Latest / Merryn Talks Money / Live Event: What Did Rachel Reeves Risk With Her First Budget?

Transcript

Live Event: What Did Rachel Reeves Risk With Her First Budget? · Merryn Talks Money

0:03
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the special
0:21
Speaker 1: edition of Marrin Talks Money, the podcast in which people
0:24
Speaker 1: who know the markets explain the markets.
0:26
Speaker 2: I'm Merri in Sunset Web.
0:28
Speaker 1: We are recording this episode today in front of an audience. Hello, audience,
0:31
Speaker 1: welcome at our Bloomberg headquarters in London. And we're doing
0:35
Speaker 1: that because it's a special day. On how you define special,
0:38
Speaker 1: it is the day after the long awaited budget, which
0:42
Speaker 1: I'm sure you all watched very carefully yesterday. So before
0:45
Speaker 1: we get onto introducing the guests, let me just take
0:48
Speaker 1: the mood of the room. Who felt better after the
0:52
Speaker 1: budget yesterday? Okay, So that's quite a lot of hands,
0:57
Speaker 1: a lot of people felt better, who felt worse?
1:02
Speaker 2: Okay? And of those of you.
1:03
Speaker 1: Who put your hand up and said you felt better,
1:05
Speaker 1: did you feel better because it wasn't quite as bad
1:08
Speaker 1: as you expected, that's all the hands. And did anybody
1:13
Speaker 1: feel better because it was really really great?
1:17
Speaker 2: Okay? For those of you who aren't in the room,
1:19
Speaker 2: not a single hand won't up.
1:21
Speaker 1: So there is obviously quite a lot to unpack here.
1:24
Speaker 1: We're going to unpack those announcements. We're going to look
1:26
Speaker 1: at the tag sites, look at the extra borrowing, and
1:28
Speaker 1: look at the smaller measures and what they actually mean
1:31
Speaker 1: for you right onwards.
1:32
Speaker 2: I'm very lucky today.
1:33
Speaker 1: I don't just have money to stilled author and Bloomberg
1:37
Speaker 1: writer John Steppeck. Obviously we have him most times. This
1:39
Speaker 1: is fantastic, but today we are extra lucky. We also
1:42
Speaker 1: have Stephanie Flanders, head of Economics and Government at Bloomberg
1:45
Speaker 1: News and head of Bloomberg Economics. And as an extra
1:49
Speaker 1: treat we have Andy King, who spent ten years at
1:52
Speaker 1: the UK's Office for Budget Responsibility, most notably as a
1:55
Speaker 1: member of the obr's Executive Budget Responsibility Committee, and who
1:58
Speaker 1: is currently especially partner at Flint Global. So welcome all
2:03
Speaker 1: of you, thank you, and he could possibly start with you.
2:07
Speaker 1: As we saw from the show of hands here we've
2:09
Speaker 1: got an audience that wasn't madly impressed. And when you
2:13
Speaker 1: look at the bear numbers, what you see is a
2:15
Speaker 1: massive tax rise, very significantly larger than anyone would have
2:19
Speaker 1: expected if they'd listened to any labor politician speaking before
2:22
Speaker 1: the election, much more than you might have expected if
2:24
Speaker 1: you'd believe the manifesto, A very sharp rise in spending
2:29
Speaker 1: both investment and current a tax to GDP ratio that's
2:34
Speaker 1: going to be one of the highest ever, a state
2:37
Speaker 1: spending ratio that is possibly one of the highest we've
2:40
Speaker 1: ever seen.
2:41
Speaker 2: And when you.
2:42
Speaker 1: Look out over the rest of the decade, really quite
2:45
Speaker 1: shockingly low growth numbers. We get to two percent next
2:48
Speaker 1: year on the forecast, but beyond that we're well below
2:51
Speaker 1: two percent into the end of the decade, and we
2:53
Speaker 1: average out the decade at one point five eight percent.
2:56
Speaker 1: And that's not GDP ahead, it's just GDP. So look
3:00
Speaker 1: at those bad numbers, it's hard to feel good about
3:03
Speaker 1: it on a big sweep. Is there anything that you
3:07
Speaker 1: can see there that makes you feel a little better? Well,
3:12
Speaker 1: this is a tone I'm planning to use the whole
3:13
Speaker 1: way through it.
3:15
Speaker 3: A very leading introduction, Thanks very much, you know, I mean,
3:19
Speaker 3: I thought that the show of hands really told the
3:21
Speaker 3: story there.
3:22
Speaker 4: What was it?
3:23
Speaker 3: Sixty percent unhappy? Forty percent could have been worse. And
3:29
Speaker 3: that's probably a decent outcome for this budget because the
3:34
Speaker 3: Chancellor's inheritance was a tax burden set to rise to
3:40
Speaker 3: the highest in decades, was a larger state than before
3:45
Speaker 3: the pandemic, but was a state that was the plans
3:51
Speaker 3: were to cut that back quite substantially, without any detail.
3:56
Speaker 4: On how that would be done.
3:57
Speaker 3: Now, my former colleagues at the GOBR, who are not
4:00
Speaker 3: allowed to make normative statements, did their very best to
4:03
Speaker 3: say that that was implausible, perhaps even impossible, And so
4:08
Speaker 3: what we saw yesterday was a replacement of essentially unrealistic
4:14
Speaker 3: numbers with at least possibly deliverable realistic numbers. And the
4:19
Speaker 3: difference was huge. As you say, seventy billion pounds going
4:23
Speaker 3: into public spending, most of that two thirds of that
4:26
Speaker 3: into public services, a third into public investment, a huge
4:31
Speaker 3: tax rise adding to what was already a huge tax
4:36
Speaker 3: rise baked in that had been announced in the budget
4:39
Speaker 3: since the pandemic, and strangely, it leaves the size of
4:44
Speaker 3: the state in five years time roughly where it is today.
4:48
Speaker 3: It's a decision not to reduce the size as opposed
4:52
Speaker 3: to increase it. Of course, it is much larger than
4:55
Speaker 3: it was pre pandemic. That's down to things like aging,
5:00
Speaker 3: down to things like their health troubles in the country,
5:04
Speaker 3: and the very important point at the end, it's because
5:07
Speaker 3: growth is weak and has been weak now for fifteen years,
5:11
Speaker 3: and is essentially expected to remain weak for another five
5:14
Speaker 3: and there are those who would say that the OPRS
5:17
Speaker 3: have been optimistic, not pessimistic about growth. But it is
5:20
Speaker 3: a very still a very challenging outlook. And I think
5:25
Speaker 3: that was my takeaway. You needed to do all of
5:27
Speaker 3: those things to get the public finances and public services
5:33
Speaker 3: on a path that can be delivered, but is still
5:37
Speaker 3: quite difficulty.
5:38
Speaker 2: And it is incredibly fragile the whole thing.
5:40
Speaker 1: So it is incredibly vulnerable to shifts in inflation, and
5:42
Speaker 1: we may see how inflation as a result of this budget,
5:45
Speaker 1: incredibly vulnerable to shift in interest rates and positive the
5:49
Speaker 1: positive part of this budget is very far out the
5:52
Speaker 1: idea that as a result of this kind of spending
5:54
Speaker 1: over the next five years, we'll see an uptick in
5:56
Speaker 1: GDP over the much longer term.
5:59
Speaker 2: And it is fragile, start right, it.
6:02
Speaker 3: Is it isn't you know? There are parts of this
6:06
Speaker 3: budget that unfortunately looked like those from pre elections. So
6:11
Speaker 3: fuel duty has once again been frozen only for one
6:15
Speaker 3: year for the fourteenth time, and you know, the fiscal
6:20
Speaker 3: targets have been changed. One is actually tighter and one
6:23
Speaker 3: is looser than those that were inherited. But there's only
6:27
Speaker 3: a tiny fraction of headroom against them. So any of
6:31
Speaker 3: those things you mentioned, or any decisions that are taken
6:35
Speaker 3: defense spending, say, they all will require either trade offs
6:41
Speaker 3: or will make you know, will make life difficult because
6:46
Speaker 3: because the outlook is challenging.
