WEBVTT - The US-EU Tariff Deal and Reeves vs Bailey 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:17.600 --> 0:00:20.279 Welcome to the Merton Talks Money Market rap, where we 0:00:20.320 --> 0:00:22.440 talk about the biggest moves in markets this week and 0:00:22.480 --> 0:00:25.920 what's driving them. I'm joined Stebick, senior reporter and author 0:00:25.920 --> 0:00:29.000 of the Money Distilled newsletter. Mern's off and holiday for 0:00:29.040 --> 0:00:33.400 a few weeks, so I've invited show regular Marcus Ashworth, 0:00:33.840 --> 0:00:37.720 Bloomberg Opinion colmist in Markets Guru to join me in 0:00:37.760 --> 0:00:41.120 the studio. Nice to have you back, Marcus said. 0:00:41.600 --> 0:00:44.560 Now you haven't got stripefa Yeah, always a pleasure, never. 0:00:46.440 --> 0:00:48.960 Right, So away, let's talk about what's been happening this 0:00:49.080 --> 0:00:52.599 week and at the weekend we have a deal in 0:00:52.600 --> 0:00:58.480 my old stomping ground of Girvin on the Scottish coast, 0:00:58.600 --> 0:00:59.680 the Scottish Riviera. 0:01:00.080 --> 0:01:03.000 Yes, it's been very amazing watching people work out where 0:01:03.040 --> 0:01:03.240 is that. 0:01:05.280 --> 0:01:07.400 There's a big rock in the sea called Elsa Craig 0:01:08.200 --> 0:01:11.240 and it's a very very beautiful segment of you come over, 0:01:11.640 --> 0:01:15.560 assuming that it's not raining, which it never isn't. But anyway, 0:01:15.600 --> 0:01:19.000 so I said, Trump and the EU signed a deal, a. 0:01:19.280 --> 0:01:21.199 Deal for Yeah. 0:01:21.280 --> 0:01:25.600 Yeah, what's your take because I'm looking at it and 0:01:25.640 --> 0:01:27.880 the idea is that so they basically get the same 0:01:27.920 --> 0:01:31.919 deal as Japan fifteen percent across the board and everything 0:01:31.959 --> 0:01:36.520 the EU sells enter the US and basically nothing from 0:01:36.560 --> 0:01:38.880 the other side. And this is one reason that all 0:01:38.920 --> 0:01:41.400 everyone in the EU is feeling a little bit aggrieved, 0:01:41.400 --> 0:01:47.080 a little bit humiliated. But is that is that the reaction. 0:01:46.520 --> 0:01:49.360 I'm going to take, for a change a controversial view 0:01:49.400 --> 0:01:51.360 on this. I actually think that EU have done a 0:01:51.360 --> 0:01:54.200 lot better than they give them themselves any credit for, 0:01:54.760 --> 0:01:57.240 because it's all a lot of politics internally, and sure 0:01:57.440 --> 0:02:01.360 this isn't optimal. However, if you look at the so 0:02:01.520 --> 0:02:04.120 called great deal that Starmer pulled off the UK at 0:02:04.160 --> 0:02:07.680 ten percent, an extra five percent isn't that much more 0:02:07.720 --> 0:02:11.120 considering the situation where the UK actually has essentially is 0:02:11.680 --> 0:02:14.000 running a trade surplus with the US. They are not 0:02:14.320 --> 0:02:17.120 in the bad books, certainly on goods anyway. Let's leave 0:02:17.160 --> 0:02:19.919 services out this out for a moment. But the EU 0:02:20.200 --> 0:02:23.560 is the largest importer you know, into the US which 0:02:24.200 --> 0:02:25.800 exported in the US. Part of me in the sense 0:02:25.840 --> 0:02:28.440 that they are the biggest problem as far as Trump 0:02:28.480 --> 0:02:32.119 would like us to see it. Therefore, and also there's 0:02:32.120 --> 0:02:34.680 a lot of bad blood over verious different approaches to 0:02:35.639 --> 0:02:38.440 strom ashes with the Ukraine and all manner of stuff 0:02:38.840 --> 0:02:43.840 that clearly Trump has had problems with the Europe, so 0:02:44.480 --> 0:02:46.920 in some senses it's shown that he's wanting to do 0:02:47.000 --> 0:02:50.480 a deal. And of course the promises on both energy 0:02:50.560 --> 0:02:54.600 and further investments into the US are pretty open ended 0:02:54.639 --> 0:02:57.960 in arbitry. But it's a gesture of faith and it's 0:02:58.200 --> 0:03:01.600 a warm, fuzzy feeling. Sure they might have liked to 0:03:01.600 --> 0:03:05.200 