Latest / Merryn Talks Money / Odd Lots: Liz Truss on the 'Doom Loop' Engulfing the UK Economy

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Odd Lots: Liz Truss on the 'Doom Loop' Engulfing the UK Economy · Merryn Talks Money

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Speaker 1: Hello, everyone, it's Meren Somerset Web. Later this week we
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Speaker 1: will have our first personal finance episode of the season
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Speaker 1: and another markets round up, and next week we have
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Speaker 1: got a great interview with Cidita helm And Oxford professor,
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Speaker 1: influential economist and key voice in energy policy making. But
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Speaker 1: for today, I wanted to bring you another interview we
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Speaker 1: think you will enjoy from our colleagues over at The
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Speaker 1: Odd Lots podcast. Host Joe Wiser, Sol and Tracy Alloway
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Speaker 1: sat down with former Prime Minister Liz Trust. They talked
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Speaker 1: about the political reality of fiscal consolidation and how difficult
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Speaker 1: it is on both the tacks and the spending side,
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Speaker 1: central bank independence, and.
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Speaker 2: What our economic vision was really all about.
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Speaker 1: Enjoy the conversation and we'll be back with more merin
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Speaker 1: Talks Money later this week.
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Speaker 3: Bloomberg Audio Studios, Podcasts, Radio News.
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Speaker 4: Hello and welcome to another episode of The Odd Lots Podcast.
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Speaker 5: I'm Jill Wisenthal and I'm Tracy Alloway.
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Speaker 4: Tracy, we're recording this August twenty six, twenty twenty five.
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Speaker 4: There's a lot going on right now, particularly in I guess,
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Speaker 4: many big questions about macro and governance and all kinds
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Speaker 4: of things in some of the richest countries in the world.
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Speaker 5: That is certainly one way to put it. So just
1:20
Speaker 5: overnight we had headlines saying that Trump was going to
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Speaker 5: fire Lisa Cook from the FED, and this obviously fits
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Speaker 5: into the whole debate around central bank independence and how
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Speaker 5: much influence governments should actually have on central banks. And
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Speaker 5: it turns out this is a debate that we've had
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Speaker 5: before in other countries totally.
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Speaker 4: And part of the reason I think Trump is focused
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Speaker 4: on the FED is the high level of interest payments
1:43
Speaker 4: and you'd like to see them come down. Speaking of
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Speaker 4: interest payments, this morning I saw the headline that the
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Speaker 4: UK thirty year guilt is like at the highest in
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Speaker 4: nineteen eighty nine, it continues to elevate. So for all
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Speaker 4: the stress that we have here, all the fiscal pressure,
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Speaker 4: inflationary pressure, it actually times potentially worse elsewhere.
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Speaker 5: Although yes, I will say the pound is up against
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Speaker 5: the dollar right, so from a currency perspective, we're kind
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Speaker 5: of doing worse.
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Speaker 4: From a currency perspective. But there's a lot these things
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Speaker 4: are global, is I think the point, and all of
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Speaker 4: these anxieties and stresses, it's not just a US story.
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Speaker 5: No, and obviously it's feeding into ball markets and I
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Speaker 5: cannot tell you how many notes we get on a
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Speaker 5: daily basis about how governments can reduce the debt, how
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Speaker 5: they deal with deficits and things like that.
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Speaker 4: Right now, everyone to talk about this these days here
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Speaker 4: in twenty twenty five, it got a lot of interest.
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Speaker 4: Of course in twenty twenty two, after there is a
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Speaker 4: famous spike in yields in UK guilts and maybe the
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Speaker 4: sort of premonition of what a lot of rich countries
2:44
Speaker 4: would be dealing with. So I'm very excited to say,
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Speaker 4: we really do have the perfect guest to speak about
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Speaker 4: all of this today to understand some of the pressures
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Speaker 4: facing rich developed economies. We're speaking with the right honorable
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Speaker 4: Liz Trust, former Prime Minister of the UK, author of
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Speaker 4: the recent book Ten Years to Save the West. Liz Trust,
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Speaker 4: thank you so much for coming on Odd Latch. Thrilled
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Speaker 4: to have you here, good to be on. I have
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Speaker 4: a question. You know, when you see like thirty year
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Speaker 4: guilt yields higher substantially than when you were the Prime minister,
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Speaker 4: and whenever one attacked you or the mini budget, do
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Speaker 4: you feel some sense of like sort of vindication or
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Speaker 4: happiness or is it all like despair for the state
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Speaker 4: of your country.
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Speaker 6: Well, I do feel despair for the state of my country,
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Speaker 6: and it's in fact why I tried to do what
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Speaker 6: I tried to do in twenty twenty two, because I
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Speaker 6: could see the way things were going. I could see
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Speaker 6: our economy was stagnant, that the tax revenue being generated
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Speaker 6: wasn't enough to cover the amount of money the state
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Speaker 6: was spending, and we needed to do something different in
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Speaker 6: order to get out of a negative spiral. And what
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Speaker 6: I see now is we're further down that negative spiral
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Speaker 6: and we are heading for a very very serious crisis.
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Speaker 6: I said last year, I thought we were headed for
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Speaker 6: or on IMF bailout as Britain experienced in the nineteen seventies.
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Speaker 2: I think that's even.
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Speaker 6: Truer now than it was a year ago. And we're
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Speaker 6: in an economic doom loop of higher taxes, lower growth,
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Speaker 6: higher debt, and it's very difficult now to see the
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Speaker 6: political way out of that.
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Speaker 5: So how should governments actually announce or unveil large scale
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Speaker 5: policy shifts because there does seem to be a some
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Speaker 5: institutional constraint and then be the market reaction. We saw
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Speaker 5: that this year in the US, after Trump's Liberation Day announcement,
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Speaker 5: you know, a lot of people were saying this was
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Speaker 5: Trump's trust moment. How should governments actually go about I
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Speaker 5: guess balancing the views of the market with you know,
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Speaker 5: big scale change in terms of policy.
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Speaker 6: I think the issue that I faced, and it is
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Speaker 6: also the issue that Donald Trump faced in the United States,
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Speaker 6: is a lot of the mainstream economic establishment do not
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Speaker 6: agree with the policies that I was pursuing, and they
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Speaker 6: don't agree with the policies that Donald Trump is pursuing.
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Speaker 6: So you're operating in a hostile environment. In the UK's case,
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Speaker 6: we have institutions that have become very divorced from government policy.
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Speaker 6: In nineteen ninety eight, the Bank of England was made
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Speaker 6: independent by Gordon Brown. Since then, I believe it has
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Speaker 6: been pretty much unaccountable, so politicians have very little control
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Speaker 6: over monetary policy. What has happened is monetary policy has
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Speaker 6: driven fiscal policy. It's very hard to coordinate between those
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Speaker 6: two policies as a government because you don't have control
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Speaker 6: of the leavers. Even more so, back in twenty ten,
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Speaker 6: George Osborne established the Office of Budget Responsibility, which handed
5:56
Speaker 6: over huge powers to another on elected authority. It's a
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Speaker 6: bit like the Congressional Budget Office, but it has more
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Speaker 6: power within the British system. So what I was facing
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Speaker 6: back in twenty twenty two was powerful institutions that didn't
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Speaker 6: share my policy objectives. Now I believed, as the democratically
6:19
Speaker 6: selected leader of the country that I should be able
6:22
Speaker 6: to pursue those policies. It was what I was elected
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Speaker 6: on it in fact, it was what the Conservative Party
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Speaker 6: elected on. But what I faced was resistant. So when
6:31
Speaker 6: you're talking about timing of policy announcements, it's not like
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Speaker 6: you're operating on a.
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Speaker 2: Clear cee. You're operating in a stormy c where there are.
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Speaker 6: People out there who want you to fail, not just
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Speaker 6: your political opponents, but also.
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Speaker 2: The institutional opponents.
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Speaker 6: And that is what Donald Trump faced with his tariff
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Speaker 6: policies that he announced on Liberation Day. A lot of
6:55
Speaker 6: economists said they wouldn't work. A lot of people say
6:59
Speaker 6: said it would make make the budget deficits in the
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Speaker 6: US worse. And those policymakers are very influential with the markets.
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Speaker 6: So in the case of the Bank of England, or
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Speaker 6: the case of the people sitting on the Federal Reserve,
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Speaker 6: or civil servants within the treasury.
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Speaker 2: These people are.
