Speaker 1: I think what it demonstrates is an impatience on the
Speaker 1: part of the Prime Minister and a new Chancellor with
Speaker 1: what they see as orthodox treasury thinking. And I think
Speaker 1: that she is suspicious of the Treasury, is reluctant to
Speaker 1: agree to spending money. I think she regards the treasures
Speaker 1: too cautious. And I think that David Linnington, they're a
Speaker 1: former minister for the Cabinet Office who actually joined us
Speaker 1: in an interview a little bit earlier on this week
Speaker 1: to discuss the ousting of the Treasury's most senior civil servant.
Speaker 1: That's right, fran See. And of course we have the
Speaker 1: huge stories still dominating the news of the death of
Speaker 1: Queen Elizabeth the Second. Officially we are in a morning
Speaker 1: period that means there should be no government business actually
Speaker 1: happening this week. However, however, the new Prime Minister is
Speaker 1: doing exactly that. She's setting the turn for administration and
Speaker 1: he's made changes. That's right. They she has fired or
Speaker 1: her new chance to Quasi quarteng has in in his
Speaker 1: second day on the job, he has sacked a very
Speaker 1: senior civil servant called Tom Scholar. This has caused waves
Speaker 1: around the civil service, to the government and more broadly,
Speaker 1: because what it shows is that the UK government is
Speaker 1: going to push ahead with it's very zealous reform of
Speaker 1: Britain's economic policy. I'm David Merritt and I'm Francine Laque
Speaker 1: and this is in the City, Bloomberg's podcast, connecting you
Speaker 1: to the stories at the heart of the City of London. Now,
Speaker 1: this week the Beam counters Dave get the Boot look
Speaker 1: at liszt Trust's mission to bring the civil service into
Speaker 1: line and what that tells us about her plans for
Speaker 1: the economy. Yes, and joining us this week we have
Speaker 1: a Lego Straton, author of our daily UK newsletter, The Readout,
Speaker 1: and former Downing Street Press secretary, and Philo Audrick are
Speaker 1: UK EK reporter. What happened? I can't I mean, I
Speaker 1: can't believe what They two into the job and suddenly
Speaker 1: you realize a Legro that the Prime Minister, through a
Speaker 1: transfer sacked a top civil sort event. Well, the funny
Speaker 1: thing is as well that because of the nation going
Speaker 1: into mourning, you didn't really realize because it was it
Speaker 1: was not really that high profile because all of us
Speaker 1: were focused on the not supposed to do anything right,
Speaker 1: I mean, the government supposed to do any business during
Speaker 1: this period, right, That is a good point, Dave. But
Speaker 1: we now know, we've seen that this is a government
Speaker 1: that intends to do things differently. They're in a hurry
Speaker 1: and things are being broken on Tom Scholar. I think
Speaker 1: it's important to remember that the guy who's now the
Speaker 1: new Chancellor was the Business Secretary and potentially Quasi Quoteng
Speaker 1: over time felt that the Treasury was you know, he
Speaker 1: would have had a front row seat slash interaction with
Speaker 1: that the Treasury and he will probably over time have
Speaker 1: felt that it you know, he would have seen very clearly,
Speaker 1: but also have felt it wasn't doing quite what he
Speaker 1: would like. And so it isn't like we have a
Speaker 1: completely new government that didn't have any interaction with these characters.
Speaker 1: There will be people who you know, Quasi and others
Speaker 1: officials and his advisers who will have felt we need
Speaker 1: we need a personnel change. This movie feels so profound
Speaker 1: right in this meaning a film. Is it to send
Speaker 1: a warning shot to others and saying you phull into line,
Speaker 1: you look at growth, stop counting the beans, or you're out,
Speaker 1: or is it just a campaign promise. It's definitely is
Speaker 1: the attempt to change the mindset at the top of
Speaker 1: the Treasury. I mean, obviously it's just Tom Skoller who's
Speaker 1: going They're not they're not sacking you know, the whole
Speaker 1: clairel On Bedelli and the other people right through the treasury.