6:47
Speaker 1: I mean, there is no getting away from the fact
6:50
Speaker 1: that we've seen extraordinary changes in the role of the
6:53
Speaker 1: state and in the amount of debt we have in
6:54
Speaker 1: the UK over the last couple of decades. So if
6:56
Speaker 1: you go back to before the financial crisis, are debt
7:00
Speaker 1: DP race you collect correct me if I'm wrong, Here's
7:01
Speaker 1: definitely because you're the expect here was around thirty. It
7:04
Speaker 1: was about thirty I think thirty percent or so eighty
7:06
Speaker 1: eighty before COVID. Now we're up at one hundred and
7:09
Speaker 1: there's no I think any of us can see sort
7:11
Speaker 1: of credible reason to expect it full significantly from there.
7:14
Speaker 1: Back in the nineteen nineties, the state state spending was
7:16
Speaker 1: what around twenty eight to thirty percent of GDP, and
7:19
Speaker 1: now we're up into the high forties. You know, we've
7:21
Speaker 1: made some fairly extraordinary shifts. And when you look at
7:24
Speaker 1: a budget like this, can you see any way that
7:27
Speaker 1: we rowe back from those rather extraordinary.
7:30
Speaker 5: Now, if you make a substantial different change in the
7:32
Speaker 5: way you think about public services and the quality and
7:36
Speaker 5: the degree of generosity or adequacy of the welfare system,
7:41
Speaker 5: then you could take us back to those levels.
7:44
Speaker 4: I think it's a.
7:44
Speaker 5: Little bit odd to focus on this budget in isolation
7:49
Speaker 5: and focus on that debt number in isolation. You know,
7:52
Speaker 5: the budget caps. As Andy has said, the budget came
7:56
Speaker 5: at the beginning of a parliament when I imagine nobody
7:59
Speaker 5: was expecting it to be a give away a budget
8:01
Speaker 5: it never is, and when it had been very widely
8:04
Speaker 5: flagged that there was a complete disconnect between sort of
8:09
Speaker 5: the realistic spending plans and the level of taxes that
8:12
Speaker 5: people had committed to on either side. And I think
8:15
Speaker 5: actually the polls suggests that no one everyone did, in
8:18
Speaker 5: fact expect the Labor government to raise taxes more than
8:22
Speaker 5: was indicated in the manifesto, and that would also be
8:24
Speaker 5: the case for the Conservatives if they'd wen't.
8:27
Speaker 4: I think so.
8:28
Speaker 5: I think it has to be placed in the context
8:30
Speaker 5: of where we are, what the plans were like before,
8:35
Speaker 5: and I think the very tough challenges I mean Andy's right,
8:38
Speaker 5: I mean, for me, this just told us how much
8:41
Speaker 5: you have to do just to begin to narrow the
8:45
Speaker 5: gap between what we want as a nation in terms
8:47
Speaker 5: of our welfare services and our public services, and how
8:51
Speaker 5: much we're willing to pay for it. And it's a
8:52
Speaker 5: very common thing that people talk about the gap. But
8:55
Speaker 5: you know that is why we're going up. It is
8:57
Speaker 5: an all time high, even slightly higher tax ratio than
9:02
Speaker 5: it would have been under the previous government's plans.
9:06
Speaker 4: Or you could put it.
9:07
Speaker 5: You could say we're moving towards the European average because
9:10
Speaker 5: we actually want European style public services, and that's a choice.
9:14
Speaker 5: But I think it sort of shows you you can
9:15
Speaker 5: do all of this. You can spend another seventy billion,
9:18
Speaker 5: of which forty billion came from higher taxes, and still
9:22
Speaker 5: only be sort of as Andy said, sort of paying
9:24
Speaker 5: for what you need right now.
9:26
Speaker 4: At the most basic level.
9:27
Speaker 5: The other thing you look at in isolation is the
9:29
Speaker 5: rise in debt, and I think, to look at what's
9:32
Speaker 5: happened to our growth and what's happened to our debt
9:35
Speaker 5: as a country without looking at the global context, and
9:38
Speaker 5: what's happened to the debt of every single advanced economy.
9:41
Speaker 5: I mean Germany, I think truly is the exception in
9:44
Speaker 5: not having seen a more than doubling of its I
9:47
Speaker 5: think it's even Germany has seen a doubling of its debt,
9:49
Speaker 5: but it's still relatively let low. Every other country has
9:53
Speaker 5: seen a move either beyond one hundred percent of GDP
9:56
Speaker 5: or closed one hundred percent of GDP. As we know,
9:58
Speaker 5: the US debt trajectories even more unsustainable, but with a
10:02
Speaker 5: stronger growth underpinning it. So this is not to say
10:07
Speaker 5: that you know, everyone else a terrible so we get
10:09
Speaker 5: to be terrible too. But I think that we're clearly
10:10
Speaker 5: our country has responded to similar challenges and has sort
10:15
Speaker 5: of had to run up debt in response to that.
10:19
Speaker 5: Whether we can can I think that your right to
10:21
Speaker 5: highlight the weak growth picture, but it is it is
10:25
Speaker 5: over the piece, no weaker than it was looking before
10:28
Speaker 5: and has been since the Global financial crisis. It is
10:30
Speaker 5: fundamental to the narrowness of the choices we face that
10:34
Speaker 5: we not be able to get that productivity growth rate,
10:37
Speaker 5: long term productivity growth rate back anywhere close to where
10:40
Speaker 5: it was before the Global financial crisis. But I mean
10:43
Speaker 5: that too, is a shared challenge, and I think at
10:46
Speaker 5: least we have a very clear effort to invest over
10:52
Speaker 5: the next five to ten years in an effort to
10:55
Speaker 5: try and move the dial on that. And I would
10:56
Speaker 5: say I think the officer budget Responsibility is optimistic in
10:59
Speaker 5: some way areas because it's been proved wrong on its
11:02
Speaker 5: productivity forecast for a very long time. Where it was
11:05
Speaker 5: quite negative I think was on the impact of public
11:09
Speaker 5: investment on private investment and on the broader capacity of
11:13
Speaker 5: the economy. As they say themselves, there's perfectly possible that
11:17
Speaker 5: that public investment will crowd in private investment. They're assuming
11:20
Speaker 5: it won't, and they're assuming, in fact it's a one
11:22
Speaker 5: for one for trade off. We could in the US
11:25
Speaker 5: it was learned that you could make room.
11:27
Speaker 4: Through those kind of investments. We'll see, we'll see.
11:31
Speaker 1: So if it had to be done, best done quickly,
11:34
Speaker 1: and was employer national insurance the right way to do it,
11:37
Speaker 1: do you think? I mean that puts quite a burden
11:39
Speaker 1: on businesses. And if you add up employer national insurance
11:41
Speaker 1: rises and you add that to the rise in the
11:43
Speaker 1: minimum wage, you've got a lot of smaller businesses and
11:45
Speaker 1: businesses and the services sector screaming slightly.
11:48
Speaker 5: You have chosen to put quite a lot of pain
11:51
Speaker 5: on I think medium sized, a lot of the very
11:53
Speaker 5: small employers. I think they've made an effort to at
11:55
Speaker 5: least partially protect them. But I think you're quite right
11:59
Speaker 5: that the combination of the national living wage increase and
12:04
Speaker 5: the national insurance rise is a sort of upfront challenge
12:09
Speaker 5: and an increase in the cost and cost of labor.
12:13
Speaker 5: I wouldn't have cut national insurance last year, and I
12:17
Speaker 5: think there was no economists who thought that was affordable,
12:19
Speaker 5: especially by taking twenty billion out of the future public
12:22
Speaker 5: spending plans.
12:22
Speaker 4: That's what happened last November.
12:24
Speaker 5: Is you know the way A large part of how
12:27
Speaker 5: it's I'm hesitant to say this with Addy King because
12:29
Speaker 5: I know he will immediately correct me if I come wrong,
12:31
Speaker 5: but a large part of how the national insurance cuts
12:35
Speaker 5: we were quote unquote financed was through these very unrealistic
12:39
Speaker 5: spending plans. So in a sense, Rachel Ries was just
12:44
Speaker 5: reversing cuts which were widely felt to be unaffordable. I
12:48
Speaker 5: think it's unfortunate that the reversal has been is as
12:53
Speaker 5: bad for or it is affecting labor supply in a
12:57
Speaker 5: negative way and hurting employers when youbably would have wanted
13:00
Speaker 5: to just add some a few pence to income tax.
13:04
Speaker 4: But that's that's not the world we live in.
13:06
Speaker 2: Now, this this rise in n M, we should mention it.
