Latest / Merryn Talks Money / Is Brexit Truly to Blame for the UK’s Problems?

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Is Brexit Truly to Blame for the UK’s Problems? · Merryn Talks Money

• 0:00
  Speaker 1: John, Well, you told them so, didn't you.
• 0:03
  Speaker 2: Yeah, I'm feeling really, really, really smug right now.
• 0:06
  Speaker 1: What did you tell them?
• 0:07
  Speaker 2: I said that the Bank England probably won't raise interest
• 0:09
  Speaker 2: rates tomorrow. I got the right side of the heads
• 0:11
  Speaker 2: of speak.
• 0:13
  Speaker 1: Yesterday you said the Bank of England wouldn't raise interest
• 0:16
  Speaker 1: rates tomorrow, and tomorrow is today. Yes, well, they wait,
• 0:18
  Speaker 1: we'll just after the decision readers story to disappoint you,
• 0:21
  Speaker 1: but we do record this bit a day before you
• 0:24
  Speaker 1: hear it. Not read listeners in this case. And John,
• 0:27
  Speaker 1: why did you think that? And obviously they read your
• 0:30
  Speaker 1: stuff so.
• 0:32
  Speaker 2: But they already know is the kind of gut thing.
• 0:36
  Speaker 2: So the economy has been showing some glimmerings of slowing
• 0:41
  Speaker 2: down a bit, despite the fact that the Bank England's
• 0:44
  Speaker 2: kind of embardest about not being good at corn inflation
• 0:47
  Speaker 2: the blood.
• 0:49
  Speaker 3: Yeah exactly.
• 0:50
  Speaker 2: But the path of these resistance was for holding this month.
• 0:54
  Speaker 3: I thought.
• 0:56
  Speaker 1: Do you think they might have looked at the money
• 0:59
  Speaker 1: supply numbers?
• 1:01
  Speaker 2: Hmmm, probably not. He I know, I think that's.
• 1:07
  Speaker 1: Unfair of you. I think you know, even Bank of
• 1:10
  Speaker 1: England governors are capable of learning, and they've been told
• 1:14
  Speaker 1: and told and told over the last year or so,
• 1:16
  Speaker 1: for God's sake, why don't you just look at the
• 1:18
  Speaker 1: money supply numbers, Because there is a connection between money
• 1:22
  Speaker 1: supply and inflation. If you increase the money supply massively,
• 1:25
  Speaker 1: you'll probably get inflation, and when money supply starts to
• 1:28
  Speaker 1: turn down, you will probably see inflation. For that's something
• 1:32
  Speaker 1: that has held for quite a long time with gaps.
• 1:35
  Speaker 1: Obviously it doesn't always work, but mostly it's a it's
• 1:37
  Speaker 1: a pretty good indicator, that's true.
• 1:40
  Speaker 2: And to be a feel, I mean Melvin King, who
• 1:42
  Speaker 2: obviously actually boys walked at the banking the way, why.
• 1:45
  Speaker 1: Did dedn't he might know something about this stuff.
• 1:48
  Speaker 2: So for all the accusations a group think, he clearly
• 1:51
  Speaker 2: itually thinks in the completely opposite dodiation from the Cordon lawn.
• 1:54
  Speaker 2: And so I said, no, you're really the criticism has
• 1:57
  Speaker 2: probably stung and Kevin the basest moon. Yeah, But I mean,
• 2:02
  Speaker 2: then you get you know, Ben by nanke coming. Then
• 2:04
  Speaker 2: you check that they're working. And I'm not entirely sure
• 2:07
  Speaker 2: that Ben is a massive kind of fine of money.
• 2:09
  Speaker 1: Superparatory, and they'll come to you soon and ask you
• 2:11
  Speaker 1: to go in and check their working.
• 2:13
  Speaker 2: I do hope, so so do I hope.
• 2:15
  Speaker 1: They pay you all. I give you one of those
• 2:16
  Speaker 1: defined benefit pensions r P I linked Okay, yes.
• 2:24
  Speaker 3: Something.
• 2:25
  Speaker 1: Bank of England will come in together, will check any
• 2:27
  Speaker 1: old model you like, but we can tell you in
• 2:28
  Speaker 1: advance they're all wrong. Right, What does this mean, John,
• 2:31
  Speaker 1: They listen, we think, or I think, and I think
• 2:34
  Speaker 1: you think as well, that interest rates they're not going
• 2:36
  Speaker 1: to go down in a hurry. We're trying to get
• 2:38
  Speaker 1: a little bit of back to the old normal. We're
• 2:40
  Speaker 1: trying to get to a point where interest rates are
• 2:42
  Speaker 1: higher than inflation and.
• 2:44
  Speaker 2: Well, yeah, high on inflation, and well usually what happens
• 2:48
  Speaker 2: is that wages are a bit higher than inflation. In
• 2:50
  Speaker 2: the Bank England rate certainly before two thousand and eight
• 2:54
  Speaker 2: was always higher than inflation. So you get real wage
• 2:56
  Speaker 2: rises and also savings, but can paid re wentze.
• 3:00
  Speaker 1: This is this is this is a real economy. Is
• 3:03
  Speaker 1: when you can put your money in the bank and
• 3:04
  Speaker 1: you can get a small, real return on it.
• 3:06
  Speaker 2: Yeah, and I mean that's it's because we've grown used
• 3:09
  Speaker 2: to this, or.
• 3:13
  Speaker 1: Young people, yeah exactly.
• 3:14
  Speaker 2: Anyone under the age of about four a ish has
• 3:16
  Speaker 2: got used to this long period where that has been
• 3:19
  Speaker 2: completely the opposite way around. But you know, the long
• 3:23
  Speaker 2: term average, I think the last time I checked since
• 3:25
  Speaker 2: the Second World War was for the base rate to
• 3:27
  Speaker 2: be kicking about five percent and mortgage.
• 3:31
  Speaker 1: Rates, by the way, to always kick around two percentage
• 3:32
  Speaker 1: points above the rate of interest.
• 3:34
  Speaker 2: Oh yeah, so I mean, you know, the I do
• 3:38
  Speaker 2: think that this particular at the moment, because the competition
• 3:42
  Speaker 2: between banks is quite high and there aren't many transactions
• 3:45
  Speaker 2: being written, you're probably actually getting a pretty good mortgage
• 3:49
  Speaker 2: deal in terms of the typical spread over the base
• 3:52
  Speaker 2: rate over a longer period of time. But I wouldn't,
• 3:56
  Speaker 2: you know, if I if I was needing, they can
• 3:58
  Speaker 2: buy a house or refinance the host just not. I
• 4:00
  Speaker 2: wouldn't make a big bit on rates going much lower
• 4:03
  Speaker 2: than they currently are, because you'd already sort of seeing
• 4:06
  Speaker 2: you know, I think I'm pretty sure you can walk
• 4:08
  Speaker 2: in a five year deal below the base rate in
• 4:10
  Speaker 2: the moment. Basically, don't bit on rates going lower.
• 4:13
  Speaker 1: Yeah, but also for a moment to just be clear
• 4:15
  Speaker 1: that we have it. We saw a lower than expected
• 4:19
  Speaker 1: rate of inflation this week, but inflation is still really
• 4:23
  Speaker 1: high and the target is two percent. We're still well
• 4:27
  Speaker 1: over six percent, and apart from anything else, if you
• 4:30
  Speaker 1: want to be honest about inflation, or of the Bank
• 4:32
  Speaker 1: of England wants to be honest about it. I mean,
• 4:33
  Speaker 1: they're the big if. But you know, let's say they
• 4:35
  Speaker 1: do want to be honest about it. You really should.
• 4:38
  Speaker 1: You really should if you're being if you're doing this
• 4:40
  Speaker 1: stuff properly, you should get inflation down below two percent
• 4:44
  Speaker 1: and you should keep it there for a considerable amount
• 4:47
  Speaker 1: of time to even things out to a long term
• 4:50
  Speaker 1: average of two percent. And that's quite important. You know,
• 4:53
  Speaker 1: we've had eight percent percent for a while now, so
• 4:56
  Speaker 1: that means we really need to be knocking around one
• 4:57
  Speaker 1: percent for a decade. I mean, to be honest, straightforward,
• 5:02
  Speaker 1: and to compensate people, we were trying to higher lump
• 5:06
  Speaker 1: of inflation.
• 5:07
  Speaker 2: Yeah, I mean, maybe you might have done the numbers
• 5:09
  Speaker 2: on this, but we did have a lot of sub
• 5:12
  Speaker 2: two percent, sub one percent years during the post two
• 5:17
  Speaker 2: thousand and eight year. Because that was one argument, wasn't
• 5:19
  Speaker 2: for reason the average if I mean that was, I mean,
• 5:22
  Speaker 2: that was you kind of knew the Tonning point was
• 5:24
  Speaker 2: coming because the point in which the Fed said, I say,
• 5:27
  Speaker 2: maybe it's okay if we let inflation go up for
• 5:29
  Speaker 2: a bit longer and be higher than usual, because that
• 5:33
  Speaker 2: would be a fair way to do it. And that
• 5:34
  Speaker 2: was literally twenty twenty, I think, wasn't it, when they
• 5:37
  Speaker 2: actually were coming to the Tounning point, And they very
• 5:40
  Speaker 2: quickly reversed that. That was within a couple of months,
• 5:42
  Speaker 2: they said.
