Latest / Merryn Talks Money / Exclusive: Rachel Reeves on Iran Shock, US Trade and Inflation Risks

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Exclusive: Rachel Reeves on Iran Shock, US Trade and Inflation Risks · Merryn Talks Money

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  Speaker 1: the markets. I am Marenzumzetweb Editor at Large Bloomberg Ukay Wealth.
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  Speaker 2: And I'm joined Stevig, Senior reporter and the Money Distilled.
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  Speaker 1: Newsletter John Afternoon. So today the Chancellor Rachel Reeves. She
• 1:10
  Speaker 1: delivered a spring forecast in the Parliament and after that
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  Speaker 1: speech she actually traveled in person to the Bloomberg office
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  Speaker 1: and spoke to our colleague Stephanie Flanders, who is the
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  Speaker 1: head of Government and Economics here at Bloomberg. Now we
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  Speaker 1: are going to listen to that interview in just a
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  Speaker 1: few minutes, Luckier. But John, before that, did you make
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  Speaker 1: anything of the spring statement? I was there anything in
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  Speaker 1: there that you could even have a go at making
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  Speaker 1: anything of.
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  Speaker 2: The one thing I will see in the Chancellor's favor
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  Speaker 2: is that she wanted it to be an one event
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  Speaker 2: and it was at no one event. She didn't make
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  Speaker 2: any policy change announcements, and the whole thing was entirely
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  Speaker 2: overshadowed by the war and Ryan, so I'd say, yes,
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  Speaker 2: so we could ignored it because it's.
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  Speaker 1: Completely irrelevant, because any conversation about inflation or interest rates
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  Speaker 1: or anything like that is meaningless in the face of
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  Speaker 1: a possible spapulation recret.
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  Speaker 2: Yes, I mean, actually it's a good lesson in the
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  Speaker 2: whole pointlessness of this Office for Budget Responsibility, Forecast business.
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  Speaker 2: Where we sat the entreat these as if they're handed
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  Speaker 2: down on stone tablets. And to be fair, the OBR
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  Speaker 2: even they said when it came out, by the way,
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  Speaker 2: this could swing in absolutely any direction. Now, given what's
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  Speaker 2: happened in Iran. But here's something that got something an
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  Speaker 2: email from Berenberg earlier and they pointed out that the
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  Speaker 2: obr's forecasts are contingent on Brent Coruld being at sixty
• 2:29
  Speaker 2: three dollars a barrow, which it was roughly two days ago.
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  Speaker 2: Now it's at eighty three a natural gas price sixty
• 2:36
  Speaker 2: four pence a term. It's now one pound fifty a theirm.
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  Speaker 2: So so those numbers last. Then obviously inflation is going
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  Speaker 2: to be higher. Interest rates are not going to go
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  Speaker 2: down the way that we'd all actually been hoping for
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  Speaker 2: about a week ago, and that means growth is probably
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  Speaker 2: going to be worse. Inflation is going to be worse.
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  Speaker 2: The physical headroom the Chancellor keeps going on about will
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  Speaker 2: not exist and things will, yes, we'll deteriorate it quite significantly,
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  Speaker 2: so kind of lights hope that it's all actually over
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  Speaker 2: within a week, which also I'm struggling to see the
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  Speaker 2: path there.
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  Speaker 1: And if only we had a good long term domestic
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  Speaker 1: supply of oil and gassy.
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  Speaker 2: And weird could be faith so fair and such a thing.
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  Speaker 1: Now listen, I know you say how marvelous it is
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  Speaker 1: that it was a it was a non event. Then
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  Speaker 1: nothing happened, and I know that's what she wanted. But
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  Speaker 1: when I look at the state of the UK, I
• 3:26
  Speaker 1: look at the state of the economy, I look at
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  Speaker 1: sixteen percent plus use unemployment, at all these things, I think, gosh,
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  Speaker 1: I don't know, maybe there's something, anything, that could be done.
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  Speaker 1: And in a way, while a period of silence is
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  Speaker 1: in many ways welcome, a real action plan to do
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  Speaker 1: something about these awful effects of previous policies on the
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  Speaker 1: UK economy would also be kind of useful.
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  Speaker 2: Yeah, I mean, the we had hopes that she may
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  Speaker 2: do something about the youth unemployment, if only delay in
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  Speaker 2: the rise in the minimum wage, for example. And who knows,
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  Speaker 2: I mean maybe that maybe there are things that she's
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  Speaker 2: planning to to. I mean that sort of feel that
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  Speaker 2: she was probably caught on the hop by all of
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  Speaker 2: this stuff and then hasn't come up with any replacement
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  Speaker 2: plan to tackle it. She's meant to be meeting by
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  Speaker 2: oil and gas industry, for example, tomorrow. Whether she'll actually
• 4:14
  Speaker 2: do anything about the tax problems that are stopping them
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  Speaker 2: from exploding in the North Sea is quite another matter.