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Speaker 6: Out there creating their own ways. So I think that's
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Speaker 6: the context you have to see what I was trying
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Speaker 6: to do.
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Speaker 4: First of all, I totally take your point about the
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Speaker 4: sort of limitations of many mainstream economists, the bias of
7:31
Speaker 4: many mainstream economists, And we have many critics of mainstream
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Speaker 4: economics regularly on the show. So that's a point well taken.
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Speaker 4: When you unveiled your many budget, given the fiscal constraints,
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Speaker 4: or the perceived fiscal constraints, why text cuts specifically and
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Speaker 4: not also spending cuts. You know, there's so many different
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Speaker 4: aspects of the UK spending situation, whether it's the triple
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Speaker 4: locked pension. There's this thing that goes viral Twitter a
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Speaker 4: lot about like how easy it is to get car, etc.
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Speaker 4: Like why not first take aim at potentially low hanging
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Speaker 4: fruit or at least in combination, you know, spending cuts.
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Speaker 2: Well, that is.
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Speaker 6: Exactly what I sought to do. The package we were
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Speaker 6: putting forward was a combination. It was actually not tax cuts.
8:17
Speaker 6: It was reversing a tax rice and I think that's
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Speaker 6: a very important distinction. The biggest measure we wanted to
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Speaker 6: take was keeping corporation tax at nineteen percent, not raising
8:29
Speaker 6: it to twenty five percent. And I believed, and I've
8:32
Speaker 6: since been proven right, that if you raise corporation tax
8:36
Speaker 6: to that level, you get less business activity, you get
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Speaker 6: lower growth. Combined with the non dom tax that's been
8:43
Speaker 6: put in place or the removal of the non dom benefits,
8:47
Speaker 6: we've seen more millionaires leave Britain than any other country
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Speaker 6: in the world per capita. So what we were doing,
8:55
Speaker 6: just on its own account, raising taxes at that juncture
9:00
Speaker 6: back in twenty twenty two was a bad idea. I
9:03
Speaker 6: believe that it would lead to lower economic growth and
9:08
Speaker 6: a higher deficit in the long term. And some economists
9:11
Speaker 6: agreed with me, but the economists working for the government,
9:15
Speaker 6: the Office of Budget Responsibility of the Bank of England
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Speaker 6: did not agree with me, and they were keen on
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Speaker 6: that policy, and in fact they forced me to reverse
9:24
Speaker 6: that policy.
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Speaker 2: So that's one point.
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Speaker 6: Second point on spending is we did try to rain
9:29
Speaker 6: in spending.
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Speaker 2: So a particular thing I sought to.
9:33
Speaker 6: Do was increased welfare by wages not prices, because we
9:39
Speaker 6: were in a very high inflation year in twenty twenty two.
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Speaker 6: That would have saved seven billion pounds on the government budget,
9:47
Speaker 6: which has a significant amount. What I found was that
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Speaker 6: Conservative MPs were not prepared to vote for that. So
9:54
Speaker 6: even a relatively minor change which was simply not raising
9:58
Speaker 6: welfare as much as it was going to be raised,
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Speaker 6: created a massive outcry on the Conservative benches. So the
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Speaker 6: answer on spending is it was politically not possible. Now,
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Speaker 6: personally I would have liked to be even tougher on spending.
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Speaker 6: I think we could have done that over time, but
10:17
Speaker 6: I had to think about what was politically realistic, and
10:22
Speaker 6: so what we had is spending constraint, not raising spending
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Speaker 6: as much as was previously planned, keeping taxes low rather
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Speaker 6: than raising them and choking off economic growth, which is
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Speaker 6: what I thought it would do and was what actually happened.
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Speaker 6: And then also supply side measures such as legalizing fracking
10:42
Speaker 6: in the UK making it easier to drill in the
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Speaker 6: North Sea, so that you stimulate the economy with supply
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Speaker 6: side reforms. That was the overall package, and you know
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Speaker 6: what happened. And you can compare my fiscal package with
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Speaker 6: packages that Richie soon acted during COVID or packages that
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Speaker 6: Rachel Reves did. Since my package was smaller even according
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Speaker 6: to the estimates of the Office of Budget Responsibility, and
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Speaker 6: yet it got a very different reaction, and this is
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Speaker 6: because the economic establishment, the key figures in the treasurer
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Speaker 6: in the Bank of England have a bias towards a
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Speaker 6: more Canesian approach. So I think it's important to note
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Speaker 6: that this physical package was not any bigger than packages
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Speaker 6: before or after. It just got a different reaction. I
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Speaker 6: think the other the other important point to note about
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Speaker 6: what happened in September and October twenty twenty two is
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Speaker 6: the night before the mini budget, the Bank of England
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Speaker 6: announced the sale of forty billion pounds worth of guilts.
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Speaker 6: So I had a central bank who were making announcements
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Speaker 6: that made our lives a lot more difficult the day
12:03
Speaker 6: before the mini budget. And since the guilt spike in
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Speaker 6: twenty twenty two, the Bank of England have actually produced
12:10
Speaker 6: a paper saying that two thirds of that spiking gilts
12:15
Speaker 6: was down to their failure to regulate the pensions market.
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Speaker 6: So there were lots of other things going on at
12:21
Speaker 6: the same time, but it was very very convenient for
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Speaker 6: the mini budget to be blamed for what happened. And
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Speaker 6: as you pointed out at the beginning of the show,
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Speaker 6: the guilt spike wasn't as high as it is now.
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Speaker 6: So what I think is going on now is you
12:38
Speaker 6: can see the different treatment of a tax spending, high
12:43
Speaker 6: spending labor government from a conservative politician who's trying to
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Speaker 6: pursue in my view, Laffer curve friendly tax freezers, supply
12:56
Speaker 6: side reforms, and spending restraint.
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Speaker 5: There is an institutional and market bias towards economic orthodoxy
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Speaker 5: or Keynesianism, as you just pointed out, why not try
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Speaker 5: to adapt your budget or your economic policy to that
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Speaker 5: reality because it did seem like, you know, you were
13:16
Speaker 5: sort of expecting the markets to adapt to your policy
13:20
Speaker 5: rather than vice versa. I guess I'm asking it's just
13:23
Speaker 5: is there a better way to try to communicate what
13:26
Speaker 5: you were doing at the time.
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Speaker 6: Well, I'm a believer in democracy, and I think it's
13:31
Speaker 6: democratically elected politicians that should decide policy, not unelected central banks.
13:39
Speaker 6: And you know there is a network, there's the IMF,
13:42
Speaker 6: World Bank, the central banks meeting regularly. They are far
13:47
Speaker 6: too powerful in my view at deciding what countries economic
13:52
Speaker 6: policy should be, and they have.
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Speaker 2: Not been effective.
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Speaker 6: You know, if you look at the Bank of England's
13:56
Speaker 6: record over the past ten years on things like in flotation,
14:00
Speaker 6: on economic growth, it's been extremely poor and I fundamentally,
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Speaker 6: you know, why should democratically elected politicians cow taw to
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Speaker 6: what unelected officials want when we're the people who are
14:19
Speaker 6: held to account for the success of failures of the policy.
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Speaker 6: And what is happening now is Rachel Reeves's very orthodox.
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Speaker 6: She's a former Bank of England employee. She's essentially taking
14:30
Speaker 6: dictation from the Bank of England and the Treasury about
14:33
Speaker 6: what she should do and we can see the results
14:36
Speaker 6: of that. And what is happening is we are going
14:39
Speaker 6: to reach an endpoint where the country runs out of
14:41
Speaker 6: money and then we will have a major crisis and
14:45
Speaker 6: we will have to think differently. I just think it's
14:48
Speaker 6: very sad it's got to that point. This was obvious
14:52
Speaker 6: from where we were in twenty twenty two. But as
14:55
Speaker 6: I've said, the economic orthodoxy prove very powerful. And Frankie,
14:59
Speaker 6: what is the point of wanting to become prime minister
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Speaker 6: if you're simply going to go along with the failing
15:05
Speaker 6: orthodoxy that has put your country in the problems it
15:09
Speaker 6: is already, which is where we were.
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Speaker 5: You know, you mentioned that the Bank of England wasn't
15:14
Speaker 5: really independent from HM Treasury until Gordon Brown's chancellorship in
15:19
Speaker 5: the nineteen nineties. Do you think that arrangement still works
15:23
Speaker 5: or would you perhaps call for reform where maybe the
15:28
Speaker 5: Treasury regains some of its influence over the central Bank.
