WEBVTT - Ex-UK Treasury Minister Jim O'Neill Talks Starmer, Bond Markets

0:00:02.480 --> 0:00:07.080
<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

0:00:07.560 --> 0:00:09.800
<v Speaker 2>Joining us now is Jim O'Neil, former chief economist at

0:00:09.840 --> 0:00:12.800
<v Speaker 2>Gold and Sachs and a former Treasury minister who's advised

0:00:12.840 --> 0:00:16.760
<v Speaker 2>multiple governments on growth initiatives. Jim, welcome back to Bloomberg Radio.

0:00:16.800 --> 0:00:19.040
<v Speaker 2>Thank you so much for your time. Just want to

0:00:19.120 --> 0:00:21.520
<v Speaker 2>quote to you what you said in October. I'm sure

0:00:21.720 --> 0:00:25.759
<v Speaker 2>you'll remember last year you were on BlueBag you said

0:00:25.760 --> 0:00:29.960
<v Speaker 2>that Keir Starmer shouldn't go even if they do really

0:00:30.040 --> 0:00:32.559
<v Speaker 2>badly in the main local elections. This is you speaking

0:00:32.640 --> 0:00:35.680
<v Speaker 2>what new thing would a new leader bring while the

0:00:35.760 --> 0:00:40.600
<v Speaker 2>Labor Party did indeed do badly in those local elections.

0:00:40.720 --> 0:00:44.640
<v Speaker 2>What is your view now? Should Starmer still stay?

0:00:46.120 --> 0:00:46.720
<v Speaker 1>I kind of.

0:00:46.720 --> 0:00:51.839
<v Speaker 3>Still think broadly the same. There's a number of issues

0:00:51.840 --> 0:00:54.720
<v Speaker 3>that affect me, but at the core, And thanks for

0:00:54.760 --> 0:00:58.080
<v Speaker 3>reminding me of what was said, because I actually do

0:00:58.320 --> 0:01:02.080
<v Speaker 3>think pretty similar that the you know, the Tory Party

0:01:02.160 --> 0:01:07.040
<v Speaker 3>effectively been semi destroyed by constantly bringing in new, supposed

0:01:07.080 --> 0:01:11.360
<v Speaker 3>great leaders without going to the British public. And I

0:01:11.360 --> 0:01:14.479
<v Speaker 3>think if the Labor Party start doing that on top

0:01:14.560 --> 0:01:19.200
<v Speaker 3>of what has already unfolded in nearly two years of

0:01:19.240 --> 0:01:22.319
<v Speaker 3>them I think that could be structurally pretty damaging for

0:01:22.400 --> 0:01:25.200
<v Speaker 3>them as well. That the idea that any of these

0:01:25.240 --> 0:01:29.200
<v Speaker 3>candidates that are being mentioned as some kind of you know,

0:01:29.360 --> 0:01:32.480
<v Speaker 3>Margaret Thatcher or Tony Blair type characters to give a

0:01:32.560 --> 0:01:35.200
<v Speaker 3>whole new meaning to the future of the country is

0:01:36.040 --> 0:01:38.240
<v Speaker 3>is not something that I think is going to necessarily

0:01:38.280 --> 0:01:42.039
<v Speaker 3>go down with the public. So for that reason alone,

0:01:42.080 --> 0:01:44.560
<v Speaker 3>I think it would be very foolhardy of the Labor

0:01:44.560 --> 0:01:49.480
<v Speaker 3>Party to do it. Second secondly, you know, link linked

0:01:49.480 --> 0:01:52.880
<v Speaker 3>to the sort of madness that's gone over the country

0:01:53.360 --> 0:01:57.160
<v Speaker 3>ever since the exit vote, whether the whole machine in

0:01:57.160 --> 0:01:59.800
<v Speaker 3>many ways, the intellectual leadership of the country still hasn't

0:02:00.120 --> 0:02:03.000
<v Speaker 3>figured out how to deal with it. This sort of

0:02:03.000 --> 0:02:05.760
<v Speaker 3>impatience that we as the public have got that, you know,

0:02:06.480 --> 0:02:10.080
<v Speaker 3>if it hasn't been miraculous solutions delivered in five minutes,

0:02:11.000 --> 0:02:13.160
<v Speaker 3>we have to have some dramatic change you and give

