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Roundup: Labour Party Conference 'Vibes,' Budget Fears, and Why We Should Care the Ultra-Rich are Leaving · Merryn Talks Money

• 0:03
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Welcome to the Merin
• 0:09
  Speaker 1: Brooks Money Weekly round Up, a debrief on the biggest
• 0:11
  Speaker 1: stories and markets and economics. I'm Marin Zumzet, web senior
• 0:15
  Speaker 1: opinion columnist, and so you introduced yourself, Jeez.
• 0:23
  Speaker 2: And I'm joined Stephek, senior reporter and author of the
• 0:25
  Speaker 2: Money Distilled newsletter.
• 0:27
  Speaker 3: Okay, I'm hoping that the rest of the podcast is
• 0:30
  Speaker 3: going to be easier to make him talk. Okay, there
• 0:34
  Speaker 3: is only there is only one big story in UK
• 0:37
  Speaker 3: markets and economic right, So today we are going to
• 0:40
  Speaker 3: take a little temperature check on the Liver Party conference
• 0:42
  Speaker 3: which is.
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  Speaker 1: On the go in Liverpool. We're gonna have to talk
• 0:45
  Speaker 1: about what the Chancellor and Prime Minister have been staying
• 0:48
  Speaker 1: ahead of that budget coming up at the end of
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  Speaker 1: next month. And I know how you feel about this.
• 0:52
  Speaker 1: You feel bad vibes, right, I do.
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  Speaker 2: I don't like all this talk of a vibes having
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  Speaker 2: an effect on the economy because I just think that's
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  Speaker 2: a bad habit to get into. There are too many
• 1:06
  Speaker 2: amateur psychologists in economics and it's really easy to say
• 1:10
  Speaker 2: that things happen because people feel a certain way it's
• 1:14
  Speaker 2: always grounded in some material reality. As long as people
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  Speaker 2: get money, they'll spend it. If they don't have money,
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  Speaker 2: or they're going to lose their job, they won't spend it,
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  Speaker 2: and it's basically that straightforward. However, that said, this is
• 1:30
  Speaker 2: one of those slightly weird occasions where I think the
• 1:33
  Speaker 2: mood doesn't help because there's an event coming up at
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  Speaker 2: the end of October. None of us knows exactly what's
• 1:41
  Speaker 2: going to happen, but an awful lot of the outcomes
• 1:44
  Speaker 2: could potentially be quite extreme and actually quite bad for
• 1:47
  Speaker 2: a lot of people's wealth, and so you can see
• 1:51
  Speaker 2: why that may well be having an effect on confidence.
• 1:56
  Speaker 2: We've already seen a sharp decline in consumer confidence, which
• 2:00
  Speaker 2: should really be going up because it tends to go
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  Speaker 2: up when wages are rising. In real terms. The latest
• 2:06
  Speaker 2: PMI surveys of the manufacturing and services sector a loader
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  Speaker 2: still in growth territory. They took a knock and people
• 2:15
  Speaker 2: mentioned the autumn budget as being something that they're holding
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  Speaker 2: off investing beforehand. So basically, the kind of very funereal
• 2:24
  Speaker 2: tone that has come out at the top since labor
• 2:27
  Speaker 2: got into power is having an effect. And I think
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  Speaker 2: over the weekend or certainly by this morning, there's been
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  Speaker 2: a sense, and probably it was that consumer concidence data,
• 2:38
  Speaker 2: that they are starting to wake up to the fact
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  Speaker 2: that actually they're telling to grim a story and not
• 2:44
  Speaker 2: giving people any sense of where the sunlit uplands might be.
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  Speaker 2: I mean, there's always been a punitive tone to the
• 2:51
  Speaker 2: government so far, and I think that they will probably
• 2:53
  Speaker 2: try and shift that before the budget comes along. But
• 2:58
  Speaker 2: whether that means we'll get any clarity and what they're
• 2:59
  Speaker 2: going to do is another thing.
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  Speaker 1: Well this and let's talk about difficult choices. Difficult choices,
• 3:05
  Speaker 1: and I mean, for me, it all comes down to
• 3:08
  Speaker 1: the winter fuel allowance, it really does. I mean, I've
• 3:11
  Speaker 1: dealt with this in such a bizarrely wrong headed way.
• 3:16
  Speaker 1: You know, this announcement that everyone who does not get
• 3:21
  Speaker 1: pension credit will no longer get a winter fuel allowance.
