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The Paul Johnson Aftershow · Merryn Talks Money

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  Speaker 1: Welcome to Maren Took's Money the After Show. This is
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  Speaker 1: a show where we comment on and digest the conversation
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  Speaker 1: that you hear in our regular podcast.
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  Speaker 2: I'm Maren Sunset Web.
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  Speaker 1: This week, John Steppick, Senior, a border at Bloomberg and
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  Speaker 1: author of the Daily Money distilled newsletter that is a
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  Speaker 1: must read, by the way, joins me to discuss the
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  Speaker 1: conversation we had with Paul Johnson, director at the Institute
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  Speaker 1: of Fiscal Studies and author of Follow the Money. How
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  Speaker 1: much does Britain cost? The answer of course being a
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  Speaker 1: lot too much or not quite enough, depending on that
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  Speaker 1: where you've said on the political spectrum, John, that was
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  Speaker 1: a fun conversation, wasn't it? And may I say how
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  Speaker 1: wonderful it was to have you in the conversation the
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  Speaker 1: whole way through.
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  Speaker 2: Very helpful. Meant I had to do significantly less work.
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  Speaker 2: Thanks very much.
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  Speaker 3: That's very Katy. You say it was wonderful to be there,
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  Speaker 3: Thank you for having me.
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  Speaker 1: You missed the bit where I said I only liked
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  Speaker 1: having you excited to do let's work.
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  Speaker 2: You're a great compliment acceptor exactly Now, Listen, what.
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  Speaker 1: We learned from Paul was pretty straightforward. It was the
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  Speaker 1: UK is incredibly expensive. It's getting more, much more expensive.
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  Speaker 1: You're going to be a big pile of more taxes.
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  Speaker 1: We could sort it out, I'm paraphrasing here. We could
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  Speaker 1: sort it out by growing, but we don't seem to
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  Speaker 1: be very good at growing anymore. Oh dear, Is that
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  Speaker 1: a reasonable summary of what we talked about?
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  Speaker 3: Yeah, I mean I think it. Poll's great and he's
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  Speaker 3: full of data and fully really interesting points, but he's
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  Speaker 3: at a pressing bloke. Yeah, it's basically just you're going
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  Speaker 3: to have to pay a lot more tax forever, and
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  Speaker 3: your public services are just going to get essentially what.
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  Speaker 1: Well, I mean, it makes sense. You know, we've lost
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  Speaker 1: our peace dividend. And one of the points that he
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  Speaker 1: made that I think is particularly worth focusing on for
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  Speaker 1: everybody is that one of the ways in which we've
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  Speaker 1: managed to up a welfare spending to the extent we have,
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  Speaker 1: and to spend as much more on the NHS, for example,
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  Speaker 1: as we have is because of the feast dividend. Because
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  Speaker 1: we've been seeing our defense spending fall and fall and
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  Speaker 1: fall and fall down to a couple of percentage points.
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  Speaker 1: So you know, a third of what it used to be, and.
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  Speaker 2: That's turning around.
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  Speaker 1: So we're now, for obvious reason, is going to have
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  Speaker 1: to spend more on defense. There's really no way out
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  Speaker 1: of that in this geopolitical environment. And at the same
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  Speaker 1: time we also need to spend more and more on welfare,
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  Speaker 1: on social care, on the NHS because of our aging
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  Speaker 1: population and by the way, our population that is not
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  Speaker 1: growing as fast as anyone expected it to even a
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  Speaker 1: couple of years ago. So it's very hard to see
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  Speaker 1: a way out, particularly with our low growth levels.
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  Speaker 2: And we didn't look particularly.
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  Speaker 1: At the speed of UK's growth during that podcast, but
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  Speaker 1: if you look at between late nineties nineteen ninety eight
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  Speaker 1: two thousand and seven, that period, the UK economy grew
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  Speaker 1: at two and a half percent a year the whole
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  Speaker 1: way through, and since then we've dipped and you know,
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  Speaker 1: one and a half percent is kind of our dream
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  Speaker 1: these days, and that's the problem, and it's all about productivity.
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  Speaker 3: Yeah, and that's I mean, that's a really interesting point
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  Speaker 3: they make there about the peace dividend, because there's arguably
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  Speaker 3: there's an element there that this is all part of
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  Speaker 3: the same kind of turning point now where we're now
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  Speaker 3: going into a higher interest rate kind of era as well,
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  Speaker 3: because the Peace dividend also enabled you know, a massive
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  Speaker 3: flow of extra labor into the world market, and that
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  Speaker 3: helped keep wages down, et cetera, et cetera, helps keep
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  Speaker 3: inflation down. And now that that's all kind of going
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  Speaker 3: into reverse, you've you've got you've get this happening as well.
