was not delivered as the public intended. I
Speaker 5: mean the biggest case in point is of course immigration,
Speaker 5: where the Boris Johnson government failed to invact allowed immigration
Speaker 5: to increase huge amounts, which has had a very negative effect.
Speaker 2: You know, since you mentioned party politics in the UK
Speaker 2: and the split within the Conservative Party, again ignorant question here.
Speaker 2: I do get the impression that the Conservatives just like
Speaker 2: all seem to hate each other more than the members
Speaker 2: of the Labor Party and the nineteen twenty two Committee,
Speaker 2: which I still like have to Wikipedia every once in
Speaker 2: a while to remember what that is, and they're always
Speaker 2: like scheming against each other. Is there like a deeper
Speaker 2: culture of just internal hate in the Conservative Party than
Speaker 2: the Liberal right?
Speaker 4: I would say.
Speaker 5: I would say the problems that the Conservative Party go
Speaker 5: back to where Margaret Thatcher was defenestrated and the sort
Speaker 5: of Tory wets and the you know, the Thatch Rights.
Speaker 5: But if you compare it to American politics, you know,
Speaker 5: if you look at the split between people like Trump
Speaker 5: and people like Dick Cheney or the sort of Bush Republicans,
Speaker 5: it's a very similar ideological divide. But what is different
Speaker 5: in America is that Trump has basically taken over the
Speaker 5: Republican Party, whereas in Britain the kind of the left
Speaker 5: of the Conservative Party is still in control of it.
Speaker 5: That's the difference. Well, there is going to be a
Speaker 5: political realignment, and you can see it in America. You know,
Speaker 5: Republicans are now getting votes from low income people, people
Speaker 5: in rural areas. The Democrats are dominating in the sort
Speaker 5: of liberal cities. That's exactly what's going to happen in
Speaker 5: Britain at the next election. It's just the Conservative Party
Speaker 5: hasn't really got its head around which of those two things.
Speaker 4: It is.
Speaker 3: So one of the things that seems to be happening
Speaker 3: in many developed countries at the moment is everyone wants
Speaker 3: to boost their own domestic manufacturing sector. And I believe
Speaker 3: you've spoken about the need for this in the UK
Speaker 3: book four. When I think about the British economy. I
Speaker 3: usually think there's a pretty big monopoly when it comes
Speaker 3: to let's call it intellectual.
Speaker 2: Jobs, services, finance office, journalisms and journalism.
Speaker 4: Yeah, that kind of thing.
Speaker 3: But when I think about British manufacturing, you know, it's
Speaker 3: it's an island with a relatively small population compared to
Speaker 3: some other places in the world and high taxes. As
Speaker 3: you've been pointing out, what would make Britain actually competitive
Speaker 3: when it comes to manufacturing at a time when everyone
Speaker 3: seems out to compete in the same field.
Speaker 5: Well, the number one thing is energy prices need to
Speaker 5: come down. They're the highest in the world. They're four
Speaker 5: times the United States. If you are a car manufacturer,
Speaker 5: steel manufacturer, it's incredibly hard to compete. So that has
Speaker 5: to change. We have to make it much easier to
Speaker 5: build things in Britain. If you want to build a
Speaker 5: new factory, it takes far too long. So there are
Speaker 5: all of those sort of supply side policies.
Speaker 4: That need to change.
Speaker 5: I think Britain we de industrialized pretty much earlier than
Speaker 5: any other country.
Speaker 4: You can see the.
Speaker 5: Same thing now happening in Germany and continental Europe. I
Speaker 5: think it's important to do, or you can to maintain
Speaker 5: a manufacturing base because a lot of industry like AI,
Speaker 5: for example, requires high levels of energy. It requires other
Speaker 5: industries that it can sort of feed off if you like,
Speaker 5: So if you just become I talked about Singapore and
Speaker 5: seams earlier, but Singapore's a relatively small countries so it
Speaker 5: can afford to be a trading hub.
Speaker 4: Britain is a country.
Speaker 5: Of seventy million people. I think you can't rely on
Speaker 5: services alone. I think you have to produce the full gamut.
Speaker 5: I'm very worried that we're losing our last steel blast furnace.