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Speaker 6: I think the Bank of England needs to be accountable
15:33
Speaker 6: to politicians. I think the current system doesn't work. This
15:37
Speaker 6: is why I'm very sympathetic to what Donald Trump is
15:39
Speaker 6: saying about the Fed. Monetary policy is incredibly important. It
15:45
Speaker 6: determines the allocation of assets within society. And what we've
15:49
Speaker 6: seen in Britain is we've seen people who have property,
15:54
Speaker 6: who have capital have done very well out of the
16:00
Speaker 6: rest rates that the Bank of England and the easy
16:02
Speaker 6: money the Bank of England has created over the past
16:07
Speaker 6: fifteen years, and we're seeing young people struggle to get
16:10
Speaker 6: on the housing market. We are seeing it real effects
16:14
Speaker 6: in the economy of the Bank of England's policies. And
16:17
Speaker 6: as a democrat, somebody at leaves in democracy, I just
16:20
Speaker 6: think it's wrong that people should be making those decisions
16:24
Speaker 6: and not accountable to the electorate. And it's also very
16:28
Speaker 6: difficult as I found as Prime minister to combine fiscal
16:32
Speaker 6: and monetary policy if you don't hold one.
16:35
Speaker 2: Of the leavers.
16:36
Speaker 6: So yes, I think it's got to change, and I
16:38
Speaker 6: think there is a reckoning coming for the central banks,
16:42
Speaker 6: not just in Britain but also in the United States,
16:45
Speaker 6: also the ECB. The current system does not work, and
16:50
Speaker 6: I think one of the reasons that the Bank of England,
16:53
Speaker 6: I would say sabotaged what I was trying to do
16:57
Speaker 6: is I was a critic of central banks before I
17:01
Speaker 6: became Prime Minister. I'd been very clear that I thought
17:03
Speaker 6: the Bank of English record was not good, that the
17:05
Speaker 6: Treasury should have much more of a role in setting
17:08
Speaker 6: the mandate for the Bank of England, and they didn't
17:12
Speaker 6: like their power being challenged.
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Speaker 4: First of all, I want to say, I think your
17:31
Speaker 4: point about the sort of the political impossibility of or
17:36
Speaker 4: the political at least difficulty of spending cuts is really important.
17:39
Speaker 4: And the fact that you had the Tory majority obviously,
17:42
Speaker 4: and even what you described as sort of modest cuts
17:45
Speaker 4: to the rate of growth is spending couldn't get the votes.
17:48
Speaker 4: I think there's a very telling issue and raising a
17:51
Speaker 4: stress about the ability of any democracies to do difficult
17:54
Speaker 4: things sitting aside. Maybe what's politically capable in the next parliament,
17:59
Speaker 4: should the next part Parlament revisit questions such as either
18:02
Speaker 4: the triple pensions or free point of use at the NHS.
18:07
Speaker 2: So just on your.
18:08
Speaker 6: Point about political possibility, I think the only thing that
18:12
Speaker 6: is politically possible at present, or certainly was in twenty
18:15
Speaker 6: twenty two, was to try and restrain the growth of
18:19
Speaker 6: spending and to grow the economy faster than that. And
18:22
Speaker 6: I think that is what just that is my Trumpite
18:25
Speaker 6: strategy is in the US you've got to outpace the
18:29
Speaker 6: growth of public spending sure with economic growth. I think
18:34
Speaker 6: that is only possible. What you've just said about actually
18:37
Speaker 6: spending cuts is when there is some kind of crisis.
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Speaker 4: Well, so this is what I'm saying. So you mentioned
18:42
Speaker 4: you said last year that you were worried that the
18:45
Speaker 4: UK could need another IMF bailout. There were headlines I
18:48
Speaker 4: think of the news just in the last week of
18:50
Speaker 4: some economists talking about that again. Okay, like, if this
18:53
Speaker 4: is what we're talking about, I mean, if this is
18:55
Speaker 4: real and we're talking about the UK essentially being at
18:57
Speaker 4: the point of needing an IMF bailout. Is it time
19:00
Speaker 4: to look at these sort of core pillars of existing
19:04
Speaker 4: spending levels.
19:06
Speaker 6: Well, you can see what's been going on in Parliament,
19:08
Speaker 6: which is the Labor Party tried to put through some
19:11
Speaker 6: modest welfare cuts and there was a massive rebellion by
19:15
Speaker 6: Labor MPs. Even though they have a huge majority in Parliament,
19:19
Speaker 6: they could not get through some pretty minor changes, smaller,
19:23
Speaker 6: by the way, than the amount I was proposing in
19:25
Speaker 6: twenty twenty two. I think it was only worth about
19:28
Speaker 6: four billion pounds. They could not get that through their
19:31
Speaker 6: current parliamentary party, and all of the evidence, what happened
19:36
Speaker 6: in Greece, what happened in Ireland where spending cut programs
19:40
Speaker 6: have been achieved, or Argentina is another good example, have
19:44
Speaker 6: come after a crisis. I think that's deeply regrettable. But
19:49
Speaker 6: I can't see certainly with the current parliament serious spending
19:53
Speaker 6: cuts happening until Britain runs out of money.
19:58
Speaker 5: I'm going to ask Joe's question just in a slightly
20:00
Speaker 5: different way, but if you were back in government today
20:03
Speaker 5: and guilt yields are where they are, what specific tradeoffs
20:08
Speaker 5: between spending and taxes tax cuts would you be willing
20:12
Speaker 5: to make and what trade offs do you think are
20:15
Speaker 5: actually politically realistic.
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Speaker 6: Well, the issue now is that taxes have got so
20:21
Speaker 6: high that they're checking off economic growth, and we're seeing
20:26
Speaker 6: millionaires leaving the country, We're seeing businesses closing down. I
20:31
Speaker 6: think the easiest thing and the most sensible thing to
20:33
Speaker 6: do straight away is all the supply side stuff. Abolishing
20:37
Speaker 6: planning regulations, taking on the environmental NGOs, getting on with fracking,
20:43
Speaker 6: using north sea oil, maybe using our coal reserves. I
20:46
Speaker 6: think those are the types of things that can be
20:49
Speaker 6: done relatively quickly and would have an impact in terms
20:54
Speaker 6: of spending. Of course, our welfare state needs to be reformed.
20:59
Speaker 6: I think something I over sixty percent of Britain's budget
21:03
Speaker 6: is a combination of the National Health Service and welfare
21:06
Speaker 6: and those are the two areas that need to be fixed.
21:08
Speaker 6: But I don't think there's any room for maneuver now
21:11
Speaker 6: on taxes. I think that raising taxes has proved already
21:16
Speaker 6: to be counterproductive. Doing it even more will simply make
21:20
Speaker 6: the UK even more unattractive for investors. So you've got
21:23
Speaker 6: to focus on supply side. Make it much easier to
21:27
Speaker 6: build things, make it much easier to frack make it
21:31
Speaker 6: much easier to hire people all of those kind of things,
21:34
Speaker 6: and you have to have spending cuts where you can.
21:37
Speaker 6: But as I've said, I've tried myself to get.
21:39
Speaker 2: Spending cuts through Parliament. It's it's not easy.
21:44
Speaker 4: I'm going to ask the really ignorant American question that's
21:48
Speaker 4: sometimes so forgive me if this comes off as blind,
21:51
Speaker 4: just so I'm just getting it out there. But is
21:53
Speaker 4: there a cult of the nytrust in the UK?
21:57
Speaker 2: There has been.
21:58
Speaker 6: I think the cult is wearing things in, but you know,
22:01
Speaker 6: there has been a cult. I think people are recognizing,
22:04
Speaker 6: though that the outcomes are not good. If you compare
22:08
Speaker 6: British health outcomes with other countries, I don't think the
22:11
Speaker 6: American system is anything to aspire to. But if you
22:15
Speaker 6: look at countries Germany, if you look at countries like Germany, France, Japan,
22:23
Speaker 6: they managed to achieve better outcomes with similar levels of funding.
22:28
Speaker 6: So I think everybody in Britain recognizes that it's not
22:32
Speaker 6: working as it's currently constituted. But it is such a
22:37
Speaker 6: big and deep issue to resolve.
22:39
Speaker 2: It really is.
22:40
Speaker 5: Joe, remind me to tell you my NHS horror story
22:44
Speaker 5: later on. Everyone has one On the plus side. It's free,
22:49
Speaker 5: all right. You know, I want to go back.