13:09
Speaker 1: You speak about employers and employee and I in the
13:11
Speaker 1: same kind of breath, right, they're sort of the same thing.
13:14
Speaker 1: So does the Office of Budgets, So does the Officer
13:15
Speaker 1: Budget Responsibility exactly, but RAG does not. So we must assume,
13:19
Speaker 1: must't we andy that this does end up coming through
13:21
Speaker 1: at lower wages or certainly lower razors to wages.
13:25
Speaker 3: Absolutely, and so the OBI said that yesterday they expect
13:30
Speaker 3: in the end three quarters of that tax rise will
13:35
Speaker 3: ultimately manifest itself in lower real wages, probably over time,
13:40
Speaker 3: as next year's four percent pay rise will actually be
13:43
Speaker 3: two and a half, and those kind of decisions. They
13:49
Speaker 3: do think that a quarter of it will come off profits.
13:51
Speaker 3: The way in which the tax rise was structured, with
13:56
Speaker 3: actually most of the revenue coming from moving the point
13:59
Speaker 3: at which your each employee's wages start to be liable
14:03
Speaker 3: for an I back to five thousand pounds, means that
14:08
Speaker 3: the tax rise itself is quite concentrated on low paid people.
14:12
Speaker 3: It doesn't matter whether you're a large employer of low
14:14
Speaker 3: paid people or a small smaller employer of low pay people.
14:17
Speaker 3: It's low paid people, whether whether tax rise is largest.
14:21
Speaker 3: But also that is the same group where your room
14:25
Speaker 3: for maneuver is reduced by the living wage, So you
14:29
Speaker 3: can't actually choose how much you pay rise you give.
14:33
Speaker 3: So that looks quite risky to me.
14:35
Speaker 2: Well, maybe it's just a way of trying to boost productivity.
14:38
Speaker 1: Like it very expensive to hire people down at the
14:41
Speaker 1: bottom en you've forced people to introduce productivity enhancement measures.
14:45
Speaker 3: That has always been one of the arguments for why
14:48
Speaker 3: minimum wages could work. That although in someone's model it
14:52
Speaker 3: says you can't have a latent productivity gain that a
14:56
Speaker 3: business has not already taken advantage of, in the real.
14:59
Speaker 5: World, can can definitely and just so just on that though,
15:02
Speaker 5: I mean, ever since the minimum wage was introduced by
15:05
Speaker 5: Golden Brown, this has been the fear, and it's been
15:08
Speaker 5: gradually increased, and there was always a feeling that at
15:11
Speaker 5: some point it would start to really hit employment. But
15:14
Speaker 5: up until now and that has actually been surprisingly positive
15:17
Speaker 5: for both employment and living standards at the bottom end.
15:20
Speaker 5: So who knows whether we've reached that critical point I mean,
15:23
Speaker 5: it is now getting closer to the average earnings than
15:25
Speaker 5: you would have ever thought was possible without having a
15:27
Speaker 5: big impact on employment.
15:28
Speaker 4: But if a lot of the studies was.
15:33
Speaker 5: Looking at one in Manchester and other places, it has
15:35
Speaker 5: actually raised productivity in these in these low wage sectors
15:40
Speaker 5: in a way that you might want to see, and
15:42
Speaker 5: hopefully that will continue.
15:43
Speaker 6: Actually, one thing I'm curious about when that point is,
15:46
Speaker 6: I mean, presumably it has they had an mpicked when
15:49
Speaker 6: for example, read comprehation in or the gaps between So
15:53
Speaker 6: if you're a minimum reja or not, then the person
15:57
Speaker 6: above view, in the person above view, the gap between
16:00
Speaker 6: those wages get smaller, and therefore the reward for if
16:04
Speaker 6: you like taking on more responsibility or going for promotion
16:07
Speaker 6: also becomes smaller. Is there any kind of evidence of
16:11
Speaker 6: that or I mean the other thing is also you know,
16:14
Speaker 6: the choice between working as say, a low paid position
16:17
Speaker 6: in the NHS and working when the tells it tesco
16:21
Speaker 6: one of those jobs I think most people would degree
16:23
Speaker 6: is much harder than the other. But if the gap
16:25
Speaker 6: between the pay for them is non existent, then that's
16:29
Speaker 6: why it's perhaps how they recruit for certain roles and others.
16:32
Speaker 4: I mean that speaks to this.
16:34
Speaker 5: There's much broader question about whether or not, for example,
16:36
Speaker 5: in social care, whether there's enough money going into that
16:39
Speaker 5: system to have people be paid in a way that
16:43
Speaker 5: reflects the hardness of the job. So I think that's
16:45
Speaker 5: sort of the basic together. But you're absolutely right that
16:46
Speaker 5: there is a It does cause compression, but it isn't
16:50
Speaker 5: the case that everyone just gets pushed, and that means
16:53
Speaker 5: that you're not paying more to everybody in order to
16:56
Speaker 5: preserve those differentials, which depending on how look at it,
16:58
Speaker 5: maybe it maybe it certainly is a good thing for
17:00
Speaker 5: people at the bottom. Yeah, and employment is a good
17:03
Speaker 5: thing for employment because you're not having to pay more
17:04
Speaker 5: for everybody.
17:05
Speaker 4: You're just paying more for those people.
17:07
Speaker 1: Johnny, you wrote the money just sailed last week or
17:09
Speaker 1: as earlier this week. There are several criteria for whether
17:11
Speaker 1: this will be a good budget or a bad budget.
17:14
Speaker 2: How did it go?
17:15
Speaker 6: I mean, but it didn't crash the gout's market, So
17:17
Speaker 6: that was the FoST wine. I did feel at the
17:20
Speaker 6: time that was a pretty low hart Oughty clear because
17:22
Speaker 6: you know, generally I just don't crash the gout's market.
17:26
Speaker 6: That doesn't happen that often in terms of making the
17:30
Speaker 6: tax system less complicated.
17:33
Speaker 4: I don't know. It's hard to gather a tech for that.
17:36
Speaker 6: Wine you've sort of introduced, I knew levels of inheritance tax,
17:43
Speaker 6: for example, without really reforming it, particularly.
17:46
Speaker 2: In fact that we should have a little little pull
17:48
Speaker 2: on that.
17:48
Speaker 1: Did anyone in the audience move their pension from dB
17:51
Speaker 1: to DC in order for their children to be able
17:54
Speaker 1: to inherit it? No, I mean think we do have
17:58
Speaker 1: quite a few listeners who did do that as a
17:59
Speaker 1: disappoint die for them yesterday.
18:02
Speaker 6: I did, Well, that's a good point. I mean, that's
18:04
Speaker 6: one thing on the inheritance tax thing. I mean, I
18:06
Speaker 6: don't know, but I remember when that first happened and
18:09
Speaker 6: it became clear that you could use a defined contribution
18:12
Speaker 6: pension to stash away your assets from inheritance tax. I
18:17
Speaker 6: realized this may not may or may not be a
18:18
Speaker 6: popular thing to say about. I remember when we first
18:21
Speaker 6: realized that and we were writing about it, we were like,
18:24
Speaker 6: this cannot last. This is a really gray area is
18:28
Speaker 6: definitely going to be reversed. So the fact that it
18:32
Speaker 6: then hung around for so long that it actually became
18:34
Speaker 6: a tax planning tool.
18:36
Speaker 4: It was always something.
18:37
Speaker 6: I think it was on the cards, and I feel
18:41
Speaker 6: that it's difficult to object to put it that way.
18:46
Speaker 6: As far as the other things inherent tax inheritance tax
18:49
Speaker 6: goal did I mean name market rallied because they only
18:53
Speaker 6: get hit with twenty percent in hurdance tax instead of
18:55
Speaker 6: forty percent, So you know, I mean, I'm sure AIM
18:58
Speaker 6: investors are we relieved about that. The farm stuff, now,
19:02
Speaker 6: I don't I know nothing about farming, to be very clear,
19:06
Speaker 6: I think that people are quite shocked about the million
19:10
Speaker 6: pound limit that does come when topowin allowance law. So
19:14
Speaker 6: it is a two million pound limit around a million
19:16
Speaker 6: pound limit from what I'm like to believe from looking
19:20
Speaker 6: at Twitter, most farms are still bigger than that, but.
