After a historic few days in Britain with the Queen's state funeral this week, it's really now back to business. It is back to business for the UK. But Dave really are a question, Like our last episode pointed out, was there ever really a break for the new government Behind the scenes, we know furious work going on for a huge economic support package bailing out households, businesses, also a vast rat of tax cards to try to stimulate the economy. Yes, it is a big week for the
Prime Minister. She started the week by flying to the United Nations General Assembly New York, where I am. It's her first outing on the world stage as UK Premier. And then of course she ends the week in the House of Commons as her chancellor lays out a mini budget. And the day before that we're going to have the Bank of England the markets forecasting yet more rate hikes. That meeting was delayed for a week because of the official morning period, so we're gonna have the Bank of
England Thursday afternoon. Dramatic moves there, and then this statement which really is a sort of emergency budget from the new Chancellor on Friday. She's really back full throttle under pressure over a deepening economic crisis. I'm David Merritt in the London studio and I'm francing like when the New York studio not together again, David, But this for the first time a long time, is actually for a reason. I'm here for the UN General Assembly and it's especially
important for the UK Prime Minister. It's her first foreign trip as PM is first trip as well, exactly. So this is in the City Blombergs podcast, connecting you to the stories at the heart of the City of London. This week, as Francine mentioned, British politics has returned full throttle with the new Prime Minister considering to face pressure over a deepening economic crisis. So our Liz trusts and
her team ready for this high stakes moment. And does the City of London think they're making the right calls? We'll hear from Eagle and General Chief Executive Officer Nigel Wilson, who says Chancellor Quasi Kwarteng has the right intent, but still the question remains can he deliver the first Bloomberg Opinion columnist Marcus Ashworth joins us in conversation over some headline grabbing policies that might be coming and whether Quartengs
all systems go approach is winning anyone over. So Marcus, let's start with reports that the government is considering scrapping its cap on bankers bonuses. The problem is that if you focus on bonuses, it means a lot of people will be discontent. I think that I'm going to hope that this was just the leak, not a good sign of the start of a new government, but that old government had lots of leaks and this one probably is
going to have the same problems. You wouldn't put this particular cart before the horse of of changing the rules generally in the city, which you've got thoroughly ignored throughout the whole Brexit process. And perhaps this new government wants to try and appreciate that one to the economy is focused on financial services. The city needs to have a clearer sense the direction and perhaps some of these rules
need to be changed. But um, the government needs to do this in sync with the Bank of England and the wider administration part of it, and indeed with the with the city itself, which is going to be circumspect about bonuses, because this is actually a good thing for banks, not necessary for bankers. It's good to focusing the attractiveness of the city, but in the right way, and it needs to be part of an overall package, not leading
with these ridiculous bonus right. I'm their very They're very headline catching, aren't they, But not a vote winner, well know, quite the reverse and more active, willful sort of please write this into your Labor Party h and liberal Democratic election of leaflets. But at the same point, if it's part of a wider package, then yet the government should not be in the paid having businesses. It was a rule forced on the city which never really worked with
it very well. As a consequence, basic salaries went through the roof. It's an ugly situation. But this can be unwell at a better time, perhaps after a deal or the European Union there ever is to be one on regulatory equivalence. Moves like this make it less likely, not more likely, and that isn't what the city wants. So that was what I was going to ask, because I mean, is this move likely to provoke the European Union into some sort of tougher line on the city. Well, I'm
not sure. I think they're probably a bit stunned. Like the rest of US as in really this one. First, they know that a bit of divergence is going to come. That's written in the stars. The question is whether or not there can be an overall deal, whether the EU can relax that. Essentially the City is going to allow the control and perhaps the gentle stimulation of the European financial system now certain things like clearing. I think the
city has won that argument. But with regards to you know, where bankers are based and should people trading Euros be based in Europe rather than just in the city, I think there's a there's a fair middle ground to be had and I think you know, we are getting towards their whether the city likes or not, because the ECB is quite insistent on this, but you know, the Bank
of England. We have to play quite a careful game on this and it needs help from the government, not unhelped, but somewhere because this is not about bringing back the bankers that left because of Brexit. I don't think is that ship has sailed. Um. I think it does help US banks and their flexibility, and that's really the big audience here and across Europe and the city. You want to make sure your Golden Saxes and your and your