have got particularly wine and spirits nailed down, and they've 0:03:05.200 --> 0:03:09.920 still got ongoing problems in steel. But the auto situation 0:03:10.120 --> 0:03:14.000 is bad, but not terrible. And Mertz's German chancell was 0:03:14.000 --> 0:03:17.000 correct to say that this isn't you know. Clearly growth 0:03:17.080 --> 0:03:19.520 is going to be hit very hard, which I cannot understand. Therefore, 0:03:19.520 --> 0:03:21.280 while the European central banks seem to think they can 0:03:21.320 --> 0:03:23.480 hold rate to two percent, but that's to the side 0:03:23.480 --> 0:03:25.079 for the moment, but they will have to cut more 0:03:25.080 --> 0:03:27.880 because this will be bad for the European economy. It's 0:03:27.960 --> 0:03:32.000 just potentially manageable and they will be able to negotiate 0:03:32.120 --> 0:03:35.200 through this and ongoing. This is a process. This is 0:03:35.240 --> 0:03:37.600 not but like you know, brexit breaksit is none events 0:03:37.680 --> 0:03:40.320 breaxit is a process, and it's likewise, these trade deals 0:03:40.320 --> 0:03:42.520 are going to be something which will be ongoing for 0:03:42.560 --> 0:03:45.680 the rest of our long, hopefully unhappy lives. John, We'll 0:03:45.720 --> 0:03:48.440 be talking about these subjects because it's a new new 0:03:48.520 --> 0:03:49.680 thing and it's not going away. 0:03:50.480 --> 0:03:53.120 Well, the one thing I wanted to talk about is 0:03:53.160 --> 0:03:57.720 the boy is the the poppers of the tardiffs, because 0:03:57.760 --> 0:03:59.680 one thing that I don't think people have talked about 0:04:00.360 --> 0:04:03.480 enough is, I mean, the US is going to make 0:04:03.520 --> 0:04:07.320 something like three hundred billion extra tax from that this 0:04:07.520 --> 0:04:09.200 year from the tallis as far there's someone of the 0:04:09.280 --> 0:04:10.800 numbers I've seen thrown around. 0:04:10.640 --> 0:04:12.440 In theory the volume stay up, which they won't. 0:04:12.480 --> 0:04:14.880 But yeah, yeah, absolutely, yeah, but you're still talking about 0:04:14.880 --> 0:04:19.800 that is something like five percent of the tax take 0:04:20.360 --> 0:04:23.680 currently and like it's the creivalent that Rachel reeves finding 0:04:24.160 --> 0:04:26.000 something like sexty billion down the back of the. 0:04:26.600 --> 0:04:29.279 For our pensions. I mean, you know, yeah, I'm just wondering. 0:04:29.880 --> 0:04:33.000 This sort of feels as if the reconfiguration of how 0:04:33.160 --> 0:04:37.000 the US taxes you know, the rest of the world and. 0:04:37.400 --> 0:04:39.960 People both agree on this essentially, And I think this 0:04:40.040 --> 0:04:45.240 is what's been unamazed at the commentariat refuses to go 0:04:45.320 --> 0:04:47.200 on this. But you know, to my mind, what Trump 0:04:47.240 --> 0:04:49.839 is trying to do is change the US corporate tax cones, 0:04:49.920 --> 0:04:53.560 specifically from without. He cannot change it through Congress. He 0:04:53.560 --> 0:04:55.000 doesn't have the ability to get it through. He's got 0:04:55.000 --> 0:04:57.680 his big beautiful bill through and that is a pretty 0:04:57.720 --> 0:05:00.480 meaningful change for a couple of ways. And obviously it 0:05:00.520 --> 0:05:05.400 locks in the tax code where corporates are desperate to 0:05:05.440 --> 0:05:07.320 keep it and rather having it rise again as would 0:05:07.320 --> 0:05:11.000 have done under Kamala Arras and so he's fulfilled his 0:05:11.000 --> 0:05:13.440 side of the bargain. But the reality what he's trying 0:05:13.480 --> 0:05:16.200 to do is be elected not say him forever, but 0:05:16.279 --> 0:05:20.080 Maga forever by essentially being able to offer a huge 0:05:20.279 --> 0:05:24.160 income tax cut up to one hundred and fifty thousand 0:05:24.200 --> 0:05:27.120 when it may be funded by corporates. This is bringing 0:05:27.200 --> 0:05:30.680 back on shore US corporate revenue. And he's having to 0:05:30.720 --> 0:05:32.560 do it by changing the