22:50
Speaker 2: To cost you. It costs you in other ways?
22:53
Speaker 5: True, say true, I want to go back to something
22:56
Speaker 5: you said about the economic orthodoxy leaning towards Kingism. Why
23:01
Speaker 5: do you think that is, Like, why is that the
23:03
Speaker 5: dominant economic policy framework at the moment, given that, as
23:08
Speaker 5: you keep pointing out, you know, a lot of people
23:10
Speaker 5: would argue that it hasn't actually yielded good outcomes for
23:14
Speaker 5: the developed world.
23:15
Speaker 6: In the eighties, we had some very successful supply side policies,
23:20
Speaker 6: both Thatcher and Reagan. Increased economic growth, increased the strength
23:24
Speaker 6: of our respective economies, and when the Soviet Union collapsed,
23:29
Speaker 6: I think we all thought free market capitalism had won
23:33
Speaker 6: low taxes, restrained spending, supply side economics, and I think
23:40
Speaker 6: people in favor of those policies took their foot off
23:44
Speaker 6: the pedal and that allowed more left wing economics to
23:51
Speaker 6: gain traction. And since then, I think we've seen it
23:55
Speaker 6: in universities, in the Treasury, in the Bank of England,
24:00
Speaker 6: but the Knesian economics has become much more prevalent. And
24:09
Speaker 6: whether it's the Office of Budget Responsibility or the CBO,
24:14
Speaker 6: they're looking at economics through a Knesian lens, and I
24:17
Speaker 6: think it is a big question about how on Earth,
24:20
Speaker 6: after seeing the success of those policies and now seeing
24:24
Speaker 6: the failure of Knesian policies, anyone could possibly think these
24:29
Speaker 6: policies are right. But they proved very hard to shift.
24:32
Speaker 6: And I think the left of politics have been very
24:34
Speaker 6: successful at capturing institutions. I think they've captured large parts
24:40
Speaker 6: of the bureaucracy, the universities, large parts of the media.
24:45
Speaker 6: There was in Britain. There has not just talking about
24:50
Speaker 6: these the events of twenty twenty two. There's not been
24:54
Speaker 6: real analysis of what happened and what the Bank of
24:57
Speaker 6: England did and how the institutions behaved.
25:02
Speaker 2: It's something that is not talked about.
25:04
Speaker 6: And I think the level of economic literacy in the
25:08
Speaker 6: media has also got lower, and certainly British politics just
25:12
Speaker 6: gets reported as a pantomime rather than an analysis.
25:16
Speaker 2: Of the issues.
25:18
Speaker 4: There's much you say about the media the way reporting
25:21
Speaker 4: is done that I probably am quite sympathetic with. Actually,
25:25
Speaker 4: would you ever join reform if the Conservatives can't pass
25:28
Speaker 4: modest slowdowns in the pace of welfare increases, if you
25:32
Speaker 4: know labor obviously hesitated issues, would you join reform.
25:37
Speaker 6: I'm not really thinking about party politics at the moment
25:40
Speaker 6: because my whole experience of being in government, and I
25:43
Speaker 6: was a government minister for ten years before I became
25:46
Speaker 6: Prime Minister, was that the power was not in the
25:50
Speaker 6: hands of the politicians. The power is in the hands
25:53
Speaker 6: of the bureaucrats. So even if Nigel Frage gets elected
25:57
Speaker 6: in twenty twenty nine, and currently he's the bookie favorite
26:00
Speaker 6: to get elected, if the bureaucracy isn't changed, if there
26:06
Speaker 6: isn't fundamental change to the way Britain is run, nothing
26:09
Speaker 6: will alter I mean a lot of them.
26:11
Speaker 4: Presumably presumably a breakup of the I mean right, Like
26:15
Speaker 4: that's the idea, Right, There's no prospect of breaking up
26:17
Speaker 4: the bureaucracy unless there's like genuinely something new that happens politically.
26:22
Speaker 4: Like that would be their argument, right, that of brand
26:24
Speaker 4: new party taking power is the only way that there
26:26
Speaker 4: could be some sort of deep institutional shakeup.
26:29
Speaker 6: Yes, in some ways that's true or could be true.
26:32
Speaker 6: There's no reason why the Conservative Party couldn't do a
26:35
Speaker 6: deep institutional shakeup. But the Conservative Party has to acknowledge
26:39
Speaker 6: what went wrong for fourteen years. You know why didn't
26:42
Speaker 6: we solve the immigration problem, Why didn't we solve the
26:45
Speaker 6: growth problem? Why didn't we solve things like the free
26:48
Speaker 6: speech problem? The answer is we didn't reverse the institutional changes.
26:53
Speaker 6: Tony Blair mate and I talked about how he made
26:56
Speaker 6: the Bank of England unaccountable. He also made the judiciary
27:00
Speaker 6: unaccountable with things like the Human Rights Act and the
27:03
Speaker 6: Constitutional Reform Act. So until the Conservatives acknowledge that that
27:07
Speaker 6: is why we failed to deliver an office, that is
27:12
Speaker 6: true about the Conservative Party. But if you look at
27:15
Speaker 6: the two Trump administrations, Trump one and Trump two, in
27:19
Speaker 6: Trump one, there was less recognition of the institutional change
27:27
Speaker 6: that was required in the US, and we're now seeing
27:30
Speaker 6: more of that from Trump. So my point is, whoever
27:33
Speaker 6: is in office in twenty twenty nine needs to understand
27:37
Speaker 6: that the British state needs to be fundamentally shaken up,
27:42
Speaker 6: otherwise nothing is going to happen. And I make that
27:45
Speaker 6: argument to all parties. Interestingly, there are even people in
27:48
Speaker 6: the Labor Party backbench MP's who were saying the Bank
27:52
Speaker 6: of England's independence needs to be removed. They're saying get
27:56
Speaker 6: rid of the Office of Budget Responsibility because they can
27:58
Speaker 6: see thee of policies they want pursued and not possible
28:03
Speaker 6: with the current setup.
28:04
Speaker 5: Since we're talking political parties, and on this note, you
28:08
Speaker 5: know there maybe there is some consensus on specific economic policies,
28:12
Speaker 5: as you point out, but we've had this back and
28:15
Speaker 5: forth between Conservatives and Labor for many many years now.
28:19
Speaker 5: How do you actually go about building consensus around economic policy,
28:24
Speaker 5: especially at a time when you know people would describe
28:28
Speaker 5: our current environment as relatively turbulent and guilt yields are
28:32
Speaker 5: where they are.
28:33
Speaker 6: I would say there's a bad economic consensus between Labor
28:36
Speaker 6: and the Conservatives at present, which is nobody is saying,
28:41
Speaker 6: apart from me a few others, nobody is saying that
28:45
Speaker 6: the institutions need to change. The Conservative Party are also
28:49
Speaker 6: wrapping themselves in. We need to respect the Independent Bank
28:53
Speaker 6: of England. We need to listen to the Office of
28:55
Speaker 6: Budget Responsibility. They're not prepared to take on the economic establishment.
29:01
Speaker 6: Neither are the Labor Party, and we're in a situation
29:06
Speaker 6: where the policies these institutions believe in are failing, and
29:14
Speaker 6: they're manifestly failing. Guilt rates are now much higher than
29:17
Speaker 6: they were back in twenty twenty two. Unemployment is up,
29:23
Speaker 6: our energy prices are the highest in the world, and
29:25
Speaker 6: the industry is closing down. These policies are manifestly failing,
29:30
Speaker 6: yet nobody is challenging the fundamentals of the economic institutions.
29:37
Speaker 4: You know, I'm glad you brought up free speech because
29:39
Speaker 4: I'm interested in that as well. And of course you know,
29:43
Speaker 4: again in the West, I think free speech, liberal speech
29:46
Speaker 4: norms are good, and so I worry about when I
29:48
Speaker 4: see them failing in various countries or friends and neighbors.
29:53
Speaker 4: Palestine Action seems like a bunch of like crusty old hippies,
29:56
Speaker 4: And I know they defaced a plane, but they're as
30:00
Speaker 4: a terrorist group in your country. People can get arrested
30:03
Speaker 4: even just for saying support them, And I think they're
30:05
Speaker 4: like a terrorist group basically, like on the same level
30:08
Speaker 4: of as like isis, which I think most people take. Yes,
30:10
Speaker 4: that is a genuine terrorist group, like what is going
30:13
Speaker 4: on there?