Speaker 5: What we learned during COVID is you are seriously up
Speaker 5: against it if you are relying on China for pharmaceuticals.
Speaker 5: These are the types of industry that Britain.
Speaker 4: Can excel in and does excel in.
Speaker 5: I mean, our biggest manufactured export to the United States
Speaker 5: is cars. We do produce good, high end cars that
Speaker 5: people want to buy. So there are opportunities for British manufacturing.
Speaker 5: It's just been made very very hard by high energy
Speaker 5: prices and are planning rules.
Speaker 2: I take your point about certainly about energy prices and
Speaker 2: planning rules. Many people are having the same discussions here
Speaker 2: to my mind, and Tracy mentioned the fairly small population
Speaker 2: scale is incredibly.
Speaker 4: Well, I was seventeen, okay, okay.
Speaker 2: Okay, Well you know China has, however, hundreds of millions
Speaker 2: just in the manufacturer But yes, I take your point,
Speaker 2: not that small. But did Brexit harm scale capacity because
Speaker 2: to my mind, if we're thinking about okay, mass production
Speaker 2: at efficient level, so that it's like genuinely competitive, so
Speaker 2: that it's not some sort of you know, government subsidized
Speaker 2: albatross that just exists as a make work industry, it
Speaker 2: strikes me that sheer scale of market is very important,
Speaker 2: and it feels to me like Brexit has shrunk the
Speaker 2: scale of that market.
Speaker 5: For these I mean, there's no there's no evidence that
Speaker 5: exports to Europe have gone down after Brexit, and in fact,
Speaker 5: you know, the different trade deal we got from the
Speaker 5: EU presents the UK with some opportunities because we have
Speaker 5: lower tariffs in some areas with the United States than
Speaker 5: the EU does. But I think the other big factory
Speaker 5: in manufacturing is so much of it is becoming automated
Speaker 5: that it makes economic sense for goods to be produced
Speaker 5: close to market because you're no longer getting the advantage
Speaker 5: of a massive labor cost differential. So I think it's
Speaker 5: it's just a natural progression of modern economies that more
Speaker 5: manufacturing is going to be done closer to home when
Speaker 5: you've got a much more automated process.
Speaker 3: Since we're talking trade and exports, the UK was one
Speaker 3: of the first countries I think to sign an agreement
Speaker 3: with the Trump administration on tariffs. Would you have signed
Speaker 3: that so quickly or would you have perhaps pushed back
Speaker 3: a little bit more, given you your emphasis on boosting
Speaker 3: manufacturing domestically within the UK.
Speaker 5: I did actually praise Kirsedtarma for the deal at the time.
Speaker 5: I was one of the few people to praise it,
Speaker 5: and I said, because I've got experience of negotiating with
Speaker 5: the first Trump administration. Bob Loiheiser said, I know how
Speaker 5: difficult it is, and I thought the UK got a
Speaker 5: good deal, and so it has proven that the EU
Speaker 5: has actually got a worse deal than the UK got.
Speaker 5: So I thought he was right. He was right to
Speaker 5: do that.
Speaker 4: And I want to see.
Speaker 5: Well, we are paying lower tariffs than the EU.
Speaker 3: Is, so just on a relative basis compared tor on
Speaker 3: an absolute basis, you're still paying terroriffs.
Speaker 5: Yes, But what Trump has done the with all of
Speaker 5: his trade deals around the world is essentially reset the
Speaker 5: World Trade Organization. I think it was one of the
Speaker 5: biggest errors that of American foreign policy when Clinton allowed
Speaker 5: China to join the World Trade Organization on developing country terms,
Speaker 5: and that has had in my view, it's helped boost
Speaker 5: China's economy. China is an autocratic, authoritarian regime. I think
Speaker 5: that was a disastrous policy. What Trump is trying to
Speaker 5: do is reset at that, and that has inevitable consequences
Speaker 5: for all of America's trading partners. But knowing what I
Speaker 5: do about the Trump administration, I thought the deal kissed
Speaker 5: Arma Gott was a good deal.
Speaker 2: Potentially one thing that could I.
Speaker 5: Don't praise him very often, by the way praise I figured.
