Welcome to in the City bloom most podcasts connecting you to the conversations and the stories shaping the world of finance.
I'm Francine Laqua and I'm David Merritt, and we have a bonus episode for you this week. Dave I hosted this all star Bloomberg panel in Westminster at the Unheard Club and we talked about the autum Statement, the economy, and frankly, why things should be better.
Yeah.
I was sat there in the front row, standing room onely at the back at the beautiful Unhurt Club, and yeah, you're right. It was an all star lineup, wasn't it.
It was.
It was a little bit daunting, but you know, we had our usual co host that like Ras Stratton, we had our editor in chief, we had opinion columnist Adrian Woolrich who's very very, very funny, and our head of Economics and Government, Stephanie Flanders, and it was kind of it was just good banter. They disagreed, they made up, they disagreed again.
Made friends.
We had we had, you know, some blueprint of how to take it forward. We had this Autumn Statement. There was a lot in it and at the same time, not that much. There were tax cuts, but actually we're still seeing a lot of the taxes at well, the highest in a long time. And it was probably meant to you know, set out to dividing put dividing lines between the opposition labor priorty ahead of the general action. So what did you see in it, Stephanie.
I No, I saw an interesting combination. I want to see.
The challenge for the Chancellor was to not do anything obviously political and irresponsible with the economy with him and as you say, a very narrow range of options and ideally do a little bit of good that some people would notice, while also leaving a thorny challenge for the opposition. And I think he's though it's all you know, you can see his workings, and it was pretty clear that what was going on, especially once people had zeroed in on that very big squeeze to public services, which had
in effect paid for the heady tax cuts. But terms of the individual measures sort of over one hundred very mostly quite boring measures, some very expensive measures to forting business and giving that tax cut on national assurance. You know, I think he picked a lot of things that did look responsible, did look broadly kind of technocratically helpful for the economy while also leaving that challenge for the opposition.
So I think, you know, within his own, as you say, extremely narrow constrained landscape, which I'm sure we'll talk about, does not bode well, particularly for next year's election. I think he did a decent job, and I think he achieved something else which I sort of noticed repeatedly through the day, which is to make people forget that it
wasn't actually a budget. It was an autumn statement. But I think we've already referred to it as a budget, and I suspect all of us will refer to it as a budget for the rest of the evening and the pedants in the audience will just have to shut up.
Adrian, You're a great student of history. Where does this side of statement fit? Who does it make a difference to?
Well?
I think one of the interesting things about this statement is that we're basically back to Cameronism.
That Cameron and.
George Osborne were focused on cutting the state as much as possible. There were essentially small government conservatives, left wing, leftish on social policy, but really quite right wing on
economic and social policy. Then we had this long period of disruption in which you had the return, the supposed return of big government conservatism, the idea that the Conservatives could incorporate more working class voters by having a more active state, bigger public spending, which called Bob Boris Johnson was in favor off And now we see we're going back to a world in which the Conservatives basically stand
for a smaller state. They want to cut taxes as much as they can, and they are allowing inflation to do the work of cutting the states. The state this is a big constraint the size of a lot of spending departments. They're taking a lot of money out of spending. So it's a very classic conservative camera and style conservative policy versus quite a classic sort of labor party policy in which they say they want to have a more active state, but not yet, they can't afford it. Now
they want to be responsible. So it's almost as though this intervening period of Brexit disruption a change in the nature of parties. Corbinism Johnsonism have been written out of history and we're back.
Some people might want it to be.
To a pre Brexit world in which this Conservative party sees its job as shrinking the state not incorporating working class voters very much appearing to its base. And I think another interesting thing that happened today was these migration figures, you know, very significant increase in migration, almost seven hundred thousand people. Again, it's as though Brexit never happened. You know, we voted in Brexit. People voting in Brexit for more money for the NHS and control of immigration.
We have a squeeze on spending departments, not.
Necessarily the NHS, but the NHS is obviously in big trouble and quite a lot of a lot of immigration. So it's almost as though the politicians aren't listening to what they were told in twenty sixteen. So I think it's a weird you know, returned to twenty ten, and I.
Slightly disagree.
Credit in that it's both, which is, they cannot afford to not take or try to take some of the red Wall with them, because if they do that then they've got an electoral problem. Just mathematically first, for all the politics is learned to can.