Speaker 1: So it's like a warning shot, fall into line or
Speaker 1: you're in trouble. I think it's the way to read it.
Speaker 1: The idea is, as they've said, to focus more on growth,
Speaker 1: and there have been changes within Treasury which have been
Speaker 1: moving in that direction a little bit previously, so this,
Speaker 1: I guess, is to really accelerate that process. I mean,
Speaker 1: he's not a household name, right Tom Scott, I mean
Speaker 1: who tell us a bit more about him? And do
Speaker 1: you know who did you work with him? What did
Speaker 1: he stand or was did he did he stand with
Speaker 1: the bean counters. But they're not household names. They're not
Speaker 1: meant to be happening. By definition, they're meant to not
Speaker 1: be household names. And I think any any prime minister
Speaker 1: would be very wary of a perm sect that have
Speaker 1: become a house on name. They're meant to be behind
Speaker 1: the scenes officials providing expert advice. I think the tension
Speaker 1: you get into with the Treasury, which we are going
Speaker 1: to see being tested now, is to what extent he
Speaker 1: is there to provide advice to the Chancellor and then
Speaker 1: the Chancellor provides advice to the Prime Minister, or the
Speaker 1: extent to which that the Treasury is became this this
Speaker 1: rival ideas powerhouse. One of the things that I think
Speaker 1: is the interesting implication when you look at what they're
Speaker 1: now trying to do with these very innovative and to
Speaker 1: be welcomed policy programs around the energy package for business,
Speaker 1: you know you need institutional knowledge there, and so the
Speaker 1: key question will be where the Tom scholars departure means
Speaker 1: that you've lost a little bit of that muscle memory
Speaker 1: and a bit of that you know, I was in
Speaker 1: the Treasury and I worked alongside Tom Scholar when they
Speaker 1: we devise the furlough. It happened very quickly. That's the
Speaker 1: last manual you have on the shelf for doing stuff differently. Again,
Speaker 1: when we did things like eat out to help out,
Speaker 1: you know you you are you are doing policies where
Speaker 1: there is not no one's done it before, there's no precedent.
Speaker 1: You are being told by officials that's not going to work,
Speaker 1: and so you're trying to find a way around it,
Speaker 1: and that is a creative relationship. It's not always a
Speaker 1: bad relationship that then they're they're not, by the way.
Speaker 1: Usually sometimes it is the case, but they're not always
Speaker 1: just saying no because they want to. They're saying no
Speaker 1: because it can't work. So so there's an interesting question
Speaker 1: around you have this new government that wants to do
Speaker 1: it things very differently. Can you do it when you've
Speaker 1: lost one of the key characters? And by the way,
Speaker 1: you have standings right now, but you'll take whoever comes
Speaker 1: next sometime together. Head around that the people, their teams,
Speaker 1: their expertise, the brain trust of the treasury hasn't been
Speaker 1: affected apart from this one person at the top. And
Speaker 1: the sense that you know you get is that they believe.
Speaker 1: People around the new government believe that he could have
Speaker 1: proved an obstacle to sort of re engineering the treasury
Speaker 1: because of ideological clashes. Now the fact that they got
Speaker 1: rid of him is an ideological move, and that is
Speaker 1: the type of thing that shouldn't be happening that this
Speaker 1: high level in the civil service, because everyone should understand
Speaker 1: obviously that the civil service will do what it's told. Now,
Speaker 1: I don't know if they always do. I can't promise that.
