Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. You might have noticed the UK
Speaker 1: is going to the polls on December twelve. General elections
Speaker 1: are only supposed to happen once every five years, and
Speaker 1: this is the third since the first to be held
Speaker 1: in December since the nineteen twenties. For UK voters, Christmas
Speaker 1: is definitely not coming earlier this year. In fact, for
Speaker 1: the many schools that have to close on election day
Speaker 1: to be used as polling stations, Christmas may not happen
Speaker 1: at all. Up and down the land, Carol concerts and
Speaker 1: Nativity plays have had to be rescheduled or canceled for
Speaker 1: this snap election to go ahead. Some parents are very
Speaker 1: upset others Anyway, if that's all you want to know
Speaker 1: about the UK election, you should probably turn off now
Speaker 1: come back next week when we'll be talking about the
Speaker 1: future of India, among other things. But if you do
Speaker 1: want to know what's at stake in this UK election
Speaker 1: and what the lessons might be for Brexit Britain or
Speaker 1: Donald Trump's America for that matter, this episode is for you.
Speaker 1: At the end of the show, I'll ask our UK
Speaker 1: economist Dan Hansen how he thinks the economy will be
Speaker 1: affected by the election at b Brexit. But first we
Speaker 1: have a special debate I chared earlier this week with
Speaker 1: the heads of three extremely well respected independent think tanks
Speaker 1: here in the UK. It's been their job the last
Speaker 1: few weeks to tell fact from fiction in this highly polarized,
Speaker 1: rather febrile election campaign. We talked in the debate about
Speaker 1: what the two main parties were proposing in their election
Speaker 1: platforms or manifestos, what the key dividing lines were, and
Speaker 1: whether and how much any of it could really be believed.
Speaker 1: Lots of politics and policies and smart debate. No politicians,
Speaker 1: You're going to love it. The Institute for Fiscal Studies
Speaker 1: led by Paul Johnson, the Institute for Government led by
Speaker 1: Bronwyn Maddocks, and the UK in a Changing Europe there
Speaker 1: by Alan Meno, have played a massive role already in
Speaker 1: the truth telling battle. You're gonna get lots of truth
Speaker 1: telling this evening also questions from the audience here but
Speaker 1: also importantly from the from online. I have them all here.
Speaker 1: There's lots of questions that we already have. Most of
Speaker 1: them are worth about half an hour's discussion. At least
Speaker 1: so I apologize in advanced for people, um if their
Speaker 1: questions aren't fully answered, like is there an answer to
Speaker 1: the social care crisis? Um? But they really exciting news
Speaker 1: is that this has been more broadcast online and will
Speaker 1: also be on the Stephonomics podcast, which is available whenever
Speaker 1: wherever you get your podcast. M Paul, I think we
Speaker 1: will have to deal with economics first. If you step back,
Speaker 1: can we can we put look at to briefly look
Speaker 1: at where we are in terms of what the parties
Speaker 1: are suggesting, and I think more importantly put it into
Speaker 1: some context. Well, we've certainly got big differences between between
Speaker 1: the parties. I think it's worth starting actually thinking about
Speaker 1: the what's in the manifestos just by saying that everything
Speaker 1: about the economics and public finances in the next five
Speaker 1: years is incredibly uncertain. Whoever wins and whatever happens with Brexit,
Speaker 1: there's lots of uncertainty around what impact that's going to
Speaker 1: have on the economy and the public finances. Don't forget,
Speaker 1: as we often do. There's a big, wide world out there,
Speaker 1: which economically speaking, was doing pretty well until a couple
Speaker 1: of year and until earlier this year, and we lost
Speaker 1: out on a lot of that growth, but it's slowing down.
Speaker 1: We've got trade wars between China and the US. We
Speaker 1: get a recession about once every ten years, and it's
Speaker 1: about ten years since the last recession. So whether we
Speaker 1: get another one over the next parliament remains to be seen,
Speaker 1: and if we do, of course quite a lot of
Speaker 1: stuff might get balloon. Well, off course, what what the
Speaker 1: Conservatives saying, well in their manifesto, remarkably little, I think
Speaker 1: it's fair to say on public finances, spending and tax
Speaker 1: I think we said I think we'd certainly stand by
Speaker 1: that that if this had been a one year budget,
Speaker 1: we'd have described it as pretty modest. As as as
Speaker 1: a program for government, it's really for five years. There's
Speaker 1: really remarkably little in it. I mean, so spending in
Speaker 1: a couple of years time will be about thirty billion
Speaker 1: more than it is today. So in that sense, austerity
Speaker 1: at an end, no further cuts planned um and public
Speaker 1: service spending a little bit higher by three than it
Speaker 1: was in twenty ten. Not well, that's an awful lot
Speaker 1: to write home about. After more than a decade, the
Speaker 1: public service spending outside of health will still be way down.
Speaker 1: On where it was fifteen percent lower three on those
Speaker 1: plans than it was in twenty ten, so some real increases,
Speaker 1: but in a sense those were all pre announced and
Speaker 1: there's very little additional in the manifesto. You take all
Speaker 1: of that at face value and you get the deficit,
Speaker 1: the debt pretty steady roughly where they are, which is
Speaker 1: pretty much what you might think of most of the
Speaker 1: Conservative manifesto bar Brexit, which is steady as she goes.