rest of the world rather 0:05:32.560 --> 0:05:35.360 than changing the US domestic tax code and indeed, say 0:05:35.400 --> 0:05:38.320 they're sales tax into a say a vat tax. So 0:05:39.000 --> 0:05:41.240 he is doing this and this is why. You know, 0:05:41.320 --> 0:05:43.359 one thing we haven't gone in the European deal with 0:05:43.400 --> 0:05:46.680 the US is the pharmaceuticals which Ireland knows is coming 0:05:46.720 --> 0:05:49.880 down the pipe. It's going to rightly probably change the 0:05:49.960 --> 0:05:53.960 dynamic in how so many particularly thus over seven hundred 0:05:54.520 --> 0:05:58.080 multinationals based in Ireland and they are having a fine 0:05:58.200 --> 0:06:01.479 time of it all paying toively minimal tax. And I 0:06:01.480 --> 0:06:04.800 think that's what Trump is really after. He's going to 0:06:04.839 --> 0:06:08.520 do it carefully and slowly. It is Irish popular base. 0:06:10.000 --> 0:06:11.719 At the same time he needs to make sure that 0:06:11.760 --> 0:06:13.920 this is all workable for the likes of Di Lily 0:06:14.080 --> 0:06:17.159 and Bristol Mars, et cetera, et cetera. But you know, 0:06:17.240 --> 0:06:19.839 there is a reckoning coming there on how much tax 0:06:20.120 --> 0:06:22.400 they are keeping off shore and how much work going 0:06:22.440 --> 0:06:25.880 back on shore and indeed what the pharmaceutical production will be. 0:06:25.920 --> 0:06:27.600 And it's that's the same for steel, and that's the 0:06:27.640 --> 0:06:29.080 same some sensus for autos. 0:06:29.480 --> 0:06:32.159 See, I've got to see. I think this is where 0:06:32.200 --> 0:06:36.320 Trump is winning. So he's winning and he's really underrated 0:06:36.440 --> 0:06:42.200 because he's really impoison some massive stalth taxes here and 0:06:42.320 --> 0:06:45.640 being applouded for being you know, for being there. 0:06:46.680 --> 0:06:49.240 The big mistake was in two thousand and one China 0:06:49.320 --> 0:06:51.800 was allowed in the World Trade Organization and exploited it. 0:06:51.800 --> 0:06:53.680 Ever since and I believe the Germans and the French 0:06:53.720 --> 0:06:56.640 to large degree have enabled that, and it's been quite 0:06:56.720 --> 0:06:59.040 a useful technique for them to sell a lot of 0:06:59.040 --> 0:07:01.440 stuff into China. One thing you must look at on 0:07:01.560 --> 0:07:04.480 all these things is the euro to the Yuan exchange rate. 0:07:04.480 --> 0:07:07.000 But that tells you much more. The euro is record high. 0:07:07.360 --> 0:07:09.320 It's causing Europe a lot of pain on both sides. 0:07:09.360 --> 0:07:10.960 It has to choose whether it's in bed with the 0:07:11.000 --> 0:07:13.080 States or it's going to, you know, somehow do a 0:07:13.120 --> 0:07:15.080 deal with China. I don't think either on the option 0:07:15.280 --> 0:07:17.640 they've chosen the least worse option, which is doing a 0:07:17.800 --> 0:07:21.080 sort of placemaker deal with the US, because they are 0:07:21.120 --> 0:07:24.280 the dumping ground potentially for China. If they can't Chinese 0:07:24.320 --> 0:07:27.000 can't sell goods into the States such a tariff, they're 0:07:27.000 --> 0:07:29.520 going to sell them into Europe. So there is an 0:07:29.520 --> 0:07:33.600 awful lot going on within Europe as far as realization 0:07:33.680 --> 0:07:35.880 that they need to help themselves spend a lot more 0:07:35.880 --> 0:07:38.560 on defense and a lot more infrastructure. That has yet 0:07:38.680 --> 0:07:41.320 to transpire. A lot of promises we yet to see it. 0:07:41.560 --> 0:07:44.480 But at least they walked through the ring of fire. 0:07:44.720 --> 0:07:46.920 They can come out the other side, and they'll still 0:07:46.920 --> 0:07:49.200 be alive a little bit singed, but maybe they can 0:07:49.240 --> 0:07:51.120 do a better deal, slowly but surely. But they are 0:07:51.120 --> 0:07:55.080 not out of the game by putting retalitory tariffs on 0:07:55.360 --> 0:07:58.320 the US. They could they will have fallen into the 0:07:58.320 --> 0:08:00.600 trap where they've been shown to be the one that 0:08:00.640 --> 0:08:03.520 that example of Hopefully that or may not be China, 0:08:03.600 --> 0:08:05.160 but it's certainly not going to be the EU. And 0:08:05.200 --> 0:08:07.600 they can they can move on and over a period 0:08:07.600 --> 0:08:10.640 of time, if they do deals and do the right thing, 0:08:10.680 --> 0:08:12.960 as far as Trump can see, you'll find these the 0:08:13.080 --> 0:08:14.160 tariffs will melt away. 0:08:14.200 --> 0:08:16.920 I think, yeah, no, that makes a lot of sense. 