I think they've got an electoral problem whatever happened, Yes.
But in order to try and try and answer the exam question that is the next election, they have to and bring both those bits of their new coalition post of twenty nineteen, and you see did see an attempt. You saw a number of policies like the Freeport deduction going from its five years to ten years. That's a Tea side, you know, the heartland of the Red Wall. The Red Wall has a lot of older voters, so that pretty generous triple lock pension boost was partially aimed at those groups of people.
There were a number of efforts.
I was interested in that because obviously when you see the David Cameron appointment, you do wander, you do think like, is this to your point, Adrian, you know, is this a sort of retrenchment.
To the Blue Wall. It can't be. They've got they've got to try and do both.
And I think you did see yesterday in Jeremy Hunt's comments elements that were aimed at that constituency.
Obviously the full expensing.
You know, when I was a TeV reporter and would spend a lot of time, indeed in a December election expensive, I couldn't possibly comment on that bit. Certainly going around the Red Wall in December. God helped me in twenty nineteen. I think it was visiting lots of factories. You know that the full expensing, Well.
Right, we'll have a role there, So I know what you mean.
About, you know, oh, especially with the sort of prognosis for the next few years on the finances, it looking like it feels very twenty ten on Coreen, but I.
Think it has to be.
You cannot ignore what has happened in the last seven years in terms of that sort of realignment is what we called it at the time.
Done well, I'm trying and discrete Adrian two just on the basis of twenty five years are doing that. But the basic starting point I came in this morning from America. If you if you look at it from that point, if you really this difference between labor and conservative. I get back to what's definitely said about constraint is I think the rest of the world and they look at it, they feel somewhat reassured. You've had a budget which looks kind of grown up fine. You've had a response from
the opposition, which again looks grown up fine. From the point of the rest of the world and Britain, I think through those eyes, and maybe this is reflected to tiny bit in those migration things just looks as if it's slightly returning to normal and that yes, there is a difference between the two parties, but most people outside
this country think Starmer Suna that there isn't. Yes, there's a bit there, but the constraints they're both offer operating under, and the fact that they're both relatively boring men at a certain age means that most people look at it and think this wild era is over, which that bit I do agree on, but I don't think it's a It doesn't feel like such a massive ideological divide that was before.
It's definitely what does it actually mean for the economy going forward? And it wasn't great news in terms of growth, no.
And actually what was striking about it? So of course you've got the householding. There's a lot of discussion around the sort of first Parliament where householding comes would have fallen. There's some very depressing numbers of The Resolution Foundation has pointed out that there's about nine million younger working age Britains who've nactually never lived in Britain that had sort of
rising average wages. We're not going to be back to the sort of pre cost of living crisis, real living standards until twenty twenty seven according to those numbers.
So it's all pretty bleak, I think.
The interesting thing and maybe it feeds into some of the conversation around you know, whether this was a set, whether there were elements of this that were setting up or at least preparing the way for a spring election, is even on the economics, the idea that things are going to feel better in a year's time, it's not entirely clear. This may be almost and it certainly the political risk in yesterday was this sense of we're turning
a corner. And as everyone's aware, you know, there's a risk there because a lot of people in Britain will not feel its turning a corner, and worse than that, they may actually feel worse next year. And if you look into the details of the forecast, you know, there's one sort of basic fact about this. We've had this whacking great interest rate rise, and there's been some sort of questioning of you know, how come the economy. You know, we haven't had the kind of immediate hit to the
economy that some were expecting. Part of that, certainly on the consumer side, is that the sort of good news associated with higher interest rates, people getting more savings income has been quite quite quickly realized, and we even discovered in the States, if you're not getting a higher interest rate from your bank, you now found it easier to
go to another one. And yet the really bad news that we all know is coming for millions of households is actually we're barely halfway done in terms of the resetting of mortgages. So if you're a sort of wily person thinking about actually what's going to affect the way people feel today about their finances, many millions more people will have set their mortgages, you know, in October than in April or May.
It was the ittem statement inflationary or did they kind of get away with not?