Bank of America's, etcetera. Are encouraged to employ people here and be able to compensate them without less hassle that they would be maybe in Hong Kong or New York. And that's the comparison I think the bankers have left for for Europe. Are there for a reason I would likely stay there. And timing timing aside. You said the timing is bad potentially in terms of like the publicity, but just this message that the government is getting out
of the business setting pay. I mean, surely that's kind of a good thing for Britain's image around the world, isn't it. Yeah. I mean obviously doing the same with corporation tax. They're not going to hike it. They are trying to say global Britain. You know, lots of clacks alerts going off here, aren't there Aspiration Nation? Sure, that's what people thought when it was about Bagger's bonuses. But nonetheless it does send an image if they can back
it up. But as a one off of his just a one off, then it's it's it's the wrong cart before you know, the much more valuable horse of of regulatory equipments with Europe, which may or may not be ever achieved. But this isn't necessary if this is just on its own the right way of going about it, Marcus,
thank you so much, Thanks Marcus. Earlier this month, in one of his first official acts, Quasi Quarteing held a meeting in Downing Street with a group of chief executives and senior figures from banks, insurers and asset managers, and he announced his plans to release a sort of big
bang two of reforms to boost the city of London. Now, one of the people who was actually in that meeting, Legal ind General Chief executive Officer Nigel Wilson, joins us now for his take on the Chancellor's vision, and also with us is Bloomberg's finance editor through Griffiths. No I thot, it feels like it was only a few months ago when we spoke, but it we're on another planet now,
aren't we. We We've got a different government, We've got a radical new agenda they're going to be pushing through now. The new Chancellor, Quasi Quateng hosted business leaders in Downing Street fairly recently. You were in that meeting. What can you tell us we'll do a bit of a reporting for us. What was it like in the room and did he convince you all that his plan is the right one? I think it was. First of all, it
was great that invited us. You know, the first Cabinet meeting had just finished and the people who wanted to see were the chief executives of them are the biggest financial institutions in Britain. That was a very positive signal around it. And he's naturally a pretty up big guy, and so he was very upbeat about the prospects for the UK and he was actively listening as well as being on broadcast mode. So it was positive meeting from that point point of view. So you think the government
is pivoting to listening a bit more? He said he was in broadcast mode as well. But you know it's no secret is it that Boris Johnson's government um had a different attitude throughout the Brexit years, perhaps to the business community. Without quoting him, I think Catherine I recruited a lot of time we spoke about this and that pivots are actually listening. Do you do you think there's a real kind of meat on the bones of that. Yes,
I would hope. So I think we desperately need to have everybody pointing in the same direction that we need investment led growth across the UK. We've never had that for thirty or forty years, and you need the business leaders to support that investment led growth. And you know, there's still a huge amount of unused capital in the UK and we've got to use that capital to develop and deliver better outcomes. And it's great that the government
wants to engage on that. What would be your top few things that you'd really like to hear from the new chancellor to kind of achieve this proper leveling up and and real kind of getting investment going to kind of do the kind of things that you that you
would like to see. Yes, I mean, if you if you go back to the seventies and the eighties, I mean, the seventies are a predio ismal time and there's lots of parallels between what happened in the nineteen seventies in Britain and what is happening today with inflation rates, a war going on, oil prices, energy prices. We had three day a week and energy was rationed in the nineteen seventies.
We've got a similar sort of situation right now. But what happened in ninety in the early eighties was big back and actually policy, regulation, planning all work together and we built this new city called the City of City of London and it became very dynamic. We stopped there, though, and we never went and made that right across We never delivered right across the country. So London, you know, became this incredible shining staff for the for the for
the world. You know, in the seventies, rubbish was piled thirty feet high in parts of London and learning was depopulating at the time, and we saw a dramatic turnaround. We saw a dramatic turnaround in the economy between Nino n three and you know, I had this discussion with John Major, you know where you know, there was a huge difference between between it because we started to get policy planning and regulation right to create the right backdrop.
And that's what I want to hear the government talking about. And it matters for the whole country that we get policy planning and regulation and everybody collaborates together because there's still the money around, you know, the big banks, in part by accident, we ring fence the big banks, and so there was ring fence. Banks are sitting on huge amounts of capital, the pension funds are sitting on huge amounts of capital. The insurance companies have huge amount of capital.