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  Speaker 3: So yes, so to an ext tent, we kind of
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  Speaker 3: squandered the Peace dividend arguably, which is the other reason
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  Speaker 3: that's kind of probably left as way lower productivity as well,
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  Speaker 3: because we haven't had our you know, our kind of
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  Speaker 3: noses to the grindstone, as it were, because we've been
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  Speaker 3: able to ease off from that point of view and
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  Speaker 3: kind of just enjoy law entry historys and and law
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  Speaker 3: hot doal rates for people to get the stupid ideas
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  Speaker 3: are proved and things like that.
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  Speaker 1: Stupid ideas, John, Honestly, you mean there, yeah, well let's
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  Speaker 1: not go there.
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  Speaker 2: That's not good.
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  Speaker 1: But you know, the key, the key takeaway from when
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  Speaker 1: we talked in the second half of the show, we
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  Speaker 1: talked we tried to move away from the miseries of
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  Speaker 1: taxed and the full on socialization of all risk and
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  Speaker 1: everyone's slightly over enhanced.
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  Speaker 2: Expectations of the state.
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  Speaker 1: We tried to move away from that a little bit
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  Speaker 1: and start talking about how the UK can grow, what
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  Speaker 1: we can do to improve our productivity rates, and that
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  Speaker 1: came straight down to what we we often say this
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  Speaker 1: in finance, don't we simple but not easy?
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  Speaker 4: I mean, we really really, really really do know how
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  Speaker 4: to do it, but we decide not to. I mean
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  Speaker 4: it's uh, you know, so sorting out the planning system,
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  Speaker 4: sorting out the tax system, if we've just described would
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  Speaker 4: be good for growth. We know that investment in sensible
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  Speaker 4: investment in infrastructure is clearly important, and not cutting spending
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  Speaker 4: on further education and vocational education as has happened over
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  Speaker 4: the last fifteen years, also building the roads and airports
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  Speaker 4: and so on. That we need, having a consistent strategy
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  Speaker 4: towards competition and R and D and all those sorts
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  Speaker 4: of things, and free at trade with the European Union.
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  Speaker 4: I mean, all of those things we know would be
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  Speaker 4: good for growth.
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  Speaker 1: And you know, Paul says, we know exactly what we
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  Speaker 1: need to do if we want to improve productivity and
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  Speaker 1: we need to grow. We need political stability, We need
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  Speaker 1: to sort out our tax system, which is just absurd.
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  Speaker 1: We need to have a good look at the cost
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  Speaker 1: of welfare. We need to do something about infrastructure, you know,
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  Speaker 1: build stuff, don't cancel stuff. We need to pull back
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  Speaker 1: on regulation. We need to do something about our education system.
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  Speaker 1: We need to do something in our planning, and of
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  Speaker 1: course we need to return to positive real race of interest.
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  Speaker 1: All these things need to happen if we want to
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  Speaker 1: be the kind of economy that is productive and growing again.
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  Speaker 1: And we had some hints from the Labor Party conference
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  Speaker 1: about some of those things, and we had some hints
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  Speaker 1: in the Conservative Party conference about some of those things.
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  Speaker 1: You know, both sides know that something needs to be
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  Speaker 1: done about the education system to broaden it out, etc.
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  Speaker 1: Both sides know something needs to be done about planning,
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  Speaker 1: although of course only one is planning on building new
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  Speaker 1: cities and ignoring what everyone says about it. So, you know,
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  Speaker 1: we know all those things, but we kind of can't
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  Speaker 1: do them. There's so much leftogy, appathy, obstruction built into
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  Speaker 1: our system that while we know what to do, we
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  Speaker 1: don't want to do it. And that was sort of
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  Speaker 1: slightly the most depressing thing that comes out of talking
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  Speaker 1: to Paul PAULI you're not depressing in person. By the way, Paul,
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  Speaker 1: it's not a depressing person. He just delivers depressing information.
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  Speaker 3: Different we shouldn't shoot the messenger, No, I mean, I
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  Speaker 3: think that is interesting. Nor the fact that there's a
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  Speaker 3: Lackey political cottage or whatever it is or or will.
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  Speaker 3: And I know the people you know, you quite often
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  Speaker 3: get told that well, you get the politicians and the
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  Speaker 3: political parties that you deserve as voters. But I'm not
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  Speaker 3: sure that's entirely fair. I have to say.
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  Speaker 4: I think that.
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  Speaker 3: I mean, one thing I would say that was interesting
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  Speaker 3: about the reaction of the Labor Party conference and the
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  Speaker 3: tone that Labor Party took in making the house building announcement.