• 5:43
  Speaker 1: I really vaguely thinking of the seventies would just be here.
• 5:46
  Speaker 1: I do not remember personally when they kept getting inflation
• 5:50
  Speaker 1: down again but not quite far enough, and then off
• 5:53
  Speaker 1: it went again, So it wasn't ever quite killed. See this,
• 5:57
  Speaker 1: and I'm worried that we might do that this time.
• 6:00
  Speaker 2: The eye is a really interesting point because I don't no.
• 6:06
  Speaker 2: I mean history does suggest, and history across various places,
• 6:10
  Speaker 2: not just the nineteen seventies, suggest that winstin fleetion has
• 6:12
  Speaker 2: got as high as it got at this time round.
• 6:15
  Speaker 2: It doesn't easily come back to target. And I do
• 6:19
  Speaker 2: think if you look at oil oil, it's not far
• 6:22
  Speaker 2: off one hundred dollars a battle again, So it's not
• 6:25
  Speaker 2: a certing. I mean, next year could get kind of
• 6:28
  Speaker 2: messy again.
• 6:29
  Speaker 1: Okay, you heard it her first, And remember that John
• 6:32
  Speaker 1: was right on interest rates. What else might he be
• 6:36
  Speaker 1: right on. Welcome to Marin Dogs Money, the podcast in
• 6:41
  Speaker 1: which the people who know the markets explain the markets.
• 6:44
  Speaker 1: I'm Maren sumset Web. This week we asked the fraud question.
• 6:49
  Speaker 1: Is Brexit really to blame for every single one of
• 6:53
  Speaker 1: the UK problems? Robert Colville, director at the Center for
• 6:57
  Speaker 1: Policy Studies, and economist Julian Jessip joined me to discuss.
• 7:02
  Speaker 4: Julian, Robert, thank you both very much for joining us today.
• 7:05
  Speaker 1: Thank you. So we just want to talk today about
• 7:09
  Speaker 1: how Brexit is unfolded so far. There's a lot of
• 7:14
  Speaker 1: talk about Brexist, this Brexit, that it caused, this is
• 7:16
  Speaker 1: responsible for that, It's all about this, et cetera. And
• 7:19
  Speaker 1: I'm looking at a tweet from a well known remainer
• 7:22
  Speaker 1: after the news that civil servants were in tears after
• 7:25
  Speaker 1: Brexit vote and the Foreign Office was in a state
• 7:27
  Speaker 1: of mourning, which sounds terrible, right, and a Romainer wrote
• 7:30
  Speaker 1: above that anyone who knew what it meant for people's livelihood, business, families,
• 7:34
  Speaker 1: freedom and rights was distressed. Anyone who understood and cared
• 7:38
  Speaker 1: knew that seventeen point four million people had mostly unwittingly
• 7:41
  Speaker 1: voted to harm themselves and worse to harm others now
• 7:47
  Speaker 1: and talk quite recently, you could point at all sorts
• 7:49
  Speaker 1: of things and say, look, you know, we're doing worse
• 7:51
  Speaker 1: than the rest of Europe in this area, in that area,
• 7:54
  Speaker 1: GDP inflation, et cetera. And that's because of Brexit. Now
• 7:58
  Speaker 1: those numbers don't look quite so bad in the perfectly
• 8:00
  Speaker 1: reasonable compared to the rest of Europe. So the question
• 8:03
  Speaker 1: that I want to ask both of you for starters,
• 8:05
  Speaker 1: is it the case that in fact Brexit has been
• 8:07
  Speaker 1: verging on irrelevant for the UK economy, certainly significantly less
• 8:11
  Speaker 1: relevant than most people think.
• 8:14
  Speaker 4: Julian, I think.
• 8:15
  Speaker 5: That's for the right way to look at it. I think,
• 8:17
  Speaker 5: first of all, it's worth saying, though that bit odd
• 8:19
  Speaker 5: to say that Brexit has done no harm to the
• 8:22
  Speaker 5: UK economy. After all, we have significantly increased barriers to
• 8:26
  Speaker 5: trade with our biggest single partner. We've introduced sort of
• 8:30
  Speaker 5: new obstacles to the free movement of people. We've increased
• 8:34
  Speaker 5: uncertainty in the British economy, which is undoubtedly held back
• 8:38
  Speaker 5: some investment and meant that there's been sort of additional
• 8:41
  Speaker 5: risk premiare on British assets for foreign investors. So I
• 8:45
  Speaker 5: think it'd be weird to say that there's been no impact
• 8:48
  Speaker 5: against that, though I think the impact has clearly been
• 8:51
  Speaker 5: a lot less than many people feared at the time
• 8:54
  Speaker 5: of the referendum and onwards, and actually it continues to
• 8:57
  Speaker 5: be a lot less than many people claim. So there
• 9:00
  Speaker 5: are all sorts of big numbers flying around. Your economy
• 9:03
  Speaker 5: is four percent smaller or or six percent smaller than
• 9:05
  Speaker 5: would other ways have been, but there's simply no real
• 9:08
  Speaker 5: hard evidence to support that. Or some of the scared
• 9:11
  Speaker 5: stories about the impact on inflation or trade or the
• 9:14
  Speaker 5: labor market.
• 9:15
  Speaker 1: Well, if you look at that business of four percent
• 9:17
  Speaker 1: or six percent or whatever smaller than it might have been,
• 9:19
  Speaker 1: we know how difficult forecasting GDP is, So who could
• 9:22
  Speaker 1: possibly have known where it might have been in the
• 9:23
  Speaker 1: first place.
• 9:24
  Speaker 4: Let's talk about where we know it's had a negative
• 9:26
  Speaker 4: impact first, shall we.
• 9:27
  Speaker 1: You've got immigration, but of course we haven't seen any
• 9:30
  Speaker 1: fall off in immigration. It's just a different kind of immigration, right,
• 9:32
  Speaker 1: And some may say that it's a better kind of
• 9:34
  Speaker 1: immigration because they're using a point system to allow higher
• 9:38
  Speaker 1: skilled people into the country rather than we're consistently relying
• 9:41
  Speaker 1: on low cost labor.
• 9:43
  Speaker 4: Is much better for productivity.
• 9:45
  Speaker 5: So immigration is a really interesting place to start, because
• 9:47
  Speaker 5: actually a lot of people I know who are quite
• 9:50
  Speaker 5: skeptical of Brexit actually regard our sort of post Brexit
• 9:54
  Speaker 5: migration regime as a relative success. So we have, as
• 9:57
  Speaker 5: you suggested, reduced our dependency on on cheap labor from
• 10:01
  Speaker 5: Europe and actually made it easier for us to bring
• 10:06
  Speaker 5: in more highly skilled labor from the rest of the world.
• 10:08
  Speaker 5: And if you look at the aggregate numbers then record
• 10:12
  Speaker 5: net migration over the last year or so, it's a
• 10:14
  Speaker 5: bit hard to say that Brexit is a major factor
• 10:17
  Speaker 5: behind the labor shortages that we are facing. That said,
• 10:20
  Speaker 5: undoubtedly has caused some problems in some sectors, very hard
• 10:24
  Speaker 5: for the hospitality industry, for example, swiftly to switch from
• 10:28
  Speaker 5: one type a worker to another, and there means some
• 10:31
  Speaker 5: quite bigger adjustment costs in other areas as well. But overall,
• 10:34
  Speaker 5: I would argue that this is a good example of
• 10:36
  Speaker 5: something that perhaps shouldn't have worked in theory, but does
• 10:39
  Speaker 5: seem to have worked in practice, which is that real
• 10:41
  Speaker 5: wages have risen or at least not fallen by as
• 10:45
  Speaker 5: much as they would otherwise have done. That is, forcing
• 10:47
  Speaker 5: companies to rethink how they use labor, and it's probably
• 10:51
  Speaker 5: one factor contributing to some slightly better news on investment recently.
• 10:55
  Speaker 5: So I think I'd actually regard the sort of post
• 10:58
  Speaker 5: Brexit migration policy as success rather than.
• 11:00
  Speaker 1: You're not doing very well on finding the negative, Julia,
• 11:04
  Speaker 1: what about you can you can you find a genuine
• 11:06
  Speaker 1: negative for us?
• 11:08
  Speaker 3: Well?
• 11:08
  Speaker 6: I think there's obviously been a terms of trade shock
• 11:10
  Speaker 6: for the UK economy. As Junia said, We've imposed friction
• 11:13
  Speaker 6: on trade with the EU, and we haven't really done
• 11:16
  Speaker 6: much of the wonderful super diverging that was promised that
• 11:20
  Speaker 6: would create massive growth opportunities elsewhere. I think the summary is,
• 11:24
  Speaker 6: at the moment we have a sort of poor photocopy
• 11:26
  Speaker 6: of EU membership as opposed to something which looks genuinely distinct.