Speaker 1: Not much change, of course, risks around what would happen
Speaker 1: as a result of no deal if that's where we
Speaker 1: end up in a year's time. Labor couldn't be much
Speaker 1: more different. Um the scale of the tax and spending plans,
Speaker 1: it's hard to overstates they really are extremely bit so,
Speaker 1: just to throw some big numbers at you, um, current
Speaker 1: spending increases eighty billion a year. This is on top
Speaker 1: of the thirty odd billion already coming through investment spending,
Speaker 1: and an extra fifty five billion a year on average
Speaker 1: over a parliament has doubling government investment and the tax
Speaker 1: increases of eight billion a year by all British historical standards,
Speaker 1: astonishing and unprecedented levels of tax and spending increases It's
Speaker 1: important to put addly in international context though. If you
Speaker 1: take the overall spending plans, they would take us from
Speaker 1: relatively low by Western European standards to rather more average
Speaker 1: by Western European standards as tax and spending as a
Speaker 1: fraction of national income, so unprecedented in UK history, but
Speaker 1: not unprecedented in terms of international comparison. Um on the
Speaker 1: on those spending plans, where's all that money going? I
Speaker 1: think the answer in the sense is it's largely going
Speaker 1: to a reimagined and more universal welfare state. So free
Speaker 1: higher education, free childcare, free personal care, free prescriptions, um
Speaker 1: and free, quite a lot of free TV licenses, free
Speaker 1: quite a lot of other things. This is actually not
Speaker 1: a manifesto focused on the poor. There's very little in
Speaker 1: there actually to undo the welfare cuts we've had over
Speaker 1: the last ten years. Probably less than a quarter of
Speaker 1: the welfare cuts to be reversed. And of course the
Speaker 1: main beneficiaries of the things that I just mentioned are
Speaker 1: those who currently are high earning graduates, are are older
Speaker 1: people who actually have some assets and so on. But actually,
Speaker 1: I think despite these big differences between labor and conservatives
Speaker 1: on their tax and spending plans. I think there's one
Speaker 1: thing in common, which is actually we don't really know
Speaker 1: what they would do, because it's not I think clausible
Speaker 1: that within a single parliament Labor could do all of
Speaker 1: the things that I've just described and nationalized water power, broadband,
Speaker 1: royal mail and bringing their inclusive share ownership SKI and
Speaker 1: as I say, double double investment spending and all the
Speaker 1: other things that they're describing. There's a list and aspiration
Speaker 1: which might be achievable over a couple of decades, but
Speaker 1: certainly isn't achievable over a couple of years. So I
Speaker 1: think actually with both Labor and Conservatives ones and left
Speaker 1: with a lot of uncertainty about what actually they would
Speaker 1: do um in in their time, in their time in government,
Speaker 1: where would where would Labor's plans leave us in terms
Speaker 1: of the public finance as well on their own on
Speaker 1: their own figures, borrowing would something like double um too
Speaker 1: about four percent of national income, the debt would national
Speaker 1: debt would be rising. And that's all assuming that the
Speaker 1: economy continue to grow as currently currently projected. But I
Speaker 1: think the big I mean the big story here is
Speaker 1: a huge increase in the role, scope and scale of
Speaker 1: the state not just in terms of its tax and spending,
Speaker 1: but in terms of nationalization, which would take more than
Speaker 1: five percent of private business assets into the into the
Speaker 1: public sector. A minimum wage actually which were directly set
Speaker 1: from Whitehall, the wages of a quarter of private sector workers,
Speaker 1: so high as it's set relative to the sorts of
Speaker 1: wages that people learned. So a dramatically different view of
Speaker 1: the role of the state compared with compared with the
Speaker 1: compared with the Conservatives, and a big change from where
Speaker 1: we've ever been. From wind your the in student has
Speaker 1: done some fantastic stuff almost daily on the public services
Speaker 1: piece of the election debates. I mean, it does strike
Speaker 1: me that although we talk about we've talked about the
Speaker 1: sort of big macro numbers, actually what's striking about this
Speaker 1: election is not the not the macro debates that we've
Speaker 1: tended to focus on in the past, but actually real
Speaker 1: disagreements about the cre economic level, about the basic principles
Speaker 1: for policy. Absolutely, let me say two general things about
Speaker 1: this election and then dig into some of the detail
Speaker 1: and pick up on these points that Stephanie and Paul
Speaker 1: are raising. And the first is that this is a
Speaker 1: real battle of ideas. We've had something of a consensus
Speaker 1: for thirty forty years about how to run government, no
Speaker 1: matter whether Labor or Conservatives have been leading that government.
Speaker 1: And it's about driving for more efficient use of public spending,
Speaker 1: bringing in some of the techniques from the private sector,
Speaker 1: like targets and a certain sort of managerialism. But you've
Speaker 1: even abroad consensus there and that the government was there
Speaker 1: to work with the private sector, and the boundary might
Speaker 1: go back and forth a bit, but the techniques for
Speaker 1: doing all that would would would get better and better.
Speaker 1: And this is um and certainly the challenge from Labor
Speaker 1: in this election is something very different. They don't see
Speaker 1: it that way, and they have on to great length,
Speaker 1: great length and the manifesto to spell out just how
Speaker 1: differently they see things. And while we can talk about
Speaker 1: the individual policies, I think we have to capture as
Speaker 1: well that this is really a different worldview about how
Speaker 1: government works, as well as the size of the state.
Speaker 1: And the second thing, picking up on a point that
Speaker 1: Paul made, is that they have promised too much. The
Speaker 1: Conservatives have promised too much with Brexit ah their big
Speaker 1: idea if you like there, their manifesto is not entirely
Speaker 1: devoid of things, because that sits there right in the middle.