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  Speaker 2: But no, you're right, there's loads of messes. I mean,
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  Speaker 2: part of the problem, obviously, is that Rachel Reeves has
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  Speaker 2: compounded She's not responsible for them directly, but she certainly
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  Speaker 2: made them all a lot worse with the policies that
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  Speaker 2: she's pursued in her previous two budgets. So I'm not
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  Speaker 2: convinced that she's the one that can of fix things.
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  Speaker 2: But we shall see.
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  Speaker 3: We shall see. Well.
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  Speaker 1: On that happy note, let's get into the interview. Bloomberg
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  Speaker 1: Stephanie Flanders speaking with Chancellor Rachel Waves on Tuesday afternoon.
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  Speaker 3: Chancellor, thank you so much for doing this. You've come
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  Speaker 3: over to Bloomberg headquarters straight from the Treasury on a busy.
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  Speaker 4: Day, Okay, straight from the Chamber.
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  Speaker 3: From the Chamber of course. Yes, you want to talk
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  Speaker 3: about your thoughts about the state of the UK economy
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  Speaker 3: and the growth plan going forward, But obviously, given everything
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  Speaker 3: that's happening today in markets in the Middle East, I
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  Speaker 3: want to start with just asking you a few questions
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  Speaker 3: about that. I mean, you mentioned in your speech in
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  Speaker 3: the Commons that you were planning to talk tomorrow to
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  Speaker 3: Northsea oil producers. What are you hoping to get out
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  Speaker 3: of that conversation?
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  Speaker 4: So I said in the Chamber that some of the
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  Speaker 4: most affected industries I wanted to spend some time with
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  Speaker 4: and been in touch with over the last few days.
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  Speaker 4: And obviously developments in oil and gas markets are absolutely
• 5:41
  Speaker 4: crucial for every family in every business in Britain. Now
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  Speaker 4: oil and gas production in the North Sea Council less
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  Speaker 4: than one percent of global supply of oil and gas,
• 5:52
  Speaker 4: but it's still very important. It's important for jobs in
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  Speaker 4: the UK, it's important for investment, and it's important for
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  Speaker 4: every family in Britain. So I'm going to be meeting
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  Speaker 4: with them tomorrow to talk about their production plans and
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  Speaker 4: also to talk about how they see the situation evolving.
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  Speaker 4: Because every oil and gas company pretty much that operates
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  Speaker 4: in the North Sea will also operate in other parts
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  Speaker 4: of the world, whether that is Shell or BP or
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  Speaker 4: equinor or others, and so getting their insights into how
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  Speaker 4: oil and gas prices might evolve based on a number
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  Speaker 4: of different scenarios over the coming days and weeks will
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  Speaker 4: be very useful for me and for the government.
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  Speaker 3: We can give you our scenarios as well, but our
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  Speaker 3: economists are looking at this as you suggest, there's nothing
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  Speaker 3: that our norse to oil producers could do to affect
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  Speaker 3: a global or price hike, it is already up significantly.
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  Speaker 3: If it's sustained for any period, it seems like it
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  Speaker 3: would be much harder to get the headline inflation rate
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  Speaker 3: in the UK back to two percent as you were,
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  Speaker 3: as you were hoping it would be. You did a
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  Speaker 3: lot of things in the budget and courage shall we say,
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  Speaker 3: inflation to go back to two percent even by April.
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  Speaker 3: Has Donald Trump's wore in Iran taken that away from you?
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  Speaker 4: Well, the first thing I would say is that the
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  Speaker 4: action that I took in the budget will still happen.
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  Speaker 4: So the freezing prescription charges, the freezing rail fares, and
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  Speaker 4: also the one hundred and fifty pounds off of energy
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  Speaker 4: bills that I announced in the budget will take effect
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  Speaker 4: next month, and so people paying families paying their gas
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  Speaker 4: and electricity bills do not need to worry about the
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  Speaker 4: next three months. That price cap is set and they
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  Speaker 4: will get the benefit of those policies I announced in
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  Speaker 4: the budget. But of course, you know, we have to
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  Speaker 4: see how things evolve in terms of where oil and
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  Speaker 4: gas prices go going forward. But what the Office's Budget
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  Speaker 4: Responsibility confirmed today and what the Bank of England said
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  Speaker 4: when they published their most recent outlook for inflation in
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  Speaker 4: February was that the measures that we have taken as
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  Speaker 4: the government helping bring inflation back down to target much
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  Speaker 4: sooner than they anticipated. I think in the OBR numbers
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  Speaker 4: today inflation is likely to meet target at six months
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  Speaker 4: earlier than they previously envisaged. Now, of course that doesn't
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  Speaker 4: take into accounter developments over the last few days, but
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  Speaker 4: also we are only just into what is happening in
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  Speaker 4: the Middle East. We saw each other last week, Stephanie,
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  Speaker 4: and we were not talking about the Middle East or around.