We need to redeploy that capital into useful activities and there's tons of opportunities for doing that. Virtually every sector in the UK can have a change of regulation, a bit better planning and more investment and that will allow you GDP to grow and per capital income to grow, and we haven't seen that for a long time. So it's specifically to get that done. Then are we talking about, I mean things like solvency too is one. You're talking
about freeing up capital that's currently tied up. That's sort of reform that needs to happen. Yes, I mean solvently two is the easiest win because it doesn't have the overlay of basil, which the banks have to a more complicated situation as a consequence of that. But someboty two
we've had the right to change since sixteen. For whatever reason, we've chosen not to do that, and that's an easy win for the government to encourage more investment by firms like ours and we're putting our hands up and say yes, we'd like to invest more in the UK because it is a great place to invest. And policy has not been changed fast enough. It's been a very difficult time for the government to get through real changes in policy, and all of these things have to change, and the
change in a crisis. When I talked about the seventies, the part of the reason that we got stuff done in the eighties because there had been a crisis. There was a crisis. Check the records, big growth here for the UK. And we're in a crisis now right, we're in an energy crisis. When an inflation crisis, we're war
obviously the Ukraine with Russia. Yes, we are in a crisis, and I think that's why, you know, just blaming the Bank of England for inflation isn't the right answer, and it's actually you know, America has got a very similar level of inflation. Most of Europe has a very similar level of inflation. Inflation is very complicated. We've lived in a world where we hadn't really considered inflation for a
very long period of time. Rates have been very constant and so there hasn't been not so much going on now we've got an enormous amount of things going wrong and people are very fearful of that. And Nigel, what about tax? How how important is it for the government to say something on tax? Obviously we know where what List Trusts is likely to say it's been very well
flagged on corporation tax. But do you think that in fact there could be more that's done on tax across the business world or indeed perhaps for the financial sector that could kind of really kick start investment. I think tax is one item, but actually it's not such a high priority item right now as many of the other
other issues that we have. People have underinvested in Britain during numerous different tax regimes over the last thirty or forty years, and that's because of the lack of collaboration and coordination across the across the across the UK, which has meant our GDP per capital has performed poorly against lots of our peer groups. And we have you know, as we know, only London has a hyper capital income of any of any city or town, any large city or town in the UK was compared with Dresden, Leipzig
and Berlin. And that's in a generation they've caught up in past past us and that's because of these reasons that we haven't done the right things here in the UK for a long period of time. People haven't collaborated together, and people have pointed fingers that other people giving them the blame when it actually isn't their fault. So do
you think corporation tax doesn't have a huge effect. I mean, you know, we've had a concert the it's been a previous Conservative chancellors right who raised corporation tax and said, look, it doesn't necessarily drive away investment. Trust is pretty clear, she says. And Quartack they're saying, look, we have to have lower corporation tax rates that are than our neighbors, than our European competitors if we're going to attract businesses. Is she broke up. It's not the wrong tree, but
it's just one of the elements. And I think it goes back to you know what, what is a comprehensive package that makes the UK more attractive. It isn't a single item if all of the other things are. You know, if it's going to take your seven years to get planning in London, doesn't matter what the corporation taxes. To be frank you keep talking about planning. Actually, and this is really interesting, I think because actually this is sort of out of the remit I guess, of the normal
kind of chancellors plans. But are you saying, do you think this government is going to finally face through Well, they talked about sort of cuts, making it easier to push through programs, getting rid of some of the planning laws that's pretty controversial in some parts of the country. We have to be more forward looking about changing plan changing planning, using compultory purchase orders, which people have always been reluctant to do in the past. And we have
to be bald about these things. You know, when I think of how much the city changed in the in the nineteen eighties for the better. We have to do that right across the country. That's just an absolute given. You know. Corporation tax is just one of those signals that actually we are open for business to do more investment here in the UK and you'll see a more dynamic government as a consequencer. That's the messaging they're giving.