Speaker 2: That's one thing that theoretically could be done to lower
Speaker 2: energy prices for in many places would be a resolution
Speaker 2: of the war in Ukraine. And I'm curious when you
Speaker 2: look at either Trump's pursuits or what Keir Starmer has said,
Speaker 2: do you see other paths? Were you the Prime minister now,
Speaker 2: what would you be pushing for in that particular conflict.
Speaker 5: Well, I want what I want out of that conflict
Speaker 5: is I want Putin not to have been rewarded for
Speaker 5: his appalling invasion of Ukraine. So what we don't want
Speaker 5: is him, or indeed shi Jingping to get the signal
Speaker 5: from the resolution of the Ukraine conflict that this was
Speaker 5: a this invasion was somehow justified or worth it. I
Speaker 5: want Russia to be contained because I still believe that
Speaker 5: they have expanded its instincts.
Speaker 3: Just going back to the Mini Budget for a second,
Speaker 3: one of the components of that was government support to
Speaker 3: offset higher energy prices, and that was also one of
Speaker 3: the things that seemed to spook markets, This idea that
Speaker 3: the UK government would be fiscally on the hook to
Speaker 3: compensate for astronomical energy prices at the time that seemed
Speaker 3: to be expanding at an enormous rate. If you were
Speaker 3: going to do it all over again, would you have
Speaker 3: possibly included some sort of mechanism to maybe limit the
Speaker 3: cost or avoid the sense that the UK was basically
Speaker 3: bailing out its population in some way.
Speaker 5: It's important to note that the Energy package was one
Speaker 5: thing that wasn't reversed, so that was not the policy.
Speaker 5: The policy that I was forced to reversed, and that
Speaker 5: was made pretty clear to me pretty much through threats
Speaker 5: was the corporation tax increase. The energy policy remained in place.
Speaker 5: The energy policy remained in place. And the point about
Speaker 5: the energy policy was it was not a subsidy that
Speaker 5: happened automatically. It was only when energy prices reached a
Speaker 5: certain level. And I believed it was right for the
Speaker 5: government to do that because the government had failed to
Speaker 5: ensure adequately cheap energy was supplied.
Speaker 4: But what I was.
Speaker 5: Doing in tandem with that policy of essentially ensuring people
Speaker 5: against very high energy prices was getting on with fracking,
Speaker 5: licensing new north sea gas reserves so the prices would
Speaker 5: never get that high. So it was an insurance against
Speaker 5: prices going high to give consumers and businesses confidence to
Speaker 5: invest whilst we sorted out the supply that had been
Speaker 5: so badly failed by previous governments. That was the intention
Speaker 5: of the policy, and as I've said, the policy wasn't
Speaker 5: reversed by my successor. The policy that was reversed was
Speaker 5: getting on with the fracking. So you had the energy
Speaker 5: insurance policy but not the fracking policy. Those policies were
Speaker 5: designed in tandem so that we can make sure that
Speaker 5: businesses in the country weren't spooked by the threats of
Speaker 5: having a sky high energy prices. And by the way,
Speaker 5: if the energy prices had got that high, there would
Speaker 5: have had to be some kind of package to deal
Speaker 5: with them. Anyway, what I was doing is giving people
Speaker 5: notice so they had the confidence to invest.
Speaker 4: The energy package was.
Speaker 5: Actually announced because very sadly, her Majesty the Queen died.
Speaker 5: It was announced a few weeks beforehand. It wasn't announced
Speaker 5: at the time of the mini budget. The thing that
Speaker 5: the economic establishment really objected to in the mini budget
Speaker 5: of the taxes, it was that, you know, it was
Speaker 5: not raising corporation tax.
Speaker 4: That's what they didn't like.
Speaker 2: I just have one last question. You know, Tracy and
Speaker 2: I work in public, though not as public is having
Speaker 2: been the Prime Minister of the UK. We live in
Speaker 2: this age where people, you know, stories go insane, and
Speaker 2: people love to see someone publicly humiliated. And it just
Speaker 2: seems to me that the UK press in particular is
Speaker 2: a bunch of jackals. But that's just my impression over here,
Speaker 2: even relative to the pressure.