Speaker 1: And yet what they've promised in terms of getting that done,
Speaker 1: and the time scale on which they've promised to do it,
Speaker 1: and the fact that they're objective depends on the European Union,
Speaker 1: not just on the European Union, but on the unanimous
Speaker 1: approval by twenty seven different European countries, makes that extraordinarily hard.
Speaker 1: That's them. Labor has, to its credit, spent obviously a
Speaker 1: great deal of time and many many pages in spelling
Speaker 1: out in detail what it intends to do. Um. The
Speaker 1: sheer bureaucratic volume of what they try to do, I
Speaker 1: think we need to remind ourselves of it. UM take
Speaker 1: them years, possibly simply to create the three new departments.
Speaker 1: They want things that are in there almost as an aside,
Speaker 1: like abolished universal credit, to be enormously disruptive and take
Speaker 1: a couple of a couple of governments to do, and
Speaker 1: I'm not sure they'd be well advised to do it.
Speaker 1: And that's before getting onto some of the big planks
Speaker 1: of what they want to do, like renationalization and so on.
Speaker 1: So you know, they've got enough in there for many,
Speaker 1: many governments. And this question of prioritization, I think would
Speaker 1: be particularly forceful director directed at them on ownership, which
Speaker 1: matters a great deal to labor Um. We can see
Speaker 1: from this manifesto labor as really set out it believes
Speaker 1: that it matters who owns things. It matters that if
Speaker 1: the government owns things, it matters if workers own things,
Speaker 1: and it is clearly after a transfer of power UM
Speaker 1: through this ownership. I think it has yet to make
Speaker 1: the case that government ownership of many of the problematic
Speaker 1: things it has alighted on, for example, the railways would
Speaker 1: be dramatically would lead to a dramatic improvement UM. These
Speaker 1: These are problematic for many reasons, but they were under
Speaker 1: government ownership before. It is absolutely true that in some
Speaker 1: cases UM priadization has not helped. But the fault I
Speaker 1: think has lies more easily, is more easy to identify
Speaker 1: the faults with a regulatory regime, and that would be
Speaker 1: an easier starting point then simply pulling the whole lot
Speaker 1: into government hands again. And there is not in many
Speaker 1: cases capacity to man the edge of these things in
Speaker 1: the way that there was in the past in government,
Speaker 1: and to say that all these problems will suddenly go away.
Speaker 1: They won't they will be more easily pinned at the
Speaker 1: door of ministers. Allen's going to talk much more about Brexit,
Speaker 1: but I would just say I'm at the Conservative deadline
Speaker 1: of the end of the year is so tight, you
Speaker 1: preparing so thoroughly already for those negotiations, and you only
Speaker 1: have to scaff in a few words like fish and
Speaker 1: Gibraltar to make the whole thing very complicated and difficult
Speaker 1: for any new government UK government to accept that there
Speaker 1: is a real possibility if we have a Conservative government here,
Speaker 1: that we have another no deal cliffhanger, though the room
Speaker 1: for compromise that both sides showed might lead us to
Speaker 1: hope that that could be brushed away on labor side,
Speaker 1: This timetable of six months to get it all done,
Speaker 1: including a second referendum, I honestly think is for the birds.
Speaker 1: It just um they would have to be bringing in
Speaker 1: legislation right away for a second referendum without even knowing
Speaker 1: what the question was, because they wouldn't have done the
Speaker 1: deal yet. So I think they've been unrealistic, both of
Speaker 1: them in different ways on this, And I just come
Speaker 1: back to that point of the battle of ideas. I
Speaker 1: mean this, these are two very very different expressions of
Speaker 1: how government works and the role of government plays in
Speaker 1: fixing things and by extension, the role of freedom for
Speaker 1: individuals or businesses. It is a battle about liberalism in
Speaker 1: a way, and we can express some of this in numbers,
Speaker 1: um the sheer amounts of money going to one thing
Speaker 1: or other, but it's bigger than that, um. And so
Speaker 1: even though this has been called the Brexit election and
Speaker 1: the public services and wall of money election, I think
Speaker 1: it really is a battle of ideas, and I want
Speaker 1: to I'm going to come back very briefly on that,
Speaker 1: because I do think it's interesting. It hasn't come out
Speaker 1: of nowhere, this very different approach um. And of course
Speaker 1: many people would say it's directly a throwback to a
Speaker 1: previous time and previous Labor Party policies, but that how
Speaker 1: much do you think it's a reflection on the failures
Speaker 1: of that sort of managerial approach that was in a
Speaker 1: sentence for all these years that throughout this period, not
Speaker 1: just recently, throughout this period, quite significant majorities of the
Speaker 1: public have been in favor of renationalizing quite large chunks
Speaker 1: of the privatized industries, and certainly younger people also have
Speaker 1: a perception that things have that that managerial model certainly
Speaker 1: didn't change enough in response to the financial crisis. I
Speaker 1: was struct there was a very good Business Week piece
Speaker 1: about trying to explain to the Business Week audience and
Speaker 1: the Bloomberg audience this week how Corbin had sort of
Speaker 1: got so far, and particularly about you know, how radically
Speaker 1: he was, but also how particularly younger people supported him.