0:02:13.160 --> 0:02:17.440
<v Speaker 3>it a chance to somebody else. Itself is contradictory with

0:02:17.520 --> 0:02:20.919
<v Speaker 3>what I've said before, because unless we can boost the

0:02:21.000 --> 0:02:24.600
<v Speaker 3>labor force, unless we can boost trade with places that

0:02:24.720 --> 0:02:29.000
<v Speaker 3>really matter, including Europe, then it's not obvious how we're

0:02:29.000 --> 0:02:31.840
<v Speaker 3>going to get out of this sort of vicious circle

0:02:31.919 --> 0:02:34.280
<v Speaker 3>that we're in. That there are a few other things

0:02:34.280 --> 0:02:38.040
<v Speaker 3>that I think they could do to help boost things,

0:02:38.120 --> 0:02:40.200
<v Speaker 3>but you know, those two things.

0:02:39.960 --> 0:02:42.120
<v Speaker 1>Have said quite a core problem.

0:02:42.280 --> 0:02:46.240
<v Speaker 3>Whoever happens to be sitting in number ten, Jim, let.

0:02:46.200 --> 0:02:48.520
<v Speaker 4>Me ask you about one of the candidates who could

0:02:48.560 --> 0:02:51.520
<v Speaker 4>potentially replace kist Armory hasn't got a seat in Parliament

0:02:51.639 --> 0:02:53.960
<v Speaker 4>right now. But I wonder whether you think the bond

0:02:54.000 --> 0:02:57.520
<v Speaker 4>market will ever forgive Andy Burnham's comment that politicians shouldn't

0:02:57.520 --> 0:02:58.280
<v Speaker 4>be in hoc to it.

0:03:00.240 --> 0:03:03.200
<v Speaker 3>Well, it doesn't look like the markets are in too

0:03:03.240 --> 0:03:05.239
<v Speaker 3>great a mood to do that right now, given where

0:03:05.280 --> 0:03:08.320
<v Speaker 3>the guilt markets opened up this morning, although I quickly

0:03:08.320 --> 0:03:11.400
<v Speaker 3>had obviously some of that is also because of the

0:03:11.520 --> 0:03:15.040
<v Speaker 3>rise in US eels and the renewed rising Brent crude prices.

0:03:15.120 --> 0:03:17.360
<v Speaker 1>But if you look at the way the spreads traded

0:03:17.400 --> 0:03:17.680
<v Speaker 1>in the.

0:03:17.639 --> 0:03:23.040
<v Speaker 3>Past month as the renewed speculation about Andy coming back

0:03:24.040 --> 0:03:29.040
<v Speaker 3>has grown, there's the market verdict, and it's not obvious

0:03:29.080 --> 0:03:32.040
<v Speaker 3>to me how Andy can climb back down from that,

0:03:32.480 --> 0:03:36.600
<v Speaker 3>and how markets believe in a in a hurry, And

0:03:36.640 --> 0:03:39.560
<v Speaker 3>I quickly add, given how heavily involved I am in

0:03:39.600 --> 0:03:44.920
<v Speaker 3>the whole Greater Manchester story in Northern Powerhouse. You know,

0:03:45.560 --> 0:03:47.119
<v Speaker 3>I'm in the camp that thinks it would be great

0:03:47.160 --> 0:03:49.520
<v Speaker 3>if Andy stayed where he was, to be honest, because

0:03:49.760 --> 0:03:53.200
<v Speaker 3>the momentum going on in Greater Manchester is fantastic and

0:03:53.240 --> 0:03:57.000
<v Speaker 3>it's not obvious to me also following Thursday, if Andy

0:03:57.040 --> 0:04:01.240
<v Speaker 3>stepped down and there was another election, that we'd get

0:04:01.280 --> 0:04:03.880
<v Speaker 3>anything other than the reform character coming through, like we're

0:04:03.880 --> 0:04:06.640
<v Speaker 3>getting all over the place, and I'm not sure that's

0:04:06.680 --> 0:04:10.880
<v Speaker 3>great for the whole devolution and sort of power of

0:04:10.920 --> 0:04:13.920
<v Speaker 3>what places like great Manster especially have been doing the

0:04:13.920 --> 0:04:14.680
<v Speaker 3>past decade.