Speaker 1: But just the act of sacking scholar is is pretty
Speaker 1: shocking because it is saying there's there's these ideological devices
Speaker 1: introducing politics into an a political sphere effectually during an
Speaker 1: energy crisis. During a crisis, it makes it even more
Speaker 1: But this was Lizzar's trust campaign, right, it was like
Speaker 1: she didn't believe in orthodox economics. So is this how
Speaker 1: she's going to govern as Prime minister? It's clear she
Speaker 1: doesn't want to be stopped in her growth boosting policies. Now,
Speaker 1: when I said only there's been some changes in government
Speaker 1: in terms of trying to refocus on growth. There's a
Speaker 1: thing called the Green Book, which if you do cost
Speaker 1: benefit analysis for every pound that's invested in Rhodes or whatever,
Speaker 1: and you have to work out, you know, what's the
Speaker 1: best way of doing and that was a very beam
Speaker 1: counting process. And actually Rishi was changed. He changed the
Speaker 1: rules on the on the Green Book to make it
Speaker 1: easier to actually invest in things even if the numbers
Speaker 1: didn't add art necessarily. And so you have these tiny
Speaker 1: little moves in that direction, and clearly they've youre that
Speaker 1: that that sort of process of change is so slow
Speaker 1: that they just want to push it extraordinarily fast. And
Speaker 1: if you think she's only got two years to deliver,
Speaker 1: and she's like, I'm delivered, delivered, deliver, she needs to
Speaker 1: do everything extraordinarily quickly. So any sense of an obstacle
Speaker 1: in the way she probably want to get. How are
Speaker 1: economists reading this then? I mean, are people the people
Speaker 1: who are crunching the numbers are making a forecast for growth,
Speaker 1: you know, widespread forecasts for a recession in this country.
Speaker 1: She's talking about a huge fiscal stimulus with the energy package.
Speaker 1: Do people think it's gonna work? Well? I mean this
Speaker 1: like the one thing she's doing is introducing policy sort
Speaker 1: of uncertainty and concerns like everywhere, Like you've got enormous
Speaker 1: amount of borrowing. We don't know how much because she
Speaker 1: haven't told us yet coming for the energy package, the
Speaker 1: business support plan, you know, they haven't actually drawn it up.
Speaker 1: It's just a bunch of words at the moment. You know,
Speaker 1: the Bank of England that we're going to change the
Speaker 1: mandate and then you sack this sort of very stable
Speaker 1: figure at the top of the treasury. And so the
Speaker 1: markets are not liking economists are not liking it the
Speaker 1: streets saying, you know, we this this is just adding
Speaker 1: to the uncertainty, and we're seeing the pound react as
Speaker 1: a result. We were already saying, people like Phil and I,
Speaker 1: before we heard the energy package, that it was a gamble,
Speaker 1: because we knew she was going to come in and
Speaker 1: she had this different Liz orthodoxy, if you like, which
Speaker 1: was my way or the highway. We're going to cut
Speaker 1: taxes and that way we're going to boost growth, and
Speaker 1: a lot of economists were saying, well, I'm not sure
Speaker 1: about that. So she already had this kind of intellectual
Speaker 1: economic gamble which she was going to unfall on us
Speaker 1: all and then having said during the leadership campaign no handouts,
Speaker 1: she has now announced. Not only has she announced, I'm
Speaker 1: not saying necessarily that she is is wrong. I mean,
Speaker 1: there's a lot of people who think that had Richie
Speaker 1: got in or whoever was going to be in charge
Speaker 1: and the autumn is going to need to do something
Speaker 1: along these lines. It's just the magnitude that it's extraordinary.
Speaker 1: And also in the context of saying no handouts and
Speaker 1: then whatever the biggest handout, I mean, everybody agrees it's
Speaker 1: an extraordinary magnitude, you know, I mean this needs to
Speaker 1: be said. You know, there are Martin Lewis is a
Speaker 1: very well respected, important and alert campaign are very worried
Speaker 1: about households this winter. You know, people like him think
Speaker 1: this will go a long way to addressing real vulnerability.
Speaker 1: So we spoke to the former Transfer Philip Penland and
Speaker 1: he was saying, well, the only thing to keep the
Speaker 1: government check is the market. The markets are looking very
Speaker 1: very closely at political pronouncements and the UK does face
Speaker 1: some serious headlines. We've got a big balance of payments challenge.