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  Speaker 3: They're kind of big front page grabber. Is I think
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  Speaker 3: that shows that the at least the national conversation on
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  Speaker 3: infrastructure and specifically in house building is shifting in the
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  Speaker 3: direction of moving away from you know, theoretically everyone being
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  Speaker 3: an INMBI a kind of not in my back garden
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  Speaker 3: kind of person. And I think that's kind of positive
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  Speaker 3: because it shows that there is that kind of mood
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  Speaker 3: swing towards look, we're kind of fed up, let's get
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  Speaker 3: stuff done. I mean, obviously The issue is then when
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  Speaker 3: you get into the weeds of it, you end up
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  Speaker 3: waiting because it's one thing, so okay, since labor are
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  Speaker 3: saying this, but I was recently talking to somebody about
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  Speaker 3: that whole nutrient neutrality thing which labor blocked, and that's
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  Speaker 3: literally kind of preventing the kind of instant kind of
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  Speaker 3: you know, shovels in the groundwork on something like one
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  Speaker 3: hundred thousand odd houses and a one hundred thousand odd
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  Speaker 3: houses in the grand scheme of how many we we
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  Speaker 3: say we need or want to build is a small amount,
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  Speaker 3: but on an annual basis, it's an awful lot. And
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  Speaker 3: the point is you could start all of them now
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  Speaker 3: if you kind of got rid of this somewhat minor
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  Speaker 3: environmental kind of rule. And that's the problem. You sort
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  Speaker 3: of you get into that and immediately you know, like
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  Speaker 3: most of these regulations were put in place for a
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  Speaker 3: reason and because some pressure group was annoyed about them
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  Speaker 3: in the first place. There's a lot of very small
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  Speaker 3: special interests, and I don't I don't know what it
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  Speaker 3: will take for our politicians to start running raiding rough
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  Speaker 3: short over those special interests. I feel that there's a
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  Speaker 3: real ridiculous level of sensitivity in the part of leaders.
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  Speaker 3: That is incredibly overblown. And I don't I really don't
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  Speaker 3: know where it comes from.
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  Speaker 1: Well, everybody, everybody wants to look like the best person,
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  Speaker 1: and it's easier to do it by you know, approving Well,
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  Speaker 1: you know, some of these pressure groups are very strong,
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  Speaker 1: and the things that they say are very valid. You know,
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  Speaker 1: we must protect this type of animal, that type of animal,
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  Speaker 1: this type environment, or that type of environment. And the
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  Speaker 1: bigger picture is much harder to sell, you know, And
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  Speaker 1: the housing is very hard to sell to communities when
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  Speaker 1: it's when it's about putting up larger states on the
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  Speaker 1: edge of towns without increasing and improving the infrastructure around
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  Speaker 1: those towns. While the idea of having new towns is
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  Speaker 1: a lot better than the idea of having new housing
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  Speaker 1: estates tacked onto existing towns that don't have the infrastructure
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  Speaker 1: capacity to deal with them. So, you know, I quite
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  Speaker 1: rather like that that idea of Kastarmers, let's just build
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  Speaker 1: nice new towns. He's in cahoots with the king, really,
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  Speaker 1: isn't He does that a pounded bree everywhere.
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  Speaker 2: I'm all over that all over.
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  Speaker 3: That king tells is the true, Poppet myself being to
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  Speaker 3: live a party as that will be interesting.
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  Speaker 1: The King has been absolutely right when it has come
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  Speaker 1: to building whole new towns. Everybody loves a boundary, everybody
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  Speaker 1: loves living in it.
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  Speaker 2: It looks nice. No one protests about a poundbury.
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  Speaker 1: So this idea of building attractive, not hideous, attractive new towns,
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  Speaker 1: whether they offend architects or not, because everything attractive does
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  Speaker 1: seem to offend the modern architect If you put those
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  Speaker 1: up in new spaces with the infrastructure they required, that
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  Speaker 1: the shops, the GP surgeries, the opticians, etc. Rather than
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  Speaker 1: tacking them onto the edge of existing towns and expecting
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  Speaker 1: those towns just to you know, take it. I think
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  Speaker 1: you won't have the same problem that we've had for
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  Speaker 1: the last couple of decades. So I was very very
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  Speaker 1: pro that idea from Kiostarmer, and pro a couple of
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  Speaker 1: other ideas as well, very very not pro some others.
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  Speaker 1: But we won't go into that now.
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  Speaker 3: Yes, probably it's not.
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  Speaker 2: Probably does not.
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  Speaker 3: I mean, the one last thing I would say is that,
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  Speaker 3: and we did discuss this with Paul, that there are
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  Speaker 3: a lot of things in the taccess them which are I'll.
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  Speaker 2: Just dafted new taxes that should come in.