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  Speaker 4: There was lots of other things to talk about in
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  Speaker 4: the economy, but this only really kicked off on Friday.
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  Speaker 4: So of course we're monitor developments very very closely and
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  Speaker 4: do everything in our power to protect businesses and families
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  Speaker 4: in the UK. And we are better placed to do
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  Speaker 4: that than we were just a few months and years
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  Speaker 4: ago because of the choices we've taken as the government.
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  Speaker 4: So what I was able to set out today in
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  Speaker 4: the OBR forecast is that both interest rates inflation have
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  Speaker 4: been falling faster than expected. Government borrowing and debt have
• 9:05
  Speaker 4: been revised down since the budget last year G seven
• 9:10
  Speaker 4: borrowing is not coming down at the same rate that
• 9:15
  Speaker 4: it is in the UK. Our public sector net borrowing,
• 9:17
  Speaker 4: forecast to be just four point three percent this year,
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  Speaker 4: is the lowest in six years and the first time
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  Speaker 4: in twenty two years that our borrowing has been lower
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  Speaker 4: than the G seven average. So welcome developments which put
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  Speaker 4: us in a stronger position to be able to withstand
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  Speaker 4: the shocks, including the shock that we are likely to
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  Speaker 4: be responding to in the weeks and months ahead, than
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  Speaker 4: we would have been without the action that we've taken
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  Speaker 4: as the government to secure and stabilize the public finances.
• 9:44
  Speaker 3: But it is vulnerable. I mean even that fall in
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  Speaker 3: borrowing is driven in large part actually by lower than
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  Speaker 3: expected spending, which is actually in turn lower spending on
• 9:54
  Speaker 3: guilt interest, which is a result of lower inflation. So
• 9:57
  Speaker 3: that lower path for inflation that we were on even
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  Speaker 3: markets were assuming for this year, that was also going
• 10:03
  Speaker 3: to potentially pave the way for another rate cut. You
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  Speaker 3: mentioned in your speech how proud you were that you've
• 10:09
  Speaker 3: been part of the government at the Bank of England
• 10:12
  Speaker 3: had been able to have six rate cuts since Lady King.
• 10:16
  Speaker 4: Was going on. There's three things that are going on
• 10:18
  Speaker 4: to put our public finances in a better position. First
• 10:22
  Speaker 4: of all, tax revenues have come in stronger than anticipated,
• 10:26
  Speaker 4: and we saw that particularly in the January January borrowing numbers.
• 10:29
  Speaker 4: It was the biggest surplus on record.
• 10:32
  Speaker 3: But year to date, isn't it still lower than the
• 10:34
  Speaker 3: forecast than they abas's forecast, so that that month was
• 10:37
  Speaker 3: very good.
• 10:38
  Speaker 4: But borrowing has come in lower this revelue. The borrowing
• 10:43
  Speaker 4: has come in lower than forecast. And spending we set
• 10:47
  Speaker 4: out the spending review last summer, many people said, well
• 10:50
  Speaker 4: we wouldn't be really able to live within those budgets. Well,
• 10:53
  Speaker 4: this year we have not used all of the surplus
• 10:56
  Speaker 4: that is put aside for genuine emergencies and instead we're
• 10:59
  Speaker 4: able to roll that surplus forward, so spending is under control. Whereas,
• 11:03
  Speaker 4: of course, when I became Chancellor, the reserve for the
• 11:07
  Speaker 4: year that we were in and we were only three
• 11:09
  Speaker 4: months into it had been spent four times over. So
• 11:12
  Speaker 4: we haven't used a full reserve for this year. And
• 11:14
  Speaker 4: also borrowing costs have come down. The OBR today forecast
• 11:19
  Speaker 4: that borrowing costs next year will be four billion pounds
• 11:22
  Speaker 4: lower than that even they thought in the budget last year.
• 11:25
  Speaker 4: So tax revenue coming in a bit stronger spending coming
• 11:28
  Speaker 4: in as planned and in fact not even using the
• 11:30
  Speaker 4: full reserve, and also borrowing costs coming down because of
• 11:34
  Speaker 4: that additional stability we've brought to the economy. Have all
• 11:38
  Speaker 4: contributed to the better forecast or the public finances that
• 11:42
  Speaker 4: I was able to set out today.