Speaker 1: The pound has had a pretty tough time over the
Speaker 1: last six months, and I think there's a very strong
Speaker 1: need for the government to provide not only reassurance to
Speaker 1: its citizens that it will provide short term help to
Speaker 1: get through this winter, but to markets that it does
Speaker 1: get the fact that it can't keep on printing money
Speaker 1: to bail people out from these challenges. I mean, is
Speaker 1: it an obstacle when you're in government do you look
Speaker 1: at do you listen to head funds or look at
Speaker 1: you know, sterling and guild. Somebody said to me the
Speaker 1: other day that the pound is the nation's share price.
Speaker 1: So they in government, they do look at it. I
Speaker 1: think the thing about this government, Quasi is one of
Speaker 1: the most incredibly astute and bright and well read, and
Speaker 1: indeed he's an author himself. Politicians we've seen in recent times.
Speaker 1: He's very intellectually confident, and he I think has formed
Speaker 1: a view and and there's there's some credence to this.
Speaker 1: He's formed a view that people will wear more borrowing
Speaker 1: and that this is a wartime situation and that this
Speaker 1: government needs to spend and borrow. But we don't know
Speaker 1: because we're waiting for the actual price tag in next week,
Speaker 1: but borrow money we expect um and that the markets
Speaker 1: will wear it. And I think the evidence point he
Speaker 1: has for that is if you look back during the
Speaker 1: furlough and so on, there was this sort of nervousness
Speaker 1: in government about how much can we push it? And
Speaker 1: in the end the answer was you could. You could.
Speaker 1: Not only were other countries around the world doing the same,
Speaker 1: but it was the right thing to do and had
Speaker 1: they not you'd have had mass unemployment and so on.
Speaker 1: So he's very very anyway, a very very intelligent, clever
Speaker 1: chap and he has made a formed of view with
Speaker 1: his very very close and old friend Liz trust that
Speaker 1: they can they can push it. Of course, you've got
Speaker 1: to remember that the counter factual here is that doing
Speaker 1: nothing was going to just punch a massive, massive hole
Speaker 1: in the public finances anyway, because you're going to have
Speaker 1: a very very deep recession, which now it looks like
Speaker 1: we could avoid, like the UK could avoid a recession
Speaker 1: if this, if this energy bailout plan does work, you know, optimally.
Speaker 1: But there are rumors and actually the tax cuts that
Speaker 1: they promised will be limited in scope. Another I don't know,
Speaker 1: I don't know what's coming on. We're going to learn.
Speaker 1: We will learn all about this when we because it
Speaker 1: supposedly going to come out next week. But yeah, I
Speaker 1: mean those cuts of sort of thirty billion plus a years,
Speaker 1: I mean they're considerable. That One of the lessons from
Speaker 1: the pandemic is we spent years actually do fiddling around
Speaker 1: on the edges of making small policy changes, and like
Speaker 1: like two or three billion here always felt like a
Speaker 1: big policy. This is a thirty billion pound tax change, right,
Speaker 1: And it's like the pandemic showed, you know, how do
Speaker 1: you get inflation you spend four billion quid or you know,
Speaker 1: there's all you know, you get you do. You basically
Speaker 1: make big discore moves and they actually do affect the economy,
Speaker 1: and thirty billion might do something for growth. It's a bigger,
Speaker 1: it's a big You have a billion here been in
Speaker 1: there that it would be said to be unraveling if
Speaker 1: someone said it wasn't costed somewhere else. And I mean
Speaker 1: this is just slightly on another planet. This is the
Speaker 1: new normal, the new normal. The systems are bigger. Yeah,
Speaker 1: but the balance of payment hasn't it's still there that
Speaker 1: that's not changed. Yeah, I mean that's pretty funny. So
Speaker 1: the real numbers are actually slightly distorted. The owners says
Speaker 1: that the eight point five record deficits can't be fully
Speaker 1: trusted because there's been a break in the data. But
Speaker 1: even so it cooms to say it's five to six percent,
Speaker 1: which is twice what we were coping with before. And
Speaker 1: the kindness of strangers of people going to still invest
Speaker 1: in the UK. The pound does look very fragile. It's
Speaker 1: not a good backdrom. But there's one other thing to mention,
Speaker 1: which I always thought before it looked like Lisztrust was
Speaker 1: going to win that in some ways was more pertinent
Speaker 1: to your listeners and to Bloomberg readers, was was what
Speaker 1: happens on the protocol and with Northern Ireland, because I
Speaker 1: think that that feels like actually the thing that people
Speaker 1: are wanting movement on in order to make investment decisions
Speaker 1: and so on. So I actually always thought ahead of
Speaker 1: her becoming leader that some of the other parts. I
Speaker 1: didn't know about the hundred and fifty billions at that point,
Speaker 1: but the other parts were probably something that would be absorbed.