30:13
Speaker 6: Well, they did attack a military base, and they are
30:17
Speaker 6: advocating for terrorism in the UK.
30:21
Speaker 4: They do face a plane and then also people get
30:24
Speaker 4: arrested or in trouble for saying that they support them.
30:27
Speaker 6: They are clearly a problematic organization and there are lots
30:31
Speaker 6: of organizations in Britain that are allowed in the UK
30:35
Speaker 6: that aren't actually allowed in many Arab countries. So I
30:38
Speaker 6: think it's right that we crack down on these organizations.
30:42
Speaker 6: I do think when people you know, I am a
30:46
Speaker 6: pro free speech person. I'd love to have the First
30:49
Speaker 6: Amendment here in Britain. I support both people I agree
30:54
Speaker 6: with and people I don't agree with having a lot
30:57
Speaker 6: more free speech. And it is a travis that we've
31:00
Speaker 6: just seen Lucy Connley released from jail, who put out
31:03
Speaker 6: a tweet, deleted it four hours later and was sentenced
31:07
Speaker 6: to thirty one months in prison.
31:08
Speaker 2: Ye, that is absolutely ludicrous and I.
31:10
Speaker 6: Think we've become an international laughing stock. And it is
31:14
Speaker 6: an attempt and Kirs Starmer is very clear about this.
31:17
Speaker 6: It is an attempt by the authorities to suppress what
31:22
Speaker 6: people are talking about. And I think that's a very
31:24
Speaker 6: dangerous thing for a society, for a society to go down.
31:29
Speaker 4: All of these things really worry me. In the Lucy
31:32
Speaker 4: Connolly example, so she tweeted and I understand that she
31:36
Speaker 4: deleted it, but she tweeted about setting a hotel on fire.
31:39
Speaker 4: I mean that is arguably a call to violent action, Like,
31:42
Speaker 4: how would that be different? Would you feel the same
31:44
Speaker 4: way if someone said, look, you know, we should set
31:45
Speaker 4: a synagogue on fire? Is that free speech?
31:48
Speaker 2: Well?
31:48
Speaker 6: I think what she said would not have been deemed
31:52
Speaker 6: a violation in the US because it wasn't and I
31:55
Speaker 6: don't believe she was talking about a specific you go
31:58
Speaker 6: out and do this now, it was a general statement.
32:01
Speaker 6: It was obviously a terrible thing to say, and she
32:04
Speaker 6: has said sorry for that. I think there's a question
32:07
Speaker 6: about whether or not in the US that would have
32:09
Speaker 6: even been a crime at all, and even if it
32:11
Speaker 6: is a crime, whether it merits a thirty one month
32:14
Speaker 6: prison sentence. When we have people caught with child pornography
32:19
Speaker 6: being let off with no jail time at all. You
32:22
Speaker 6: probably heard the expression two tier Britain. But what is
32:26
Speaker 6: happening is people are being let out very early for
32:29
Speaker 6: crimes like child rape and yet put in prison for
32:34
Speaker 6: things that they write on Twitter. And those are two
32:36
Speaker 6: different categories.
32:37
Speaker 2: In my opinion.
32:39
Speaker 5: You mentioned the First Amendment just then, how would you
32:41
Speaker 5: reform I guess speech rights in the UK if you
32:45
Speaker 5: were in power again.
32:48
Speaker 6: We came up with free speech, freedom of the press
32:50
Speaker 6: back in sixteen ninety five, and it was a historic
32:54
Speaker 6: British liberty. We had the Bill of Rights of course
32:57
Speaker 6: sixty to eighty nine, which then the United States built
33:02
Speaker 6: on that with your Bill of Rights and so on.
33:04
Speaker 6: So these liberties are there in the British Constitution. The
33:07
Speaker 6: problem is all of the laws that have been passed since,
33:11
Speaker 6: most notably the Online Safety Act. So what we need
33:14
Speaker 6: to do is restore Britain's historic liberties with a great
33:19
Speaker 6: restoration bill that sweeps away all of this legislation that
33:25
Speaker 6: has tied the country and knots. And I've talked about
33:29
Speaker 6: our problematic institutions, the problems with the judiciary, the problems
33:34
Speaker 6: with free speech. This is all down to very poor
33:37
Speaker 6: quality legislation that is essentially handed power that used to
33:41
Speaker 6: sit in the hands of the individual British citizen or
33:45
Speaker 6: the British Parliament. It's handed those power to unelected bureaucrats.
34:05
Speaker 4: Basically, my entire professional career, your party has been in
34:09
Speaker 4: power except for you know, the last ten minutes or
34:12
Speaker 4: so in Labor and Cure Star Mari.
34:14
Speaker 2: Doesn't feel like ten minutes here.
34:16
Speaker 4: Maybe it just feels like it over here because it
34:18
Speaker 4: feels like a lot of the rot. You described the
34:22
Speaker 4: rot that you perceive in your country. Almost so much
34:24
Speaker 4: of it seems to have taken place under Conservative government.
34:29
Speaker 7: Why is that?
34:29
Speaker 4: And why would anyone, you know, and they're thinking about
34:31
Speaker 4: the next election, why would anyone think that if there's
34:35
Speaker 4: so much route was allowed to happen under the Tories,
34:37
Speaker 4: that the Tories should be given another chance in power.
34:41
Speaker 6: So I think the rot has sort of built up
34:43
Speaker 6: over time. So I talked about the development of the bureaucracy.
34:48
Speaker 6: You had the Atlet government which socialized land, which created
34:52
Speaker 6: the NHS, which created the welfare state. A lot of
34:55
Speaker 6: our problems go back to that government. But what was
34:58
Speaker 6: very important about the Blair government is this taking power
35:05
Speaker 6: that was in the hands of Parliament and putting it
35:08
Speaker 6: in the hands of unelected bodies, bureaucracies, the Bank of England,
35:14
Speaker 6: the Judicial Appointments Commission, all of this plethora of people
35:19
Speaker 6: offcom who are now making the decisions about free speech.
35:22
Speaker 6: These pleasure of people who have not been elected now
35:25
Speaker 6: de facto run our country. And the big mistake the
35:28
Speaker 6: Conservative Party made was not reversing that. And this was
35:32
Speaker 6: because at the time David Cameron said he wanted to
35:35
Speaker 6: be the heir to Blair, you know, who wanted to
35:38
Speaker 6: be fashionable. The Conservatives want to be modern. But I
35:40
Speaker 6: think it was a huge error and the Conservative Party
35:45
Speaker 6: lost its soul. That's what happened in the pursuit of power,
35:48
Speaker 6: in the pursuit of trying to be modern, the Conservative
35:51
Speaker 6: Party lost its soul. And I think it's an open
35:53
Speaker 6: question about whether or not the Conservative Party can get
35:58
Speaker 6: its sold back or be replaced. But certainly you know
36:02
Speaker 6: where we are now. Not enough people are saying what
36:08
Speaker 6: really went wrong over those fourteen years, but the Conservative
36:13
Speaker 6: Party failed to take on the bureaucracy. These were not
36:17
Speaker 6: the Conservative Party's policies. They were just policies that we
36:21
Speaker 6: didn't object to.
36:23
Speaker 5: Related to Joe's point, when you think back to certain
36:29
Speaker 5: moments in Britain's economic history, so for instance Brexit, the
36:33
Speaker 5: argument then was that if we get rid of all
36:36
Speaker 5: this EU regulation, the UK economy will be free to
36:40
Speaker 5: flourish and prosper. And I think in the nineteen seventies,
36:43
Speaker 5: you know, Anthony Barber instituted some tax cuts as well,
36:46
Speaker 5: right before inflation hit I think twenty five percent or
36:49
Speaker 5: something like that. Why should the UK population have confidence
36:55
Speaker 5: that a growth focused economic policy, one that features you know,
37:00
Speaker 5: big tax cuts and deregulation will actually drive economic growth.
37:05
Speaker 6: Well, I think the important thing to note about about
37:07
Speaker 6: Brexit is we haven't got rid of any of those
37:10
Speaker 6: European laws. They're still on the British statute books. So
37:15
Speaker 6: laws that protect bats and news still on the statute books.
37:19
Speaker 6: Laws that tell you how your can opener should work
37:23
Speaker 6: are still on the statute books. We still have the
37:25
Speaker 6: working time Directive, we still got all of those laws.
37:29
Speaker 2: So this goes.
37:31
Speaker 6: Back to the problem you were talking about the Conservative Party.