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  Speaker 3: But that good news, A lot of that was related
• 11:46
  Speaker 3: to the falling guilt yields, A lot of some of
• 11:49
  Speaker 3: that has been reversed even just today in the concerns
• 11:52
  Speaker 3: in the markets and expectations of lower interest rates from
• 11:55
  Speaker 3: the Bank of England, which traders in the market this
• 11:58
  Speaker 3: week have decided again to certainly not happen in March
• 12:02
  Speaker 3: now and where as they were expecting, and maybe not
• 12:04
  Speaker 3: happen in the next few months.
• 12:06
  Speaker 4: I won't comment on market movements over a day or two.
• 12:10
  Speaker 4: I think it is too early to know what the
• 12:14
  Speaker 4: market impact is. Obviously, the immediate concern for the government
• 12:18
  Speaker 4: is trying to get the three hundred thousand British citizens
• 12:21
  Speaker 4: who are in the Middle East back home if they
• 12:24
  Speaker 4: want to come back to the UK. Think around one
• 12:27
  Speaker 4: hundred thousand have always already registered for the scheme to
• 12:32
  Speaker 4: say that you are there, and that is very welcome
• 12:36
  Speaker 4: and that's our mediate goal, as well as protecting our
• 12:41
  Speaker 4: personnel and our assets in the region. But of course
• 12:44
  Speaker 4: the economic consequences of any extended military action, especially in
• 12:50
  Speaker 4: the Middle East, which is so crucial for trade and
• 12:54
  Speaker 4: for oil and gas, would have an impact on the
• 12:57
  Speaker 4: UK economy, But it is too early to judge exactly
• 12:59
  Speaker 4: what that will be and therefore what response would be needed.
• 13:02
  Speaker 3: I mean, I'll focus on the economy today. I'm not
• 13:04
  Speaker 3: going to go into the government's stance in relation to
• 13:07
  Speaker 3: the support or not for what the President's doing. But
• 13:10
  Speaker 3: judging from Donald Trump's posts in the last and interviews
• 13:14
  Speaker 3: in the last twenty four hours, he does seem to
• 13:16
  Speaker 3: be not very happy with the Prime Minister as a
• 13:19
  Speaker 3: result of the last few days. Do you worry that
• 13:21
  Speaker 3: that will make it harder to finalize, finally finalize the
• 13:26
  Speaker 3: trade situation, the trade deal with the US, which was
• 13:28
  Speaker 3: put into quite a lot of uncertainty by that Supreme
• 13:31
  Speaker 3: Court judgment a few weeks ago.
• 13:33
  Speaker 4: When it comes to decisions around using British armed forces
• 13:40
  Speaker 4: to take part in conflicts around the world, it is
• 13:45
  Speaker 4: very important that we judge those on whether it is
• 13:50
  Speaker 4: legal and whether it is the right thing to do.
• 13:54
  Speaker 4: You can't make a decision about whether to get British
• 13:58
  Speaker 4: armed forces involved in a conflict because it may or
• 14:00
  Speaker 4: may not make it more likely to get a trade deal.
• 14:03
  Speaker 4: And we judged that there was not a legal basis
• 14:06
  Speaker 4: for offensive action on Iran, but of course once Iran responded, particularly.
• 14:15
  Speaker 3: Sorry, not a legal basis for the UK or but
• 14:17
  Speaker 3: presumably not for the US either.
• 14:19
  Speaker 4: We can only make judgments for ourselves and that was
• 14:23
  Speaker 4: the judgment that we came to based on our legal advice,
• 14:27
  Speaker 4: and it's up to other countries to explain what action
• 14:30
  Speaker 4: they've taken and on what basis. But once Iran responded
• 14:34
  Speaker 4: in the way that they did, including with missiles being
• 14:39
  Speaker 4: launched into our allies who were not involved in the
• 14:41
  Speaker 4: offensive action, and the risks to our military basis in Cyprus,
• 14:47
  Speaker 4: of course it was right that we became involved in
• 14:51
  Speaker 4: defensive action and we were involved in that from Saturday,
• 14:55
  Speaker 4: and of course on Sunday we gave permission for US
• 14:59
  Speaker 4: jets to use British assets from which to launch those
• 15:03
  Speaker 4: defensive actions. And that's a decision that we've taken as
• 15:07
  Speaker 4: a government on trade. I'm proud of what we've done
• 15:10
  Speaker 4: as a government, we've secured a trade deal with India,
• 15:13
  Speaker 4: I think probably the best trade deal that any country
• 15:16
  Speaker 4: in the world has secured with India, and we hope
• 15:18
  Speaker 4: to be able to bring that into an effect in
• 15:20
  Speaker 4: the next couple of months. But in addition, improving our
• 15:24
  Speaker 4: trade relations with our nearest neighbors and trading partners in
• 15:27
  Speaker 4: the European Union, and I'm going to say more about
• 15:30
  Speaker 4: our relations with the European Union in a speech I'm
• 15:32
  Speaker 4: going to give in a couple of weeks time, because
• 15:34
  Speaker 4: I think that that is one of the big bets
• 15:36
  Speaker 4: that we can take as a country to change our
• 15:38
  Speaker 4: trajectory for productivity and growth. We've already rejoining the Erasmus
• 15:44
  Speaker 4: scheme to allow young people to be able to study
• 15:48
  Speaker 4: in the European Union countries and for young people in
• 15:50
  Speaker 4: those countries to be able to study in the UK.