0:04:15.280 --> 0:04:19.760
<v Speaker 2>Yeah, and Manchester being the second largest urban economy after London,

0:04:19.839 --> 0:04:22.520
<v Speaker 2>you know, hugely important. I think that's an interesting part.

0:04:22.720 --> 0:04:25.360
<v Speaker 1>Outgrown London by three times in the past.

0:04:26.480 --> 0:04:31.479
<v Speaker 2>Exactly. Yes, this is yeah, absolutely Andy Burnham's line, isn't

0:04:31.520 --> 0:04:34.839
<v Speaker 2>it clearly his his selling point? Look, what about Gordon

0:04:34.880 --> 0:04:38.040
<v Speaker 2>Brown and Harriet Harmon bringing them back? What does that say?

0:04:38.160 --> 0:04:40.400
<v Speaker 2>Does that help or hinder starm if you think that

0:04:40.440 --> 0:04:43.839
<v Speaker 2>he should? I mean, can he really cling on? Realistically?

0:04:44.800 --> 0:04:47.920
<v Speaker 3>I mean, I feel how do I put it carefully?

0:04:47.920 --> 0:04:49.919
<v Speaker 3>I mean I know all these people pretty well, and

0:04:49.960 --> 0:04:52.880
<v Speaker 3>I like a lot of them. Especially Gordon and Andy.

0:04:53.680 --> 0:04:59.120
<v Speaker 3>But I'm not sure bringing Gordon back is great for

0:05:00.160 --> 0:05:05.360
<v Speaker 3>the Chancellor image wise because obviously what Gordon's main strength

0:05:05.520 --> 0:05:12.040
<v Speaker 3>was in the past. And secondly, Gordon represents the old

0:05:12.120 --> 0:05:15.839
<v Speaker 3>school and the old days, and I'm not sure he

0:05:16.000 --> 0:05:20.320
<v Speaker 3>or Harriet really bring around this sort of seeming desire

0:05:20.400 --> 0:05:26.360
<v Speaker 3>for some kind of new approach the last Thursday's implied

0:05:26.400 --> 0:05:30.240
<v Speaker 3>results seem to want and call for. So what the

0:05:30.320 --> 0:05:33.080
<v Speaker 3>Prime Minister's going to do in the next couple of

0:05:33.080 --> 0:05:37.080
<v Speaker 3>hours has come up with some what looks like not

0:05:37.640 --> 0:05:40.520
<v Speaker 3>briefed thing in advance where it's really going to change

0:05:40.520 --> 0:05:43.920
<v Speaker 3>people's belief about how we're going to get greater growth

0:05:43.960 --> 0:05:46.520
<v Speaker 3>and greater belief that the Labor Party is delivering for

0:05:47.040 --> 0:05:50.440
<v Speaker 3>all these confused and contradictory.

0:05:49.680 --> 0:05:53.200
<v Speaker 4>Factions, well, it was reformed that when a lot of

0:05:53.240 --> 0:05:56.160
<v Speaker 4>the seats off Labor at the local elections. Jim, when

0:05:56.200 --> 0:05:58.440
<v Speaker 4>you listen to them, they say they're all about growth.

0:05:58.680 --> 0:06:01.239
<v Speaker 4>Do you believe any of the policy when it comes

0:06:01.240 --> 0:06:05.000
<v Speaker 4>to economics from Nigel Farage, I.

0:06:04.960 --> 0:06:06.640
<v Speaker 1>Don't really believe that. I don't.

0:06:06.720 --> 0:06:10.400
<v Speaker 3>I think if you look at reform proposals, it's just

0:06:11.520 --> 0:06:13.480
<v Speaker 3>it would scare the hell out of the guilt market

0:06:13.520 --> 0:06:16.359
<v Speaker 3>even more, maybe that's partly why the guilt market is

0:06:16.440 --> 0:06:20.200
<v Speaker 3>also struggling, because the markets may be coming to the

0:06:20.240 --> 0:06:25.640
<v Speaker 3>inevitable conclusion that whoever appears, whether it's Kis Starmers staying

0:06:25.680 --> 0:06:29.000
<v Speaker 3>on or somebody else, nothing's going to change and we're

0:06:29.000 --> 0:06:31.080
<v Speaker 3>going to get a reform government. But if you look

0:06:31.120 --> 0:06:34.360
<v Speaker 3>at all the sort of good is that Farage and

0:06:34.520 --> 0:06:41.279
<v Speaker 3>his close colleagues are promising, that implies much bigger budget

0:06:41.360 --> 0:06:45.320
<v Speaker 3>deficits than we have now and the massive constraints of

0:06:45.360 --> 0:06:48.200
<v Speaker 3>the labor force. So how are we going to get

0:06:48.400 --> 0:06:52.279
<v Speaker 3>anything vaguely better than what we have now is pretty

0:06:52.320 --> 0:06:54.120
<v Speaker 3>impossible for me to see at the moment.