19:24
Speaker 1: Farms that are sustainable or profitable will be much more
19:27
Speaker 1: valuable than that. If a hobby farmer is going to
19:30
Speaker 1: be more valuable than that, So that was quite an
19:33
Speaker 1: interesting move. And I also felt that a bit like
19:36
Speaker 1: with AM is one of those things once you've broken
19:38
Speaker 1: the taboo of adding inheritance tax, so those it could
19:41
Speaker 1: go on. So I know everyone who invests the name
19:42
Speaker 1: is very relieved, but I wouldn't be at all surprised
19:45
Speaker 1: if there's another bite at that one.
19:48
Speaker 6: Yeah, and I mean to be fair again, it was
19:51
Speaker 6: always dafted aim was being propped up by being a
19:55
Speaker 6: funnel for inheritance tax avoidance because you know, the the companies,
20:01
Speaker 6: the companies should be good enough not to just be
20:03
Speaker 6: getting money because it's a way to minimize your your losses.
20:07
Speaker 6: But at the same time, if you're not then going
20:10
Speaker 6: to replace that. We already have an issue with raising
20:14
Speaker 6: funds for small companies in this country or released it's
20:17
Speaker 6: not actually, it's more the funnel between small companies and
20:19
Speaker 6: big companies. And obviously the budget didn't do and in
20:23
Speaker 6: particular for capital markets. It wasn't against them, but it
20:26
Speaker 6: wasn't for them either, which was something that had been
20:29
Speaker 6: talked up a lot before the election. As far as
20:33
Speaker 6: our stuff goes. Capital gainst tax going up from twenty
20:36
Speaker 6: eighteen percent to twenty to.
20:37
Speaker 4: Twenty four percent.
20:38
Speaker 6: Again, that was more a relief from what it could
20:41
Speaker 6: have been. Doesn't before men and doesn't make anything more straightforward.
20:46
Speaker 6: So yeah, so in terms of complexity, I would have
20:48
Speaker 6: said that, you know, it wasn't. No Chancellor has passed
20:55
Speaker 6: that for years and years. You know, they don't ever
20:57
Speaker 6: make it less complicated. And I do think that I
21:00
Speaker 6: do think that's a problem. It is like I politically speaking,
21:04
Speaker 6: if Rachel Reeves could not get fuel duty through now
21:08
Speaker 6: at the start of a five year term, way I
21:12
Speaker 6: mean a shallow but wide landslide victory. You know, it's
21:15
Speaker 6: never going to happen. And this is why, for example,
21:18
Speaker 6: like the OBR, there should be something in the rules
21:20
Speaker 6: that says it's not biased on making a judgment. If
21:24
Speaker 6: a politician is clearly not going to have this in
21:27
Speaker 6: the next budget, for us to take it out and
21:29
Speaker 6: put the pressure on them. You know, I'm actually in
21:31
Speaker 6: a way that would be a good way to take
21:35
Speaker 6: the fiscal watchdog side of things, because politics is the
21:38
Speaker 6: thing that gets in the way of improving the structure
21:42
Speaker 6: of our tax system. And if we want to get
21:44
Speaker 6: more productive, then we're going to have to simplify it.
21:47
Speaker 6: And simplifying it doesn't mean making the tax take lower.
21:51
Speaker 6: It actually would probably make the tax take higher. But
21:54
Speaker 6: there are so many things that have been done over
21:56
Speaker 6: the years because they don't show up on working people's
22:00
Speaker 6: pace lips, you know, even though actually it poly means
22:02
Speaker 6: a load of working people will get fired or not
22:04
Speaker 6: get hired as a result of this. So I think
22:07
Speaker 6: that we don't think enough about the structure of our
22:10
Speaker 6: systems in terms of, you know, the bare numbers as
22:14
Speaker 6: long as the spreadsheet adds up and we can put
22:17
Speaker 6: up with it. You know, there's a reason that we've
22:19
Speaker 6: not had growth since two thousand and eight, and that
22:21
Speaker 6: clearly comes down to something qualitative rather than quantitative. It
22:26
Speaker 6: doesn't mean it's easy to effects, but you know, it's
22:29
Speaker 6: not like I mean, because we blame demographics all the time,
22:32
Speaker 6: but we didn't all age overnight. In two thousand and eight.
22:34
Speaker 6: There was a global financial crisis and that did something.
22:38
Speaker 6: So either the productivity before then was artificial, which I
22:41
Speaker 6: think is partially true, but also since then we've done
22:44
Speaker 6: something to the economy that's made it much much harder
22:47
Speaker 6: to be productive. And whether that's too much financial regulation,
22:51
Speaker 6: be carefully going down that route, or if it's something else.
22:54
Speaker 6: But that's the sort of questions we need to have,
22:56
Speaker 6: and they are divorced from.
23:00
Speaker 2: Quite a lot of those kind of thing in the budget.
23:01
Speaker 1: I mean, if you look at it, and if you
23:03
Speaker 1: look at several of the of the tax changes that effectively,
23:06
Speaker 1: when you look at the numbers will raise no money
23:08
Speaker 1: at all, so vat on private schools, the changes to
23:12
Speaker 1: non doms regulations, the abolition of that, and the private
23:17
Speaker 1: equity rising private equity taxations, so thirty two percent on
23:20
Speaker 1: carried interest. These will raise almost nothing. But if anything,
23:23
Speaker 1: that had to be done because they're so clearly laid
23:26
Speaker 1: out in the manifesto.
23:28
Speaker 3: So fair, Yes, absolutely. I mean the choice to try
23:33
Speaker 3: and tax those with the broadest shoulders always means that
23:36
Speaker 3: you're that you're looking at choices for people who are
23:41
Speaker 3: well advised, are savvy, can have lots of options, and
23:45
Speaker 3: so I mean one thing is to take it as
23:49
Speaker 3: a good thing that those tax measures are not in
23:52
Speaker 3: the budget book raising massive amounts of money. It means
23:55
Speaker 3: that they've taken a realistic assessment of what people will
23:58
Speaker 3: do in the face of higher time tax rates.
24:00
Speaker 1: Yes, so there has been more of a focus on
24:02
Speaker 1: behavior than you might have expected, and the run up
24:05
Speaker 1: for them.
24:07
Speaker 3: Not more than I would have expected, because I spent
24:09
Speaker 3: ten years trying to put those kind of assumptions into numbers.
24:13
Speaker 3: But there was a lot of focus on the types
24:16
Speaker 3: of taxes where behavioral responses are big, and it's good
24:20
Speaker 3: to see that you know they thought about them. Whether
24:23
Speaker 3: they're right or wrong, you know, unknowable because there's some
24:26
Speaker 3: of these taxes where you're talking about hundreds, maybe thousands
24:30
Speaker 3: of people, not millions as the tax base. And you know,
24:35
Speaker 3: I remember asking the AHMRC officials that you know, you
24:38
Speaker 3: can't tell me, but could you just like google the
24:41
Speaker 3: fifty biggest and find out if their kids are you know,
24:44
Speaker 3: school age, are they likely to move? I think this
24:46
Speaker 3: is more important than finding the right elasticity from a
24:50
Speaker 3: study of Swiss cantons.
24:52
Speaker 1: Yeah, I suppose one thing that people say is that
24:54
Speaker 1: there'll be a relief out there because the rise in
24:57
Speaker 1: the taxon carried interest are only thirty two percent, wh
25:00
Speaker 1: was expected to go much higher. Proof that you can
25:01
Speaker 1: still lobby this government, and if you've got plenty of
25:04
Speaker 1: manay to lobby, you can still make sure that it
25:06
Speaker 1: works for you.
25:07
Speaker 3: And to be honest, it looks like they're kind of
25:08
Speaker 3: following the evidence that those are the models I remember of,
25:11
Speaker 3: you know, the revenue maximizing rates in hmrc's giant spreadsheets.
25:17
Speaker 3: So that's a good thing too.
25:19
Speaker 1: Definitely, what do you expect another round of tack phrases
25:21
Speaker 1: from this government?
25:22
Speaker 5: And I think the big risk is that we've all
25:24
Speaker 5: said this is this is an amazing huge budget, and
25:28
Speaker 5: there was also this kind of expect insane expectations around
25:32
Speaker 5: it that it was going to kind of set the
25:33
Speaker 5: political weather for the whole of the Parliament and resolve
25:39
Speaker 5: all of the sort of disquiet on both on the
25:43
Speaker 5: labor side and in sort of in the broader public,
25:45
Speaker 5: and solve all our economic problems. I mean, it just
25:48
Speaker 5: was never going to be able to wear that carry
25:50
Speaker 5: that weight. You've raised forty billion, more than almost any
25:56
Speaker 5: other chancellor as a share of GDP in the modern times.