• 3:23
  Speaker 1: So what that does is a means testing obviously, but
• 3:27
  Speaker 1: the winter fuel allowance, because it's been universal for so
• 3:30
  Speaker 1: long and existed for so long, has become in everybody's
• 3:33
  Speaker 1: minds part of the state pension. It's part of the
• 3:36
  Speaker 1: state pension. So people effectively believe that they've had part
• 3:39
  Speaker 1: of their state pension taken away, or that part of
• 3:41
  Speaker 1: their state pension is being means tested, and that makes
• 3:45
  Speaker 1: everybody think, well, what else is going to be means tested?
• 3:47
  Speaker 1: What else are they going to take away from the
• 3:49
  Speaker 1: low income? This isn't just about rich people anymore. They're
• 3:52
  Speaker 1: going for everybody, and you know, rich people are already
• 3:54
  Speaker 1: pretty nervy.
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  Speaker 3: Right.
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  Speaker 1: We might talk about the number of people who are
• 3:57
  Speaker 1: beginning to leave the UK and they talk about the UKs.
• 3:59
  Speaker 1: It's turning about leaving the UK is turning into action.
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  Speaker 1: But there's beginning to be the sense I think across
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  Speaker 1: the nation of hang on a tack, what do I
• 4:08
  Speaker 1: get out of this? And what are you taking away
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  Speaker 1: from me here? And I feel that they've done that
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  Speaker 1: really badly. I had somebody on the radio this morning,
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  Speaker 1: the government minister, and I'm probably wasn't sure who it was,
• 4:18
  Speaker 1: because if we've turned it on and off again, you
• 4:19
  Speaker 1: know how it is with the radio pointing out that
• 4:21
  Speaker 1: this could have been presented differently as something along the
• 4:23
  Speaker 1: lines of, you know, the last government was constantly taking
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  Speaker 1: from the young and giving to the old, and we're
• 4:29
  Speaker 1: trying to do the opposite. Could have presented it like
• 4:31
  Speaker 1: that but didn't.
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  Speaker 2: It's really weird that it was the first thing they
• 4:35
  Speaker 2: came out with as well. I mean that, in the
• 4:38
  Speaker 2: absence of any other policies, virtually the one that they'd
• 4:42
  Speaker 2: stays to hang the heart or at this point was
• 4:46
  Speaker 2: taking money from, you know, pensioners who are like on
• 4:52
  Speaker 2: the veilge of not being able to afford it. That's
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  Speaker 2: I mean, I thought, when she stood up and she
• 4:59
  Speaker 2: said it, I thought, Okay, this is kind of a
• 5:02
  Speaker 2: message along the lines of what you were saying about
• 5:05
  Speaker 2: the Tories indulged in order the old too much, and
• 5:07
  Speaker 2: they haven't. But even if that was your message, a
• 5:10
  Speaker 2: better thing to do with the bin to get rid
• 5:12
  Speaker 2: of the triple lock, you know, and downgrade it at least,
• 5:16
  Speaker 2: then you're still that you're not taking money away from people.
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  Speaker 2: I mean, like you said, it's just a really strange
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  Speaker 2: way to do it, and it's a really strange thing
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  Speaker 2: you make your very fast announcement.
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  Speaker 1: Yeah, but it's also I mean, it springs on something
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  Speaker 1: that I really want to talk about. We're just tax
• 5:31
  Speaker 1: at this idea of tax morale, and we've talked a
• 5:34
  Speaker 1: lot of Bloombergers has written a lot more. Put a
• 5:36
  Speaker 1: link to some things of Bloomberg have written about about
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  Speaker 1: the very high net worth beginning to leave the UK,
• 5:40
  Speaker 1: talking about the UK, about smart schools in London, messaging
• 5:44
  Speaker 1: parents to let them know that if they need help
• 5:46
  Speaker 1: moving their childhood international school, their organization is there to help.