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  Speaker 4: I mean, I mean so many ways that you could
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  Speaker 4: make it better than it than it is. I mean,
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  Speaker 4: we have this absurd situation where we've got National Insurance
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  Speaker 4: contributions which are just attaxed. There's no relation to anything
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  Speaker 4: that people are entitled to, which you pay on earned income.
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  Speaker 4: So if you're a wage sleeve like me, you pay
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  Speaker 4: lots of that. If you're a partner at a professional
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  Speaker 4: services company, you don't. If you're self employed you pay
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  Speaker 4: a lot less. And if your income is coming from
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  Speaker 4: rents on a property happened to earn or shares what
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  Speaker 4: you don't pay anything. You don't pay any National insurance
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  Speaker 4: on pension payment in payment that actually don't pay it
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  Speaker 4: on pension contributions either. So number one, just admit that
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  Speaker 4: this is just a tax on income and get a lot.
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  Speaker 3: I mean, they add the result obviously of layer upon
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  Speaker 3: layer of basically stealth taxes, and you know corn merchant
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  Speaker 3: moves by successive chancellors. But again it feels like one
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  Speaker 3: of those things if somebody just kind of spoke to
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  Speaker 3: the public in a slightly rational way, particularly if it's
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  Speaker 3: a new government and they're a bit more popular, and
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  Speaker 3: they've got a wee bit more leeway and an honeymoon
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  Speaker 3: period and said, they see how these stupid marginal tax rates,
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  Speaker 3: we're gonna get rid of them and we're going to
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  Speaker 3: replace them. Me is something that's perfectly fair and it's
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  Speaker 3: still progressive, but one that doesn't stop people from deciding
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  Speaker 3: to earn more money because they're going to get punched
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  Speaker 3: in the face as soon as they got over, you know,
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  Speaker 3: one hundred thousand pounds, fifty thousand pounds, et cetera, et cetera.
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  Speaker 3: So I'd like to see someone talking about that. And
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  Speaker 3: again it's one of these weird things where what you
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  Speaker 3: probably need is a leftish identified party getting any power.
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  Speaker 3: It do always something, because then it doesn't look as
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  Speaker 3: if they're going behind to the wretch, whoever their wretch
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  Speaker 3: you can consider it to be. So, you know, I
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  Speaker 3: Fraechel re uses less than then that strikes me as
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  Speaker 3: making a lot of sense.
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  Speaker 1: You know, this is really important, John, because what when
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  Speaker 1: you listen to both parties at the moment actually talking
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  Speaker 1: about growth. They talk about growth as though growth is
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  Speaker 1: something you can force, something you can make. They talk
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  Speaker 1: about creating jobs and all this kind of things so
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  Speaker 1: they can somehow make it happen. And that's not how
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  Speaker 1: it works. And what you've just described is the opposite thing.
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  Speaker 1: It's let growth happen, you know, let an economy grow.
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  Speaker 1: The moment we're always talking about forcing it. Now, you
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  Speaker 1: can't force economic growth. What you can do is create
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  Speaker 1: the correct infrastructure. Step back and let it happen. You
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  Speaker 1: need to create an environment that allows growth. And that's
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  Speaker 1: something you.
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  Speaker 2: Don't hear talked about, Everet.
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  Speaker 1: It's always about the big government, big state, pushing it,
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  Speaker 1: making it, creating it things that you and I, because
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  Speaker 1: we're getting old, simply are not possible.
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  Speaker 3: And no, unfortunately, Bill, I see how long it's these
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  Speaker 3: at a fashion. The only thing that will stop. That's
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  Speaker 3: the point vigilities. Weirdly enough, and yeah, at least they
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  Speaker 3: seem to be shown some things that can help. Even
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  Speaker 3: the law, I'm still not convinced that they actually properly exist.
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  Speaker 1: Well, we'll come back to this. We'll come back to
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  Speaker 1: this another day. But I would like to finish our
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  Speaker 1: conversation John with an Adam Smith quote. I believe all
• 14:35
  Speaker 1: conversations should end with an Adam Smith quote, and this
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  Speaker 1: one is particularly relevant to everything that we've just been
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  Speaker 1: talking about.
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  Speaker 2: You ready, yelp.
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  Speaker 1: The uniform, constant, and uninterrupted effort of every man to
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  Speaker 1: better his condition is frequently powerful enough to maintain the
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  Speaker 1: natural progress of things towards improvement, in spite both of
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  Speaker 1: the extravagance of government and of the greatest errors of
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  Speaker 1: its administration. Thanks for listening to this week's Marin Talks
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  Speaker 1: Money the after Show. This episode was hosted by me
• 15:08
  Speaker 1: Meren Somerset Web alongside John Steppek. It was produced by
• 15:11
  Speaker 1: Someersidi additional editing by Blake Naples.