• 15:53
  Speaker 4: But we also want to deliver an energy and electricity
• 15:56
  Speaker 4: trading deal, we want a food and farming agreement, an
• 16:00
  Speaker 4: SPS agreement, and also we want to bring in a
• 16:05
  Speaker 4: youth ability scheme so that young people in Britain can
• 16:08
  Speaker 4: go and take advantage of opportunities in Europe and vice versa.
• 16:12
  Speaker 4: Young people in the European Union can come and work
• 16:15
  Speaker 4: in the UK. I know that some countries around the
• 16:17
  Speaker 4: world are looking to pull up the drawbridge, but Britain
• 16:21
  Speaker 4: benefits from being an open trading economy, open to trade,
• 16:24
  Speaker 4: open to investment, and also open to talent.
• 16:27
  Speaker 3: But for trade, it's enormously important just to have some
• 16:30
  Speaker 3: kind of certainty about what the trade rules are. I mean,
• 16:32
  Speaker 3: are you able to say to UK exporters to the
• 16:36
  Speaker 3: US that you know currently what the trade rules are
• 16:40
  Speaker 3: for going into the US, because it's not clear to us.
• 16:43
  Speaker 4: Well, we've secured a trade deal with the US last
• 16:46
  Speaker 4: year on the export of goods. Since then we've gone
• 16:49
  Speaker 4: further and secured a deal around pharmaceuticals, which is obviously
• 16:52
  Speaker 4: crucial for the UK given the importance are of our pharmaceuticals.
• 16:56
  Speaker 3: As far as those things are not affected by the
• 16:59
  Speaker 3: Supreme Court. As far as your.
• 17:01
  Speaker 4: Concern, obviously we are in constant negotiation and dialogue with
• 17:05
  Speaker 4: the US administration. But there's absolutely no reason why the
• 17:08
  Speaker 4: trade deal that we secured last year can't be maintained.
• 17:11
  Speaker 4: And of course there are other areas as well where
• 17:13
  Speaker 4: we want to go further with our trade links with
• 17:15
  Speaker 4: the US, whether that is on the future of capital markets,
• 17:19
  Speaker 4: where we want to deepen and strengthen the capital market
• 17:24
  Speaker 4: links between our economy, making it easier for British companies
• 17:27
  Speaker 4: to raise finance in the US and US businesses to
• 17:31
  Speaker 4: raise finance in London, as well as doing more in
• 17:34
  Speaker 4: terms of mutual recognition of standards so that if you
• 17:38
  Speaker 4: have a license for a product in the US, you
• 17:40
  Speaker 4: can bring it to the UK and again vice versa,
• 17:43
  Speaker 4: to help British businesses in financial services and elsewhere to
• 17:46
  Speaker 4: be able to launch product products in the US, which
• 17:49
  Speaker 4: is obviously hugely beneficial for UK firms. So there are
• 17:52
  Speaker 4: other areas as well where we want to deepen those
• 17:55
  Speaker 4: relations with the US, But our nearest neighbors and trading
• 17:59
  Speaker 4: partners are countries in the EU, and the benefits from
• 18:03
  Speaker 4: rebuilding trust between US and the European Union, and crucially
• 18:09
  Speaker 4: those trade links in goods and our hope in services
• 18:12
  Speaker 4: in due course is what will have the biggest impact
• 18:16
  Speaker 4: on British businesses and jobs and living standards.
• 18:34
  Speaker 3: Let's talk about that sort of broader approach to growth.
• 18:38
  Speaker 3: I know you're going to talk about also in a
• 18:40
  Speaker 3: speech in a couple of weeks you promise that today's
• 18:43
  Speaker 3: spring statements being forecast would be a non event so
• 18:46
  Speaker 3: I think I can say to you succeeded in making
• 18:48
  Speaker 3: it not very eventful. We haven't had all this kind
• 18:51
  Speaker 3: of speculation that we had leading up to the budget,
• 18:53
  Speaker 3: so we haven't had that uncertainty. As you've mentioned, the
• 18:55
  Speaker 3: economic news leading up to this, at least till this
• 18:58
  Speaker 3: week was fairly positive. The political environment is, if anything,
• 19:02
  Speaker 3: has deteriorated for the government, and we had a poll
• 19:05
  Speaker 3: today that showed labor even potentially behind the Greens as
• 19:09
  Speaker 3: well as reform. I guess I mean your economic mission,
• 19:13
  Speaker 3: which was central to this government. A large chunk of voters.