Speaker 1: And he's that says they not only have zero problem
Speaker 1: with his desire for an activist state, they see it
Speaker 1: as the sole remedy for system that's still forcing average
Speaker 1: people to pay for the sins of the financial industry
Speaker 1: and the crash. I mean there is a bit of
Speaker 1: some of this is is because there was a failure
Speaker 1: to change. I think that's exactly right. And I think
Speaker 1: it's it's it's older than the financial crisis itself. Um.
Speaker 1: And I think some of the privatizations, you know, it
Speaker 1: worked partly. Um. You can argue it's not very popular
Speaker 1: that the railways were even worse before and carried many
Speaker 1: fewer people. Um. And and that beat has in a
Speaker 1: lumbering way improved itself. H and so on. And I
Speaker 1: think that is right. But the regulators also, to my mind,
Speaker 1: have struggled with a very difficult job, not just a
Speaker 1: price regulation, but sometimes of content regulation in the case
Speaker 1: of Offcom. They've got they've got very very difficult jobs.
Speaker 1: And there is not a great deal of support rightly
Speaker 1: in my view for kind of unelected technocrats presiding of
Speaker 1: these things that really affect people's household bills and so on.
Speaker 1: So I think a lot of the challenges right and
Speaker 1: when you come to the generational imbalances, um, we can
Speaker 1: have this, there would be a whole seminargist on the
Speaker 1: definitely be very expert on. But what the responses to
Speaker 1: the financial crisis did in terms of the exacerbating the
Speaker 1: problems in the housing market and exacerbating our stocks of
Speaker 1: wealth for some some parts of the population easily caricatured.
Speaker 1: But but there is enormous sting in that for the
Speaker 1: generational divide, and I think politicians have been very very
Speaker 1: slow to recognize that and to address some of the
Speaker 1: particular problems for example, the housing the housing market, UM,
Speaker 1: and so these things are built up. But state where
Speaker 1: the state ownership is actually a remedy for all of these,
Speaker 1: I think is an entirely separate argument along that I
Speaker 1: think Labor has has really yet to make the case
Speaker 1: for let alone to win ann and men not um.
Speaker 1: Bromwin said, this was supposed to be the Brexit election.
Speaker 1: It is striking that it has not been as dominated
Speaker 1: by Brexit as we might have expected, and I guess
Speaker 1: some people would take that as an example as a
Speaker 1: sign of these other real debates being quite important to people.
Speaker 1: I guess the other the other reason might be that
Speaker 1: people just don't fed up with talking about Brexit and
Speaker 1: don't know who to believe, because, as brom Win says,
Speaker 1: there is so much unreality on both sides on this topic.
Speaker 1: What do you think well? And yet at the same time,
Speaker 1: people have very strong feelings about Brexit. That mean that,
Speaker 1: you know, if you look at the survey evidence, far
Speaker 1: more people in the British Social Attitudes Poll, of the
Speaker 1: survey that's taken are now very interested in politics and
Speaker 1: whatever the case before, we can expect I think pretty
Speaker 1: high turn out, not just because people are motivated because
Speaker 1: we have a new registers so are counting fewer dead
Speaker 1: people now, so the proportion is going to be naturally so,
Speaker 1: so I think people are motivated by Brexit I mean
Speaker 1: the problem is, I think, are there are the specters
Speaker 1: as as Bromwin hinted at this, that they're being offered,
Speaker 1: aren't all together straightforward or necessarily honest. On the point
Speaker 1: about and I'll come onto the manifesteds in a minute,
Speaker 1: but on the point about whether or not this is
Speaker 1: a Brexit election, I suppose the proof of the pudding
Speaker 1: is going to be in the eating. Now, seventeen was
Speaker 1: meant to be a Brexit election, but if you dig
Speaker 1: into the numbers, then actually social class as ever was
Speaker 1: the primary driver of how people voted. So there was
Speaker 1: a Brexit impact, but it was quite limited. And what
Speaker 1: we don't know this time, and I'll come back to
Speaker 1: this in a minute, because it matters is whether or
Speaker 1: not new Brexit coalitions will take shape, whether in particular
Speaker 1: the Tories come to power on the back of a
Speaker 1: Brexit coalition that might win the majority, but I might
Speaker 1: actually make it very very hard for them to govern
Speaker 1: because creating a set of economic policies for that Brexit
Speaker 1: coalition is going to be challenging, to say the least.
Speaker 1: But on the manifestos, if I start with Labor, I
Speaker 1: mean the Labor offer is on the surface quite simple.
Speaker 1: We're going to go to Brussels, we're gonna negotiate the deal,
Speaker 1: we're gonna come back, gonna have a referendum, and as
Speaker 1: bron Win says, that will take us six months and
Speaker 1: then we'll move on to other things. Now there are
Speaker 1: holes in this, I mean not least in the fact
Speaker 1: that it's far from clear what Jeremy Corban is going
Speaker 1: to ask for in Brussels. There are some wonderfully ambiguous
Speaker 1: phrases in the manifesto joined UK EU Trade Deals is
Speaker 1: one such phrase. If by joints the Labor Party mean
Speaker 1: that EU will negotiate them and we will have to
Speaker 1: apply them, then I think the EU could probably live
Speaker 1: with that. If by joint the Labor Party means we're
Speaker 1: going to get a real say over them, I suspect
Speaker 1: Brussels might turn around and say hectually no. So that's
Speaker 1: one issue where there's going to be a little bit
Speaker 1: of ambiguity, and the other is on the notion of
Speaker 1: alignment with the Single Market. What Labor don't say is
Speaker 1: how much. So the scale of ambition is very very unclear. Uh.