Speaker 1: But actually, unless there was real progress on the protocol,
Speaker 1: that would be the thing that would continue to cast
Speaker 1: some kind of chill over the over the UK's economy.
Speaker 1: And if we were to interpret her actions talking about
Speaker 1: sacking Tom Scholar, she's not afraid to do provocative things.
Speaker 1: So from that can we extrapolate that she's prepared to
Speaker 1: blow up the protocol? But it doesn't doesn't doesn't look
Speaker 1: like it. But we can't quite untangle the extent to
Speaker 1: which what we're dealing with at the moment is a
Speaker 1: nation and the government in mourning, and that you know,
Speaker 1: clearly we saw King Charles in Northern Ireland yesterday. Clearly
Speaker 1: everybody has agreed to to pause on all matters related
Speaker 1: to the protocol, which is obviously the right thing. And
Speaker 1: we're haven't the grace period extended? I mean some some
Speaker 1: people do say the grace period will continue to be
Speaker 1: extended and extended and extended is what we live with
Speaker 1: and what we're trying to arrange is the permanent. So
Speaker 1: we can't quite figure out the extent to which the
Speaker 1: pause is because of mourning or whether it's because actually
Speaker 1: her government is choosing and I don't know the answer
Speaker 1: to this is choosing to be extremely radical on its
Speaker 1: tax cuts and on its bid to to sort energy
Speaker 1: the energy crisis out, but in other ways will will
Speaker 1: will will trim. This feels very like, you know, Ronald Reagan.
Speaker 1: This is like Reaganism. It's back with a vengeance. Do
Speaker 1: be encounters matter? Yes? They do? I mean, are you sure? Yeah?
Speaker 1: I mean, here we are the economists Bloomberg. Surely, the
Speaker 1: being counters matter. They They're very important. I mean, the
Speaker 1: Office of Budget Responsibility is the being counter in chief,
Speaker 1: and it is telling that they the document that they're
Speaker 1: going to release, the fiscal Statement is not going to
Speaker 1: be costed by the o b R next week. There
Speaker 1: will be a budget later in the year where there
Speaker 1: will be a sort of OBI costumes. So the bean
Speaker 1: Counters tells something as well. Right, she's sidesteps the being
Speaker 1: counter in chief for the purposes of this budget. That
Speaker 1: is so, I think because as far as I understand,
Speaker 1: what they're going to do with this is they're going
Speaker 1: to put in the tax cuts alongside the big energy
Speaker 1: bill stuff, and then they're going to want the dynamic
Speaker 1: growth model because inflation will mechanically be lower, so the
Speaker 1: cost of the national debt will come down, so that
Speaker 1: she wants to. I think they're going to want to
Speaker 1: put in all of these kind of moving parts. It's
Speaker 1: a bit like Gordon Brown before the OBRE was set up,
Speaker 1: where you can control effectively what the result is once
Speaker 1: you put put the equation together with the O b R.