• 19:17
  Speaker 3: You look at the polling, are disappointed, feel that the
• 19:20
  Speaker 3: government should have done better. Do you think that you
• 19:23
  Speaker 3: could have done better?
• 19:24
  Speaker 4: People voted for change at the general election a year
• 19:27
  Speaker 4: and a half ago, and I'm deeply aware of my
• 19:29
  Speaker 4: responsibility and helping to deliver that change. Now since I
• 19:33
  Speaker 4: became chancellor, wages have increased faster than inflation every single month,
• 19:38
  Speaker 4: and the six cuts in interest rates means that if
• 19:41
  Speaker 4: you're taking out a mortgage, a typical mortgage, you'll be
• 19:45
  Speaker 4: saving around three hundred pounds a year than if you'd
• 19:48
  Speaker 4: have taken that mortgage out the day before I became
• 19:51
  Speaker 4: Chancellor of the Exchequer. But the years leading up to
• 19:55
  Speaker 4: that had been really tough for people. The last parliament
• 19:58
  Speaker 4: was the first parliament ever where people were poorer on
• 20:01
  Speaker 4: average at the end of it than they were at
• 20:03
  Speaker 4: the start, and it takes time to unwind that legacy.
• 20:07
  Speaker 4: We've made progress, but is there more to do? Absolutely
• 20:10
  Speaker 4: there is, which is why I'm so focused on bringing
• 20:14
  Speaker 4: down inflation and interest rates and returning that stability to
• 20:17
  Speaker 4: the economy. But the other thing that makes people's lives
• 20:21
  Speaker 4: better is having public services that function properly, being able
• 20:24
  Speaker 4: to get a hospital appointment or a doctor's appointment when
• 20:27
  Speaker 4: you need it, Ensuring your kid gets into the school
• 20:30
  Speaker 4: they want to go to and has good qualified teachers.
• 20:35
  Speaker 4: Buses and trains that run frequently and are affordable. All
• 20:40
  Speaker 4: of those things that we're starting to make a difference,
• 20:44
  Speaker 4: But there is more to do. I think that the
• 20:46
  Speaker 4: next election, what people are going to ask is and
• 20:48
  Speaker 4: me and my family better off? And I'm determined that
• 20:51
  Speaker 4: the answer to that question is yes. By ensuring that
• 20:54
  Speaker 4: people have more money in their pockets to spend on
• 20:57
  Speaker 4: the things that they want to spend it on, not
• 20:58
  Speaker 4: just the essentials the mortgage, the bills, the weekly food shop,
• 21:03
  Speaker 4: but more money to spend on the things that they
• 21:05
  Speaker 4: actually want to do that give them pleasure in their
• 21:08
  Speaker 4: lives and are undetermined that people have more of that.
• 21:12
  Speaker 4: But the first thing you need to do to achieve
• 21:15
  Speaker 4: that is to bring stability back to the economy. And
• 21:17
  Speaker 4: what the OBR forecasts showed today is that we have
• 21:21
  Speaker 4: made great strides forward in returning that stability to the economy,
• 21:26
  Speaker 4: which should pay dividends in terms of having money to
• 21:29
  Speaker 4: spend on the priorities of working people and to make
• 21:32
  Speaker 4: working people better off.
• 21:33
  Speaker 3: There was quite a lot in the forecast. I mean,
• 21:35
  Speaker 3: there is a slightly lower growth forecast for this year,
• 21:38
  Speaker 3: and that's due to lower net migration, which the government
• 21:42
  Speaker 3: has obviously taken a lot of measures on. But the
• 21:44
  Speaker 3: OBI expects it and expects that fall in net migration,
• 21:48
  Speaker 3: the increase in the labor force and people coming in
• 21:50
  Speaker 3: to be permanent, but that that sort of half a
• 21:53
  Speaker 3: percent of GDP loss and GDP growth will be made
• 21:56
  Speaker 3: up for in productivity. Will actually get more out of
• 21:59
  Speaker 3: the people we have working in this country. So is
• 22:02
  Speaker 3: that the new UK growth model that we were not
• 22:05
  Speaker 3: really welcoming people in the same way. But we want
• 22:07
  Speaker 3: to get we hope employers get more out of British workers.