Speaker 1: And of course, when it comes to the political practicalities
Speaker 1: of the labor position. There's very little escaping from the
Speaker 1: fact that even were Jeremy Corbyn to pull this trick off,
Speaker 1: to go to Brussels renegotiate a deal, and there are
Speaker 1: reasons I think to wonder whether he'll get that far,
Speaker 1: which I'll come back to in a sect, But he
Speaker 1: will come back and then find a significant amount of
Speaker 1: his own cabinet, of his own parliamentary party, of his
Speaker 1: own party membership, and of his own electorate will then
Speaker 1: go and campaign against what he's just done, which at
Speaker 1: a minimum is not a good look. I mean, you know,
Speaker 1: think back to six It's not a good look for
Speaker 1: a prime minister to have his deal trashed by his
Speaker 1: own party. So there's there's instability inherent in that anyway,
Speaker 1: So you know there there there are there are issues
Speaker 1: around what what what labor is offering. I personally think
Speaker 1: it will be very very hard for a minority labor
Speaker 1: government because that is the only source of labor government.
Speaker 1: We're going to have to get the necessary legislation through
Speaker 1: Poland my hunches as they try to do this and
Speaker 1: run into the choppy waters of a Lib Dem party,
Speaker 1: half of whose MPs will be people who left in
Speaker 1: order that Jeremy Corbyn didn't become Prime Minister of an
Speaker 1: SMP that has its own list of demand, I wouldn't
Speaker 1: be at all surprised if we weren't to have another
Speaker 1: election before we got anywhere near a referendument. Will see
Speaker 1: what happens. I was going to say that to last
Speaker 1: actually uh turned to the Tories. I mean, there are
Speaker 1: three things that concerning about the Tory manifestoized, but well,
Speaker 1: one thing that doesn't concern me is I think I
Speaker 1: would say that if the Conservatives come back with a
Speaker 1: majority of one, they will get Brexit done by the
Speaker 1: end of January, because I'm pretty certain that no Conservative
Speaker 1: MP returned in this election will vote against any Brexit
Speaker 1: motion in the House of Commons until we've left, so
Speaker 1: I think they only need a very very small majority
Speaker 1: to get us over that line. Then, going back to
Speaker 1: one of the things I said earlier, if you imagine
Speaker 1: a Tory party in Parliament that involves not just traditional
Speaker 1: Tory MPs, but you know, a Tory MP for I
Speaker 1: can hardly say this a Tory MP for Wakefield, for Bolsover,
Speaker 1: for West Bromwich, for Walsall all those people once they've
Speaker 1: been elected and got over the sort warm Glowe will
Speaker 1: be thinking, hang on a say, the Prime minister's plan
Speaker 1: for Brexit is to make our economical relationship with the
Speaker 1: European Union so thin that a significant number of my
Speaker 1: constituents might lose their jobs Before I'm up for re election,
Speaker 1: those pressures will be real inside the Parliamentary Conservative Party,
Speaker 1: I think quite quickly. So in a sense, the more
Speaker 1: successful Boris Johnson's electoral strategy is, the harder it will
Speaker 1: be to deliver the sort of Brexit he's been promising.
Speaker 1: Just putting you on the spot because there's a question
Speaker 1: from online that does just that. What is harder to
Speaker 1: do negotiate the future relationship within the year, or negotiate
Speaker 1: a new withdrawal agreement and hold a referendum within six
Speaker 1: months if you're just kind of you know, on the
Speaker 1: implause and bombitter which which which one is kind of
Speaker 1: off the scale and which one is or they are
Speaker 1: they both? Well, they're not neither easy. The trade. I remember,
Speaker 1: it's not just the trade that depends the scale of
Speaker 1: our ambitions. I mean, one piking omission from the Tory
Speaker 1: manifesto is any mentioned at all of security corporation with
Speaker 1: the European Union, and let issues around military corporation, round
Speaker 1: data sharing for police collaboration are incredibly important. If you
Speaker 1: want to do all of that, and you want to
Speaker 1: do it well, you're not going to do it in
Speaker 1: a year. So negotiating a good, broad, thorough relationship with
Speaker 1: our nearest and largest trading partner is not going to
Speaker 1: take the year, is going to take longer. So that's
Speaker 1: that's the most implausible. But the other one is pretty
Speaker 1: I've been looking through I had been paying attention, but
Speaker 1: I'm also looking through all the many, many questions meant,
Speaker 1: some of which came in before before we started talking.