37:33
Speaker 6: The Conservative Party is fundamentally split between people who want
37:38
Speaker 6: Britain to be you know, Singapore on TEMs, you know,
37:42
Speaker 6: a free trading, go getting country, and people who want
37:48
Speaker 6: it to be part of Europe and want to be
37:50
Speaker 6: part of the European Lots of labor, laws protecting people,
37:56
Speaker 6: environmental red tape, all of that stuff. And that issue
37:59
Speaker 6: was never resolve within the Conservative Party, which is why
38:03
Speaker 6: you know you saw prime ministers being deposed, why you
38:06
Speaker 6: have the debate within the Conservative Party. And I think
38:10
Speaker 6: if you look at the Brexit vote in Britain, fifty
38:12
Speaker 6: two percent vated for Brexit, forty eight percent didn't, so
38:15
Speaker 6: Brexit was not delivered as the public intended. I mean
38:20
Speaker 6: the biggest case in point is of course immigration, where
38:25
Speaker 6: the Boris Johnson government failed to invact allowed immigration to
38:30
Speaker 6: increase huge amounts, which has had a very negative effect.
38:35
Speaker 4: You know, since you mentioned party politics in the UK
38:38
Speaker 4: and the split within the Conservative Party, again ignorant question here.
38:42
Speaker 4: I do get the impression that the Conservatives just like
38:45
Speaker 4: all seemed to hate each other more than the members
38:47
Speaker 4: of the Labor Party and the nineteen twenty two Committee,
38:50
Speaker 4: which I still like have to Wikipedia every once in
38:52
Speaker 4: a while to remember what that is. And they're always
38:54
Speaker 4: like scheming against each other. Is there like a deeper
38:57
Speaker 4: culture of just internal hate in the conservation of party than.
39:00
Speaker 2: The Liberty I would say.
39:02
Speaker 6: I would say the problems of the Conservative Party go
39:04
Speaker 6: back to where Margaret Thatcher was defenestrated and the sort
39:08
Speaker 6: of Tory wets and the you know, the Thatch rights.
39:13
Speaker 6: But if you compare it to American politics, you know,
39:17
Speaker 6: if you look at the split between people like Trump
39:20
Speaker 6: and people like Dick Cheney or the sort of Bush Republicans,
39:24
Speaker 6: it's a very similar ideological divide. But what is different
39:29
Speaker 6: in America is that Trump has basically taken over the
39:33
Speaker 6: Republican Party, whereas in Britain the kind of the left
39:38
Speaker 6: of the Conservative Party are still in control of it.
39:41
Speaker 6: That's the difference. Well, there is going to be a
39:44
Speaker 6: political realignment, and you can see it in America. You know,
39:47
Speaker 6: Republicans are now getting votes from low income people, people
39:52
Speaker 6: in rural areas. The Democrats are dominating in the sort
39:56
Speaker 6: of liberal cities. That's exactly what's going to happen in
39:59
Speaker 6: Britain the next election. It's just the Conservative Party hasn't
40:03
Speaker 6: really got its head around which of those two things.
40:06
Speaker 2: It is.
40:07
Speaker 5: So one of the things that seems to be happening
40:10
Speaker 5: in many developed countries at the moment is everyone wants
40:13
Speaker 5: to boost their own domestic manufacturing sector. And I believe
40:18
Speaker 5: you've spoken about the need for this in the UK before.
40:21
Speaker 5: When I think about the British economy, I usually think
40:25
Speaker 5: there's a pretty big monopoly when it comes to let's
40:28
Speaker 5: call it intellectual.
40:29
Speaker 4: Jobs, services, finance office, journalism and journalism.
40:33
Speaker 5: Yeah, that kind of thing. But when I think about
40:36
Speaker 5: British manufacturing, you know, it's it's an island with a
40:40
Speaker 5: relatively small population compared to some other places in the
40:44
Speaker 5: world and high taxes. As you've been pointing out, what
40:48
Speaker 5: would make Britain actually competitive when it comes to manufacturing
40:52
Speaker 5: at a time when everyone seems out to compete in
40:56
Speaker 5: the same field.
40:57
Speaker 6: Well, the number one thing is energy prices to come down.
41:01
Speaker 2: They're the highest in the world. They're four times the
41:03
Speaker 2: United States.
41:04
Speaker 6: If you are a car manufacturer, steel manufacturer, it's incredibly
41:09
Speaker 6: hard to compete, so that has to change. We have
41:14
Speaker 6: to make it much easier to build things in Britain.
41:16
Speaker 6: If you want to build a new factory, it takes
41:17
Speaker 6: far too long. So there are all of those sort
41:20
Speaker 6: of supply side policies.
41:22
Speaker 2: That need to change.
41:24
Speaker 6: I think Britain we de industrialized pretty much earlier than
41:28
Speaker 6: any other country. You can see the same thing now
41:30
Speaker 6: happening in Germany and continental Europe. I think it's important
41:34
Speaker 6: to do all you can to maintain a manufacturing base
41:38
Speaker 6: because a lot of industries like AI for example, requires
41:42
Speaker 6: high levels of energy. It requires other industries that it
41:47
Speaker 6: can sort of feed off if you like, So if
41:50
Speaker 6: you just become I talked about Singapore and seams earlier,
41:54
Speaker 6: but Singapore's a relatively small countries so it can afford
41:57
Speaker 6: to be a trading hub. Britain is a country of
41:59
Speaker 6: seventy million people. I think you can't rely on services alone.
42:03
Speaker 6: I think you have to produce the full gamut. I'm
42:06
Speaker 6: very worried that we're losing our last steel blast furnace.
42:09
Speaker 6: What we learned during COVID is you are seriously up
42:13
Speaker 6: against it if you are relying on China for pharmaceuticals.
42:17
Speaker 6: These are the types of industry that Britain.
42:20
Speaker 2: Can excel in and does excel in.
42:22
Speaker 6: I mean, our biggest manufactured export to the United States
42:26
Speaker 6: is cars. We do produce good, high end cars that
42:29
Speaker 6: people want to buy. So there are opportunities for British manufacturing.
42:34
Speaker 6: It's just been made very, very hard by high energy
42:38
Speaker 6: prices and our planning rules.
42:41
Speaker 4: I take your point about certainly about energy prices and
42:44
Speaker 4: planning rules. Many people are having the same discussions here.
42:47
Speaker 4: To my mind, and Tracy mentioned the fairly small population
42:51
Speaker 4: scale is incredibly well, that's small. I was seventeen years okay, okay,
42:55
Speaker 4: Well you know China has, however, millions just in the
42:59
Speaker 4: manufacturer But yes, I take your point, not that small.
43:02
Speaker 4: But did Brexit harm scale capacity? Because to my mind,
43:05
Speaker 4: if we're thinking about, Okay, mass production at efficient level,
43:09
Speaker 4: so that it's like genuinely competitive, so that it's not
43:11
Speaker 4: some sort of you know, government subsidized albatross that just
43:15
Speaker 4: exists as a make work industry. It strikes me that
43:19
Speaker 4: sheer scale of market is very important, and it feels
43:22
Speaker 4: to me like Brexit has shrunked the scale of that
43:25
Speaker 4: market for.
43:26
Speaker 6: These I mean, there's no evidence that exports to Europe
43:29
Speaker 6: have gone down after Brexit, and in fact, you know,
43:32
Speaker 6: the different trade deal we got from the EU presents
43:37
Speaker 6: the UK with some opportunities because we have lower tariffs
43:40
Speaker 6: in some areas with the United States than the EU does.
43:43
Speaker 6: But I think the other big factory in manufacturing is
43:46
Speaker 6: so much of it is becoming automated that it makes
43:50
Speaker 6: economic sense for goods to be produced close to market
43:53
Speaker 6: because you're no longer getting the advantage of a massive
43:56
Speaker 6: labor cost differential.
43:58
Speaker 2: So I think it's it's just a nat.
44:00
Speaker 6: Progression of modern economies that more manufacturing is going to
44:03
Speaker 6: be done closer to home when you've got a much
44:06
Speaker 6: more automated process.
44:08
Speaker 5: Since we're talking trade and exports, the UK was one
44:12
Speaker 5: of the first countries I think to sign an agreement
44:14
Speaker 5: with the Trump administration on tariffs. Would you have signed
44:18
Speaker 5: that so quickly or would you have perhaps a pushed
44:21
Speaker 5: back a little bit more, given you know, your emphasis
44:24
Speaker 5: on boosting manufacturing domestically within the UK.