26:01
Speaker 5: You've stopped the rot in the public services, but you've
26:06
Speaker 5: chosen to inject. She has chosen to inject front load
26:09
Speaker 5: most of that additional a lot of that additional spending
26:12
Speaker 5: in the first year and a half, including for the
26:15
Speaker 5: NHS and then for the as Andy pointed out, the
26:19
Speaker 5: for the unprotected departments. You're looking at a slightly less
26:24
Speaker 5: less of a squeeze. I think half the squeeze in
26:28
Speaker 5: real terms every year that was the previous plans, but
26:32
Speaker 5: still much tighter than we've recently achieved. So I think
26:36
Speaker 5: that the risk is this money. You know, there's a
26:39
Speaker 5: there's an you know, one and a half percent of
26:41
Speaker 5: GDP extra going into the NHS over the next couple
26:44
Speaker 5: of years, give or take. Hopefully we will notice that,
26:48
Speaker 5: and hopefully it won't just get swallowed up because of
26:50
Speaker 5: the speed she is, speed of which it's going in.
26:53
Speaker 5: It won't just get swallowed up in ways that don't
26:55
Speaker 5: build lasting improvement, you know. I hope there is a
26:58
Speaker 5: sort of step change in the way that it works.
27:01
Speaker 5: I hope they're willing to hire us some more managers
27:03
Speaker 5: to actually handle this money, which is always politically difficult,
27:06
Speaker 5: but that's what they desperately need, actually, is more people
27:08
Speaker 5: to actually to.
27:10
Speaker 4: Manage in the NHS.
27:13
Speaker 5: And get those kind of output and productivity numbers better
27:16
Speaker 5: so that we continue to notice it, because otherwise you
27:21
Speaker 5: may be sort of in a sense, squandering this big
27:24
Speaker 5: tax rise that you were able to do at the
27:25
Speaker 5: beginning of parliament with not and having to go back
27:28
Speaker 5: in a couple of years. And I think they will
27:30
Speaker 5: inevitably have to come back. I think the question is
27:32
Speaker 5: that when they come back, will people say, Okay, we
27:34
Speaker 5: can see this is working, and we're willing to kind
27:37
Speaker 5: of spend a bit more money on it. Or are
27:38
Speaker 5: they going to say, well, hang on a minute, you know,
27:40
Speaker 5: why should we throw more money into a black hole?
27:42
Speaker 5: I mean maybe we will then be talking about a
27:43
Speaker 5: different kind of black hole.
27:44
Speaker 1: Yeah, I mean, here is the big risk for this government, right,
27:47
Speaker 1: so they've done this. It's a big blade. Lots of
27:49
Speaker 1: new spending and say, lots of new money going into
27:51
Speaker 1: the NHS. Even though they said there wasn't going to happen,
27:53
Speaker 1: it has happened. So the general public is going to
27:56
Speaker 1: really need to see a result there and reasonably quickly.
27:59
Speaker 1: And at the same time, one of the results of
28:01
Speaker 1: the budget has been that we now expect great to
28:03
Speaker 1: force slightly more slowly than we might have before, and
28:06
Speaker 1: that will help people's mortgage payments, etc. So it may
28:10
Speaker 1: there's a lot of risk in here for the government politically. Yeah,
28:12
Speaker 1: I mean, obviously we should get too excited about the numbers.
28:15
Speaker 1: I think it's true that we stopped expecting another a second,
28:18
Speaker 1: I mean a December rate cut yesterday by the time
28:22
Speaker 1: that Rachel Ruth had stopped talking.
28:23
Speaker 5: We still expect in November one. I think the difference
28:27
Speaker 5: that the OBR is suggesting it's maybe interest rates or
28:31
Speaker 5: bank rate over the course of the next few years
28:33
Speaker 5: will be zero point two percentage points higher something like that.
28:38
Speaker 5: I think ordinary people may not notice a lot of
28:40
Speaker 5: this tax increase, but it certainly is quite a squeeze
28:44
Speaker 5: on business and potentially is not still not doing enough.
28:53
Speaker 1: You said earlier, Andy that that the possibly the best
28:56
Speaker 1: thing you can say for this budget is that public
28:59
Speaker 1: sources are now going to get worse.
29:01
Speaker 2: Is that really the best we can say?
29:03
Speaker 3: I hope it's not the best we can say.
29:05
Speaker 2: I think.
29:06
Speaker 3: I just I read all the front pages of seventy
29:10
Speaker 3: billion of extra spending. I looked at the line that
29:12
Speaker 3: shows the state roughly the same size over the next
29:15
Speaker 3: five years, and I just thought to myself, like, it
29:19
Speaker 3: tells you more about what could not be delivered before
29:22
Speaker 3: than it does about the generosity of what's been announced.
29:26
Speaker 3: And if you look at public services today, you know,
29:29
Speaker 3: you can name any public service and there is something
29:32
Speaker 3: equivalent to a backlog associated with it. Overcoming that I
29:38
Speaker 3: think is part of the reason why the spending is
29:40
Speaker 3: front loaded. But overcoming that in two years for some
29:45
Speaker 3: of these things is going to be quite difficult. So possibly, yes,
29:50
Speaker 3: you know, not things look quite broken in quite a
29:54
Speaker 3: lot of places right now, like them. Not being broken
29:58
Speaker 3: is probably, you know, is a good outcome, but it's
30:00
Speaker 3: probably not that kind of feel good. Everything's brilliant because
30:05
Speaker 3: the public spending numbers are so generous.
30:07
Speaker 1: Okay, I'm not really hearing massive positivity, John, Was there
30:12
Speaker 1: anything in here that you think will make things better
30:17
Speaker 1: for ordinary investors?
30:18
Speaker 2: Rare?
30:19
Speaker 1: I mean, the good news is that isis weren't fiddled
30:21
Speaker 1: with and we're set on our set on our allowance
30:24
Speaker 1: there for five years VCTs we get to hang onto
30:27
Speaker 1: aim twenty forty percent. But for me, the big problem
30:31
Speaker 1: was no active signal of confidence in the stock market.
30:35
Speaker 1: You know, we wrote a lot you and I and
30:37
Speaker 1: a lot of other people in the run up to
30:38
Speaker 1: this budget about wouldn't it be great if we could
30:41
Speaker 1: see some reduction in stamp duty down perhaps to historical norms,
30:44
Speaker 1: or perhaps even an abolition of stamp duty, which was
30:46
Speaker 1: some kind of a signal. We were very keen on
30:49
Speaker 1: the brit I say, which we obviously knew wasn't going
30:51
Speaker 1: to come up, but we were waiting for for some
30:53
Speaker 1: kind of a signal from the government that there was
30:56
Speaker 1: going to be intense support for UK stock market. It's
31:00
Speaker 1: even although we slightly disapprove of it, mandatory mandatory investments
31:03
Speaker 1: in UK markets from DC pensions.
31:06
Speaker 6: I think they could have thrown a bone because stamp
31:09
Speaker 6: duty and shares is a good example because it raises
31:11
Speaker 6: three point five billion a year and if you would
31:14
Speaker 6: you could either even just reduce the rate, or you
31:17
Speaker 6: could say extend the relief up to foot say two
31:22
Speaker 6: fifty companies, and then you say if it made a difference,
31:25
Speaker 6: and if it made a difference, then take it further.
31:28
Speaker 6: You could have tested that, and I get that, you know,
31:31
Speaker 6: it's it was a small thing, but the end of
31:33
Speaker 6: the day's again one of the slight problems I think
31:36
Speaker 6: the way we do things here anyway is that the
31:38
Speaker 6: Chancellor stands up in literally names schools and hospitals that
31:41
Speaker 6: they are going to individually rebuilding a kin like Is
31:43
Speaker 6: that no a local councilor's job. So that kind of thing,
31:48
Speaker 6: you know, So they could have done something in that front.
31:50
Speaker 6: And I think the other problem is there's an element
31:52
Speaker 6: of you know, they clearly decided to just go down
31:57
Speaker 6: the non dom route they were already planning, which's absolutely fine.