• 11:30
  Speaker 6: But that's partly because building something genuinely distinct was always
• 11:34
  Speaker 6: going to be the work of many years, and divergence
• 11:36
  Speaker 6: was always going to happen gradually, not just as we
• 11:38
  Speaker 6: decided to do stuff, but as the EU decided to
• 11:41
  Speaker 6: do stuff. I should say up front here by the way,
• 11:42
  Speaker 6: that I am a Romainer. I did vote for Remain,
• 11:45
  Speaker 6: but reached the apparently novel position that on the twenty
• 11:48
  Speaker 6: fourth of June that you know that the people's vote
• 11:50
  Speaker 6: should be respected and delivered, and it would be much
• 11:52
  Speaker 6: worse to democracy we didn't deliver on that verdict than
• 11:55
  Speaker 6: if we just decided that the idiots saw some numbers
• 11:58
  Speaker 6: on the bus and got all confused, said dear hearts.
• 12:01
  Speaker 6: I think what's sort of happening is that exactly the
• 12:04
  Speaker 6: same way as we blame Brussels for everything before Brexit,
• 12:07
  Speaker 6: people are blaming Brexit for everything after Brexits. I mean,
• 12:10
  Speaker 6: on immigration, for example, it's certainly true that there's a
• 12:14
  Speaker 6: change when the new agents come in, but what sends
• 12:17
  Speaker 6: all the people from Europe home is the pandemic. That's well,
• 12:20
  Speaker 6: that's the huge, great thing that happens. Likewise, the reason
• 12:23
  Speaker 6: we start then in recruiting health service workers en mass
• 12:27
  Speaker 6: from other countries is the pandemic and the trains on
• 12:29
  Speaker 6: the health service. I mean, effectively, the sort of tetemic
• 12:32
  Speaker 6: immigrant switches from being the Polish barrista or Polish plumber
• 12:35
  Speaker 6: to being an Indian or Filipino healthcare or a social
• 12:39
  Speaker 6: care worker. And that's really kept the nhs afloat.
• 12:42
  Speaker 5: Just to echo that, if you look at other countries.
• 12:45
  Speaker 5: So Germany for example, is in a very similar boat
• 12:48
  Speaker 5: when it comes to labor shortages, and part of that
• 12:51
  Speaker 5: is that a large number of migrant workers went home
• 12:54
  Speaker 5: during COVID, often to countries like Poland that are now
• 12:57
  Speaker 5: doing relatively well, and they simply not come back now.
• 13:01
  Speaker 5: Of course, Germany is still a member of the European Union,
• 13:03
  Speaker 5: but it's got pretty much the same problem in the
• 13:06
  Speaker 5: labor market. Other countries you can look at in Europe,
• 13:09
  Speaker 5: like the Netherlands, for example, their core inflation rate, so
• 13:13
  Speaker 5: that's inflation excluding food and energies, is proving just as
• 13:17
  Speaker 5: sticky as ours for similar reasons. Again nothing to do
• 13:21
  Speaker 5: with Brexit, because of course the Netherlands is still a
• 13:24
  Speaker 5: member of the European Union, but they're also facing labor shortages,
• 13:29
  Speaker 5: the legacy of high energy costs being passed through into
• 13:32
  Speaker 5: all sorts of other bills, and a tight labor markets.
• 13:36
  Speaker 5: So not only we not an outlier in terms of
• 13:39
  Speaker 5: headline GDP so the overall size of the economy, but
• 13:43
  Speaker 5: also if you look at individual things like the title
• 13:45
  Speaker 5: it's the labor market or what's happening to inflation, there
• 13:47
  Speaker 5: are plenty of countries in Europe exactly the same position
• 13:50
  Speaker 5: that we are.
• 13:50
  Speaker 6: There are obviously individual companies which have had many logistical
• 13:53
  Speaker 6: difficulties in importing or exporting products from the EU that
• 13:57
  Speaker 6: the life has become unnecessarily complicated and might come even
• 14:00
  Speaker 6: more complicated if we were to impose the full range
• 14:03
  Speaker 6: protections read for food for example. Likewise, HGV drivers they said,
• 14:08
  Speaker 6: to all kinds of reasons why it becomes less attractive
• 14:10
  Speaker 6: to driver lorry into the UK if you've got these
• 14:13
  Speaker 6: extra barriers, then to sort of keep it circulating within
• 14:16
  Speaker 6: the European mainland. But the tendency to blame literally everything
• 14:20
  Speaker 6: on Brexit is kind of I think it obscures both
• 14:23
  Speaker 6: the you know, the massive events that have happened recently,
• 14:26
  Speaker 6: the pandemic and the cost of doing crisis. But I
• 14:27
  Speaker 6: think also crucially it attracts our attention from the long
• 14:30
  Speaker 6: running weaknesses of the UK economy, all the things that
• 14:33
  Speaker 6: people like us have been shouting about at the think
• 14:36
  Speaker 6: tank I work in, or Julian likewise, scandalously bad performance
• 14:40
  Speaker 6: on productivity in real wages for a decade or more,
• 14:43
  Speaker 6: utter failure to invest enough as an economy, both you know,
• 14:46
  Speaker 6: on the public and the private site like those are
• 14:48
  Speaker 6: really really big issues which long pre day Brexit, so the.
• 14:51
  Speaker 1: British economy can be completely rubbish even without Brexit.
• 14:56
  Speaker 4: Being the point.
• 15:00
  Speaker 3: That's right.
• 15:00
  Speaker 5: I think Brexit was never a magic wand it created opportunities,
• 15:05
  Speaker 5: but it's then up to the government to take those opportunities,
• 15:08
  Speaker 5: and there are plenty of examples there where the government
• 15:12
  Speaker 5: seems to be moving only slowly, if at all.
• 15:16
  Speaker 1: You're absolutely right, but it's a good point to make
• 15:18
  Speaker 1: that we see the negatives not being particularly serious and
• 15:21
  Speaker 1: obviously there but not so much as to hamper the
• 15:23
  Speaker 1: UK economy. But all the positives that people who were
• 15:26
  Speaker 1: pro Brexit before the vote were hoping for, all the
• 15:29
  Speaker 1: policies they thought might arrived, they're just not coming.
• 15:33
  Speaker 5: I think that's right. I don't think it's enough for
• 15:35
  Speaker 5: somebody who supported Brexit, by the way, I did vote
• 15:37
  Speaker 5: to leave the EU in twenty sixteen. I don't think
• 15:40
  Speaker 5: it's enough for people like me to say, oh, well,
• 15:42
  Speaker 5: the damage hasn't been as bad as some people feared.
• 15:46
  Speaker 5: I think you need to show some tangible benefits, and
• 15:48
  Speaker 5: those clearly have been slow to come. I'm very sympathetic,
• 15:52
  Speaker 5: as Roberts said, that there are lots of smaller businesses
• 15:54
  Speaker 5: and individuals and musicians, for example, whose life has become
• 15:59
  Speaker 5: a lot more difficult as a result of leaving the EU.
• 16:01
  Speaker 5: I wouldn't want to dismiss those problems, so I think
• 16:05
  Speaker 5: we do need to show some tangible benefits sooner rather
• 16:08
  Speaker 5: than later. There are a few things I can point to.
• 16:11
  Speaker 5: I think the new trade deals that are being done
• 16:13
  Speaker 5: are an important step in the right direction. We're moving
• 16:16
  Speaker 5: faster than the EU ears on other things, for example,
• 16:19
  Speaker 5: reform of agricultural policies, reform with some of the regulations
• 16:23
  Speaker 5: holding back the financial services sector. So there are some
• 16:27
  Speaker 5: things that we can point to. But I think things
• 16:30
  Speaker 5: need to get a lot better in the next few
• 16:32
  Speaker 5: years before those of us who did vote leave the
• 16:35
  Speaker 5: EU can really say that things are heading in the
• 16:37
  Speaker 5: right direction.
• 16:37
  Speaker 4: You need the government to do something. Is that how
• 16:39
  Speaker 4: you see it, Robert, I think so.
• 16:42
  Speaker 6: But I don't think you can underestimate the level of
• 16:45
  Speaker 6: what European dysfunction. I mean, I think in the macro picture,
• 16:49
  Speaker 6: the extraordinary gap is between American growth and European stagnation.
• 16:55
  Speaker 6: And obviously the fact that they didn't depend on floy
• 16:57
  Speaker 6: the debuting selling them gas is has been a sort
• 17:00
  Speaker 6: of contributing player in that. But it genuinely seems, you know,
• 17:03
  Speaker 6: if you look at you and where the big companies
• 17:04
  Speaker 6: are being created, where the growth is being created, where
• 17:06
  Speaker 6: manufacturing going, where investment is going, like, the fact that
• 17:10
  Speaker 6: we are struggling on those things is not a uniquely
• 17:12
  Speaker 6: British phenomenon.
• 17:13
  Speaker 3: We are despite Brexit.