• 5:50
  Speaker 1: The various reports from ubs from Henley et cetera suggesting
• 5:53
  Speaker 1: how many millionaires we are going to lose from the
• 5:55
  Speaker 1: UK as a result of these new taxes. And this
• 5:58
  Speaker 1: comes down to this idea that people need a reason
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  Speaker 1: to pay taxes, that they need to be complicit with
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  Speaker 1: the government in order to be compliant. And there's been
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  Speaker 1: a lot of academic research on that. The World Bank
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  Speaker 1: has written about it a lot about there's a dynamic
• 6:13
  Speaker 1: relationship between the state and the taxpayer, and it's about
• 6:18
  Speaker 1: two things. It's about the extent to which tax payments
• 6:21
  Speaker 1: are enforced and the extent to which their payment is facilitated,
• 6:25
  Speaker 1: but also in large degree about the taxpayer trusting that
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  Speaker 1: that money is used well. In the ECD is on
• 6:31
  Speaker 1: a lot of research on it as well. It's all
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  Speaker 1: about the degree to which the tax system is considered
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  Speaker 1: to be fair, equitable, reciprocal and accountable all right, And
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  Speaker 1: it's also it's transactional. What do I get back? What
• 6:46
  Speaker 1: do I get back? So if you look at countries
• 6:48
  Speaker 1: like I don't know it be Denmark, right, maybe Denmark, Well,
• 6:51
  Speaker 1: tax is very high, but people feel that they get
• 6:54
  Speaker 1: in response to that very high percentage of tax revenues
• 6:56
  Speaker 1: are percentage GDP that they get great childcare, they get
• 7:00
  Speaker 1: great healthcare, they get clean streets, they get you know,
• 7:03
  Speaker 1: reasonable court systems, et cetera.
• 7:05
  Speaker 2: Et cetera.
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  Speaker 1: Maybe they even get a pension. That doesn't me interested.
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  Speaker 1: I don't know enough about Denmark to be sure. But suddenly,
• 7:10
  Speaker 1: when you look around the UK and our tax morale,
• 7:13
  Speaker 1: if you look at all the surveys et cetera, our
• 7:14
  Speaker 1: tax morale is falling across the board and has been
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  Speaker 1: for some time. People pay their taxes. Compliance in the
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  Speaker 1: UK is high. It has to be, because the price
• 7:22
  Speaker 1: of not paying your tax is pretty high. But the
• 7:26
  Speaker 1: feelings about it aren't so good. You know, maybe you
• 7:28
  Speaker 1: don't get much in the way of healthcare, Maybe you
• 7:30
  Speaker 1: can't find a dentist. Maybe you're worried you're not going
• 7:34
  Speaker 1: to get your state pension after all, when you feel
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  Speaker 1: that you're really paid for it, maybe you're not thrilled
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  Speaker 1: about your other type of pension. Maybe you're uncertain about
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  Speaker 1: the type of pensions that people in the public sector
• 7:44
  Speaker 1: get and you don't get Maybe the potholes are beginning
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  Speaker 1: to irritate you. Maybe you look around at a welfare
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  Speaker 1: stage and think, well, what do I get as a
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  Speaker 1: tax payer? What am I getting out of this? And
• 7:54
  Speaker 1: if the answer is not enough, then tax morale against
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  Speaker 1: a fall. And then you get at the high level,
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  Speaker 1: you get people leaving, you know, messages on old school
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  Speaker 1: WhatsApp saying the packers are in and that kind of thing.
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  Speaker 1: You get that, And at the other end you get
• 8:10
  Speaker 1: people beginning to do all the things that we've talked
• 8:13
  Speaker 1: about before. Work a little less, use rappers a little more,
• 8:19
  Speaker 1: try and think of ways of getting round tags, give
• 8:22
  Speaker 1: more away before the seven year rule for i HT
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  Speaker 1: then maybe is a good thing for them to do, et.
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  Speaker 2: Cetera, et cetera.
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  Speaker 1: And so it becomes a long term problem. And how
• 8:31
  Speaker 1: do you get that back. Once you've broken down the
• 8:34
  Speaker 1: relationship of trust between a government and a tax paying population,
• 8:39
  Speaker 1: that's pretty hard to pull back.
• 8:43
  Speaker 2: That was a rattly no I thought that was that
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  Speaker 2: was good didn't feel like that that was that wasn't
• 8:48
  Speaker 2: ninety at all. Actually, I said tax one now is
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  Speaker 2: basically a measure of how much value for money people
• 8:54
  Speaker 2: think they're getting from the public services. To that extent,
• 8:58
  Speaker 2: it's ultimately feel just feeling.
• 9:01
  Speaker 1: But it's not just about that, because basically, you know,
• 9:04
  Speaker 1: there's a there's a rational reason to pay tax. You
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  Speaker 1: comply because the expected costs of not complying are greater
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  Speaker 1: than the costs of paying in the first place. That's
• 9:13
  Speaker 1: the kind of rational bit. But there's lots of intangible
• 9:16
  Speaker 1: stuff there as well. There's bits about, you know, trusting
• 9:19
  Speaker 1: the government bit. It's about believing in what the government does.