That's certainly the messaging that the that we the chief executives of the financial services sector picked up and we now we we have our job to deliver, and we try and deliver, you know, continuously and for a long period of time. The government has to do the same. To talking about messaging, I mean this boat, the banker bonus cap that is called a lot of headlines in the last few days. There's Trust is in New York. As we record this, she's told our reporter that, um, well,
this might not be particularly popular. It's not a vote winner, is it. But is it about the messaging that sends to investors, to financial institutions that the government shouldn't be in the business of setting pay and leave it up
to corporations. Yes, I think this is about messaging. This is not about massive amounts of um and it's you know, I think this is one of the things that leaked ahead of time because it's an immotive issue and an unpopular issue, and therefore people want to rant rant about it. But actually it's just one of the tools and the many tools that the government is trying to adopt to change the position of the UK. Now, so I do
wonder on this planning stuff. You know, Trust and Quotaine have been very keen to talk about how radical they are and how keen they are to be bold and take on all these sorts of foes, real or imagined around the world. Do you think that they have a sort of appetite to listen when it comes to these perhaps slightly less kind of exciting sounding policies for for
the UK. And again when we kind of put the overlay of the fact that it's two years till the next general election, Yeah, that's the awkward thing because planning takes longer than two years from what things in the UK. Therefore, even if you want to start stuff under the current regime, just just it's quite difficult to get these You know, we've talked about shove already products for a very long period of time and we haven't seen anywhere near enough
of them happen across the UK. Does anybody think we don't need more affordable housing, social housing, built to rent housing here in the here in the UK. That absolutely the case. Would we like to see much more progress made in terms of investment in climate change? Absolutely? Would would we like to be to have the equivalent of Portugal in terms of our five gene network And the answer to that is yes, these things have not happened and the conscovered government has been on watch why these
things have happened. So actually you need to change something to get them to happen, because the capital is around, sitting around waiting to invest in these things, and it's barriers around policy, planning and regulation that have stopped it. But when we look at London's record of the last couple of years for attracting capital, protracting companies to raise capital, even you know that crown has been lost, hasn't it
to other centers? Do you sit coming back? Yeah, well it's not going to come back unless we change things. And that means that you know, regulation has to be has to change change quicker. You know, if we go on to you know, the whole digital digital network that we see and and five g across across Europe, we've fallen right behind lots of places. We can't let that happen. Where we're you know, in the teens, not at the top. We want to be at the top, not in the teams.
And you think Quantine as the matter, Now I think he's he's certainly got the intent. You know, it's now can you deliver? It's the delivery and execution. We've been incredibly welcomed in the United States. You know, if we were as welcomed in the in the UK as we were in the United States, that would be a fantastic thing.
And we we have our capital that we can allocate outside the KOK of our UK annuity assets over fifty of them outside the UK outside of the UK already under the current the current rules, you know, and that's not the you know, these are backing UK liabilities. So we've got the diverse a vacation through international rather than through investing in a different different types of assets here in the UK. That's not the best solution. So delivered that I think there's trust. Use that word, didn't she
and her first speech as Prime minister. We're going to deliver. We're gonna deliver. How long do you give them before you can tell whether they're going to be We'll see on Friday whether it's solid. Me two gets a strong mention and actually there's a plan and a timetable for getting changes here in there here in the UK. And I think all of my banking colleagues will see that as a positive signal if they've sorted out the easiest problem,
which is solvings. You two and then move out to move on to some of the more difficult ones around around banking and also fun management. So do you think we're at a moment where people might come to the view that both banks and insurers in this country simply are being forced to hold too much capital as as a consequence of the financial crisis and that and that you know, perhaps while still being proved intensensible, actually that
needs to be fundamentally reconsidered. You know, we're more talking about the acid eligibility, what it is we're allowed to invest in. That's why over fifty of our assets are outside of the outside of the UK. If there was more assets that were qualified here in the UK, we'd invest in them here in the UK. And so the the capital treatment is just a nudge, And actually it's a nudge which will be broadly equivalent with what's going
to happen in in the U anyway. So it's not that these these are going to hugely divert just that Europe you set some rules which are not the same as the American rules. So the Americans, although they have equivalents, have much better and more attractive capital rules than than we do here in the UK. Nigel Wilson, thank you so much for joining us. Thank you once again. Will you come back in a few months in times, I will be back, don't worry, a great story to tell.
Thanks are listening to this week's in the City. We'll be back next week, but in the meantime, if you like our show, please head on over to Apple Podcasts or wherever you listen to podcasts and rate, review and subscribe. And if you're looking for a daily rap of the stories that matter in the UK, sign up now for a newsletter, The read Out with Allegra Stratton on Bloomberg dot com Slash Newsletters, or check out the show notes
for a link. This episode was hosted by Me David Merritt and for a good portion of it me Francin Lakwa. It was produced by Summersati Special thanks to Marcus Ashworth, Catherine Griffiths and Nigel Wilson.