Speaker 1: They don't control it. So it's quine that kind of
Speaker 1: handy to to leave the OBI are to one side
Speaker 1: of this. Even we are right, well, you can blame
Speaker 1: them if something goes wrong. Is that they because they
Speaker 1: blame the bean counters if something goes wrong you is
Speaker 1: it like get out class? I don't think then they
Speaker 1: can get it wrong, doesn't it? But it's somebody marking
Speaker 1: your homeworks Yeah, it was set up, wasn't it. Tonge
Speaker 1: government over spending perhaps two billion pounds on support, stopped
Speaker 1: fiddling the book social sie stepping. So surely they've outlived
Speaker 1: their useful, haven't. I mean, people are saying are they
Speaker 1: going to actually continue with the I mean, but again
Speaker 1: it's one of those things where in all of this
Speaker 1: policy uncertainty, to get rid of the guy who checks
Speaker 1: your homework is only going to make the market scape.
Speaker 1: I'm really not sure about this country, that's right. I
Speaker 1: think you can make a kind of you can make
Speaker 1: a an argument that, let's trust this government is taking
Speaker 1: the right gambles in with the parts that we know
Speaker 1: about right now. I think I'm trying to kind of
Speaker 1: channel this trust is kind of riskiness and radical, radical nature,
Speaker 1: you know. I think that as soon as you start
Speaker 1: to be disbanding the kind of official monitor that either way,
Speaker 1: you know, George Osborne, you know, your one time colleague
Speaker 1: brought in, I think that's the point at which you know,
Speaker 1: kind of jumps the shark, right. I think it's the
Speaker 1: point in which it goes a bit too far, which
Speaker 1: is come I mean, in terms of the scholar sacking
Speaker 1: that doesn't go too fine, as much it is. It
Speaker 1: is a massive statement, is a massive gesture. But you
Speaker 1: haven't ripped out the heart of the treasury. The treasury
Speaker 1: is still the treasury. You just it's the management of
Speaker 1: the treasury that's they're changing with the top guy. I mean,
Speaker 1: someone actually reminded when the markets were at war, right,
Speaker 1: is that through Is that the prism through which the
Speaker 1: government can do this and actually get away with it,
Speaker 1: spending spending, the spending the way out of whatever. I
Speaker 1: think she said as much. Yeah, and it's it's manifestly
Speaker 1: the case. And you have families very real, you know,
Speaker 1: having to choose between eating and eating. I think the
Speaker 1: point that people in government make is, you know, look
Speaker 1: at us compared to some of the European nations. I
Speaker 1: think we sort of in this building can fixate on
Speaker 1: versus the dollar and versus America and so on, but actually,
Speaker 1: when compared to the continent, which you know very well,
Speaker 1: you know, actually we it's not not such an unpretty picture.
Speaker 1: Thank you so much, thank you allgrat thanks, don't do
Speaker 1: that again, thank you, Phil, thank you at thank you.
Speaker 1: I was just remondered of what Golden Brown always used
Speaker 1: to say, what did he used to say, what did
Speaker 1: you ever shake his hand? And he'd say, thank you
Speaker 1: for all that you do. Thanks for listening to this
Speaker 1: week's in the City. We'll be back next week, and
Speaker 1: don't forget. If you're looking for a daily rap of
Speaker 1: the stories that matter in the UK, sign up now
Speaker 1: for our newsletter, The Read Out with acro Stratton on
Speaker 1: Bloomberg dot com Slash Newsletters, or check out the show
Speaker 1: notes for a link. And if you like what you
Speaker 1: listen to, head over to Apple Podcasts or wherever you
Speaker 1: listen to podcasts and rate, review and subscribe. This episode
Speaker 1: was hosted by me David Merritt and me Francin Laqua.
Speaker 1: It was produced by Samasadi. Special thanks to legros Stratton
Speaker 1: and Phil Aldrich.