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  Speaker 1: But it's about believing that your taxes are well spent
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  Speaker 1: and spent in a non corrupt way. All these things,
• 9:28
  Speaker 1: and a belief that the system works. But what I
• 9:33
  Speaker 1: think has begun to happen in the UK is that
• 9:35
  Speaker 1: there's this idea about how tax is spending should be
• 9:39
  Speaker 1: organized and how money should be used. And obviously not
• 9:42
  Speaker 1: just in this government obviously it's pretty new, but the
• 9:44
  Speaker 1: government before that, and the government before that and the
• 9:46
  Speaker 1: government before that. The ideal of how spending ought to
• 9:49
  Speaker 1: be organized and ones. Then I hate to use this
• 9:52
  Speaker 1: raism and I'm gonna do it anyway. One's lived experience
• 9:56
  Speaker 1: of how of how your tax money is spent is different.
• 10:01
  Speaker 2: See, this is really interesting. And one thing I wonder
• 10:06
  Speaker 2: if because nowadays when we talk about taxes and often
• 10:11
  Speaker 2: and this is actually this is a side effect of
• 10:14
  Speaker 2: politicians ruling out any of the actual taxes that raise
• 10:17
  Speaker 2: all the money, but taxes these days often seen as
• 10:20
  Speaker 2: a punitive measure. It's something that you know, I'm going
• 10:24
  Speaker 2: to put you know, punishment taxes on sugar, I'm going
• 10:27
  Speaker 2: to put higher taxes on alcohol duty, I'm going to
• 10:30
  Speaker 2: put carbon taxes, all of that sort of stuff. And
• 10:34
  Speaker 2: so effectively, the idea is that if you're getting taxed
• 10:38
  Speaker 2: is because some of your behavior is bad. And I
• 10:41
  Speaker 2: just wonder if that has not helped that sort of
• 10:46
  Speaker 2: our tax system being pushed from being actually a way
• 10:49
  Speaker 2: that we all collectively pay for public services that we
• 10:53
  Speaker 2: recognize we need into something that's sort of meant to
• 10:56
  Speaker 2: nudges away from behaviors that are certain part society has
• 11:00
  Speaker 2: decided are not allowable or not tolerable anymore.
• 11:06
  Speaker 1: Just a straight up punishment for being rich.
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  Speaker 2: Well, yeah, because I mean that is part I would
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  Speaker 2: say that's part of the other issue where the way
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  Speaker 2: the labor has been talking since they came to power,
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  Speaker 2: there's almost a sense that you guys, let the Tories
• 11:20
  Speaker 2: kind of like, you know, be in power for fourteen
• 11:22
  Speaker 2: years and now you all deserve a third of thrashing
• 11:25
  Speaker 2: before you know, before we let money. Well, yeah, that
• 11:31
  Speaker 2: does seem to be an element of that as well,
• 11:33
  Speaker 2: and I do. I mean, it's very clear from talking
• 11:36
  Speaker 2: to people that this time round the rich or you know,
• 11:40
  Speaker 2: the mobile wealthy are I mean, to be fair, they
• 11:43
  Speaker 2: moved to the last time that don't be seen has
• 11:45
  Speaker 2: changed as well, but this time they really are moving
• 11:50
  Speaker 2: And that makes a lot of sense because it's we
• 11:52
  Speaker 2: talked about before the inheritance tax changes tax that's the
• 11:55
  Speaker 2: big deal, and so you can see why they would
• 11:59
  Speaker 2: want to leave. So I think the follow on from
• 12:02
  Speaker 2: that is how much does it might all and how
• 12:07
  Speaker 2: do we get back to some sort of semblance of
• 12:11
  Speaker 2: attack system the walks.
• 12:15
  Speaker 1: Well, first you have to prove that spending is appropriate,
• 12:18
  Speaker 1: that spending is fair, that everyone gets back not everything
• 12:23
  Speaker 1: they give in, of course, because that doesn't work in
• 12:24
  Speaker 1: the progressive system. But they get back enough enough to
• 12:27
  Speaker 1: feel that payment of taxes is rational and you need
• 12:30
  Speaker 1: to have a state that looks well organized and a
• 12:33
  Speaker 1: non corrupt And as you say, you have to stop
• 12:36
  Speaker 1: making it sound like a punishment in one of the
• 12:38
  Speaker 1: phrases that they constantly use in this government and indeed
• 12:41
  Speaker 1: the previous government that you know, those those with broad
• 12:44
  Speaker 1: shoulders should carry more of the burden. But what people
• 12:46
  Speaker 1: are starting to say, well, those broad shoulders just make
• 12:49
  Speaker 1: it a hell of a lot easier to carry a
• 12:50
  Speaker 1: luggage over the border. You know.