Speaker 5: So it's funny when Americans come over and they don't
Speaker 5: realize what they're like, and I'm like, you ain't seen
Speaker 5: nothing until you dealt with the UK press, and they
Speaker 5: always ga, Liz, you were right, you're about these people.
Speaker 2: I just see in the headlines it's I don't know,
Speaker 2: it seems obvious to me. What's your lesson takeaway? How
Speaker 2: do you move past a period of one's life like that.
Speaker 5: Well, I didn't really see it like that. I just
Speaker 5: see that the British press needs to change. And I'm
Speaker 5: a big support of independent media. I think the British
Speaker 5: press is coverage of e Can is appalling. I think
Speaker 5: their coverage of politics is skin deep. I don't think
Speaker 5: they've done anything to analyze the sort of failings of
Speaker 5: the British state, and I think there won't be serious.
Speaker 5: We don't just need to change the bureaucracy in this country.
Speaker 5: We need to deal and change the press. And people
Speaker 5: are now turning off the BBC. You know, they're turning
Speaker 5: off the mainstream media because they can see that the truth.
Speaker 4: Isn't being told.
Speaker 5: And there used to be a golden age I guess
Speaker 5: in journalism where people cared about the truth. I'm afraid
Speaker 5: they don't now. Friends of mine who are journalists just
Speaker 5: say their editorial conference is about how many clicks their
Speaker 5: article gets, and it's you know, I just think that's pathetic.
Speaker 3: Well, these are the tensions of being a journalist in
Speaker 3: modern times. But I have one more question. It's just
Speaker 3: going back to some technical aspects I guess of economic policy.
Speaker 3: So you've criticized the OBR for you know, it's forecasts
Speaker 3: that end up influencing or you know, perhaps even dictating
Speaker 3: government policy. I guess My question is, you know, when
Speaker 3: you think about a pro growth economic agenda that also
Speaker 3: relies on forecasts about future growth. And when we talked
Speaker 3: to Stephen Myron from the Trump administration earlier this year,
Speaker 3: that was one takeaway from our conversation was how much
Speaker 3: the Trump administration was really betting on economic growth picking
Speaker 3: up in order to offset some of the stuff it
Speaker 3: was doing it. But why should people have confidence in
Speaker 3: the growth forecast but not have confidence in you know,
Speaker 3: OBR forecasts.
Speaker 5: But the point about the OBR, and this has been
Speaker 5: proven by history, is that they overestimate how much raising
Speaker 5: taxes will bring in in revenue because they don't take
Speaker 5: the full account of the depression and economic activity, and
Speaker 5: they estimate the impact of supply side reforms like planning
Speaker 5: or fracking or whatever else.
Speaker 4: And there are two answers.
Speaker 5: This one is there are better economists out there, and
Speaker 5: I think the government, as was the case prior to
Speaker 5: twenty ten, the government should have the ability to hire
Speaker 5: the economists that they believe are right. I don't think
Speaker 5: my homework should be marked by somebody doesn't agree with me,
Speaker 5: which is what was happening.
Speaker 4: I think that's just wrong.
Speaker 5: If people don't like what I'm saying and they don't
Speaker 5: like the policies, they can vote me out at an election.
Speaker 5: But I wasn't even allowed to try the policies because
Speaker 5: the people marking my homework said no. I mean, that's
Speaker 5: the bottom line. But the second thing is I think
Speaker 5: we're far too reliant on forecasts. You can't predict the future,
Speaker 5: and trying to say which is what the UK system
Speaker 5: does that five years out we know exactly what the
Speaker 5: debt is.
Speaker 4: Going to be is rubbish.
Speaker 5: You know, we don't know what if Donald Trump imposes
Speaker 5: huge tariffs, what if the UK strikes a trade deal
Speaker 5: with India? You know what if there's a discovery of
Speaker 5: a new technology that totally transfer You don't know what
Speaker 5: the future is going to look like. And my economics
Speaker 5: is based on first principles. I know that if you
Speaker 5: put up taxes too high, people won't go out to
Speaker 5: work anymore. I know that if you make energy prices cheaper,
Speaker 5: businesses are more likely to invest in Britain.