0:08:17.560 --> 0:08:21.840 Toning are we from kind of transatlantic a fields and 0:08:22.000 --> 0:08:25.600 back to or in little Aland this week we've heard 0:08:25.760 --> 0:08:29.000 the other thing that's been happening is Rechel Reeves and 0:08:29.000 --> 0:08:31.880 Andrew Bailey at the Bank of England have had a 0:08:31.880 --> 0:08:36.000 bit of a spy or allegedly allegedly allegedly well, this. 0:08:35.920 --> 0:08:38.839 Is over not over monetary policy, which I've written about before, 0:08:38.880 --> 0:08:43.280 which is clearly that Bailey past others have fallen out 0:08:43.320 --> 0:08:46.840 with Reeves's economic strategy and do not believe that the 0:08:46.920 --> 0:08:49.000 tax risers and variety of other different things have gone 0:08:49.040 --> 0:08:52.720 through since April have helped the economy or a good 0:08:52.800 --> 0:08:54.719 good thing that is. 0:08:56.840 --> 0:08:58.000 A reasonable point of view. 0:08:59.080 --> 0:09:01.600 I could possibly come you think that, John, But yeah, 0:09:01.640 --> 0:09:02.760 I mean other people seem to do. 0:09:03.400 --> 0:09:04.640 I needs to get half of it through. 0:09:06.200 --> 0:09:08.640 The spending bits seems to come well, but the tax 0:09:08.760 --> 0:09:11.560 rises somehow seem to come through. Anyways. This is a 0:09:11.600 --> 0:09:14.080 separate matter where she's under a lot of pressure which 0:09:14.080 --> 0:09:16.680 she seems to be recognizing that she needs to help 0:09:16.720 --> 0:09:19.320 the city, the financial industry, and one of the key 0:09:19.400 --> 0:09:23.800 things is obviously Revolute, which is a proper challenger bank, 0:09:23.880 --> 0:09:25.800 not like the sort of normal ones which haven't really 0:09:25.840 --> 0:09:29.400 challenged anything. But this is a fintech revolution of Revolute, 0:09:29.880 --> 0:09:33.439 which you know will be a big challenge to the 0:09:33.720 --> 0:09:37.240 major high street banks over time. And it should and 0:09:37.320 --> 0:09:39.720 could list in the UK, And we missed out on 0:09:39.840 --> 0:09:43.000 Shean maybe for the best, but we would and should 0:09:43.120 --> 0:09:46.720 really have a homegrown monster like Revolute should be listing 0:09:47.000 --> 0:09:49.760 in London but is now allegedly looking at listing in 0:09:49.800 --> 0:09:50.240 the US. 0:09:50.280 --> 0:09:50.360 Now. 0:09:50.400 --> 0:09:53.640 A lot of this is performative, you know, Staff perhaps 0:09:54.000 --> 0:09:55.920 at the same time is looking potentially to buy a 0:09:56.000 --> 0:09:58.800 US bank to get the license the key thing and 0:09:58.840 --> 0:10:01.280 banking license in the States, because we in the UK 0:10:01.400 --> 0:10:05.080 will not give Revolute a banking license despite it being 0:10:05.360 --> 0:10:10.200 a vast in the number of customers anyway presence, and 0:10:10.240 --> 0:10:12.480 there's lots of further hoops. Rightly so, and I think 0:10:12.520 --> 0:10:16.600 what Bailey has said, Look, don't just lean on the Treasury, 0:10:16.720 --> 0:10:20.280 lean on the Crudential Regulatory Authority, smash heads together and 0:10:20.400 --> 0:10:24.040 get us the way through a banking license for Revolute, 0:10:24.080 --> 0:10:28.040 because they knock on consequences are bigger, more profound for 0:10:28.120 --> 0:10:33.440 the existing infrastructure of banks. But more importantly, knaf off Gobba. 