44:27
Speaker 6: I did actually praise kirsed Arma for the deal at
44:31
Speaker 6: the time. I was one of the few people to
44:33
Speaker 6: praise it. And I said, because I've got experience in
44:36
Speaker 6: negotiating with the first Trump administration bob Leiheiser, so I
44:40
Speaker 6: know how difficult it is. And I thought the UK
44:43
Speaker 6: got a good deal. And so it has proven that
44:46
Speaker 6: the EU has actually got a worse deal than the
44:49
Speaker 6: UK got.
44:49
Speaker 2: So I thought he was right. He was right to
44:52
Speaker 2: do that. And I want to see, well, we are
44:55
Speaker 2: paying lower tariffs than the EU.
44:57
Speaker 5: Is, so just on a relative compared to on an
45:01
Speaker 5: absolute basis, you're still paying terrorists.
45:05
Speaker 6: Yes, But what Trump has done with the with all
45:08
Speaker 6: of his trade deals around the world is essentially reset
45:12
Speaker 6: the World Trade Organization. I think it was one of
45:15
Speaker 6: the biggest errors that of American foreign policy when Clinton
45:20
Speaker 6: allowed China to join the World Trade Organization on developing
45:24
Speaker 6: country terms, and that has had in my view, it's
45:29
Speaker 6: helped boost China's economy. China is an autocratic, authoritarian regime.
45:33
Speaker 6: I think that was a disastrous policy. What Trump is
45:37
Speaker 6: trying to do is reset that, and that has inevitable
45:42
Speaker 6: consequences for all of America's trading partners. But knowing what
45:46
Speaker 6: I do about the Trump administration, I thought the deal
45:49
Speaker 6: kissed Arma Gott was a good deal.
45:52
Speaker 4: Potentially. One thing that could.
45:54
Speaker 2: I don't praise him very.
45:55
Speaker 4: Often praise one thing that theoretically could be done to
46:01
Speaker 4: lower energy prices in many places would be a resolution
46:06
Speaker 4: of the war in Ukraine. And I'm curious when you
46:09
Speaker 4: look at either Trump's pursuits or what Keir Starmer has said,
46:13
Speaker 4: do you see other paths were you the prime minister, now,
46:15
Speaker 4: what would you be pushing for in that particular conflict.
46:19
Speaker 6: Well, I want what I want out of that conflict
46:22
Speaker 6: is I want Putin not to have been rewarded for
46:27
Speaker 6: his appalling invasion of Ukraine. So what we don't want
46:31
Speaker 6: is him, or indeed chijingping to get the signal from
46:34
Speaker 6: the resolution of the Ukraine conflict that was this invasion
46:40
Speaker 6: was somehow justified or worth it. I want Russia to
46:45
Speaker 6: be contained because I still believe that they have expanded
46:51
Speaker 6: his instincts.
46:53
Speaker 5: Just going back to the Mini Budget for a second,
46:56
Speaker 5: one of the components of that was government support to
46:59
Speaker 5: offset higher energy prices, and that was also one of
47:02
Speaker 5: the things that seemed to spook markets, this idea that
47:05
Speaker 5: the UK government would be fiscally on the hook to
47:09
Speaker 5: compensate for astronomical energy prices at the time that seemed
47:13
Speaker 5: to be expanding at an enormous rate. If you were
47:16
Speaker 5: going to do it all over again, would you have
47:20
Speaker 5: possibly included some sort of mechanism to maybe limit the
47:23
Speaker 5: cost or avoid the sense that the UK was basically
47:28
Speaker 5: bailing out its population in some way.
47:32
Speaker 6: It's important to note that the Energy package was one
47:35
Speaker 6: thing that wasn't reversed, so that was not the policy.
47:40
Speaker 6: The policy that I was forced to was reversed, and
47:43
Speaker 6: that was made pretty clear to me pretty much. Good
47:46
Speaker 6: three threats was the corporation tax increase, the energy policy
47:51
Speaker 6: remained in place. The energy policy remained in place. And
47:55
Speaker 6: the point about the energy policy was it was not
47:58
Speaker 6: a subsidies that happened automatically. It was only when energy
48:03
Speaker 6: prices reached a certain level.
48:05
Speaker 2: And I believed it was right.
48:07
Speaker 6: For the government to do that because the government had
48:09
Speaker 6: failed to ensure adequately cheap energy was supplied. But what
48:15
Speaker 6: I was doing in tandem with that policy of essentially
48:20
Speaker 6: ensuring people against very high energy prices was getting on
48:25
Speaker 6: with fracking licensing new north sea gas reserves so the
48:32
Speaker 6: prices would never.
48:32
Speaker 2: Get that high.
48:34
Speaker 6: So it was an insurance against prices going high to
48:37
Speaker 6: give consumers and businesses confidence to invest whilst we sorted
48:42
Speaker 6: out the supply that had been so badly failed by
48:46
Speaker 6: previous governments. That was the intention of the policy, and
48:49
Speaker 6: as I've said, the policy wasn't reversed by my successor.
48:54
Speaker 6: The policy that was reversed was getting on with the fracking,
48:57
Speaker 6: so you had the energy insurance but not the fracking policy.
49:01
Speaker 6: Those policies were designed in tandem so that we can
49:04
Speaker 6: make sure that businesses in the country weren't spooked by
49:09
Speaker 6: the threats of having a sky high energy prices. And
49:13
Speaker 6: by the way, if the energy prices had got that high,
49:16
Speaker 6: there would have had to be some kind of package
49:18
Speaker 6: to deal with them. Anyway, what I was doing is
49:21
Speaker 6: giving people notice so they had the confidence to invest.
49:25
Speaker 6: The energy package was actually announced because very sadly, Her
49:28
Speaker 6: Majesty the Queen died. It was announced a few weeks beforehand.
49:32
Speaker 6: It wasn't announced at the time of the mini budget.
49:35
Speaker 6: The thing that the Economic Establishment really objected to in
49:39
Speaker 6: the mini budget was the taxes. It was that, you know,
49:42
Speaker 6: it was not raising corporation tax. That's what they didn't like.
49:47
Speaker 4: I just have one last question. You know, Tracy, that
49:49
Speaker 4: I work in public though now as public is, having
49:52
Speaker 4: been a Prime Minister.
49:53
Speaker 2: Of the UK.
49:55
Speaker 4: We live at this age where people, you know, stories
49:58
Speaker 4: go insane, and people love to see someone publicly humiliated.
50:02
Speaker 4: And it just seems to me that the UK Press
50:04
Speaker 4: in particular is a bunch of jackals. But that's just
50:06
Speaker 4: my impression over here, even relative to the pressure.
50:09
Speaker 6: So it's funny when Americans come over and they don't
50:12
Speaker 6: realize what they're like, and I'm like, you ain't seen
50:14
Speaker 6: nothing until you dealt with the UK press, and they
50:17
Speaker 6: always go, Liz, you were right, You're right about these people.
50:20
Speaker 4: I just see in the headlines. I don't know, it
50:22
Speaker 4: seems obvious to me. What's your lesson takeaway? How do
50:25
Speaker 4: you move past a period of one's life like that?
50:29
Speaker 2: Well, I didn't really see it like that.
50:31
Speaker 6: I just see that the British press needs to change,
50:34
Speaker 6: and I'm a big support of independent media. I think
50:38
Speaker 6: the British press is coverage of economics is appalling. I
50:41
Speaker 6: think their coverage of politics is skin deep. I don't
50:45
Speaker 6: think they've done anything to analyze the sort of failings
50:48
Speaker 6: of the British state, and I think there won't be serious.
50:55
Speaker 6: We don't just need to change the bureaucracy in this country.
50:57
Speaker 6: We need to deal and change the press. And people
51:01
Speaker 6: are now turning off the BBC. You know, they're turning
51:04
Speaker 6: off the mainstream media because they can see.
51:09
Speaker 2: That the truth ism being told.
51:11
Speaker 6: And there used to be a golden age I guess
51:14
Speaker 6: in journalism where people cared about the truth. I'm afraid
51:16
Speaker 6: they don't now. Friends of mine who are journalists just
51:19
Speaker 6: say their editorial conference is about how many clicks their
51:21
Speaker 6: article gets, and it's you know, I just think that's pathetic.
51:26
Speaker 5: Well, these are the tensions of being a journalist in
51:29
Speaker 5: modern times. But I have one more question. It's just
51:31
Speaker 5: going back to some technical aspects I guess of economic policy.