32:01
Speaker 6: Was nothing. Maybe it'll pan it, maybe it won't. May
32:03
Speaker 6: we we'll just find out if they're all up and
32:05
Speaker 6: leave or if they don't. But it's more that point
32:07
Speaker 6: of signaling a continuation of the support. Basically, it's like
32:14
Speaker 6: I think a lot of people in the city maybe
32:16
Speaker 6: voted for Labor thinking it was New Labor two point zero.
32:19
Speaker 6: Obviously times have changed, you know, the nineteen nineties was
32:22
Speaker 6: a different world.
32:24
Speaker 4: So it's not just that.
32:25
Speaker 6: But I think that with this budget they've sort of
32:28
Speaker 6: confirmed it. Guys, this isn't Tony Blair again, it's not
32:32
Speaker 6: Jeremy Cobbyn either, but it's something closer to just kind
32:37
Speaker 6: of big state, you know, not really kind of hugging
32:41
Speaker 6: the rich sort of mode. And I think that that
32:45
Speaker 6: is an ideal given that we're wanting to get more
32:47
Speaker 6: investment in the UK.
32:49
Speaker 1: Yeah, and then a lot of our listeners will be
32:51
Speaker 1: by to let investors by to little vests.
32:55
Speaker 2: Quite a lot of our listeners are by to little
32:56
Speaker 2: vesters and.
32:57
Speaker 6: The hands only when like that.
33:00
Speaker 2: They didn't they didn't got quite advised, they didn't.
33:02
Speaker 4: Lost them before they.
33:07
Speaker 2: And they will be mildly disappointed with this rise in
33:10
Speaker 2: stamp duty. And I did.
33:11
Speaker 1: I got some response on on social media to talking
33:14
Speaker 1: about this last night, saying why is why is this
33:16
Speaker 1: a problem? You know, buy to that investors already owned
33:19
Speaker 1: their houses wide vay care of stamp duty goes up.
33:21
Speaker 1: But because as we've written about over and over and over,
33:23
Speaker 1: stamp duty is in the end paid by the seller,
33:26
Speaker 1: not the buyer, so they'll theater and reduced prices when
33:28
Speaker 1: they sell.
33:29
Speaker 2: So that's going to be disappointing.
33:30
Speaker 4: That's good to disappoint.
33:31
Speaker 6: I'm being bick to be honest. If you're still a
33:33
Speaker 6: landlord at this point, then you must really know your business,
33:36
Speaker 6: because I mean since George Osborne, the writing has been
33:40
Speaker 6: on the wall for I mean, I'm amazed that. I'm
33:43
Speaker 6: amazed that survived as long because all of the tax
33:46
Speaker 6: advantage has been taken away. It's no, it's no extremely
33:48
Speaker 6: taxed and efficient and lots of we used to be
33:50
Speaker 6: a lined lord. And I mean I'm not necessarily I
33:54
Speaker 6: don't have a big issue with that in some ways
33:57
Speaker 6: because too much capital in the UK is locked up
34:00
Speaker 6: in hosies. But you know, yeah, if you are style alnedlord,
34:05
Speaker 6: then you know, I can absolutely because it must be
34:07
Speaker 6: very good at your job and to be making money
34:09
Speaker 6: at it.
34:10
Speaker 2: Thank you. Go. Congratulations from John to the landlords and
34:12
Speaker 2: the audience. Well done. Right.
34:14
Speaker 1: We're going to move on to questions we'd have quite well,
34:17
Speaker 1: we have twenty minutes or so, so if you do
34:19
Speaker 1: have them, now's your chance to start with over here.
34:22
Speaker 2: Thank you. We are just to remind you we are.
34:25
Speaker 1: Recording, so your question will be recorded, and so will
34:28
Speaker 1: the answers, and so you will need the mic and
34:30
Speaker 1: you'll need to speak directly into it.
34:32
Speaker 2: Thank you.
34:33
Speaker 7: Following the budget yesterday, both sort of following the commentators
34:36
Speaker 7: on Sky News BBC, there was strong opinion raised that
34:42
Speaker 7: potentially the Labor government don't actually have a mandate to
34:45
Speaker 7: do what they've done, considering the discussion on tax rises
34:50
Speaker 7: was considerably less than what they've actually gone ahead and done. Yes,
34:54
Speaker 7: Rachel Reeves is blamed this twenty two billion black hole,
34:58
Speaker 7: but I'm wondering whether what the three you feel on
35:01
Speaker 7: that issue.
35:03
Speaker 1: I mean, I think I'm going to hand that to definitely,
35:06
Speaker 1: because she did just slightly answer it earlier in the
35:08
Speaker 1: conversation by saying that the polls do show that most
35:11
Speaker 1: people thought that taxes would go up more than had
35:14
Speaker 1: been suggested in the manifesto. Regardless off he won, But
35:17
Speaker 1: I would rather agree with you that they were incredibly clear,
35:20
Speaker 1: incredibly clear pre the election that this wasn't going to happen,
35:23
Speaker 1: and whatever excuse you used, it did happen, and it
35:25
Speaker 1: happened on steroids.
35:26
Speaker 2: But definitely I'm going to disagree.
35:28
Speaker 5: I'm going to take a risk because this is being recorded,
35:30
Speaker 5: so you know it might be making a mistake. I
35:33
Speaker 5: would say, I think the way you judge an election
35:38
Speaker 5: campaign is not by exactly what the debate is about,
35:42
Speaker 5: but about the sort of direction of change that people
35:44
Speaker 5: are indicating. And if you go back to twenty ten,
35:47
Speaker 5: and as someone who was the economics editor at BBC
35:50
Speaker 5: at that time, I remember quite clearly that the argument
35:53
Speaker 5: over austerity was plus all minus twelve billion of austerity
35:58
Speaker 5: on Alistair Darling, the last Labor Chancellor, had brittle in
36:03
Speaker 5: what was considered by Labour status to be quite an
36:05
Speaker 5: austere government, a seteer budget earlier in the year and
36:10
Speaker 5: was trying to kind of fix some of the mess
36:12
Speaker 5: from the global financial crisis, fiscal mess, and George Osbourne
36:16
Speaker 5: was claiming he was going to do twelve billion more
36:18
Speaker 5: of squeeze in spending and we had a big debate
36:21
Speaker 5: about it. Of course, that turned out to be, for memory,
36:24
Speaker 5: a fifth of what he actually announced in the summer budget,
36:28
Speaker 5: so you could but the director, we knew that they
36:31
Speaker 5: were going to be tougher on spending, and that was
36:32
Speaker 5: the sort of the honesty in the message was not
36:34
Speaker 5: the number. It was like, we will care more about
36:38
Speaker 5: fixing fiscal mess, and we will do it more by
36:41
Speaker 5: spending cuts. And I would argue people would disagree that
36:45
Speaker 5: this election campaign had that flavor, and I suspect the
36:49
Speaker 5: tax increases are about five times what they admitted to
36:52
Speaker 5: give or take. But we sort of knew that labor
36:55
Speaker 5: was going to be worried more about the quality of
36:57
Speaker 5: public services and didn't think tax cuts were priority. And
37:00
Speaker 5: that was the So we knew the flavor. We didn't
37:03
Speaker 5: know the numbers.
37:04
Speaker 1: Yeah, I suppose that ordinary voters might actually listen to
37:08
Speaker 1: the numbers, and they might have actually listened when they
37:10
Speaker 1: were told that it would be you know, eight billion
37:12
Speaker 1: fully costed, etc.
37:15
Speaker 4: Reason the extent that it was.
37:17
Speaker 5: I think if we make a big thing about how
37:19
Speaker 5: they should now be you know, taken to task for
37:22
Speaker 5: having you know, misled the public, then we would have
37:24
Speaker 5: to go back through many many governments who done it,
37:26
Speaker 5: thordered Andy.
37:29
Speaker 3: Prior to this election, the public spending numbers, which is
37:33
Speaker 3: the source of the problem in my walk of life,
37:38
Speaker 3: everyone knew that they were too low by a massive amount.
37:43
Speaker 3: Some people thought twenty to thirty, some people thought fifty
37:46
Speaker 3: to sixty. Yesterday's number was seventy, of which twenty is
37:53
Speaker 3: a decision to do more public investment. So the order
37:57
Speaker 3: of magnitude was known. The other thing that everyone in
38:00
Speaker 3: my walk of like was kind of lamenting was that
38:04
Speaker 3: no party could say that these public spending numbers can't
38:09
Speaker 3: be delivered and therefore we'll need to raise more taxes,
38:12
Speaker 3: because you open yourself up to the tax bombshell retort.