• 12:53
  Speaker 2: That's it. Yeah, that's a good one to do it,
• 12:57
  Speaker 2: I mean supports. The other problem is there, and I
• 13:01
  Speaker 2: think I said this is something I do think is
• 13:03
  Speaker 2: under a remarked a point and I having good exact
• 13:07
  Speaker 2: figures in front all of me. But the income tax
• 13:10
  Speaker 2: buddon on the lower paid actually went down in real
• 13:15
  Speaker 2: terms under the Conservative government.
• 13:18
  Speaker 1: Well, there's been long ago ever since Nick Claig hasn't
• 13:20
  Speaker 1: it because it was his One of his big ideas
• 13:22
  Speaker 1: was that the personal allowance should be raised and raised
• 13:24
  Speaker 1: and raised, and that the low income should pay as
• 13:27
  Speaker 1: little income tax as possible and perferbly no income tax.
• 13:30
  Speaker 1: That was something that he felt incredibly strongly about and
• 13:33
  Speaker 1: of course, like lots of lots of these things, it
• 13:35
  Speaker 1: sounds wonderful in theory. Of course, we don't want the
• 13:37
  Speaker 1: low paid to pay to pay piles of income tax.
• 13:39
  Speaker 2: That would be terrible.
• 13:40
  Speaker 1: We want everyone to have as higher and let income
• 13:43
  Speaker 1: and as great a living standards as possible. But once
• 13:45
  Speaker 1: you start charging the low paid nothing, and so you know,
• 13:50
  Speaker 1: everyone pays very little, you have to start charging the
• 13:53
  Speaker 1: rich more and more and more and more and more. Actually,
• 13:55
  Speaker 1: in the case of the UK, the middle income people
• 13:58
  Speaker 1: more and more and more and more and more, and
• 13:59
  Speaker 1: then you can little top heavy.
• 14:01
  Speaker 2: Yeah, I mean, this is the problem, is not that
• 14:04
  Speaker 2: it's not the rich, it's the moderately and afteragely kind
• 14:11
  Speaker 2: of well off at some point during their careers. You know,
• 14:15
  Speaker 2: we get a lot of people who are going to
• 14:16
  Speaker 2: be higher rate taxpayers these days eventually, because the rate
• 14:21
  Speaker 2: has now come down so much, and most of this,
• 14:25
  Speaker 2: I guess it does boil down the lack of political
• 14:29
  Speaker 2: guts to just well thanks it. Yeah, I mean again,
• 14:37
  Speaker 2: I mean and again it's the same thing they should
• 14:39
  Speaker 2: have done with the winter fuel allowance.
• 14:41
  Speaker 1: Is extraordinary, isn't it. They used all that political capital
• 14:44
  Speaker 1: on the winter fuel allowance, which in the great scheme
• 14:47
  Speaker 1: of things is nothing. It's pennies. In the great scheme
• 14:49
  Speaker 1: of the you guys insanely large public debt and fast
• 14:53
  Speaker 1: ground public sector and commitment to the population. You could
• 14:57
  Speaker 1: have used that political capital or to do something important,
• 15:00
  Speaker 1: something better.
• 15:02
  Speaker 2: Yeah, and something that may have annoyed people as much,
• 15:04
  Speaker 2: but they could at least have seen the point here, yea,
• 15:08
  Speaker 2: In all, well, do you know what.
• 15:09
  Speaker 1: We're going to talk ourselves into misery here, We're going
• 15:12
  Speaker 1: to talk ourselves to the misery. And it may be,
• 15:15
  Speaker 1: it may be that this conference is going to change everything.
• 15:18
  Speaker 1: By the end of the week, we're going to be
• 15:19
  Speaker 1: super optimistic and come the budget, we're going to see
• 15:22
  Speaker 1: this huge growth orientated, business orientated, wealth creating, supportive budget
• 15:29
  Speaker 1: and you and I are just going to have to
• 15:31
  Speaker 1: eat all those words. Tax morale is going to go
• 15:33
  Speaker 1: to the sky and everything's going to be fine. You
• 15:36
  Speaker 1: want to bet on that.
• 15:37
  Speaker 2: I would gladly see that happen. Okay, I feel like
• 15:41
  Speaker 2: we'll be disappointed, John.
• 15:44
  Speaker 1: I I'll organize that off audio. Thanks for listening to
• 15:50
  Speaker 1: this week's Marin Talks Money debrief.
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