I think, now this is one thing that I should have got more into the weeds of. But I was quite struck by the Jeremy Hunt's assertion that the OBR was said it was the measures in the autumn statement were not inflationary, And I think the way he had managed to get round that potentially was with some of those duty changes which actually reduced the headline inflation rate. Now, so there'll be people in the audience, you will be able to quickly check this.
It's inflationary in the sense that it's using inflation to do the dirty work of the government. So you're using inflation to squeeze the spending departments, and you're using inflation to bring more people into the tax system and therefore increase your tax revenoruy war pretending to be reducing.
Well, it's accepting inflation and it's making money from.
The inforcation, using exploiting inflation. If you think about cynical political ends.
But given before before the.
Autumn statement, given the freezing of how the thresholds, we're going in a really exciting direction.
You're really up for this. We're going to go right into the weeds.
But before before Jeremy Hunt did anything, you actually were obviously raising the tax take taking money out of people's pockets, and in that sense it was there would have been a sort of disinflationary effect. What's happened is he's taken he's actually put some money back into people's pockets, or at least given them money that they would otherwise not have had with this national insurance. So you could say that was inflationary. I think what is interesting is I
wonder how hard it will be potentially. You know, politicians are very easy, find it very easy to live with inconsistency one five. But we have had months and months of these debates over a public sector pay and strikes where we have the Chancellor has said, not entirely accurately, we can't give more money to the NHS nurses. We can't do this because it's inflationary. Yet it's okay, you can't let you can't say that. You can't say that and then also say you're putting lots of money into
people's pockets. So I think there is a bit of a dissonance there, But I'm sure on the technicality he was speaking the truth when he said it was not overall an inflationary autumn statement.
I mean I should rephrase my question for agent. Is it going to complicate the job of the Bank of England.
No, I mean I think the point about a safe pair of hands is correct. I think there's a general confidence in amongst the economists and the sort of the great and the good about about what's going on here. But I just want to make a sense of the camera in comparison, going back to the camera era, because I think there's more truth in it than my colleagues.
Thing.
But one thing is that the.
Camera in era was in many ways an era of sort of optimism. They thought that they could squeeze the state, but the private sector would expand and take over and people would get richer. Then we had all the pictures the big society, that the charities could take over things.
Then we had all these these.
These eruptions because of the Brexit thing, and what have we got? Now We've got a situation which they're continuing to squeeze the state, public, public, the spending departments, the big spending departments, apart from the NHS. They're trying to continuing to squeeze that. But there's new and they can they look trying to do something about our dismal productivity,
but there's no real optimism there. What you have behind all this is a stagnant economy that's failed to solve its productivity problem, an aging population and need to suck in lots of poorly educated foreign workers to add to the you know, to look out after all people and to do lots and lots and lots of service jobs. So whereas the camera and era was an era of
I think disguided but a real optimism. This is basically, you know, trying to make do make the best with a pretty awful economic outlook, and trying very belatedly to do a little bit about productivity whilst still relying on cheap labor.
Let me agree with you, then, okay, if you didn't have me disagree with you, Yeah, right it so, yes, it does look like whoever wins the next election is going to be doing austerity mark two or mark three, however you cut it.
I think the thing that.
We want to reflect on looking back at twenty ten is whether that austerity was the right austerity, if that's a sort of particularly helpful way of thinking about it. Certainly, when I was a TV reporter, most of the reporting I ended up doing was around the fact that they did these sort of invisible cuts, pushed them out to the local government, and actually the huge crises we then went to have put to Brexit to one side for a second. We were around drugs, were around violent crime, were around
old people, and about sexual care. So actually I had this period of optimism I don't remember as a reporter.
I don't remember it feeling very optimistic.
I remember, you know, a lot of kind of anxiety about that huge reduction that they did.
Of course that phrase fix the roof while the summer shining. I think that they do.
They think that actually building up that sort of war chest enabled them to go into the pandemic and then go into the war in Ukraine and then spend down on and so on. So I think there is a sort of complexity to all of this. Yes, they are retrenching. If they win the next election, label will have a
similar job on their hands. But they think it's because of this sort of you know, the big bazooka of the Hoover, Dawn and dorsh that went out to use Boris Johnson's phrase of the time, you know, when they spent on furlough, when they spent on sea bills, bounce backloads, eat out to help out the law, you know, propping
up theaters, all of that extraordinary amounts of spending. So there is a kind of there is a sort of question around, you know, once you have spent that much on those sorts of things, paying people's wages for so long, paying people's energy bills.