38:16
Speaker 3: And so there was a what did Paul Johnson called
38:20
Speaker 3: it a conspiracy of silence? Didn't This was well known
38:24
Speaker 3: but not part of the debates.
38:25
Speaker 1: Well known, well known by you, definitely me and john
38:28
Speaker 1: but maybe not by the electorate.
38:30
Speaker 5: Yeah, Paul Johnson was quoted over the course of the campaign.
38:33
Speaker 5: I mean, it's true that maybe no one's watching the
38:36
Speaker 5: BBC ITV channel for anymore or listening to podcasts, but
38:39
Speaker 5: I think in any one of those, any any economic
38:41
Speaker 5: discussion on any of those media featured the quote, or
38:47
Speaker 5: at least the thought that Andy's just giving.
38:49
Speaker 2: Yeah, yeah, okay, So yes and no is the answer
38:51
Speaker 2: to that?
38:53
Speaker 1: Another one over here, hang on for the microphone please,
38:56
Speaker 1: we'll try and get the answer to this one to
38:57
Speaker 1: be less yes and no.
38:58
Speaker 2: More clear, Thanks very much.
39:00
Speaker 8: Just a question about the sort of the politics of
39:02
Speaker 8: the budget, where it seems from what the OBR have
39:06
Speaker 8: said that in twenty twenty eight, twenty twenty nine, when
39:10
Speaker 8: we're likely to have election because of the actions in
39:13
Speaker 8: this budget, you're going to have or we're going to
39:16
Speaker 8: have slow in growth and rising inflation, which to me
39:18
Speaker 8: seems quite a bizarre political choice to sort of fatally
39:23
Speaker 8: front load the consumption and potentially face the country when
39:25
Speaker 8: things are getting worse.
39:28
Speaker 2: That seems fair, definitely.
39:30
Speaker 5: I mean, I think when you say bizarre politically, so
39:33
Speaker 5: I guess we can't say that this is an overly
39:35
Speaker 5: political budget because it's possible, as Andy suggested, that it
39:39
Speaker 5: actually was a realistic and sensible strategy to be front
39:43
Speaker 5: loading that spending, or at least to be doing more
39:45
Speaker 5: of the spending in the first couple of years given
39:47
Speaker 5: the backlog. And I just I think only those who
39:51
Speaker 5: will be overseeing the way that money gets spent can
39:53
Speaker 5: know whether that's really true, but they conceivably have chosen
39:58
Speaker 5: to actually do the thing that will make makes most
40:00
Speaker 5: sense as opposed to the thing that's politically savvy. But
40:03
Speaker 5: I agree with you, there's a very at the moment,
40:05
Speaker 5: there is an unusual arc to the way the spending
40:10
Speaker 5: and the sort of pain, if you like, is being felt.
40:14
Speaker 5: And I guess that's another reason for thinking that this
40:15
Speaker 5: will not be the end of it.
40:17
Speaker 4: But it never is. By the way, is any more budgets,
40:20
Speaker 4: So you have to come up with more.
40:21
Speaker 1: They have to come up with more, and it seems
40:23
Speaker 1: unlikely that those coming budgets are going to involve falling
40:25
Speaker 1: Texas or projections of rising growth.
40:28
Speaker 2: You're nodding away. Did you want to have something to that? Oh?
40:30
Speaker 6: I just think I wouldn't pay too much attention and
40:32
Speaker 6: no offense to They will be hard and you know,
40:35
Speaker 6: and all the other think tanks in the bank at
40:37
Speaker 6: England because you know, the wrong usually and the and
40:40
Speaker 6: the wrong for a good reason, because stuff changes. You know,
40:43
Speaker 6: It's like there's stuff asn't static. People react to forecasts.
40:48
Speaker 6: The entire market, the entire you know, economy as reflex
40:52
Speaker 6: of so I think, you know, even if I mean
40:56
Speaker 6: at the end of the day, it's not going up
40:58
Speaker 6: by that much, and if curth it is only at
41:01
Speaker 6: that level by that point, yeah, I think we will
41:02
Speaker 6: all be heartily disappointed. But yeah, I just wouldn't attached
41:07
Speaker 6: too much, especially ninety five or so, because anything.
41:10
Speaker 1: Can happen, and models, as Andy has discussed, models can't
41:14
Speaker 1: encompass all the behavior elements and the technological change elements, etc.
41:18
Speaker 1: So anything, anything could happen a good or bad, hopefully
41:21
Speaker 1: good others when you're in the front.
41:25
Speaker 4: Thank you, John.
41:26
Speaker 9: I agree with you that the the IHT pension loophole
41:30
Speaker 9: was It's hard to argue of that being scrapped, but
41:33
Speaker 9: it is just another example of the government making changes
41:37
Speaker 9: to the pension system. And as someone who's relative early
41:40
Speaker 9: on in his career, I'm expected to invest a lot
41:45
Speaker 9: of more money up in this for another thirty years,
41:47
Speaker 9: forty years with complete certainty. Is it time I start
41:51
Speaker 9: thinking about diverting someone that money going into my pension
41:54
Speaker 9: elsewhere into other vehicles or as well, like how can
41:58
Speaker 9: the governments regain my trust.
42:01
Speaker 2: Like by to that for example, good things.
42:05
Speaker 6: I mean, obviously we can't give personal financial advice, one
42:08
Speaker 6: thing we've always recommended, and to be very clear, I
42:12
Speaker 6: mean this is entirely bipartisan. Government's just and it kind
42:17
Speaker 6: of goes back to what I was saying before. It's
42:19
Speaker 6: like we've got a structural issue that boys down to politics,
42:22
Speaker 6: largely militating against good policy, and that seems to have
42:26
Speaker 6: become an even greater problem I think over the last
42:29
Speaker 6: ten years or so. So this is both Tories and
42:32
Speaker 6: labor and anyone else that will ever get in. So
42:36
Speaker 6: your pension is subject to political risk in a way
42:40
Speaker 6: that I feel. For example, your eyes at isn't so
42:42
Speaker 6: much because an eyes is a really straightforward financial product,
42:45
Speaker 6: despite effort's to complicate it. You can take your money
42:49
Speaker 6: out of it pretty much instantly most of the time.
42:53
Speaker 6: And also they're very popular because people do understand them,
42:56
Speaker 6: so that's one reason why governments have tended to avoid
42:59
Speaker 6: targeting them. Whereas pensions come in all shapes and sizes,
43:03
Speaker 6: it's a lovely port of capital that's just locked up
43:05
Speaker 6: there not doing anything. You know, It's like it could
43:08
Speaker 6: be getting used to spend on public services, et cetera.
43:11
Speaker 6: Et cetera, and so there's always a temptation to go
43:14
Speaker 6: after it. So basically, as a loose guide, I would
43:18
Speaker 6: sort of say, don't you know, obviously you need pent
43:22
Speaker 6: your pension. If you get auto enrollment, for example, in
43:24
Speaker 6: your workplace, then that's money that you're passing up on
43:27
Speaker 6: if you don't take advantage of it. But at the
43:30
Speaker 6: same time you should probably be putting some money into
43:32
Speaker 6: your ISSA as well. So basically want to diversify your
43:36
Speaker 6: savings vehicles as well as diversifying your portfolio.
43:39
Speaker 4: So that make sort of sense.
43:42
Speaker 1: And with John all the way on this absolutely right.
43:44
Speaker 1: There's so much political risk in your pension, much less
43:47
Speaker 1: political risk in your ISSA. You know, whenever we write
43:49
Speaker 1: about this way, you know, they'll joke on banks. Why
43:51
Speaker 1: did your own banks? That's where the money is. That's
43:53
Speaker 1: how governments feel about pensions. We have a question at
43:57
Speaker 1: the back here.
43:58
Speaker 2: Hi.
43:58
Speaker 10: I am aarity chief exec, which I think makes me
44:02
Speaker 10: very unusual in this room. But one of the things
44:05
Speaker 10: that I'm really interested in asking is charities have been
44:09
Speaker 10: propping up the public sector for really quite a long
44:12
Speaker 10: time now, and some of the some of charities are
44:15
Speaker 10: obviously enormous, but most of them are small, and this
44:20
Speaker 10: hit on national insurance is going to be really really
44:23
Speaker 10: challenging for charities. Do you have any views or what
44:27
Speaker 10: views do you have about what the Chancellor might have
44:30
Speaker 10: been able to do for the charity sector which does
44:33
Speaker 10: employ more than a million people.