• 17:15
  Speaker 6: We are European economy and we look pretty much like
• 17:18
  Speaker 6: many of the other European economies and I think that
• 17:21
  Speaker 6: I think that's a really important issue to address. It
• 17:23
  Speaker 6: may be, it hopefully could be that Brexit gives us
• 17:26
  Speaker 6: the opportunity to do more things to galvanize that. I
• 17:28
  Speaker 6: think one of the startly things about Brexit is we've
• 17:30
  Speaker 6: just all completely lost interested in what Europe is doing
• 17:33
  Speaker 6: and now completely under reporting pretty much anything that's happening
• 17:36
  Speaker 6: in Brussels, which I think is really interesting. But you know,
• 17:39
  Speaker 6: for example, on digital services and technology, you know our
• 17:42
  Speaker 6: legislation is bad, their legislation looks worse.
• 17:46
  Speaker 1: So what do you put the big gap between growth
• 17:50
  Speaker 1: in the US and growth in European economies and in
• 17:53
  Speaker 1: the UK down to?
• 17:55
  Speaker 3: I mean, I think there's all sorts of things.
• 17:57
  Speaker 4: I know, it's a long list. Pull out a couple.
• 17:59
  Speaker 3: Yeah, US is a huge market.
• 18:01
  Speaker 6: I think local competition is a really important and are
• 18:03
  Speaker 6: completely underplaced part of this. What you see in the
• 18:06
  Speaker 6: States is a huge shifting growth from basically the places
• 18:09
  Speaker 6: where you pay lots of tax and you can't build
• 18:10
  Speaker 6: houses to the pla is where you can build houses
• 18:13
  Speaker 6: and you don't pay much tax. Companies are fleeing New
• 18:16
  Speaker 6: York for Miami, They're fleeing California for Texas, and the
• 18:19
  Speaker 6: Sun Belt states are doing incredibly well. We don't be
• 18:22
  Speaker 6: in Britain, don't have that dynamic of internal competition at all.
• 18:27
  Speaker 3: As energy pressed tax rates.
• 18:29
  Speaker 1: We could competition if Scotland could cut them, not keep
• 18:32
  Speaker 1: putting them up, then you know British companies might flee
• 18:35
  Speaker 1: to Edinburgh and Glasgow.
• 18:36
  Speaker 3: Well, the case for the union would be approved.
• 18:39
  Speaker 4: I suppose. So yeah, sorry I interrupted you. What was
• 18:41
  Speaker 4: your second point?
• 18:42
  Speaker 3: Energy energy costs?
• 18:43
  Speaker 1: Right?
• 18:43
  Speaker 6: I mean, the shale revolution has absolutely smashed the cost
• 18:47
  Speaker 6: of energy in the US. It's made in America and
• 18:49
  Speaker 6: energy exporter, which is extraordinary. And as the cost of
• 18:54
  Speaker 6: solar power is tumbling by the minute, it seems and
• 18:57
  Speaker 6: guess guess where they're building solar panels.
• 18:58
  Speaker 3: It's in Texas and where they have a lot of sun.
• 19:01
  Speaker 4: Yeah.
• 19:02
  Speaker 1: So the price of energy in the UK is going
• 19:03
  Speaker 1: to continue to go up and that's going to hamper
• 19:05
  Speaker 1: us long term.
• 19:06
  Speaker 6: Isn't it unless we start building an awful lot more
• 19:10
  Speaker 6: generating capacity than we have today.
• 19:12
  Speaker 1: Any Yes, Jillian, what do you think you see is
• 19:15
  Speaker 1: the big problems in the UK that have nothing to
• 19:17
  Speaker 1: do with Brexit.
• 19:19
  Speaker 5: Well, I think actually the comparison of the US is
• 19:21
  Speaker 5: a great starting point. Robert's already touched on some key points.
• 19:24
  Speaker 5: So the greater flexibility that is easier to move around
• 19:28
  Speaker 5: in the US, partly due to the fact that it's
• 19:30
  Speaker 5: real to be easy to build new homes and factories
• 19:33
  Speaker 5: compared to overhear the high level of energy costs. Initially,
• 19:37
  Speaker 5: I think some of the recent growth in the US
• 19:38
  Speaker 5: has been flattered by a fiscal boom that is not
• 19:42
  Speaker 5: sustainable to a big increase in government spending, a lot
• 19:45
  Speaker 5: of which I think will turn out to be wasteful,
• 19:47
  Speaker 5: and in the meantime it's actually starting to worry a
• 19:50
  Speaker 5: few people in the financial market. So even though the
• 19:53
  Speaker 5: US has the enormous advantage of still a shrewing in
• 19:55
  Speaker 5: the world's major reserve currency, the dollar. It's credit rate
• 20:00
  Speaker 5: has been downgraded recently by at least one of the
• 20:02
  Speaker 5: major rating agencies, so there's at of spending boom from
• 20:06
  Speaker 5: that government may not be sustainable, but the underlying fundamentals
• 20:09
  Speaker 5: of the economy are still relatively sound us compared to
• 20:13
  Speaker 5: the rest of Europe. I mean, there are a few
• 20:16
  Speaker 5: additional things that I think are going wrong. One, obviously,
• 20:18
  Speaker 5: is the direction of tax in the UK. It's true
• 20:21
  Speaker 5: that our level of tax isn't particularly high compared to
• 20:25
  Speaker 5: other countries, but the big difference is the extent which
• 20:28
  Speaker 5: we've increased it over the last few years, and that's
• 20:32
  Speaker 5: most obvious in the case of corporation tax. So raising
• 20:35
  Speaker 5: our main rate of corporation tax from nineteen percent to
• 20:38
  Speaker 5: twenty five percent at a time when our major competitors
• 20:42
  Speaker 5: in Europe, notably France and Germany, are actually looking to
• 20:46
  Speaker 5: lower the burden of taxation on their companies. I think
• 20:49
  Speaker 5: that's one obvious problem. Productivity is clearly a big problem
• 20:53
  Speaker 5: in the UK, not least in the public sector, not
• 20:56
  Speaker 5: talked about enough. We've had very little growth in public
• 20:59
  Speaker 5: sector productivity for decades. In the private sector productivity has
• 21:03
  Speaker 5: only really been a problem since the global financial crisis,
• 21:05
  Speaker 5: but going back over decades, public sector productivity has been
• 21:09
  Speaker 5: pretty much flat.
• 21:13
  Speaker 1: Why is it the public sector of productivity is so
• 21:15
  Speaker 1: far we might as well have our own answers, But
• 21:17
  Speaker 1: what's your answer?
• 21:20
  Speaker 5: I hate to pick on the NHS. Sounds like a
• 21:22
  Speaker 5: broken record, but I mean, the NHS is the biggest
• 21:25
  Speaker 5: single part of our public sector, one of the biggest
• 21:28
  Speaker 5: parts of the economy overall, and very hard for state
• 21:31
  Speaker 5: monopoly to improve productivity because there isn't enough internal competition
• 21:36
  Speaker 5: that'll learn competition with the private sector. So I think
• 21:40
  Speaker 5: you need to look at the NHS, and myself and others,
• 21:42
  Speaker 5: of course, have been advocating looking at best practice in
• 21:45
  Speaker 5: the rest of Europe and in Asia, which typically involves
• 21:49
  Speaker 5: more private sector involvement, both in terms of finance and provisions.
• 21:53
  Speaker 5: So the NHS would be an obvious place to start.
• 21:56
  Speaker 5: But inevitably, the public sector is not subject to the
• 22:00
  Speaker 5: same sort of competitive and market pressure as the private
• 22:03
  Speaker 5: sector is, so there's a problem there. I think partly also,
• 22:07
  Speaker 5: you could make a reasonable agment that we haven't been
• 22:09
  Speaker 5: investing enough in infrastructure, some of which I think always
• 22:13
  Speaker 5: has been provided by the government in general. Of course,
• 22:16
  Speaker 5: I think the private sector can do these things better.
• 22:18
  Speaker 5: But even as a free market here, I recognize there
• 22:21
  Speaker 5: are some sort of public good aspects here, or some
• 22:24
  Speaker 5: very large projects that only really the private the public
• 22:27
  Speaker 5: sector can afford to do a reasonable cost. So I
• 22:30
  Speaker 5: think under investment is a factor.
• 22:32
  Speaker 1: And that's true at the corporate level as well, right,
• 22:34
  Speaker 1: And it's not just the public sector that has underinvested.
• 22:37
  Speaker 4: Companies have massively underinvested too.
• 22:40
  Speaker 5: Yeah, in the private sector, it's because you know, the
• 22:45
  Speaker 5: framework hasn't been there. So that's a government problem of
• 22:48
  Speaker 5: taxes and regulations being too high and also inconsistent and
• 22:52
  Speaker 5: constant chopping and changing in the tax regime is not helpful.