I think we forget.
Any government is going to find it difficult to move on from that if it is the case that we are going to go into a period where the next parliament is lower spending and we assume that they will ring fence in HS, they will ring fence in education. Difficult choices for the Labor Party as well. What is
the right way to do it? Bearing in mind as well that those those local government cuts have happened already, So that so that kind of there's the low hanging fruit, to use the horrible phrase, you know, it is not on the tree anymore.
What do you do next?
And you know what what I think?
Rachel Breeze was asked about it this morning on the radio, and what do you do?
John? How do you see the blueprint? I mean if you look at the UK and how it grows, If it grows, like, how would you compare it with the US in three four years?
I think the world basically there's a kind of there is a kind of basic comparaicony you look at the US. What's amazing about the numbers is that the private sector, Adrians should written about. There's a private sector is doing amazingly well. It's doing staggering well. That the public sector, going back to my earlier point, is a complete mess. So you have the Trump versus Biden scenario and everything around that. The politics of America have seldom more dysfunctional.
Congress running out, people worried about the debt in a way, if you think Britain splurged a bit, it's nothing a bed with the money it's being pumped out recently in America.
So all those things have happened.
But the basic idea of productivity of the private sector pushing ahead, even the slightly ludicrous row open AI is a memory or a reminder about how much further ahead America is in these things and other places. So I think it is there is America has got this way of saving itself, which is that private sector.
And just but to push back a bit.
As you know, there's quite a lot of sort of critique of that view of the US, like through the through the decades where they're very good at taking leave well for private sector to take the credit for things that actually had involved quite a lot of public sector investment. You know, every failure is public sector, and any success is immediately owned by the private sector.
And there's lots of.
The American public sector as well.
So I'd explained the politics as being a total shit show if you don't mind.
But but it's.
Not that slightly different from the public sector and the money that's going in If you look at Biden's you know, there may turn out to be an enormous amount of waste involved in the infrastructure build of chips or the IRA, but that is actually money that's largely going into private investors' hands and manufacturers who are actually you know, and innovators
who are going to take that money. As I say, some of it will turn out to be in the wrong place because they've been they have quite an ambitious way of trying to push that money into different parts of the country, but it is almost entirely going to the private sector and giving a lot of this dynamism and momentum. I mean, just to make you feel a little bit worse. Two point six percent growth I think the US maybe this year versus zero point four for
the UK. And what's really striking about the difference is that you've also got two point six or thereabouts growth in productivity output per head as well as.
The growth in output.
Productivity is going down.
No, no, in the US. Yeah, in the UK it was actually the last number was negative. But I'm just going to round that to zero. But yeah, some of that is a Biden money.
There's definitely also saying if you look at green jobs, particularly Legos very good on this. You look at the amount of money that Biden has just chucked at Green that is the IRA and all the various different bits of that your brilliant private Yes, but it's also laid down a chalnel to the European Union, they responded, and British, I think the amount of money Hunt put in this week looks culturally.
One of the striking things about the response the Labor Party's response to the Autumn State was how petty or.
Silly it was really or not quite silly, but petty difference.
Rachel Reads came back from Washington a few months ago talking about secure inomics and the Green New Deal and spending lots of money to you know, the active states with lots of money around, you know, to to generate growth. And now the Labor Party is no longer talking about that because quite simply, the reason the money around they can't use. They can't do that sort of thing. So whatever Biden has has been doing, and he's been doing very very big spending or party won't be doing that.
So one of the things that this budget does, is this mortem statement does is confirm the fact that the Labor Party doesn't really have very much room to maneuver.
It's going to come into power at some point next.
Year or early in the following year, and it's going to have a whole bunch of spending departments which are being squeezed. It's going to have the highest tax take since since the nineteen fifty is, it's going to be
in a desperately poor situation. Is a very interesting comparison between when Blair came into power the Conservatives basically left him an extremely good legacy on which you could build and the tour that the Labor Party is not going to come into power with a dismal economy, dismal productivity figures, dismal public spending figures, an incredible feeling of gloom.