0:10:33.760 --> 0:10:37.200 This is our this is our patch. You know. We 0:10:37.240 --> 0:10:39.520 don't want the Treasury of the government leaning on telling 0:10:39.559 --> 0:10:44.880 what the Independent Bank of England financial regulator is allowed 0:10:44.880 --> 0:10:47.080 to do. And it does it. It's any sweet time. 0:10:47.360 --> 0:10:49.760 There is a point there, a possibly a valid one, 0:10:50.040 --> 0:10:53.160 but you can see for once reason may well have 0:10:53.280 --> 0:10:57.320 a valid rationale that the regulators which he's been stamping on, 0:10:58.040 --> 0:11:02.360 you know, fairly brusquely with CMA and changing the head 0:11:02.360 --> 0:11:06.200 of that and a few other clearly measures on the 0:11:06.200 --> 0:11:08.200 Financial Conduct Authority. I've got out the way of a 0:11:08.200 --> 0:11:10.640 bunch of stuff. And there is a message coming through 0:11:10.640 --> 0:11:12.559 from the regulators. We get it, we will get out 0:11:12.559 --> 0:11:14.840 of the way. We are trying to be proactive and 0:11:14.840 --> 0:11:17.320 look at growing business rather than just say no to everything. 0:11:18.240 --> 0:11:20.600 But maybe the banking hasn't quite got the message. But 0:11:21.080 --> 0:11:24.160 certainly I think it's an interesting dynamic that the Bank 0:11:24.200 --> 0:11:27.520 of England governor in both is the two hatsy wears, 0:11:28.000 --> 0:11:31.280 is pushing back against this government, which you wouldn't, necessarily 0:11:31.440 --> 0:11:33.720 being cynical, have expected. 0:11:33.640 --> 0:11:36.840 As fascinating to me that reeves the way that she's 0:11:37.000 --> 0:11:41.560 trying to kind of ignate growth or get growth going 0:11:41.960 --> 0:11:46.840 is to make the deggilt us feel uncomfortable join. 0:11:46.760 --> 0:11:49.680 The dots up. She should have the bank totally on 0:11:49.760 --> 0:11:52.400 board before this happens, not have to have a spat 0:11:52.440 --> 0:11:55.720 with him because he's feeling, you know, you're stretting on 0:11:55.760 --> 0:11:58.520 my turf. So this is where the policy doesn't join up. 0:11:58.720 --> 0:12:01.640 She's lost the room as far as economic policy is concerned, 0:12:02.360 --> 0:12:07.000 and she's at risk of losing whatever but potential sort 0:12:07.000 --> 0:12:09.480 of you know from her prown Sandwich offensive prior to 0:12:09.480 --> 0:12:12.000 the election of like yes, we're goin. We get the message. 0:12:12.040 --> 0:12:14.559 We will help industry, will help business. We will certainly 0:12:14.600 --> 0:12:17.720 help the city and at least she understands it, but 0:12:17.960 --> 0:12:22.920 it's the enactment in power of policy which is not 0:12:22.960 --> 0:12:25.680 necessarily as joined up as one would hope. However, that 0:12:25.720 --> 0:12:29.760 does not in any way perhaps excused what the Bank 0:12:29.800 --> 0:12:33.000 of England governor is doing on himself with regards to his 0:12:33.160 --> 0:12:36.720 wakeful approach to management policy, or indeed he's digging his 0:12:36.800 --> 0:12:39.600 heels on on what I think needs to be resolved. 0:12:39.640 --> 0:12:41.839 I mean, revolute, to my mind, does deserve to get 0:12:41.840 --> 0:12:44.160 the banking license because I will just simply walk away. 0:12:44.480 --> 0:12:46.360 I mean, yeah, I mean there's a fundamental problem with 0:12:46.440 --> 0:12:50.280 the length of team, the stuff takes. I sympathized with 0:12:50.360 --> 0:12:52.960 Leeves's view. The thing that baffles me slately is that 0:12:53.400 --> 0:12:56.960 it's almost like she gnaws what should be happening in 0:12:56.960 --> 0:13:00.000 an ideal world, but we are getting there as something. 