44:37
Speaker 2: You know, I got thoughts on that.
44:39
Speaker 5: No, Okay, maybe are tricks and I think it speaks
44:44
Speaker 5: to that. I think the answer is we don't, but
44:46
Speaker 5: I think that they it does speak to even when
44:51
Speaker 5: you've you know, you pick a broad tax like this,
44:53
Speaker 5: and that's what we would have wanted them to do,
44:55
Speaker 5: rather than try and find billions here and there in
44:58
Speaker 5: ways that could actually be very costly for certain chucks
45:01
Speaker 5: of people you are hitting. You know, people in social
45:05
Speaker 5: care homes will be also facing some of the biggest
45:08
Speaker 5: squeeze from the increase in the in the national living
45:12
Speaker 5: wage and from the national insurance rise. Charities, you know,
45:17
Speaker 5: there's there's there's lots of sectors that we wouldn't necessarily
45:20
Speaker 5: want to be stressed. Who will find this But I
45:24
Speaker 5: guess that that speaks to a sort of structural issue,
45:27
Speaker 5: that that those parts of the economy are being lent
45:30
Speaker 5: on too much.
45:32
Speaker 4: But no, I think it's you know it is. It
45:35
Speaker 4: is something that's going to it's going to be different.
45:36
Speaker 1: And I have a very unpopular answer for you, which
45:39
Speaker 1: is that there's an awful lot of room for consolidation
45:42
Speaker 1: in the charitable sector. There are many, many, many far
45:45
Speaker 1: toy small charities all doing exactly the same thing. They're
45:49
Speaker 1: very heavily supported by the tax fayre, via gift gift
45:52
Speaker 1: aid and via direct grants from the government. And I
45:55
Speaker 1: think it's a it's a space of astonishing inefficiency. And
45:59
Speaker 1: if this is one of those things that drives the
46:01
Speaker 1: third sector to slightly put itself together, I'm not sure
46:04
Speaker 1: that would be a bad thing.
46:05
Speaker 2: May not have been the.
46:05
Speaker 1: Answer you wanted, but no, it is the answer you wanted. Excellent,
46:09
Speaker 1: So you're out for consolidation, right. We have another question
46:12
Speaker 1: here third row.
46:12
Speaker 9: I think so is the panel arguing for the setting
46:17
Speaker 9: up of a DOGE Department of Governmental Efficiency US style.
46:23
Speaker 2: More departments? I mean, this is like another one that
46:25
Speaker 2: Elon Musk is going to run.
46:27
Speaker 1: Yeah, yeah, I mean I'm never sure about setting up
46:30
Speaker 1: any any new departments to do anything else. They do.
46:32
Speaker 1: Remember that back in the day, there was one of
46:34
Speaker 1: the big banks that had a form you had to
46:37
Speaker 1: fill in for the applying for the creation of a
46:39
Speaker 1: new form. And so whenever I hear about the creation
46:43
Speaker 1: of a new department to help other departments do things,
46:46
Speaker 1: I worry about it slightly, but it's definitely may happen.
46:48
Speaker 5: Actually I'm interested in with it. I mean, in the
46:51
Speaker 5: this is a constant theme of public sector productivity, you know.
46:53
Speaker 5: Obviously part of the part of the challenge and having
46:56
Speaker 5: to put more and more money into public services while
46:58
Speaker 5: it remains flat, even just to keep it in the
47:01
Speaker 5: same scale. Is that the challenge of getting productivity growth
47:07
Speaker 5: in public services, and we particularly found that in the
47:09
Speaker 5: NHS over the last few years. So I just I mean,
47:11
Speaker 5: I wondered whether are there approaches to increasing public sector
47:15
Speaker 5: productivity that seem to you more or less credible when
47:19
Speaker 5: you're looking at these plans.
47:20
Speaker 3: I think surely the best news for everyone is that
47:23
Speaker 3: they are setting up a new institution called the Office
47:26
Speaker 3: for Value for Money, which we'll try to do this
47:33
Speaker 3: maybe I'll soignd a note of optimism. Some of the
47:36
Speaker 3: addition to public investment is not private growth enhancing investment,
47:43
Speaker 3: is public sector productivity enhancing investment. So if you look
47:47
Speaker 3: at anyone who's been into the NHS knows that the
47:51
Speaker 3: computer system is not conducive to the productivity of the
47:55
Speaker 3: people who work there, and that can only be addressed
47:57
Speaker 3: with public investment, and so putting more investment in is
48:01
Speaker 3: a way of helping that. And I think basically that
48:06
Speaker 3: kind of you've got to invest the save or you
48:09
Speaker 3: spend to raise is where usually I think it looks
48:14
Speaker 3: more credible. You know, the other way that public sector
48:18
Speaker 3: productivity is typically raised is just by squeezing pays.
48:21
Speaker 1: And it does feel that we've got to do something
48:23
Speaker 1: about public sector productivity. When anyone talks about the productivity
48:27
Speaker 1: Cristis in the UK, they're not really talking about the
48:28
Speaker 1: private sector. They're talking about the public sector because that's
48:31
Speaker 1: where the drag is. You look at those charts and
48:33
Speaker 1: you can see public sector productivity is basically flatline for
48:36
Speaker 1: twenty years. And so we must do something. I'm not
48:39
Speaker 1: sure that's the answer, but we must do something. Right,
48:41
Speaker 1: I think we've got time for one more question, and
48:43
Speaker 1: I did say I would take this one here, third.
48:45
Speaker 11: Row, thank you, A question really about workers and productivity,
48:54
Speaker 11: and given the government got itself into a pickle, defining workers.
49:00
Speaker 11: Has this budget actually been good for working people however
49:07
Speaker 11: you define them, and specifically this great big black hole
49:11
Speaker 11: of economic inactivity that's affecting about ten million people. And
49:17
Speaker 11: to the point about productivity, there's a considerable lag in
49:21
Speaker 11: the private sector as well.
49:22
Speaker 2: And again, has this.
49:25
Speaker 11: Has this budget done anything to improve the chances of
49:29
Speaker 11: work and working people? Doesn't appear to me that it
49:33
Speaker 11: necessarily has done.
49:34
Speaker 2: Okay, big question, and we've got about twenty seconds.
49:37
Speaker 5: Definitely, working people use public services. I mean, I think
49:41
Speaker 5: it just goes back to that fundamental point that probably
49:44
Speaker 5: this was not quite the minimum, but not close to
49:47
Speaker 5: the minimum what was needed to just sort of to
49:52
Speaker 5: prevent public services from getting worse.
49:54
Speaker 4: As Andy suggested, John.
49:57
Speaker 6: You've made employee working people more expense of so that
50:01
Speaker 6: enhances the OIDs of them getting replaced by rulebots. So
50:04
Speaker 6: in the one hand, productivity will go up. Is it
50:06
Speaker 6: good for working peoplebably not.
50:09
Speaker 1: Fifty But everyone will feel better if the NHS starts
50:11
Speaker 1: working get your hip operation, you're going to feel better
50:13
Speaker 1: working or not?
50:15
Speaker 2: And any final thoughts to add there.
50:18
Speaker 3: If the government can achieve its aims on reforming the
50:21
Speaker 3: planning system, everyone can have more buildings and equipment to use,
50:27
Speaker 3: and productivity will.
50:28
Speaker 1: Well automatically awesome, excellent. Okay, on that note, at the beginning,
50:32
Speaker 1: you're all absolutely miserable. Who feels better as a result
50:35
Speaker 1: of what they've heard on the podcast?
50:39
Speaker 2: Those of you aren't here.
50:40
Speaker 1: About ten percent of people feel better, So I don't
50:43
Speaker 1: know what that tells you about the podcast.
50:45
Speaker 4: Time.
50:45
Speaker 1: Yeah, there we go, we'll get we're getting there. Thank
50:47
Speaker 1: you all so much for coming today. We really enjoyed
50:50
Speaker 1: having you, and I hope you enjoyed being here. Thank you,
50:51
Speaker 1: my wonderful guys.
51:01
Speaker 2: SP