0:06:55.440 --> 0:06:58.040
<v Speaker 2>And what about the triple lock. I mean, one of

0:06:58.080 --> 0:07:01.719
<v Speaker 2>the key issues for the budget is the fact that

0:07:01.880 --> 0:07:05.080
<v Speaker 2>it is massive spending on things like pensions, you know,

0:07:05.120 --> 0:07:08.640
<v Speaker 2>the promise to keep pensions state pensions rising. That is

0:07:09.040 --> 0:07:11.280
<v Speaker 2>that is very significant. It's one of the kind of

0:07:11.400 --> 0:07:16.280
<v Speaker 2>main anchors for the for the budget thing weighing the

0:07:16.320 --> 0:07:19.800
<v Speaker 2>budget down. They won't, they haven't, they've they've stuck to it.

0:07:19.840 --> 0:07:23.000
<v Speaker 2>Reform and the Labor Party exactly.

0:07:23.040 --> 0:07:26.200
<v Speaker 3>I mean again, it's part of this sort of madness

0:07:26.200 --> 0:07:29.000
<v Speaker 3>that's taken over the country. I mean, there are three

0:07:29.120 --> 0:07:31.920
<v Speaker 3>or four things that seem very obvious to me that

0:07:32.200 --> 0:07:34.560
<v Speaker 3>some leader at some point is going to be honest

0:07:34.600 --> 0:07:37.080
<v Speaker 3>and bold about and we're going to have a different,

0:07:37.240 --> 0:07:41.920
<v Speaker 3>better outlook, and that includes getting with the triple lock.

0:07:42.640 --> 0:07:47.640
<v Speaker 3>It is completely bonkers. It is very unfair to younger generations,

0:07:48.320 --> 0:07:52.560
<v Speaker 3>and everybody knows in private that it needs to go,

0:07:52.680 --> 0:07:56.440
<v Speaker 3>but nobody's bold enough to say it as a policy. Secondly,

0:07:56.480 --> 0:08:00.440
<v Speaker 3>along with that, we have some crazy inconsistencies going on

0:08:00.640 --> 0:08:05.160
<v Speaker 3>welfare payments, particularly with the so called pip payments, where

0:08:05.600 --> 0:08:08.760
<v Speaker 3>probably from the data outlooks close to a million people

0:08:09.160 --> 0:08:13.120
<v Speaker 3>who are claiming all three of them are earning more

0:08:13.160 --> 0:08:18.440
<v Speaker 3>than you get on the minimum wage, which is completely insane. Also, thirdly,

0:08:19.160 --> 0:08:25.400
<v Speaker 3>despy endless talk about doing something fundamental to the housing market.

0:08:26.280 --> 0:08:31.760
<v Speaker 3>We need to completely shift the incentive structure to make

0:08:31.840 --> 0:08:36.559
<v Speaker 3>sure that it's the value of the land that's taxed,

0:08:36.600 --> 0:08:40.360
<v Speaker 3>not the value of things that go on it, and

0:08:40.400 --> 0:08:44.880
<v Speaker 3>so we can get a much more dynamic housing market

0:08:44.920 --> 0:08:50.720
<v Speaker 3>and much more flexibility of social flexibility. And then lastly

0:08:51.440 --> 0:08:54.520
<v Speaker 3>we've got to be much more candid about the other

0:08:54.800 --> 0:08:58.880
<v Speaker 3>things within government spending, and this notion that we just

0:08:59.000 --> 0:09:02.840
<v Speaker 3>carry on spending more on health whatever goes on forever,

0:09:03.600 --> 0:09:07.040
<v Speaker 3>is equally insane, and especially in this area of AI,

0:09:07.600 --> 0:09:10.559
<v Speaker 3>we need to have a proper policy on trying to

0:09:10.920 --> 0:09:14.760
<v Speaker 3>truly improve using modern technology.