• 22:56
  Speaker 5: So not just a question of luring taxes, it's also
• 22:59
  Speaker 5: about simplify buying them and a bit more predictability. In contrast,
• 23:03
  Speaker 5: for example, to the windfall tax on energy companies constantly
• 23:06
  Speaker 5: being tweaked and increased is devastating investment in the North
• 23:11
  Speaker 5: sol and gas sector. So it's partly about getting the
• 23:14
  Speaker 5: right framework, which is a problem of government and in
• 23:17
  Speaker 5: the public sector of course, by definition that's a problem
• 23:19
  Speaker 5: of government, and there are lots of things I could
• 23:21
  Speaker 5: point to. For example, we've got fiscal rules that deter
• 23:26
  Speaker 5: investment by the public sector, even investment that could be
• 23:30
  Speaker 5: a good thing is sometimes hard to get past the treasury,
• 23:33
  Speaker 5: and we're seeing that with the roofs in schools and
• 23:36
  Speaker 5: other public sector buildings being a good example of something
• 23:39
  Speaker 5: where maybe something should have be done.
• 23:40
  Speaker 1: Earlier, you mentioned tax and tax work's going in the
• 23:43
  Speaker 1: wrong direction, which they obviously are, and they're heading to
• 23:46
  Speaker 1: levels that the UK's find very hard to sustain as
• 23:49
  Speaker 1: a percentage of GDP in the past. But it's hard
• 23:52
  Speaker 1: to see what the choice is within aging population and
• 23:56
  Speaker 1: new zero and all the other various obligations that fall
• 23:59
  Speaker 1: upon state and the things people expect from the state now,
• 24:02
  Speaker 1: which seems to be more and more and more they
• 24:04
  Speaker 1: expect the state to be involved in almost everything. With
• 24:07
  Speaker 1: that dynamic, it's sort of hard to see how the
• 24:09
  Speaker 1: tax regime could go in the other direction, however much
• 24:12
  Speaker 1: the Lakes of US may think it should now.
• 24:14
  Speaker 5: I'm sympathetic to that point, and I certainly think tax
• 24:17
  Speaker 5: revenues need to rise in order to fund the public services.
• 24:21
  Speaker 5: That we want, particularly as you say, with an aging
• 24:25
  Speaker 5: population and other increasing demands. But that's not the same
• 24:29
  Speaker 5: as saying that tax rates need to go up. And
• 24:31
  Speaker 5: that's a mistake that I think a lot of other
• 24:34
  Speaker 5: commentators of the orthodox commentators tend to make, is the
• 24:38
  Speaker 5: only way to increase tax revenues is to raise tax rates, Whereas,
• 24:42
  Speaker 5: of course, if you can get a bigger economy through
• 24:45
  Speaker 5: a combination of mainly supply side reforms but also a
• 24:49
  Speaker 5: few judicious tax cuts that improve the supply side performs,
• 24:53
  Speaker 5: the economy can actually end up with a bigger economy,
• 24:56
  Speaker 5: a bigger pie to tax if you like, bigger tax base,
• 25:00
  Speaker 5: and therefore end up with more revenues. So I think
• 25:02
  Speaker 5: the mistake a lot of people make is to assume
• 25:04
  Speaker 5: that the only way to increase tax revenues is to
• 25:08
  Speaker 5: raise the tax rates on individuals or companies. And we
• 25:11
  Speaker 5: know that often doesn't.
• 25:12
  Speaker 1: Actually we know it doesn't work. We only have to
• 25:14
  Speaker 1: look at the Scottish revenues from income tax. So which
• 25:17
  Speaker 1: taxes would you cut you in to improve the supply side.
• 25:21
  Speaker 5: Well, again, that's a very good question. I think one
• 25:24
  Speaker 5: of the problems over the last few years, and I
• 25:26
  Speaker 5: think maybe this was particularly a problem in the Tory
• 25:28
  Speaker 5: leadership campaign last year, was that there was a competition
• 25:32
  Speaker 5: to announce that the biggest cuts in taxes without particularly
• 25:35
  Speaker 5: thinking about which taxes the cut and why. And I
• 25:39
  Speaker 5: certainly think at the moment we should focus on tax
• 25:41
  Speaker 5: cuts that would boost the supply side performance the economy
• 25:44
  Speaker 5: rather than just stimulating demand. But it's not difficult to
• 25:47
  Speaker 5: think of examples there. I mean, corporation taxes is one.
• 25:52
  Speaker 5: Sorting out investment allowances and getting rid of the windfall
• 25:55
  Speaker 5: tax on the energy sector would be another, as far
• 25:58
  Speaker 5: as personal taxes that conserve and I think the focus
• 26:00
  Speaker 5: should be on tackling some of the distortions caused by
• 26:04
  Speaker 5: very high marginal rates of tax So not so much
• 26:07
  Speaker 5: the average tax rate, but the fact that as some
• 26:09
  Speaker 5: people move up just a little bit in the income scale,
• 26:12
  Speaker 5: they suddenly get hit with punitive taxes, which must be
• 26:16
  Speaker 5: bad for the incentive to work or to set up
• 26:19
  Speaker 5: a company, so discouraging labor supply, it's deterring entrepreneurship. I'm
• 26:24
  Speaker 5: sure there are the smarter things you could do within
• 26:26
  Speaker 5: the income tax system, in particular to make sure that
• 26:30
  Speaker 5: work does pay and that entrepreneurs get more of the
• 26:33
  Speaker 5: reward for what they're.
• 26:34
  Speaker 1: Doing, Robert, when you look at the UK economy and
• 26:37
  Speaker 1: you think about the things that could have been done
• 26:40
  Speaker 1: since Brexit to give us more of a chance of growth,
• 26:43
  Speaker 1: is there anything that you think we've really missed a
• 26:45
  Speaker 1: few big things we could have done that we haven't done,
• 26:47
  Speaker 1: so I might still do.
• 26:49
  Speaker 6: Yeah, So obviously I agree with them Julian on marginal
• 26:52
  Speaker 6: tax rates. And when we've done a lot of work
• 26:54
  Speaker 6: on this stamp duty in both its forms is just
• 26:58
  Speaker 6: a classic transaction tax which is up the economy, both
• 27:01
  Speaker 6: on houses and shares. There are loads of points within
• 27:04
  Speaker 6: the tax and benefits system.
• 27:06
  Speaker 3: I mean.
• 27:07
  Speaker 6: The big thing, which will not surprise anyone who's ever
• 27:09
  Speaker 6: read anything I've writtenently is housing. We have underbuilt by
• 27:13
  Speaker 6: more than four million houses since the Second World War
• 27:15
  Speaker 6: compared to our European competitors. And this is awful for
• 27:18
  Speaker 6: people's life chances, but it's also awful for the economy
• 27:20
  Speaker 6: because we find it increasingly hard to match the most
• 27:23
  Speaker 6: talented people to the most productive jobs because they can't
• 27:25
  Speaker 6: afford to move to where those jobs are. And the
• 27:28
  Speaker 6: in fact we've moved rather than to the accelerating house building,
• 27:31
  Speaker 6: we've moved in the opposite direction because of resistance from
• 27:35
  Speaker 6: effectively toy grass roots. The other big thing is regulation,
• 27:38
  Speaker 6: and again this is an area where the sort of
• 27:40
  Speaker 6: Brexit focus is actually slightly distracting. So we've been doing
• 27:45
  Speaker 6: an exercise at the CPS to look at the burden
• 27:48
  Speaker 6: of regulation, but in particular how regulation is made, and
• 27:51
  Speaker 6: what you find is that a decreasing amount of our
• 27:54
  Speaker 6: regulation untilards the end of OU membership came directly from Brussels.
• 27:58
  Speaker 6: Now that may be a statistical trick, because Brussels stopped
• 28:01
  Speaker 6: relying on directives which you need to do domestic impact
• 28:04
  Speaker 6: assessments for, and started relying more on regulations which we're
• 28:07
  Speaker 6: sort of transposed directly into Member States law without anyone
• 28:10
  Speaker 6: needing to do any any numbers. But broadly speaking, this
• 28:12
  Speaker 6: focus on retained EU law, I mean actually there's only
• 28:15
  Speaker 6: one government department which has a full list of all
• 28:18
  Speaker 6: of the regulations it imposes on the economy and on
• 28:21
  Speaker 6: businesses and on consumers. There is no attention paid within
• 28:24
  Speaker 6: Whitehall comparative to the attention paid to spending within Whitehall
• 28:28
  Speaker 6: is astronomically more significant than the attention to pay to
• 28:31
  Speaker 6: the impact of regulation. There are regulatory impact assessments, but
• 28:34
  Speaker 6: they are basically filled out by the most junior person
• 28:36
  Speaker 6: in the office and what the decision has already been made.
• 28:38
  Speaker 6: And there's none of the sort of institutional resistance to
• 28:41
  Speaker 6: regulating that there is to spending. There's no equivalent of
• 28:43
  Speaker 6: the treasury putting its foot down, and indeed, both politicians
• 28:46
  Speaker 6: and the public seem to constantly demand extra regulations. The
• 28:49
  Speaker 6: cry is always something must be done. So I think
• 28:53
  Speaker 6: in a Brexit is really a wonderful opportunity to take
• 28:57
  Speaker 6: stop and try and do something things differently, not in
• 28:59
  Speaker 6: a born parre of the regulation is kind of way,
• 29:01
  Speaker 6: but just in it like being a lot more strategic
• 29:04
  Speaker 6: and surgical and analytical about the impact the decisions government
• 29:08
  Speaker 6: is making and the impacts they have on businesses and consumers.