Speaker 4: The problem with these forecasts, and this is.
Speaker 5: Another criticism of British economic media, The problem with forecasts
Speaker 5: is that people become focused on whether the numbers right
Speaker 5: in the forecast, rather than the fundamental principles of what
Speaker 5: makes the successful economy.
Speaker 2: Trist so great to chat with you, someone we wanted
Speaker 2: to have on the show for a very long time.
Speaker 2: Great that we've made it happen, and I'm appreciate your
Speaker 2: coming on. Thank you, Tracy. I'm so glad we finally
Speaker 2: got to interview this trust.
Speaker 3: We finally did it. I think it was a good
Speaker 3: time to do it, actually, because yes, you know, there's
Speaker 3: a lot of overlap with the Trump administation at the
Speaker 3: moment and what trusts experienced in twenty twenty two.
Speaker 2: Yeah, yeah, no, I mean there was a lot that
Speaker 2: I found to be interesting there, you know what I think, Actually,
Speaker 2: maybe the most interesting thing to me is thinking that Okay,
Speaker 2: in the US we have these multiple branches of government, right,
Speaker 2: so the president wants something, but Congress is going to
Speaker 2: veto it or ken veto it, especially if it's a
Speaker 2: different party in power. Obviously that's not the dynamic of
Speaker 2: UK with the parliamentary system. And yet even in the
Speaker 2: parliamentary system, to hear this, Trust described the fact that
Speaker 2: what she describes is even modest cuts to the increase
Speaker 2: in welfare weren't palatable to the members of her party,
Speaker 2: let alone the opposition, which of course never going to
Speaker 2: vote it for but in her party. I find that
Speaker 2: to be a very striking comment about the difficulty that
Speaker 2: you know, electoral democracies have in bringing back huts.
Speaker 1: Well.
Speaker 4: Absolutely.
Speaker 3: The other thing that kind of caught my eye or
Speaker 3: my ear was when we were talking about tariffs, and
Speaker 3: you know, Liz said that she had praised the deal
Speaker 3: that the UK struck with the Trump administration because it
Speaker 3: was less than what the EU was paying. And it's
Speaker 3: interesting to me that like countries seem to be competing
Speaker 3: with each other. You know, the Trump administration in some
Speaker 3: respects has been kind of successful in that getting its
Speaker 3: trade partners to compete with each other for the lowest
Speaker 3: deal rather than to, you know, try to compete on
Speaker 3: an absolute basis for lower tariffs per se. I thought
Speaker 3: that was interesting.
Speaker 2: I also think it's interesting, you know, this sort of
Speaker 2: I find myself having a lot of sympathy with this.
Speaker 2: It's sort of like anti democratic aspects of entities like
Speaker 2: the OBR or in the US, the OMB, and these
Speaker 2: ideas that okay, they have one set of assumptions about
Speaker 2: how Paul works, and the idea that like they have
Speaker 2: a formal role, and you know, there's there is a
Speaker 2: certain undemocratic element. I think of these sort of institutions
Speaker 2: that either they not necessarily with a formal veto, et cetera,
Speaker 2: that aren't elected. I have sympathy for that opinion.
Speaker 3: It certainly seems like they can act as an institutional
Speaker 3: restraint on the government. But some people would argue that
Speaker 3: maybe that's a good thing, an independent body looking at
Speaker 3: economic policy and monetary policy.
Speaker 2: Right, yeah, I mean that's the thing. And look, it's
Speaker 2: very striking that she said, really she does not accept
Speaker 2: the premise the Bank of England should be as independent
Speaker 2: as it currently is, and that you know, the idea
Speaker 2: is to your question, folding it back in with the
Speaker 2: Treasury is very striking well.
Speaker 3: Also the line about you know, not wanting to have
Speaker 3: her homework marked by someone who doesn't believe in it.
Speaker 3: I'm sure all of us as students would have liked
Speaker 3: to choose our own teacher who was creating our homework,
Speaker 3: but we don't get to for obvious reasons.
Speaker 2: We don't.
Speaker 3: Shall we leave it there?
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the aud Thoughts podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
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