0:13:00.360 --> 0:13:03.800 Keep hiding bets and controlling things in trying to Tiewdal 0:13:03.880 --> 0:13:06.280 with s norb and Day all that don't and in 0:13:06.320 --> 0:13:08.000 fact maybe the best thing to be without to just 0:13:08.400 --> 0:13:09.960 scraps some of this sub. 0:13:09.880 --> 0:13:12.640 Optimal well, I think, I mean in some senses, you know, 0:13:12.720 --> 0:13:16.320 she is I think got the right idea behind this 0:13:16.559 --> 0:13:19.360 is just the enactment, as I said, is perhaps still 0:13:19.400 --> 0:13:23.600 a little naive and perhaps a little amateur. But you know, equally, 0:13:23.800 --> 0:13:27.360 I think she has to bang heads together and I'm 0:13:27.360 --> 0:13:29.520 going to give her the benefit of the doubt in 0:13:29.600 --> 0:13:33.120 this one. And I think mister Bailey needs to be 0:13:33.720 --> 0:13:36.480 I understand why he's doing what he's doing. But equally 0:13:36.640 --> 0:13:39.640 this cannot be the excuse always that we do have 0:13:39.679 --> 0:13:42.480 to get real on this stuff. We've lost you in. 0:13:42.800 --> 0:13:45.400 We do not need to be revolute. We need to 0:13:45.400 --> 0:13:48.280 get our act together commercially, because if you look since 0:13:48.280 --> 0:13:50.559 two thousand and eight, the reason why the UK economy 0:13:50.559 --> 0:13:53.320 has got nothing to do with Brexit, you know, it's 0:13:53.320 --> 0:13:56.040 got to do with the fact that the financial industry 0:13:56.120 --> 0:14:00.560 has been severely heavily regulated, probably for good the initial reasons, 0:14:00.559 --> 0:14:02.760 but you look what's happened in the US banking sector 0:14:03.080 --> 0:14:06.080 and the US financial sector, which is leaps and bounds 0:14:06.080 --> 0:14:10.120 done better, and we have made ourselves unnecessarily hampered and 0:14:10.200 --> 0:14:13.080 hamstrung on every single step. We need to be proactive 0:14:13.080 --> 0:14:15.520 and gain otherwise we will lose. We are already losing, 0:14:16.200 --> 0:14:19.880 hopefully not termally, our financial sector, which is the largest 0:14:19.920 --> 0:14:22.000 earner of tax and twelve and a half percent of 0:14:22.000 --> 0:14:24.280 our economy as was and you know, really, you know 0:14:24.360 --> 0:14:26.720 this is this is we want to have a sufficient 0:14:26.720 --> 0:14:28.960 revenue taxes to be able to do all the spending 0:14:28.960 --> 0:14:32.400 plans they want. The easiest and best way is to 0:14:32.400 --> 0:14:36.040 make sure that your financial sector, which is world leading stay. 0:14:35.760 --> 0:14:39.760 Sat Yeah, that makes perfect sense, and then I guess. 0:14:39.600 --> 0:14:41.280 It happened then, yeah, exactly. 0:14:41.360 --> 0:14:45.320 As a boys for moving on from that into a 0:14:45.400 --> 0:14:47.680 kind of related topic that you or about this week, 0:14:48.400 --> 0:14:50.680 you can reckon that we're going to we're going to 0:14:50.760 --> 0:14:55.760 need this growth because the UK construmer is looking very 0:14:55.800 --> 0:14:57.360 fairly timid at the moment. 0:14:57.560 --> 0:15:01.120 Well it's actually held on's held up well. But you know, 0:15:01.160 --> 0:15:03.560 we've had a very nice summer, which is which affects 0:15:03.640 --> 0:15:07.320 dynamics and certain things. That helps some hospitality in some retail, 0:15:07.400 --> 0:15:10.280 it hampers some retail in different ways. And obviously if 0:15:10.280 --> 0:15:12.800 you have a warm autumn, it means people don't spend 0:15:12.840 --> 0:15:16.280 for winter clothing and you have a bad start into 0:15:16.320 --> 0:15:19.200 this sort of golden quarter of the last you know 0:15:19.360 --> 0:15:23.560 where Black Friday is named, you know, the end of 0:15:24.160 --> 0:15:26.840 Thanksgiving for a reason. It's when you know, retailers in 0:15:26.920 --> 0:15:30.360 theory turn profitable, and certainly what they need is the 0:15:30.360 --> 0:15:33.680 consumer to keep on turning up. Three fifths of our economy, 0:15:34.200 --> 0:15:37.760 sixty two percent is consumption, which matches sixty eight percent 0:15:37.840 --> 0:15:40.320 in the States. We are big consumer led economies, the 0:15:40.360 --> 0:15:43.720 UK and US very similar in that way, and we 0:15:43.800 --> 0:15:47.200 need the consumer to stop some saving. But we're seeing 0:15:47.240 --> 0:15:50.080 bank deposits rising, We're