• 29:11
  Speaker 6: And that's something we really are only in the pitthills.
• 29:14
  Speaker 3: Of I think.
• 29:15
  Speaker 4: And how would that happen?
• 29:16
  Speaker 1: That sounds expensive, boring, the kind of thing people aren't
• 29:20
  Speaker 1: going to notice.
• 29:21
  Speaker 4: I mean, I think you sound absolutely I just cannot
• 29:24
  Speaker 4: see how that would happen.
• 29:26
  Speaker 6: Well, broadly, there is a problem, and this ties in
• 29:28
  Speaker 6: with what Julian was saying the problem is the most
• 29:30
  Speaker 6: pro growth things you can do in this country are
• 29:32
  Speaker 6: often among the least popular, and vice versa. So if
• 29:35
  Speaker 6: you look at that, if you look at the tax regime,
• 29:37
  Speaker 6: taxes on investment and on business are the worst for growth,
• 29:40
  Speaker 6: according to quite a lot of modeling that's been done
• 29:42
  Speaker 6: in which we've cited in miss papers. But they're enormously popular.
• 29:45
  Speaker 6: That's why corporation tax went up, because it was the
• 29:47
  Speaker 6: easiest way of getting money rather than hitting people directly.
• 29:51
  Speaker 6: The most economically progressive tax his country would be basically
• 29:54
  Speaker 6: to have a very very well, not even just an
• 29:57
  Speaker 6: increased THEOTY, to have a much more broadly based sales
• 30:00
  Speaker 6: tax a VAT with all the exemptions stripped out, and
• 30:03
  Speaker 6: then to compensate people for the losses in other ways.
• 30:06
  Speaker 6: But you know, the politician who stands up and says, hey,
• 30:07
  Speaker 6: I'm going to put VT on children's clothes and your
• 30:10
  Speaker 6: heating bills is not going to have a job for
• 30:12
  Speaker 6: very long. And house building would be another example of that.
• 30:16
  Speaker 6: I think, you know, a large part of the problem
• 30:18
  Speaker 6: is that we just don't want it enough.
• 30:20
  Speaker 4: We just don't want what enough growth.
• 30:22
  Speaker 6: And this is this ties in with the aging population,
• 30:25
  Speaker 6: the number of people over sixties and who own their
• 30:28
  Speaker 6: own homes outright, it's extraordinary home absolutely, and.
• 30:31
  Speaker 1: That the cohorts own their houses outright and have a
• 30:34
  Speaker 1: defined benefit pension to pay the cost on those houses
• 30:37
  Speaker 1: is a really interesting dynamic because it's an experience that
• 30:40
  Speaker 1: young generations don't have and never will hurt.
• 30:42
  Speaker 6: There is a huge and enormously electricly powerful cohort because
• 30:45
  Speaker 6: of the rates at which they vote, who are essentially
• 30:48
  Speaker 6: immune from economic pressure. Like a lot of these people
• 30:51
  Speaker 6: are people who delivered Brexit in the first place, because
• 30:53
  Speaker 6: contrary to the quote you gave earlier, it's not they
• 30:54
  Speaker 6: didn't read the warnings about how this would devastate the economy.
• 30:57
  Speaker 6: It's just they were going to be fine basically whatever happened,
• 31:00
  Speaker 6: so they could afford to take the.
• 31:01
  Speaker 1: Risk, which is why their wealth tax is so popular
• 31:04
  Speaker 1: among younger voters.
• 31:05
  Speaker 6: Yes, yes, and so very unpopular about the ones, although, of.
• 31:09
  Speaker 1: Course, as you said earlier, there are so many wealth
• 31:11
  Speaker 1: tax already. Both of those stamp duties are wealth taxes,
• 31:14
  Speaker 1: but unrecognized as.
• 31:15
  Speaker 6: I actually we actually take more taxes from property than
• 31:18
  Speaker 6: the most other other countries. It's just we do it
• 31:20
  Speaker 6: in a very very ineffective and inefficient way. I mean,
• 31:22
  Speaker 6: council tax is you know, I think nineteen ninety one
• 31:25
  Speaker 6: was based on this weird extrapolation of values back then.
• 31:29
  Speaker 6: It's I mean, yeah, it is really right for an upgrade.
• 31:31
  Speaker 6: But again, if you wanted to go near it, you'd
• 31:33
  Speaker 6: be a very brave man or women.
• 31:35
  Speaker 1: Yeah, I've taken us off on a tangent, haven't the
• 31:37
  Speaker 1: Sorry Robert.
• 31:39
  Speaker 3: Dum always happy to talk about housing.
• 31:42
  Speaker 4: I'm going to ask you about housing again.
• 31:43
  Speaker 1: What's the simplest thing that we could do, Because we
• 31:45
  Speaker 1: like to keep being very simple on this podcast, what's
• 31:47
  Speaker 1: the simplest thing that we could do to transform our
• 31:50
  Speaker 1: problem with house building?
• 31:51
  Speaker 6: In the short term. Reinstate the housing targets. I mean
• 31:54
  Speaker 6: we were actually building it a fairly decent clip before that.
• 31:57
  Speaker 6: In the medium term, find the better way to come
• 32:00
  Speaker 6: to take communities housing and to get their consent to
• 32:02
  Speaker 6: deliver infrastructure more quickly. How would that work well at
• 32:08
  Speaker 6: the moment. So again it's going off a bit of tangent,
• 32:10
  Speaker 6: but this is a good time if you as If
• 32:14
  Speaker 6: you as a community housing it generally means that your
• 32:18
  Speaker 6: local council will get a payment at some point which
• 32:21
  Speaker 6: it will theoretically use to deliver all the goodies that
• 32:24
  Speaker 6: were promised, but in practice it may not, and so
• 32:26
  Speaker 6: the houses will appear before the roundabout, before the GP surgery.
• 32:30
  Speaker 6: If you can flip that on its head and actually
• 32:31
  Speaker 6: put the infrastructure in first and give people the goodies,
• 32:34
  Speaker 6: then the resistance does go away. I mean it's striking
• 32:36
  Speaker 6: at the local elections. One of the areas where the
• 32:38
  Speaker 6: Tories did best is the West Midlands, which they basically
• 32:40
  Speaker 6: turned into a building site. But because it's you know,
• 32:42
  Speaker 6: that building site is for HS two and because they're
• 32:44
  Speaker 6: going to get a high speed railway and they can
• 32:46
  Speaker 6: sort of see the progress being made. They can see
• 32:48
  Speaker 6: housing going up, they can see their communities getting better,
• 32:50
  Speaker 6: in their economy getting more dynamic. There, you know, they're
• 32:52
  Speaker 6: actually quite happy with that idea.
• 32:55
  Speaker 1: I didn't feel like that when I was watching the
• 32:56
  Speaker 1: Edinburgh trams go up.
• 32:58
  Speaker 4: Not sure. Is there anything else that either of you
• 33:03
  Speaker 4: would like to add to.
• 33:04
  Speaker 1: The Brexit conversation about things that have gone well or
• 33:08
  Speaker 1: have gone badly that we've missed out, Anything we've missed Julian,
• 33:10
  Speaker 1: that's important to this conversation.
• 33:12
  Speaker 5: Well, An interest of balance. I think one thing that
• 33:16
  Speaker 5: has gone badly is it's clearly contributed to the politically
• 33:20
  Speaker 5: uncertainty in the country over the last few years, both
• 33:22
  Speaker 5: by distracting politicians and the wider Whitehall and Westminster establishment
• 33:27
  Speaker 5: from other problems, but also the way that we've had
• 33:32
  Speaker 5: this sort of churn of prime ministers and other senior
• 33:36
  Speaker 5: figures partly related to the fallout of Brexit, is yet
• 33:40
  Speaker 5: another fact of preventing us from making big, long term decisions,
• 33:44
  Speaker 5: that the difficult decisions that might be politically unpopular but
• 33:47
  Speaker 5: are the right thing to do so. I think one
• 33:50
  Speaker 5: additional headwind to the economy from Brexit is simply that
• 33:53
  Speaker 5: sort of general climate of a political uncertainty that it's
• 33:56
  Speaker 5: undoubtedly fostered. I don't think it needed to have been
• 33:59
  Speaker 5: like this. Had a proper plan for Brexit and people
• 34:02
  Speaker 5: are more committed to deliver it from day one, then
• 34:04
  Speaker 5: we could have avoided this. But that uncertainty has undoubtedly
• 34:08
  Speaker 5: held back some business investment and also made policy making
• 34:11
  Speaker 5: in Whitehall more difficult than otherwise.
• 34:13
  Speaker 1: I might also have done as something with John and I,
• 34:15
  Speaker 1: John Steppeck and I write about all the time, which
• 34:17
  Speaker 1: has made UK assets and particularly UK listed equities for
• 34:20
  Speaker 1: nominally cheap in the rising of the risk premium, there
• 34:23
  Speaker 1: is something that global investors are now beginning to notice.