Across the country.
And now you know, as far as I can see, you're going to have two mainstream parties that are going to look played out. And I think a big surge in the right in terms of the sort of fargest right, and I think Corbyism, Corbynism returning against a sort of stagnant and failed labor.
You have to stick up for you there.
Well start, so let's get onto the rise of the right in a second. I think Rachel Reeves is probably doing in in case I'm not doing what they need to do right now, which is if they were tempted to say we're going to we're going to do ira ira ira. I've learned if if we were going to do that, it would be it would be a trap.
And so you know, I'm sure she you know, you.
Saw this debarkler over the twenty eight billion, and lots of people in the climate world, you know, saw this is the kind.
Of great, great, great green hope.
And then even the Labor Party with even Ed Miliband at the forefront of this movement was having to say, well, no, we won't spend it immediately, we'll do it in the middle of Parliament when we've got the money if we can, and boring cass come down.
And also we'll do it. We'll see it.
Well, we'll be the seed money and the pro finance will do the rest. So very different really and not not not not wrong, but are very different prospectus. But that's because if she goes any further on on you know, spending. She she immediately brings up that kind of gray hands as was back then Tory chairman attack that they are,
that they are going to waste people's money. And to Stephanie's point, you know, do you really want any government spending twenty eight billion when the private sector might might actually have a better idea on how to grow some of this this this low carbon tech. So that so that I think to be fair to them, you know, whether they immediately get into power and say ha, only joke joking, I don't think they can do that either or not only joking, but you know what I mean, you know, we didn't mean.
It, and we'd think there's I think that's endible either because there's a there's a trust, there's a trust thing there.
So it's going to be what they say, which is middle of any labor Parliament, they'll they'll inch up to spending it. I think on your there's obviously many more things for but on your point about the right, because we talked about this earlier and we've obviously seen the results in Holland in the last twenty four hours.
Let's just think this through though.
You know, if the Tory Party lose the next election, it will depend on which.
All right, in your.
Scenario, when the Conservative is the next election, who they have left? So what is the nature of the rump MPs that are left, because that will determine you know, are they red, well, are they blue? Will are they both? So that will determine some of that. And then secondly for you shaking your head.
Is you know, I'm just looking for the various people who are hoping to be or at least one person who's hoping to be in the.
Rump said, then you've.
Got if you've if you've got the Conservative Party, then in opposition, they will probably at this point be having to go further to the right if they feel that that is the space that has been vacated for them by the then new labor government, maybe even coalition government of a different sort. So I just don't think we can say for certain, especially given part of what the
Dutch result is about is about wanting a Brexit. I know, you know, it's a difficult, it's you know, most people in this room, i'm sure think Brexit was wrong, but.
That is what that's what that result is.
The migration figures we took in seven hundred thousand people, enough people to fill Glasgow or Newcastle. That's a hell of a lot of people in a country that voted to bring immigration under under control. I just think we are creating the basis for enormous social discontent and this narrowing of the political focus of these two parties that John has a representative of the global oligarchy, is creating a huge amount of potential frustration in the political system.
It would be completely true if you didn't have the government talking about stopping the boats.
Now, you are right, they're not sure.
But it is not the case that you have a sort of vanilla beige centrist establishment loving and there's.
Nobody trying to do anything on this front. You are right that they aren't. They are right now struggling and it is yet to.
Be seen how they actually accomplish their aim to stop the boats. And that is where your oxygen for this movement will come from. But at the moment you can't. You know, another panel would be saying they're two right wing on immigration.
Now what I'm thinking of legal migration figures, you know, which are very big because basically, because we have a low skills, low productivity, aging economy, which is sucking in large numbers of.
Immigrants who work that.
The indigenous people will not do, and that is creating a very unstable But they're never political basis for the political system.
The Brexit vote was not about no immigration. The Brexit vote was about controlling immigration.
Now I agree, and the people who voted control vot I don't mind if it's seven hundred thousand a year.
I don't think that's true.
So actually, if you spoke to Boris or Michael Gove at the time, and I think I think it is, it was a a I remember thinking at the time it was a problem that they were not being clear enough that they because they're economic liberals. Okay, they shape shift too, but but at the time they were it was about control. It wasn't about reducing, especially something like Michael Gove. Now I agree that that was not and I remember thinking at the time, this is not being
clearly expressed. And you will have a problem when people have interpreted this election result as.