51:36
Speaker 5: So you've criticized the OBR for you know, it's forecasts
51:41
Speaker 5: that end up influencing or you know, perhaps even dictating
51:45
Speaker 5: government policy. I guess my question is, you know, when
51:49
Speaker 5: you think about a pro growth economic agenda that also
51:54
Speaker 5: relies on forecasts about future growth. And when we talk
51:58
Speaker 5: to Stephen Myron from the Trump administration earlier this year,
52:02
Speaker 5: that was one takeaway from our conversation was how much
52:05
Speaker 5: the Trump administration was really betting on economic growth picking
52:09
Speaker 5: up in order to offset some of the stuff.
52:12
Speaker 2: It was the only strategy. It is the only strategy.
52:15
Speaker 5: But why should people have confidence in the growth forecast
52:19
Speaker 5: but not have confidence in you know, OBR forecasts.
52:23
Speaker 6: But the point about the OBR, and this has been
52:26
Speaker 6: proven by history, is that they overestimate how much raising
52:32
Speaker 6: taxes will bring in in revenue because they don't take
52:35
Speaker 6: the full account of the depression and economic activity. And
52:39
Speaker 6: they underestimate the impact of supply side reforms like planning
52:45
Speaker 6: or fracking or whatever else.
52:47
Speaker 2: And there are two answers.
52:51
Speaker 6: This one is there are better economists out there, and
52:57
Speaker 6: I think the government, as was the case prior to
53:00
Speaker 6: twenty ten, the government should have the ability to hire
53:03
Speaker 6: the economists that you know, they believe are right. I
53:08
Speaker 6: don't think my homework should be marked by somebody doesn't
53:11
Speaker 6: agree with me, which is what was happening.
53:13
Speaker 2: I think that's just wrong.
53:14
Speaker 6: If people don't like what I'm saying and they don't
53:17
Speaker 6: like the policies, they can vote me out at an election.
53:21
Speaker 6: But I wasn't even allowed to try the policies because
53:24
Speaker 6: the people marking my homework said no. I mean, that's
53:27
Speaker 6: the bottom line. But the second thing is I think
53:30
Speaker 6: we're far too reliant on forecasts. You can't predict the future,
53:35
Speaker 6: and trying to say which is what the UK system
53:39
Speaker 6: does that five years out we know exactly what the
53:42
Speaker 6: debt is going to be is rubbish. You know, we
53:44
Speaker 6: don't know what if Donald Trump imposes huge tariffs, what
53:48
Speaker 6: if the UK strikes a trade deal with India? You
53:52
Speaker 6: know what if there's a discovery of a new technology
53:56
Speaker 6: that totally transform You don't know what the future is
53:58
Speaker 6: going to look like. And my economics is based on
54:02
Speaker 6: first principles. I know that if you put up taxes
54:04
Speaker 6: too high, people won't go out to work anymore. I
54:08
Speaker 6: know that if you make energy prices cheaper, businesses are
54:11
Speaker 6: more likely to invest in Britain. The problem with these forecasts,
54:15
Speaker 6: and this is another criticism of British economic media. The
54:19
Speaker 6: problem with forecasts, is that people become focused on whether
54:23
Speaker 6: the numbers right in the forecast rather than the fundamental
54:27
Speaker 6: principles of what makes the successful economy.
54:30
Speaker 4: This trust so great to chat with you, someone we
54:33
Speaker 4: wanted to have on the show for a very long time.
54:35
Speaker 3: Time.
54:35
Speaker 4: Great that we've made it happen, and I'm appreciate.
54:38
Speaker 7: Your coming on as Thank you, Tracy.
54:52
Speaker 4: I'm so glad we finally got to interview Lis Trust.
54:55
Speaker 5: We finally did it. I think it was a good
54:57
Speaker 5: time to do it, actually, because yes, you know, there's
54:59
Speaker 5: a lot of overlap with the Trump and miss station
55:02
Speaker 5: at the moment and what Trusts experienced in twenty twenty two.
55:06
Speaker 4: Yeah, yeah, no, I mean there was a lot that
55:08
Speaker 4: I found to be interesting there, you know what I
55:10
Speaker 4: think Actually, maybe the most interesting thing to me is
55:14
Speaker 4: thinking that, Okay, in the US, we have these multiple
55:16
Speaker 4: branches of government, right, so the President wants something, but
55:19
Speaker 4: Congress is going to veto it or ken veto it,
55:21
Speaker 4: especially if it's a different party in power. Obviously that's
55:23
Speaker 4: not the dynamic of UK with the parliamentary system. And
55:26
Speaker 4: yet even in the parliamentary system, to hear this Trust
55:30
Speaker 4: described the fact that what she describes is even modest
55:33
Speaker 4: cuts to the increase in welfare weren't palatable to the
55:36
Speaker 4: members of her party, let alone the opposition, which of
55:38
Speaker 4: course never going to vote it for, but in her party.
55:41
Speaker 4: I find that to be a very striking comment about
55:44
Speaker 4: the difficulty that you know, electoral democracies have in bringing
55:48
Speaker 4: back cuts.
55:49
Speaker 5: We absolutely The other thing that kind of caught my
55:52
Speaker 5: eye or my ear was when we were talking about tariffs,
55:54
Speaker 5: and you know, Liz said that she had praised the
55:59
Speaker 5: deal that the struck with the Trump administration because it
56:02
Speaker 5: was less than what the EU was paying. And it's
56:05
Speaker 5: interesting to me that like countries seem to be competing
56:09
Speaker 5: with each other, you know, the Trump administration in some
56:11
Speaker 5: respects has been kind of successful in that getting its
56:15
Speaker 5: trade partners to compete with each other for the lowest
56:17
Speaker 5: deal rather than to you know, try to compete on
56:20
Speaker 5: an absolute basis for lower tariffs per se. I thought
56:23
Speaker 5: that was interesting.
56:24
Speaker 4: I also think it's interesting, you know, this sort of
56:27
Speaker 4: I find myself having a lot of sympathy with this.
56:29
Speaker 4: It's sort of like anti democratic aspects of entities like
56:33
Speaker 4: the OBR or in the US, the OMB, and these
56:36
Speaker 4: ideas that Okay, they have one set of assumptions about
56:39
Speaker 4: how policy works, and the idea that like they have
56:44
Speaker 4: a formal role, and you know, there's this there is
56:46
Speaker 4: a certain undemocratic element. I think of these sort of
56:51
Speaker 4: institutions that either they not necessarily with a formal veto,
56:56
Speaker 4: et cetera, that aren't elected. I have sympathy for that opinion.
57:00
Speaker 5: It certainly seems like they can act as an institutional
57:03
Speaker 5: restraint on the government. But some people would argue that
57:06
Speaker 5: maybe that's a good thing, an independent body looking at
57:11
Speaker 5: economic policy and monetary policy.
57:13
Speaker 4: Right, yeah, I mean that's the thing. And look, it's
57:16
Speaker 4: very striking that she said, really she does not accept
57:18
Speaker 4: the premise the Bank of England should be as independent
57:21
Speaker 4: as it currently is, and that the idea is, to
57:23
Speaker 4: your question, folding it back in with the treasury is
57:25
Speaker 4: very striking.
57:26
Speaker 3: Well.
57:26
Speaker 5: Also the line about you know, not wanting to have
57:28
Speaker 5: her homework marked by someone who doesn't believe in it.
57:31
Speaker 5: I'm sure all of us as students would have liked
57:34
Speaker 5: to choose our own teacher who was creating our homework,
57:37
Speaker 5: but we don't get to for obvious reasons.
57:39
Speaker 3: We don't.
57:40
Speaker 2: Shall we leave it there, let's leave it there.
57:41
Speaker 5: This has been another episode of the Authoughts podcast. I'm
57:44
Speaker 5: Tracy Alloway. You can follow me at Tracy Alloway.
57:47
Speaker 4: And I'm Jill Wisenthal. You can follow me at the Stalwart.
57:49
Speaker 4: Follow our guest Liz Trust. She's at Trust Liz. Follow
57:53
Speaker 4: our producers Carmen Rodriguez at Carman armand dash Ol Bennett
57:56
Speaker 4: at dashbod and kill Brooks at kill Brooks. For more
57:59
Speaker 4: odd Laws content, go to Bloomberg dot com slash od
58:01
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58:04
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58:11
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58:13
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