Speaker 1: Others are trying to prove that they are watching by
Speaker 1: noticing that Paul Johnson's wearing red sox question always well,
Speaker 1: there you go. Actually they make that comment as well,
Speaker 1: it's your's. There's quite a few about what the impact
Speaker 1: is going to be of all these policies going to
Speaker 1: be on productivity, because that is something that many of
Speaker 1: us have talked about, indeed wanted politicians to focus on
Speaker 1: over the last few years. And it struck me that
Speaker 1: there's a kind of broader thing about growth, you know,
Speaker 1: you see I see a lot of the investment banks
Speaker 1: and independent economists analysis of different economic scenarios after after
Speaker 1: the election, and it's quite striking that they all they
Speaker 1: can't really get around the fact that growth is they
Speaker 1: would expect the economy to be larger and growth to
Speaker 1: be faster under the Labor Party because they are in
Speaker 1: putting the fiscal policies the stimulus of the next few years,
Speaker 1: they're also looking at the very least the assumption is
Speaker 1: either that you might not have Brexit after second referendum,
Speaker 1: or that you would have at least a softer form
Speaker 1: of Brexit. And of course you can see that that
Speaker 1: kind of goes against the grain because they also know
Speaker 1: that there are all these policies that they might imagine
Speaker 1: would be bad for growth. But traditionally we've been we
Speaker 1: found it quite hard to sort of model in short
Speaker 1: time for forecast those kind of dynamic effects. So how
Speaker 1: do you think about the growth in the relative growth
Speaker 1: impact of the manifestos if some proportion of these policies
Speaker 1: are implemented. Yeah, that's a very in a sense, that's
Speaker 1: the most important, one of the most important questions, but
Speaker 1: it's an incredibly hard one m to answer and there
Speaker 1: are big risks and with with with with both of
Speaker 1: the main parties. So if you look at if you
Speaker 1: look at the sort of sort of take the Conservatives
Speaker 1: as the sort of baseline as it were, and assume
Speaker 1: that they achieve something like the kind of Brexit that
Speaker 1: they're they're looking for, then most of the forecasts are
Speaker 1: for pretty miserable growth over the next five years one
Speaker 1: and a half cent a year um something like that,
Speaker 1: which is which is well down on what we would
Speaker 1: normally have expected over the last fifty or sixty years. Uh.
Speaker 1: And you know that's associated with a combination of the
Speaker 1: costs around Brexit and just a continuation of very poor
Speaker 1: productivity growth that we've seen for the last for the
Speaker 1: last decade. A couple of people have asked this, are
Speaker 1: our institutions of state, civil service, judiciary, etcetera strong enough
Speaker 1: to withstand the assault from politicians? And what can people
Speaker 1: do to help? I mean another version of this, in
Speaker 1: the sense, which is more specific to Whitehall, is is
Speaker 1: the concept of an impartial civil service likely to survive
Speaker 1: this election and the post truth era. I say severything.
Speaker 1: I mean, first thing, actually, levels of public trust are
Speaker 1: quite reassuring. I remember looking at the time of the
Speaker 1: Supreme Court judgment of the figures on trust in the judiciary,
Speaker 1: and it was I think near eighty percent or something.
Speaker 1: There are obviously challenges to our institutions. There's the challenge
Speaker 1: of a sort of thinly disguised ambition among some round
Speaker 1: the Prime Minister to politicize the civil service. There's the
Speaker 1: horrible way in which individual civil servants were singled out
Speaker 1: and named by politicians that I thought was shameful. Ah.
Speaker 1: There is the fact that you know, at least and
Speaker 1: I say at least because I think it's more but
Speaker 1: just to peopolite. Let's say at least three of the
Speaker 1: parties in this election are running on what you could
Speaker 1: call populist platforms. So we have a Prime Minister running
Speaker 1: on a platform of the people versus the Parliament that
Speaker 1: failed them. You have a Labor Party running on the
Speaker 1: platform of us versus the establishment that rips you off.
Speaker 1: And you have Nigel Farage. And you know that is
Speaker 1: a danger to our institutions in the sense that you know,
Speaker 1: this sort of populism isn't all that helping. But I
Speaker 1: still I'm still one of those people that thinks we're
Speaker 1: in the middle of what is a political rather than
Speaker 1: a constitutional crisis as yet, and I think this gets
Speaker 1: resolved when we get a majority government. Very interesting you
Speaker 1: say that about a majority government and what it could do,
Speaker 1: because one of the other questions that was more fundamental
Speaker 1: was whether Britain's concept of liberal democracy could survive either
Speaker 1: Labor or Conservatives winning an overall majority in the next election.
Speaker 1: It sounds like you think it could actually be a
Speaker 1: step in the right direction. But Paul, if you have
Speaker 1: a majority, when one thinks about when you talk about
Speaker 1: the implausibility of some of the of the promises on
Speaker 1: the labor side, but also the lack of clarity on
Speaker 1: the Conservative side around the implications of some of about
Speaker 1: Bexit and other things, there are many people in this
Speaker 1: country who are trying to vote for a hung parliament,
Speaker 1: even though the system makes it very difficult. Um, without
Speaker 1: putting you too much on the spot, um, do you
Speaker 1: all of you actually do you fundamentally think we would
Speaker 1: be in a better or worse place with another round
Speaker 1: of hung parliament or whatever the outcome, We'd be better
Speaker 1: with a majority parliament. One thing that majority on either
Speaker 1: side would tell us, which I think we just don't
Speaker 1: know at the moment is what actually are their priorities? UM,
Speaker 1: So you know, I think you know, it is implausible
Speaker 1: that the Labor could implement its manifesto in a parliament.
Speaker 1: It is not implausible that it could put us on
Speaker 1: a path towards implementing it over two or three parliaments
Speaker 1: and make big changes within one. UM, But we don't
Speaker 1: know how they would do it, what they would do first,
Speaker 1: what they'll prioritize, or any of those things. So what
Speaker 1: the world would look like in five years time under
Speaker 1: that world, we don't know it. Equally, we don't know
Speaker 1: what a Tory majority would do because their manifesto says
Speaker 1: so remarkably little. So I mean, at least a majority
Speaker 1: would would would tell us what one side actually wanted
Speaker 1: presumably um and what it's what it's actual priorities were.