One thing.
When when when when the establishment is interpreting it.
But if you take you're not building houses and you're not building struct you're creating an enormous state.
Can I ask you this?
And then I want to put the same question to John. The UK still has a lot going for it, and I guess there is money from a broadway to be deployed with the stable government. What does the UK in your eyes right now compared to the rest of the world, And you're what does it have going for it? Me?
Yeah, I'm one question.
I think we're appalled productivity, stagnant country. I think we have a very good universe, a very good university sector, a very good creative sector, a well educated at least, a financial system that was good. But all of those things, you know, we have a concentration of wealth and creative activity in a very small chunk of the country amongst the very small group of people. The great question is how to disperse, disperse and spread.
That that that that wealth and opportunity around. We failed to do that.
We're going back to Cameronism, I say, which which pours money into the into the rich, squeezes the welfare states and creates ultimately a populist explosion.
Under different policies with more more stable.
It's usual there is basically from the point of the oligoistic outside investor, the basic point about investing is you have choices, you decide, you decide where to put your money at the moment.
You look at the.
Continent at the moment, you look at problems in Germany, you look at the problems in many other places, and actually Britain.
It's totally true.
I don't think anyone who invests money anywhere in the world thinks that Brexit was a great idea, but there is. I think there's been a much quicker realization outside Britain than there is inside it. That actually, look give or take some other things. If you've just come back from New York, you've come back here, you think the subway is safer, you think that the culture, things are cheaper.
You've got you'll see a lot of enthusiasm for people their immediate starting point is, well, Britain would be a good place to start. It doesn't mean we are so fixated by this debate, which is very easy to have. Is that we could have been so much better if
Brexit hadn't happened. If you're looking at it from that wonderful class of people which Adrian's decided I represent, then actually, if you're deciding where to put money at the moment, Britain still got a lot of attractions, partly for the reasons that Adrian outlined all those different sectors which were quite good at but also just in comparison, you are still you look at what's happened the Netherlands, you worry about that in other countries in Europe, and you think, well,
actually this is not a bad place that I was in Asia just before. Again, the first site if you're coming from China, you're coming from Singapore, you're coming from Hong Kong, the first place you look is here. So we do, yes, we are right to brate all the fact that we could be doing better than we are, but there is still actually a degree of basic attraction steada.
Obviously we are in the top two exporters of services in the world. I know, that's continued to grow. There's quite a lot of very lucrative It's not just you know, we think of the sort of service sector as being kind of cheap, imported labor whatever. Of course, there is there is some of that in hospitality and other sectors, but it's we're all, you know, it is also finance, cultural industries where the journalism, God help us, there's a you know, there's a range of things where we could.
I think Adrian has identifies the key problem that this very successful, very lucrative, not just the elite businesses are producing I don't know, seventy percent of their value added is in the southeast and then actually very close to London. So that is that is the key challenge for any new government or old government is how if you want to double down on that.
You can't suddenly become Germany.
But how do you make our other big cities, maybe just just a few, you know, Birmingham or Manchester actually have some of the same some productivity of London, you know, And I think that's where you know, I'm quite I'm quite interested in the sort of decentralization agenda. I think
on a lot of economic and social issues. Actually they are that that is the only sort of thing lever left to pull is to give more power to local governments who have so little of it and certainly very little power over money in this country relative to other countries. But I think even when you're talking about leveling up, you also have to be honest that this kind of growth that we're talking about is going to come from
big cities, from a handful of big cities. It is not going to come from as Boris Johnson tried to tell all these these left behind, all the hell back towns, we can bring jobs to your terms. You know, their their strategy has to be based on their connectivity with a big city, and if we're kind of honest about that and then empower those cities and the people around them, you never know could work on that note.
Thank you, Thank you so much. Thank you to the panelist. Thanks for listening to this bonus edition of In the City. This episode was hosted by me Francine Laquas. It was produced by Summersaudi. Additional editing by Blake Naples. Special thanks to our co host Alecra Stratton, John Nichols Waite, Adrian Woolridge, and Stephanie Slaunders.