0:09:14.200 --> 0:09:15.000
<v Speaker 1>The health service.

0:09:15.440 --> 0:09:18.439
<v Speaker 3>And if you did all these four things, I think

0:09:18.480 --> 0:09:21.920
<v Speaker 3>you'd see a dramatically different, more positive mood from the

0:09:21.960 --> 0:09:26.440
<v Speaker 3>financial markets. And with it you get a boost in

0:09:26.480 --> 0:09:30.840
<v Speaker 3>financial conditions and probably a much greater lifting business and

0:09:30.920 --> 0:09:32.640
<v Speaker 3>consumer confidence pretty quickly.

0:09:33.080 --> 0:09:36.080
<v Speaker 2>Yeah. And the I pointed this out ahead of the

0:09:36.120 --> 0:09:38.440
<v Speaker 2>last general election and ahead of the local elections that

0:09:38.520 --> 0:09:42.880
<v Speaker 2>actually the manifestos that people were not the politicians not

0:09:42.960 --> 0:09:45.040
<v Speaker 2>telling the truth about this a word for the poor

0:09:45.080 --> 0:09:48.000
<v Speaker 2>British voter. The madness that you say sweeping the UK.

0:09:48.960 --> 0:09:51.520
<v Speaker 2>I want to put the point that Britain hasn't seen

0:09:51.559 --> 0:09:54.960
<v Speaker 2>wages grow. We've got GDP data this week. I'm not

0:09:55.000 --> 0:09:57.839
<v Speaker 2>sure we can even trust the data. GDP has been

0:09:57.920 --> 0:10:01.200
<v Speaker 2>week stagflation stalking the UK. I mean, is it not

0:10:01.360 --> 0:10:04.880
<v Speaker 2>understandable that voters are trying to cast around for an

0:10:04.920 --> 0:10:05.760
<v Speaker 2>actual solution.

0:10:06.840 --> 0:10:09.920
<v Speaker 1>I mean, of course it's not just unique to the UK.

0:10:10.040 --> 0:10:12.640
<v Speaker 3>This is happening in a lot of European countries and

0:10:12.679 --> 0:10:17.679
<v Speaker 3>to some degree obviously is behind the chump strength. International

0:10:18.040 --> 0:10:22.559
<v Speaker 3>liberal capitalism as is on the TIN hasn't effectively worked

0:10:22.559 --> 0:10:25.520
<v Speaker 3>properly for the past thirty years, and so that justifies

0:10:25.559 --> 0:10:28.000
<v Speaker 3>the voter as searching around in the way you described.

0:10:28.440 --> 0:10:32.160
<v Speaker 3>But what is bizarre is that they obviously don't really

0:10:32.200 --> 0:10:37.080
<v Speaker 3>look at what the policies of these radical newcomers suggest,

0:10:37.600 --> 0:10:40.520
<v Speaker 3>because as I said a few minutes ago, certainly from

0:10:40.520 --> 0:10:44.240
<v Speaker 3>what I can see, they're even worse in terms of

0:10:44.640 --> 0:10:49.400
<v Speaker 3>the incompatibility with getting growth and having stable financial markets.

0:10:49.800 --> 0:10:53.160
<v Speaker 1>And they would deliver more or worse of what we've

0:10:53.160 --> 0:10:56.080
<v Speaker 1>got now. Now it might well be that we need

0:10:56.120 --> 0:10:57.679
<v Speaker 1>to see one.

0:10:57.520 --> 0:11:02.839
<v Speaker 3>Of those radical parties actually having proper responsibility and they'd

0:11:02.920 --> 0:11:05.520
<v Speaker 3>last five minutes as well, and then we can finally

0:11:05.600 --> 0:11:11.560
<v Speaker 3>have a bit more honest and clear growth boosting policies

0:11:11.600 --> 0:11:14.920
<v Speaker 3>coming through from something a bit more conventional. But at

0:11:14.920 --> 0:11:18.360
<v Speaker 3>the moment it all seems completely crazy to me, and

0:11:19.080 --> 0:11:22.160
<v Speaker 3>there's no two ways of saying it. That the voters

0:11:22.160 --> 0:11:25.040
<v Speaker 3>appear to want reform, but it's not obvious to me

0:11:25.160 --> 0:11:25.439
<v Speaker 3>why