seeing the savings rate go up, 0:15:50.280 --> 0:15:53.480 which is a precursor of the paradox of thrift, which 0:15:53.520 --> 0:15:55.720 is in essence, people hold back. They are on sure 0:15:55.720 --> 0:15:57.760 what's going to happen economic policy if we get a 0:15:57.800 --> 0:16:01.000 rinse repeat of last year. And they came into power 0:16:01.120 --> 0:16:03.480 and July the fourth and basically said, right, there's black 0:16:03.520 --> 0:16:06.040 holes everywhere we are going. The world is going to end. 0:16:06.080 --> 0:16:07.160 We are going to we are going to have to 0:16:07.200 --> 0:16:09.800 really do bad things in October budget. It just killed 0:16:09.920 --> 0:16:13.600 the momentum economy, killed confidence, which has not recovered since. 0:16:13.600 --> 0:16:17.000 Obviously all these tax risers came in play in April. 0:16:17.840 --> 0:16:20.280 We are under the threat of the same happening again, 0:16:20.400 --> 0:16:23.680 and that will be really comparing the family, and I 0:16:23.680 --> 0:16:25.520 think would be criminal in the sense of, you know, 0:16:26.240 --> 0:16:29.240 I think rees would would not recover. You know, she's 0:16:29.240 --> 0:16:32.200 managed to hang on more by luck than judgment, but 0:16:32.320 --> 0:16:34.680 she cannot have a repeata what happened last year into 0:16:34.840 --> 0:16:38.080 into the run up into this year's autumn budget. But 0:16:38.160 --> 0:16:41.120 the consumers showing signs and being fearful and are pulling back. 0:16:41.480 --> 0:16:44.640 And there's definitely food inflation, and definitely the minimum wage 0:16:44.720 --> 0:16:47.840 ries and variety of other employer taxes and our national 0:16:47.880 --> 0:16:51.520 insurance contributions is really feeding through. You know, employers are 0:16:51.600 --> 0:16:54.400 feeding price rises into the system which is starting to 0:16:54.400 --> 0:16:57.480 be hit on consumer activity and savior rates going up. 0:16:57.560 --> 0:17:00.480 You know, that's where people pull back. Money setting bankrup 0:17:00.480 --> 0:17:03.360 deposits is not working in the economy, which means growth 0:17:03.360 --> 0:17:06.480 will fall off and they need it. They need it 0:17:06.560 --> 0:17:07.880 to get through you know, as you know, they can't 0:17:07.880 --> 0:17:10.600 cut spend needs. They basically said in this government they 0:17:10.600 --> 0:17:12.359 will not be able to cut back on any of 0:17:12.400 --> 0:17:16.000 the welfare budget unless they have a wholly new approach, 0:17:16.040 --> 0:17:19.040 which you know they'll have to. But the string isn't 0:17:19.119 --> 0:17:22.760 coming together, and I fear that we will have a 0:17:22.840 --> 0:17:26.680 very large pension tax rate and obviously a fiscal drag 0:17:26.720 --> 0:17:30.840 on and income tax bands extended in the October budget. 0:17:30.920 --> 0:17:33.560 And you know, consumers can smell this, and that's why, 0:17:33.600 --> 0:17:35.720 you know, we end up getting the cause and effect 0:17:35.720 --> 0:17:38.560 where all of sudden things get worse before andything's actually 0:17:38.560 --> 0:17:41.000 really happened. But by that stage it's too late. Oh no, 0:17:41.080 --> 0:17:43.160 I wasn't going to ever do this. Well, yeah, you've 0:17:43.160 --> 0:17:46.840 got to tell us upfront, what's you know? Wealth tax, 0:17:46.880 --> 0:17:49.359 for instance, seems to be ruled out, but it hasn't 0:17:49.400 --> 0:17:51.160 been ruled out in a definitive sense. But she can't 0:17:51.240 --> 0:17:53.920 rule it out because he's right about our backbenchers. However, 0:17:54.280 --> 0:17:55.800 something is going to have to give, and I think 0:17:55.800 --> 0:17:59.399 that requires a much more proactive approach on being honest 0:17:59.520 --> 0:18:01.280 with what you going to do and why she's going 0:18:01.320 --> 0:18:05.480 to do it. I think some pension tax reductions, as 0:18:05.480 --> 0:18:07.440 far as the tax relief is concerned, as far as 0:18:07.440 --> 0:18:09.880 