Speaker 1: Either either one winning a majority would clearly, you know,
Speaker 1: if labeled one a majority, we'd have to be a
Speaker 1: very different country in five years time to the country
Speaker 1: we would be if the Conservatives one a majority. But
Speaker 1: I think it also asked the question about what what
Speaker 1: is then the impact on the next election, And going
Speaker 1: back to what Anan was saying, I mean, if the
Speaker 1: Conservators win a majority by winning a bunch of these
Speaker 1: seats in the Midlands and the North, and the economy
Speaker 1: doesn't look too hot in five years time because of
Speaker 1: a particularly hard Brexit or what have you. You can
Speaker 1: imagine that we swing one way this time and then
Speaker 1: swing very dramatically the other way next time. And the
Speaker 1: same may or to be true of labor towards towards Conservatives.
Speaker 1: So I suppose one of the risks, as it were,
Speaker 1: of majority on either side is you get lots of
Speaker 1: change which we don't know which were direction it will
Speaker 1: be inexactly or where it will be this time, and
Speaker 1: then the next part of just undoes it again because
Speaker 1: of this kind of because of this polarization and where
Speaker 1: where the parties are. So I think the you know,
Speaker 1: the going back to what bron we were saying that
Speaker 1: our electoral system and you know, in a sense the
Speaker 1: we the in party democracy, which I think is actually
Speaker 1: kind of you know, driving this polarization within the electoral
Speaker 1: system that we have. I mean, you could imagine bigger
Speaker 1: swings Parliament to Parliament if we get majorities at each
Speaker 1: in each case, which itself could be our supposed destabilizing.
Speaker 1: Although the system doesn't work very well without majority government
Speaker 1: in parliament, all kinds of conventions of that parliament don't
Speaker 1: work very well. I'm not sure that British people will
Speaker 1: feel that if we do have this swinging around, that
Speaker 1: they are very well represented by these majorities getting in Alternately,
Speaker 1: and Brexit has proved a very good case of that
Speaker 1: of the narrow losing minority not feeling that their views
Speaker 1: are represented, and possibly some of those who voted um
Speaker 1: leave not feeling that Boris Johnson's version of le represents
Speaker 1: them either. And I think going to your question Stephanie,
Speaker 1: about you know, is our version of liberal democracy going
Speaker 1: to hold up. I'm not sure without a change in
Speaker 1: the voting system that people are going to feel represented
Speaker 1: by this in the way that they would like to.
Speaker 1: And there's that potentially accelerated by having having another unclear result.
Speaker 1: I think it's happening anyway. I think both the majority
Speaker 1: that charges for something that much of the country doesn't
Speaker 1: want or hung parliament that just makes everyone feel like
Speaker 1: we can't stand anymore of this can do it. But
Speaker 1: a hung parliament would at least force the question of
Speaker 1: whether a change in the voting system was necessary because
Speaker 1: it's that is such a nice clear ending, and we
Speaker 1: have run out of time. I will leave it there.
Speaker 1: We have had clarity, We've had rigor we have, even
Speaker 1: if you look very carefully, had crumbs of optimism here
Speaker 1: and there. Whether whether I come away with a reason
Speaker 1: to have a spring in my step as I approached
Speaker 1: the polling station in a little over a week's time,
Speaker 1: I'm not sure, but thank you very much to the
Speaker 1: truth tellers, Paul Johnson, Bromomatics and Anna mental m. Now
Speaker 1: I'm going to have a quick word with Dan Hanson,
Speaker 1: who's our senior UK economists who actually came to Bloomberg
Speaker 1: a few years ago from Her Majesty's Treasury. No less, Dan,
Speaker 1: we heard from the experts. They're a lot about the
Speaker 1: long term impact on the economy of various scenarios for
Speaker 1: Brexit and for the election, But you've been thinking about
Speaker 1: sort of a more short term outlook for the UK
Speaker 1: and how it could be affected by the election. What
Speaker 1: should we expect. Yeah, that's right. So it's no secret
Speaker 1: that elections in the UK have become increasingly hard to predict,
Speaker 1: and we only have to look back to to be
Speaker 1: reminded of that. Um So, with that in mind, as
Speaker 1: you as you just said, we've been thinking about scenarios
Speaker 1: and we've been thinking about three in particular. The first
Speaker 1: is that Boris Johnson gets the majority he's looking for,
Speaker 1: which most which if you looked at the polls, you'd
Speaker 1: say that still that was the most likely. You look
Speaker 1: at the polls, you look at bookmakers odds, they'repending about
Speaker 1: chance on it. And for the economy, we think that
Speaker 1: would mean a few things. We think there would be
Speaker 1: some modest pickup in business investment. We don't think all
Speaker 1: of the investment that was lost over the past three
Speaker 1: years going to come back. One of the big questions
Speaker 1: for the first six months of any new Tory government
Speaker 1: will be will they extend the transition period, the Brexit
Speaker 1: transition period. That question is going to come up in
Speaker 1: the summer, at the end of June, because there's this
Speaker 1: point back, can you really do the whole trade deal
Speaker 1: in twelve months, which is what their theory they're planning
Speaker 1: to do. Theoretically, yes, but experience shows that that that's
Speaker 1: highly highly ambitious. Um. The other thing you've got to
Speaker 1: look out for for the economy and growth next year's
Speaker 1: fiscal policy. We know that fiscal policy is gonna be
Speaker 1: loosening quite significantly. A big question here is will the
Speaker 1: Tories be able to find all these investment projects, bring
Speaker 1: them online quickly and will they provide a real return?