• 34:27
  Speaker 1: So that may be something that turns around over the
• 34:29
  Speaker 1: next few years.
• 34:31
  Speaker 5: Oh, I'd certainly agree with that. I mean, particularly now
• 34:33
  Speaker 5: we've got data showing that Brexit Britain wasn't in fact
• 34:36
  Speaker 5: the outlier that people assumed it was. Then we're already
• 34:39
  Speaker 5: starting to see a turn in investment sentiment I think
• 34:42
  Speaker 5: towards the UK, which should be very positive over the
• 34:45
  Speaker 5: next few argument.
• 34:48
  Speaker 6: So I've been making argument, Actually the UK is arguably
• 34:51
  Speaker 6: one of the most stable of the G seven countries.
• 34:54
  Speaker 6: It's not going to be the fastest growing. But when
• 34:56
  Speaker 6: you look at what could happen in the US elections,
• 34:58
  Speaker 6: when you look at the rise of the AFT Germany,
• 35:00
  Speaker 6: when you look at what happened when Macron goes in France,
• 35:03
  Speaker 6: you know there are clearly a lot of other places
• 35:06
  Speaker 6: that are a lot more politically risky now than a
• 35:08
  Speaker 6: country run by Richie Sunac and potentially about to be
• 35:12
  Speaker 6: run by Kirstaber.
• 35:14
  Speaker 1: So here we are stable, reasonable growth doesn't seem so bad,
• 35:17
  Speaker 1: do you think, Julian and Robert that in ten years,
• 35:21
  Speaker 1: maybe even twenty years, people will think about Brexit positively, negatively,
• 35:26
  Speaker 1: or have forgotten all about it.
• 35:28
  Speaker 5: Well, I think there must be some diehards at both
• 35:30
  Speaker 5: extremes who either think it's been the best thing ever
• 35:33
  Speaker 5: or a completely not a disaster. But unless that really
• 35:36
  Speaker 5: shows through in the lives of ordinary people, and I
• 35:38
  Speaker 5: think it may well be forgotten to some degree. What
• 35:43
  Speaker 5: w'd be interesting is if there's ever anybody you know
• 35:45
  Speaker 5: in a serious position of power who would want to
• 35:48
  Speaker 5: hold another referendum on this. I know there are lots
• 35:50
  Speaker 5: of calls for another referendum sooner rather than later, but
• 35:54
  Speaker 5: I think we were sold this on the basis that
• 35:56
  Speaker 5: it was a once in a generation vote, and I
• 35:58
  Speaker 5: also think it's only fair to give the pro Brexit
• 36:01
  Speaker 5: side more time to deliver on the potential benefits. But
• 36:05
  Speaker 5: assuming there isn't another referendum, then I think you're You're
• 36:07
  Speaker 5: probably right. Some of us will continue to be obsessed
• 36:11
  Speaker 5: about it, but for most people that won't have much
• 36:13
  Speaker 5: impact on their day to day lives.
• 36:14
  Speaker 4: Anymore of it entirely forgotten.
• 36:17
  Speaker 3: I don't think so.
• 36:18
  Speaker 6: I mean, Mervin King has said that if you look
• 36:20
  Speaker 6: at the sort of fifty years chart of British GDP growth.
• 36:24
  Speaker 6: You know, the inflection points are nineteen seventy nine and
• 36:26
  Speaker 6: two thousand and eight, and this was a few years ago.
• 36:28
  Speaker 3: But his view was that two thousand.
• 36:29
  Speaker 6: And eight would remain the inflection point rather than twenty
• 36:32
  Speaker 6: sixteen or twenty nineteen if you take a bo went
• 36:35
  Speaker 6: And I think he's probably right on that. So I
• 36:38
  Speaker 6: was looking at some of the publing data were in
• 36:39
  Speaker 6: talking to some people who do this stuff. Party affiliation
• 36:42
  Speaker 6: has now recovered, so in the years from twenty sixteen
• 36:45
  Speaker 6: till essentially twenty nineteen twenty twenty, people identified more as
• 36:50
  Speaker 6: a lever or Remainer than as Tory or Labor and
• 36:53
  Speaker 6: that has changed. But it hasn't so much changed on
• 36:57
  Speaker 6: the remain side, because I mean Brexit is a they
• 36:59
  Speaker 6: got what wanted and be Some of them are slightly
• 37:01
  Speaker 6: embarrassed about that now because it's not perceived to have
• 37:03
  Speaker 6: gone that well, whereas there are still quite a lot
• 37:05
  Speaker 6: of people on the Leave side for whom remain. As
• 37:07
  Speaker 6: you know, the people wearing waving EU flags at the
• 37:09
  Speaker 6: last night of the problems the other night, they are
• 37:11
  Speaker 6: like the breakageers. They're the guys who care about this,
• 37:13
  Speaker 6: and they're going to try and keep it alive. So
• 37:14
  Speaker 6: I don't think it will be entirely forgotten. I think
• 37:17
  Speaker 6: it will still be quite contentious, but I think as
• 37:20
  Speaker 6: a live issue, as we drift further apart, it will
• 37:22
  Speaker 6: become harder to knit the two back together.
• 37:25
  Speaker 4: Robert Julian, thank you very much.
• 37:32
  Speaker 1: John, ma'am. Do you think you'll have forgotten Braxit in
• 37:36
  Speaker 1: twenty years?
• 37:37
  Speaker 2: I mean, not after the foster everyone made, But other
• 37:41
  Speaker 2: than that, I don't think. I'm not sure that it
• 37:44
  Speaker 2: all matter that much economically, And I mean, that's good,
• 37:55
  Speaker 2: that's a good question. And actually I do sort of
• 37:57
  Speaker 2: think it comes back to that, like after the fuss
• 37:59
  Speaker 2: and everyone.
• 38:03
  Speaker 1: Yeah, And when I think about it, I think that
• 38:05
  Speaker 1: the major downside to Brexit so far, and obviously, as
• 38:09
  Speaker 1: we discussed in that conversation, of course there's impacts. Of course,
• 38:13
  Speaker 1: there's downsides. There's all the frictions, there's the loss of
• 38:15
  Speaker 1: trade with the EU, there's a lot of pain for
• 38:17
  Speaker 1: individual businesses, et cetera. But when I think about it
• 38:20
  Speaker 1: that the main thing is, again something we've picked up
• 38:23
  Speaker 1: in the conversation is stability. You know, one of the
• 38:26
  Speaker 1: things you really need if you want to go for growth,
• 38:28
  Speaker 1: which everyone seems to want to do at the moment,
• 38:30
  Speaker 1: is a sense that you have a political stability, in particular,
• 38:34
  Speaker 1: that your institutions are strong, that your political environment is strong.
• 38:39
  Speaker 1: You remember the great Adam Smith quote about there being
• 38:42
  Speaker 1: a lot of ruin in a nation, the point being
• 38:44
  Speaker 1: that you can do an awful lot to a country
• 38:46
  Speaker 1: and it can be fine as long as your institutions
• 38:50
  Speaker 1: are strong and your politics are stable. And of course
• 38:52
  Speaker 1: what we've now done is run through I can't even
• 38:54
  Speaker 1: remember how many prime ministers in a very short period
• 38:57
  Speaker 1: as a direct result of constantly ongoing John thinks is
• 39:00
  Speaker 1: fall by the way for fingers of me as a
• 39:04
  Speaker 1: result of constant rouse about Brexit, and that to me
• 39:07
  Speaker 1: so far has been the thing that has caused some
• 39:10
  Speaker 1: of our problems. And that's possibly why I think Julian
• 39:12
  Speaker 1: says in the conversation, why there's this discount on UK
• 39:15
  Speaker 1: assets and a lack of investment into the UK, et cetera.
• 39:18
  Speaker 1: But you know, this is very short term and it's
• 39:21
  Speaker 1: not just us. There's political instability everywhere, and you know
• 39:24
  Speaker 1: you can't blame political instability in European countries on Brexit
• 39:28
  Speaker 1: or maybe you can. I don't know about it, but
• 39:30
  Speaker 1: let's not so we can pull that stability back.
• 39:34
  Speaker 2: Yeah, I mean so, I don't. I think that part
• 39:37
  Speaker 2: of the problem is that people are were very impatient.
• 39:40
  Speaker 2: We kind of expect stuff to happen over night, and
• 39:45
  Speaker 2: obviously one of the breaksit was always going to be
• 39:49
  Speaker 2: a tricky process. And then amplify that by the fact
• 39:53
  Speaker 2: that the people who actually suggested the referendum in the
• 39:55
  Speaker 2: first place, and the people who were running the country
• 39:58
  Speaker 2: throughout the process didn't want to do it, you know,
• 40:01
  Speaker 2: kind of made it trickier as well. And I think
• 40:03
  Speaker 2: the fact that actually the British institutions actually stood up
• 40:07
  Speaker 2: really surprisingly well and came out of it quite impressively.