the annual amount and on one or two other things, 0:18:10.040 --> 0:18:12.200 can make some sense if it's presented without in a 0:18:12.280 --> 0:18:12.960 coherent way. 0:18:13.359 --> 0:18:17.440 I mean, I suppose it might because it's future pain 0:18:17.720 --> 0:18:20.840 and a funny kind of way make it away with it. 0:18:20.880 --> 0:18:23.240 But I mean, I mean, this is a topic for 0:18:23.280 --> 0:18:27.399 a different podcast, But the problem with reforming pensions tax 0:18:28.119 --> 0:18:32.960 relief is always the under the boone it affects the 0:18:32.960 --> 0:18:37.200 public sector as well, and that's one reason why they've always. 0:18:37.040 --> 0:18:39.160 It never affects the public sector pension. That's the that's 0:18:39.200 --> 0:18:39.840 part of the problem. 0:18:39.920 --> 0:18:42.000 Well, yeah, exactly, But what I mean is if you 0:18:42.240 --> 0:18:45.920 if you do it properly, then you end up having 0:18:46.080 --> 0:18:47.440 increased the contribution. 0:18:48.080 --> 0:18:51.480 They can't they can't do wholesalform because they don't have 0:18:51.520 --> 0:18:52.159 the bandwidth to do it. 0:18:53.359 --> 0:18:55.440 Then they don't reason enough money. 0:18:55.280 --> 0:18:57.240 By the majority. They don't have that. They're going to tinker, 0:18:57.720 --> 0:19:00.399 they're going to cut them some things back. Perhaps Jeremy 0:19:00.400 --> 0:19:01.920 Hault was a little bit too generous on a few 0:19:01.920 --> 0:19:04.600 things prior to the last selection. We all know what 0:19:04.720 --> 0:19:08.320 he really should have done, just reverse his two employee 0:19:09.400 --> 0:19:12.119 national insurance sort of bungs. But equally on some of 0:19:12.160 --> 0:19:14.119 the pension of stuff that he did. Perhaps he was 0:19:14.160 --> 0:19:16.680 too generous. Maybe some of that should have would get 0:19:16.760 --> 0:19:19.680 rowed back. But you know, the reality here is is 0:19:20.720 --> 0:19:24.080 really going back to nineteen ninety seven when Gordon Brown 0:19:24.080 --> 0:19:26.720 did two things which you know, the Bank of England independence, 0:19:26.760 --> 0:19:29.000 everyone seems things a great idea, though the banking I 0:19:29.080 --> 0:19:31.560 don't think has lived up to its task, not in 0:19:31.680 --> 0:19:34.040 recent years particularly, but The other thing he did is 0:19:34.040 --> 0:19:37.800 he cut dividend tax credits and that is still killing 0:19:38.119 --> 0:19:40.879 our pension, you know, and it's killed a financial sector. 0:19:41.160 --> 0:19:44.360 It's the main reason actuarily why you have a very 0:19:44.359 --> 0:19:46.879 low investment in UK equities. You know. These things are 0:19:46.880 --> 0:19:49.399 all course from a under the bonnet, as you said, 0:19:50.080 --> 0:19:52.240 change which you know no one will noticed. And he 0:19:52.280 --> 0:19:54.920 got away with it. But you know, but like selling gold, 0:19:55.160 --> 0:19:57.200 you know when he did, these things come back and 0:19:57.680 --> 0:19:59.480 continue to cause us pain even now. 0:20:01.520 --> 0:20:04.280 Ah, it's a It's good to end on a high note. 0:20:06.720 --> 0:20:08.119 Thanks always happening. 0:20:08.359 --> 0:20:10.880 Yes, thanks for watching, Marcus. I look forward to having 0:20:10.920 --> 0:20:13.399 you back on and actually probably next week because Marnon's 0:20:13.440 --> 0:20:16.800 still on our holidays if you're around for another session 0:20:16.840 --> 0:20:27.560 of holiday exactly see up the workers, That's what I say. Hemy. 0:20:27.600 --> 0:20:30.400 Thanks for listening to this week's Merton Talks Money deprief. 0:20:30.480 --> 0:20:32.879 If you like our show, rate review and subscribe wherever 0:20:32.920 --> 0:20:35.840 you listen to podcasts, make sure it's a five star review. 0:20:36.200 --> 0:20:38.800 This episode was produced by Summer, Sadie and Moses and 0:20:38.920 --> 0:20:42.320 am special thanks to Marcus Ashworth and questions and comments 0:20:42.359 --> 0:20:44.840