Speaker 1: I mean, there's there's likely to be a demand boost
Speaker 1: because you put people in employment, you pay them wages,
Speaker 1: they spend the ash. But will they have a long
Speaker 1: term benefit these projects that are coming online, And the
Speaker 1: Bank of England's going to look at that. So if
Speaker 1: you have you have a have a conservative majority. Still
Speaker 1: got uncertainty around Brexit. What does that mean for for
Speaker 1: interest rates? So of you is that it means stay
Speaker 1: on hold. They've been on hold for a while. I
Speaker 1: mean I think they've they've moved in a dubbish direction. Um,
Speaker 1: that's pretty clear. But I think with the combination of
Speaker 1: some pick up We're not talking about a big, big
Speaker 1: increase in business investment, but some pick up in business
Speaker 1: investment and a pretty big fiscal policy loosening on the horizon. Remember,
Speaker 1: the Bank England looks over three years and they hit
Speaker 1: trying to hit inflation in two years, hit the inflation
Speaker 1: target in two years time. Um, those two things together.
Speaker 1: We think balance of probability, the next move will be
Speaker 1: up rather than down. But they're going to wait for that,
Speaker 1: for that cyclical boost to come through, all right, And
Speaker 1: that's if you have a full majority. That what as
Speaker 1: the bookmakers would would predict now, which is a Conservative
Speaker 1: majority under Prime Minister Boris Johnson. But the polls have
Speaker 1: narrowed a little bit, and as you said, they've been
Speaker 1: wrong recently, particularly because Brexit kind of scrambles the numbers
Speaker 1: in various ways. Lots of people might be even more
Speaker 1: than usual, might be voting tactically in some of these
Speaker 1: places where they want people who don't want to see
Speaker 1: Brexit so quickly. What are the other outcomes and is
Speaker 1: it if you're stepping back, what is it. Is it
Speaker 1: going to make a real difference to the economy in
Speaker 1: the next twelve months. I think it will. I mean
Speaker 1: that the other outcome we've been looking at is if
Speaker 1: we have what we have now, where you have a
Speaker 1: Tory minority, they have the most seats in Parliament, but
Speaker 1: they can't form a government because no one else wants
Speaker 1: to support them. They don't have the support the d
Speaker 1: UP for example. But it's also the case that all
Speaker 1: the other parties can't form a government, and certainly a
Speaker 1: stable government, a stable what would be a coalition. And
Speaker 1: in that world, we would expect the economy to perform
Speaker 1: pretty similarly to how it's done over the past twelve months,
Speaker 1: which is not very well. Yeah, it's you'd have a
Speaker 1: you'd have a world, we think at least where growth
Speaker 1: would stay around the point two percent quarter on course
Speaker 1: mark that's point eight percent annualized growth, and we think
Speaker 1: at least the trend rate for greasing the economy is
Speaker 1: about point four percent or one point six percent annualized.
Speaker 1: So the Bank of England's looking at that the world.
Speaker 1: This is a world of entrenched uncertainty and it's a
Speaker 1: scenario they have warned about and why a couple of
Speaker 1: policymakers in November voted for a cut. If that begins
Speaker 1: to come to fruition, we think it's more likely than
Speaker 1: not that they'd actually loosen policy. And it's so funny
Speaker 1: that the things that add to the list of things
Speaker 1: to be uncertain about. Remember, we've got the Bank of
Speaker 1: England Governor Mark Harney, who many people will have got
Speaker 1: to know over the years. He was supposed to be
Speaker 1: stepping down. We'll he's supposed to have stepped down loads
Speaker 1: of times, and he's each time he's had to have
Speaker 1: an extension. He is supposed to be stepping down at
Speaker 1: the end of January. We don't know who's going to
Speaker 1: replace him because people were waiting. We're waiting for this election. UM.
Speaker 1: So that is another thing that will be uncertain about.
Speaker 1: I guess even if Labor against the Odds were able
Speaker 1: to form a government, maybe they don't win a majority,
Speaker 1: but a kind of gang together with these other remaining
Speaker 1: party these remain parties Lib Dems and the Scottish Nationalists
Speaker 1: for example. UM. That also means uncertainty because we don't
Speaker 1: know what we even under that scenario. You don't really
Speaker 1: know what's going to happen with Brexit anything. So it
Speaker 1: sort of feels like this is an election that was
Speaker 1: sold to people, as you know, getting Brexit done and
Speaker 1: resolving things. Under all three scenarios, the uncertainty affecting the
Speaker 1: economy continued, and you will have plenty still to do.
Speaker 1: Thank you, Thank you very much for that, Thanks for
Speaker 1: listening to Stephanomics. We'll be back next week talking about
Speaker 1: India and probably trying not to talk about the UK
Speaker 1: election in the meantime. You can find us on the
Speaker 1: Bloomberg Terminal website, app or wherever you get your podcasts,
Speaker 1: and for more news and analysis from Bloomberg Economics, follow
Speaker 1: at Economics on Twitter. You can also find me on
Speaker 1: at my Stephanomics. The debate featured in this episode was
Speaker 1: held at the Royal Institution in Central London. It was
Speaker 1: co hosted by the Institute for Fiscal Studies, the Institute
Speaker 1: for Government and the UK in a Changing Europe. The
Speaker 1: show was produced by Magnus Hendrickson and edited by Scott Lamman,
Speaker 1: who is also the executive producer of Stephanomics. Special thanks
Speaker 1: to Dan Hansen, Paul Johnson, Bromwin Maddox, Anna Menon, Greg
Speaker 1: Opie and Bonnie Brimstone. Francesca Levie is the head of
Speaker 1: Bloombergh podcast