• 22:11
  Speaker 4: So we want to make sure that the best talent
• 22:14
  Speaker 4: in the world comes to Britain and that's why we've
• 22:16
  Speaker 4: extended our global Talent visas and they're available for high
• 22:20
  Speaker 4: net worth individuals, entrepreneurs and also academics in key subjects,
• 22:27
  Speaker 4: particularly where they bring research teams with them to the UK.
• 22:30
  Speaker 4: And those new global Talent visas are proving very popular
• 22:33
  Speaker 4: and that is about us being able to have greater
• 22:36
  Speaker 4: say about who comes into this country, and we have
• 22:39
  Speaker 4: tightened up the rules around dependents, around students, around low
• 22:44
  Speaker 4: skilled workers. That is the right thing to do, and
• 22:46
  Speaker 4: we want to make sure that people who are already
• 22:48
  Speaker 4: here have got the skills to fill the vacancies that
• 22:52
  Speaker 4: exist in the economy. But as I said before, I
• 22:55
  Speaker 4: want Britain to be seen as a country that is
• 22:57
  Speaker 4: welcome to investment, trade and and that's what those Global
• 23:01
  Speaker 4: Talent visas do. Now the OBI have revised down their
• 23:04
  Speaker 4: forecasts for net migration, so it's something like two hundred
• 23:07
  Speaker 4: thousand net migration a year. That is obviously way down
• 23:11
  Speaker 4: on the nearly a million number we had a couple
• 23:14
  Speaker 4: of years ago. But what matters in terms of GDP
• 23:18
  Speaker 4: is whether that GDP is felt in people's lives, and
• 23:21
  Speaker 4: that's why GDP per capita is probably the better measure
• 23:24
  Speaker 4: of whether that GDP is actually impacting on your living standards.
• 23:29
  Speaker 4: And what the OBR today say is that they're revising
• 23:32
  Speaker 4: up GDP per capita and expect GDP per capita to
• 23:36
  Speaker 4: increase by five point six percent during the course of
• 23:39
  Speaker 4: this parliament. And of course in the last parliament GDP
• 23:42
  Speaker 4: per capita actually fell and so that is a sharp
• 23:46
  Speaker 4: turnaround from one parliament to the next. And those numbers
• 23:50
  Speaker 4: were revised up to day, which is very welcome because
• 23:53
  Speaker 4: in the end, what matters is whether that GDP is
• 23:56
  Speaker 4: being felt by you and your family, and GDP per
• 23:59
  Speaker 4: capita is what really shows that.
• 24:02
  Speaker 3: Yeah, that's very striking in the numbers. I mean, if
• 24:04
  Speaker 3: we end up, i mean the path we're on now,
• 24:06
  Speaker 3: we could have negative net migration by the end of
• 24:09
  Speaker 3: the year. I'm quite interested in whether that's going to
• 24:11
  Speaker 3: be a sort of cause for celebration inside the Treasury,
• 24:14
  Speaker 3: given the pressure on the government to reduce those numbers,
• 24:17
  Speaker 3: or concern about how that was achieved, I mean the
• 24:21
  Speaker 3: things that were easiest to control. I mean students. For example,
• 24:24
  Speaker 3: I spoke to someone at a major university last night
• 24:26
  Speaker 3: that has been benefiting from some of the me measures.
• 24:29
  Speaker 3: You just talked about attracting foreign academics, academics from the US,
• 24:34
  Speaker 3: but at the same time they're losing foreign students who
• 24:37
  Speaker 3: find it less attractive the regime here and are even
• 24:40
  Speaker 3: sort of worried about the environment for foreign students. So
• 24:43
  Speaker 3: if you're undermining the business model for universities, and it
• 24:46
  Speaker 3: doesn't matter so much that they're able to attract all
• 24:48
  Speaker 3: these great academics.
• 24:49
  Speaker 4: I think we've done a lot to support universities since
• 24:51
  Speaker 4: we came into office with increased R and D funding,
• 24:55
  Speaker 4: and obviously a lot of that budget goes to universities
• 24:58
  Speaker 4: to invest in basic research, and we are reintroducing maintenance
• 25:04
  Speaker 4: grants for the poorest students to encourage them to take
• 25:08
  Speaker 4: that leap and go to university. But we've got to
• 25:11
  Speaker 4: get the balance right. It has been the case that
• 25:15
  Speaker 4: some courses at some colleges and universities, many people at
• 25:19
  Speaker 4: the end of their course are applying for asylum in
• 25:22
  Speaker 4: Britain and that is not what student visas were ever
• 25:25
  Speaker 4: meant for. And so we have got to be tightening
• 25:27
  Speaker 4: up when there is abuse. But at the same time
• 25:30
  Speaker 4: that gives us greater freedom to introduce those high talent
• 25:34
  Speaker 4: visas because we're freeing up space to enable us to
• 25:39
  Speaker 4: offer more of those. And I think that's what is
• 25:40
  Speaker 4: most valuable to us as a country, to attract that
• 25:45
  Speaker 4: wealth creating talent to the UK, and that is that
• 25:50
  Speaker 4: is our ambition. At the same time, we've got to
• 25:53
  Speaker 4: do more to make sure that young people in particular
• 25:55
  Speaker 4: who are already in this country have got the skills
• 25:59
  Speaker 4: and the confidence to succeed in the jobs market.