• 40:12
  Speaker 2: You know, we didn't actually end up reversing the referendum,
• 40:16
  Speaker 2: which has happened in other countries and certain occasions and
• 40:19
  Speaker 2: also could have happened here. I think everyone got a
• 40:24
  Speaker 2: much better sense of where kind of you know, responsibility
• 40:28
  Speaker 2: and sovereignty actually lies in the country, and it wasn't
• 40:31
  Speaker 2: actually that far away from where most people thought it was.
• 40:36
  Speaker 2: And I think that I don't I struggle to view
• 40:43
  Speaker 2: it as being a failure from that point of view.
• 40:46
  Speaker 2: You know, we've come through it. It got down, it
• 40:49
  Speaker 2: was messy, it was bumpy. There hasn't been an epic depression.
• 40:53
  Speaker 2: There hasn't been anything other than a lot of embarrassment,
• 40:58
  Speaker 2: you know, kind of embarrassment because I've and standing up
• 41:00
  Speaker 2: in front of our pals kind of high level kind
• 41:03
  Speaker 2: of conferences and so it's not in my country voted
• 41:06
  Speaker 2: the wrong way. But other than that, that's it.
• 41:08
  Speaker 7: Yeah, we can recover from that too, And maybe if
• 41:10
  Speaker 7: everyone would just accept the results and stop going on
• 41:14
  Speaker 7: a better Remember how everyone kept telling the Scotts to
• 41:15
  Speaker 7: just accept the results of the referendum and just shut
• 41:18
  Speaker 7: up and get on with the day job.
• 41:19
  Speaker 1: Hi say that to politicians here? Shut up, get on
• 41:22
  Speaker 1: with the day job.
• 41:23
  Speaker 4: Hi.
• 41:23
  Speaker 3: Right?
• 41:24
  Speaker 1: You know we can say that to Nicola Sturgeon. I
• 41:26
  Speaker 1: think we can say that to our Westminster politicians to
• 41:29
  Speaker 1: just get on with the day job. And the thing
• 41:30
  Speaker 1: is they know what the day job is, right, they
• 41:32
  Speaker 1: want to go for growth. We talked about this a
• 41:34
  Speaker 1: little with robertam and with Julian about what is it
• 41:37
  Speaker 1: that we need to do. Well, we know what we
• 41:39
  Speaker 1: need to do. We know we need to have a
• 41:41
  Speaker 1: less complicated and lower tax regime. We know we need
• 41:44
  Speaker 1: to change the incentives inside our tax system. We know
• 41:47
  Speaker 1: we need to deal with the regulation problems, as Robert said.
• 41:50
  Speaker 1: We know we need to stop faffing around with infrastructure
• 41:53
  Speaker 1: and do it properly. We know we need better transport links.
• 41:56
  Speaker 1: We know we need better Wi Fi. Know we need
• 41:58
  Speaker 1: to short out our edge problem and stop overproducing elites
• 42:02
  Speaker 1: and start producing people who can actually do something. You know,
• 42:05
  Speaker 1: we know all this stuff. It's not new news. And
• 42:08
  Speaker 1: now we don't have russels to blame and we've got
• 42:10
  Speaker 1: to stop breaking it, breaksit, bles it, breaxit. We just
• 42:13
  Speaker 1: need to get get on with it. And that seems
• 42:18
  Speaker 1: to be me to be the way we have to go.
• 42:19
  Speaker 1: And one of the really depressing things that I can't
• 42:22
  Speaker 1: remember who was seven in the conversation that our problem
• 42:25
  Speaker 1: here is we just don't want it enough and we
• 42:28
  Speaker 1: have a large part of the population that isn't interested
• 42:31
  Speaker 1: in the kind of policies that we need to go
• 42:34
  Speaker 1: for growth. And my fear, because you know, I like
• 42:37
  Speaker 1: to be optimistic and I'm definitely a half glass fall person,
• 42:39
  Speaker 1: everyone knows that my fear is that it may be
• 42:45
  Speaker 1: that the long term dynamic of an aging population is
• 42:49
  Speaker 1: non stop risk aversion, because we have too large a
• 42:52
  Speaker 1: group of the population who have a full incentive to
• 42:56
  Speaker 1: protect the status quo kind of. I mean almost you
• 42:59
  Speaker 1: and I are the point. You know, Please don't make
• 43:01
  Speaker 1: my health value go down. I want to retire, and
• 43:03
  Speaker 1: please please don't make the value of my pension go down.
• 43:06
  Speaker 1: I really want to retire. Please let me hang on
• 43:08
  Speaker 1: to my status quote. And then there's the generation above
• 43:11
  Speaker 1: you and me. Of course you feel that way more strongly.
• 43:13
  Speaker 1: You're an increasingly large part of the population, and crucially
• 43:16
  Speaker 1: increasing large part of the voting population, and that might
• 43:20
  Speaker 1: mean that economies such as US and all European economies
• 43:25
  Speaker 1: are automatically risk averse and therefore unable to go for growth.
• 43:29
  Speaker 1: That's my big worry. Tell me it's okay.
• 43:33
  Speaker 2: I think that's a really good point. The problem is
• 43:38
  Speaker 2: quite a tricky one measure. I mean, I'd be interested
• 43:41
  Speaker 2: to see because if you know, for all the you know
• 43:44
  Speaker 2: we talked about older people being more you know, conservative
• 43:47
  Speaker 2: or you know, kind of want to keep that house place,
• 43:50
  Speaker 2: whatever it is, I also get the sense that the
• 43:54
  Speaker 2: younger generation certainly comes across as being highly risk averse
• 44:00
  Speaker 2: and sort of you know, for what a better bird
• 44:03
  Speaker 2: socialists rather than entrepreneurial minded. But I just wonder how
• 44:06
  Speaker 2: much of this is really just perceptions where we are
• 44:11
  Speaker 2: in the current scale kind of age whites. I don't
• 44:17
  Speaker 2: I don't know that it's about demographics as such. I
• 44:22
  Speaker 2: think possibly it's more about the fact that we've gone
• 44:25
  Speaker 2: through a long period. Again. Actually, I tend to bring
• 44:29
  Speaker 2: everything back to two thousand and eight. What happened in
• 44:31
  Speaker 2: two thousand and eight is that we didn't let the
• 44:34
  Speaker 2: banking system collapse.
• 44:36
  Speaker 1: And a low the way that we wanted the banking
• 44:39
  Speaker 1: system to collapse, just to be clearly wanted you lose,
• 44:42
  Speaker 1: that's John.
• 44:44
  Speaker 2: And you know, rise from the ravages of the apocalypse
• 44:47
  Speaker 2: to lead my people to salvation. Not more there's but
• 44:51
  Speaker 2: the way we can have dealt with it seemed very
• 44:54
  Speaker 2: wishy washy, even though you know, yeah, I mean most
• 44:57
  Speaker 2: bank shareholders would not think that they were treated with
• 45:01
  Speaker 2: kid gloves, you know, most of them kind of lost
• 45:03
  Speaker 2: all of their money. But I think it's that thing
• 45:06
  Speaker 2: that comes down here that they build out the banks
• 45:09
  Speaker 2: and then suddenly everyone thought, well, where I need to
• 45:13
  Speaker 2: get bailed out as well, and then you know where
• 45:16
  Speaker 2: various crises come along where the government got bigger and
• 45:18
  Speaker 2: bigger and bigger, and then obviously the kind of you know,
• 45:22
  Speaker 2: ps to resistance, so like COVID coming along, and then
• 45:24
  Speaker 2: we get locked down and suddenly government's into absolutely everything,
• 45:29
  Speaker 2: and it's sort of seen as the cushion of last resort.
• 45:37
  Speaker 2: So I think it's much more to do with that
• 45:40
  Speaker 2: than they do be an aging population, because it's a
• 45:42
  Speaker 2: long period of time where the role of the kind
• 45:44
  Speaker 2: of state has been unquestionably increasing, and and I think
• 45:50
  Speaker 2: it was supposed.
• 45:50
  Speaker 1: To be a small state guy.
• 45:52
  Speaker 2: Yes, I mean, and the thing is, in relative terms,
• 45:55
  Speaker 2: he probably his small stay guy compared to where the
• 45:59
  Speaker 2: rest of the or the majority of the kind of
• 46:02
  Speaker 2: politicians are at the moment.
• 46:04
  Speaker 1: No one's just John. You know what, We're doomed. Thanks
• 46:10
  Speaker 1: for listening to this week's Maren Talks Money. We'll be
• 46:12
  Speaker 1: back next week in the meantime. If you like us, show, rate, review,
• 46:15
  Speaker 1: and subscribe wherever you listen to podcasts. This episode was
• 46:18
  Speaker 1: hosted by me Maren Somerset Web. It was produced by
• 46:20
  Speaker 1: Someersidi Additional editing by Blake Maple special thanks, of course,
• 46:24
  Speaker 1: to Robert Colville, Julian Jessup, and to John Steppe. Be
• 46:27
  Speaker 1: sure to sign up for John's daily newsletter, Money Distilled
• 46:30
  Speaker 1: link in the show notes. You won't regret it because
• 46:33
  Speaker 1: he's always right.