• 26:02
  Speaker 3: Do you worry some of our most successful sectors that
• 26:05
  Speaker 3: we would encourage people to go into are in professional
• 26:08
  Speaker 3: services that are potentially going to be the most transformed
• 26:11
  Speaker 3: by AI. So do you worry that some of our
• 26:13
  Speaker 3: most successful companies and sectors has got this massive missile
• 26:17
  Speaker 3: headed in its direction called AI.
• 26:19
  Speaker 4: The industries where we are successful like professional business services,
• 26:24
  Speaker 4: financial services, creative industries and AI and tech and life sciences.
• 26:29
  Speaker 4: Of course, there are risks of distruction and some jobs going,
• 26:33
  Speaker 4: but there's also massive opportunity if we seize them to
• 26:36
  Speaker 4: get the innovation and get the research here in Britain
• 26:40
  Speaker 4: and then build those new businesses in Britain. I am
• 26:42
  Speaker 4: an optimist when it comes to innovation and AI. Every
• 26:45
  Speaker 4: other wave of transformation and industrial change has resulted in
• 26:51
  Speaker 4: there being more jobs and better paid jobs. There's no
• 26:55
  Speaker 4: reason why this revolution can't be the same. But we've
• 26:59
  Speaker 4: got to make sure that people in this country have
• 27:01
  Speaker 4: got the skills to be able to do those jobs.
• 27:04
  Speaker 4: We're well placed, We've got some of the best universities
• 27:06
  Speaker 4: in the world, we've got some of the best entrepreneurs
• 27:09
  Speaker 4: in the world, and we've got a government that is
• 27:11
  Speaker 4: backing that, for example through R and D funding. But
• 27:14
  Speaker 4: we've got to seize that opportunity rather than being scared
• 27:17
  Speaker 4: a bit. And one of the things I'm going to
• 27:19
  Speaker 4: be talking about in my Maize lecture next week is
• 27:21
  Speaker 4: how as a government, as a country can do more
• 27:24
  Speaker 4: to back innovation and AI, but in a way where
• 27:28
  Speaker 4: the rewards are reaped by ordinary citizens.
• 27:31
  Speaker 3: I mean, as you know, Chancellor, there's a lot of
• 27:33
  Speaker 3: people in the city, a lot of Bloomberg clients who
• 27:36
  Speaker 3: talk about how the environment, the tax environment and elsewhere
• 27:39
  Speaker 3: other things has changed since labor came into power, and
• 27:43
  Speaker 3: they're all they say they're advising their children to move
• 27:46
  Speaker 3: to Dubai. We're seeing clients move their accounts, head fund
• 27:50
  Speaker 3: investors and others move their accounts to Dubai. Does that
• 27:52
  Speaker 3: look like such a safe decision today when the missiles
• 27:55
  Speaker 3: are flying?
• 27:56
  Speaker 4: Look, I think all of us are reading stories in
• 27:58
  Speaker 4: the paper or hearing of of people who we know
• 28:02
  Speaker 4: or we've worked with, who have made those decisions to
• 28:06
  Speaker 4: move abroad. But I would say that there are lots
• 28:10
  Speaker 4: of things that are attractive about the UK. A safe
• 28:13
  Speaker 4: and secure economy with strong defenses, and that is one
• 28:17
  Speaker 4: of the many things that is attractive about being in
• 28:19
  Speaker 4: the UK. But we only have those things because we
• 28:22
  Speaker 4: pay for them, including investing more in our defense, which
• 28:26
  Speaker 4: in the world that we live in today seems more
• 28:28
  Speaker 4: important than ever.
• 28:29
  Speaker 3: Well, another time I'll ask you how you're going to
• 28:31
  Speaker 3: get that three percent of GDP, But I I'm getting
• 28:34
  Speaker 3: ushered out. So thank you very much Chancellor for joining us.
• 28:37
  Speaker 1: Thank you Stephanie, thanks for listening to this week's Merrin
• 28:43
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• 28:51
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• 29:00
  Speaker 1: underscro Stepic. This episode was hosted by Mimes Said Webb.
• 29:03
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• 29:06
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