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Welcome to in the City of podcasts from Bloomberg about the story is important to the City of London. I'm Francin Laqua. We're bringing you something special today. You'll be hearing an interview we did with the UK's new Chancellor, Rachel Reeves when she came into Bloomberg offices in London earlier today. Afterwards, we'll also be joined by Bloomberg UK Economy Senior reporter Phil Aldrake as we debrief the interview.
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Band, clear of the doors.
Chancellor, thank you so much for joining us Bloomberg. In two weeks since the UK election, you've certainly hit the ground running. Today there was also, you know, talk about this fiscal lock in why do you feel they need to do that.
We've introduced to Parliament today the Budget Responsibility Bill that was first announced in the king Speech just yesterday, and the purpose of this bill is to provide the fiscal lock so that never again can a Prime Minister or a Chancellor do what Liz Trust and Quasi Quatting did with their disastrous mini budget just under two years ago.
So this will mean that the Office of Budget Responsibility, the Independent Office, can always provide a forecast when there are significant and permanent tax and spending changes, specifically worth more than one percent of GDP. That would have meant it would have triggered an OBR forecast back when Liz Trust and Cozikarten introduced that disastrous mini budget.
And so that I guess it is something that investors will, you know, take solos to announced to what the premis said that you will achieve that two point five percent target.
Are you confident that's achievable?
So the purpose of today really was to give businesses, give investors that confidence that Britain is a stable place to invest and do business. I'm determined to do that. We were elected two weeks ago on a mandate to grow our economy based on that stability that is so essential to underpin any economic decision making, and so that's why this bill is so important. Now. I'm under no illusions about the scale of the challenge that I face
in this job. There are going to be difficult decisions ahead, but I was really clear during the election that everything that we put forward, whether that is on the NHS or on defense or on tax policy, will always be fully costed and fully funded. That's very different so what we've had these last fourteen years with decisions with no regard to where the money's going to come from. And I'm going to.
Be different answer.
I know a lot of course of what you're trying to put in place will depend on private capital coming into the UK. Have you had discussions with institutions, investors, even pension funds of their willingness to come to the UK.
You're absolutely right that our plans to grow the economy depend on businesses and investors choosing Britain as a place to invest. And I want investors to look at Britain and see a country that's got a stable government with a clear mandate to grow the economy and chooses Britain as a stable place to invest in an increasingly volatile and uncertain world, which is why the fiscal lot today is so important, but also the other changes we've announced
in the last two weeks. We have announced more policies to grow the economy than the last government did in fourteen years. In the first seventy two hours in the job, I made more comprehensive changes to the UK planning system than the previous government did in more than a decade, because I know that we need to unlock that private investment that businesses tell me they are ready to invest if we get rid of some of those blockages, and the blockages in the planning system I think are more
significant than anything else. And so those changes to bring back mandatory housing targets for local authorities, ending the moratorium on shore wind calling in planning decisions, on data centers and on housing really crucial both to send a signal to business that Britain is a place to invest, but also to make sure that we can get on with things and get building in Britain again.
And are they listening.
Have you gotten cars from big investors saying yes, that's a plan that I wanted to see and I'm.
In absolutely so. In my first speech at the Treasury a week and a half ago, we had businesses, we had investors in the audience met afterwards. The following day we announced the creation of a National Wealth Fund, work led by Mark Carney. The task was led by Mark Carney for the Labour Party when we were in opposition now reporting to a Labor government, and on that Wealth Fund task force, we also had Amanda Blank from a Viva Vencat, from Berkley's, Antonio from Energy and other big
UK investors. And that is absolutely crucial because there's no plans that I can draw up in my new office in the Treasury that are going to work unless we have business buy in. And I hope that businesses saw in Labour's manifesto and also in the plans that we've announced in government have the fingerprints of business all over them because these plans have been co written with business, because they're all about unlocking private sector investments into our economy.
Chances are you considering tax breaks to either boost pension savings or make UK investments more attractive.
I'm not going to announce any tax breaks or tax changes without the same where the money is going to come from, and we will have a budget later this year. But I also just need to be really clear and honest about the scale of the challenge that we have inherited with the public finances. We're going to have to make difficult decisions. We need to fix the foundations before we can start rebuilding things in Britain. But unlike the previous government, I am going to be honest about the
scale of the challenge. I'm going to level with people and together we're going to rebuild our country based on that private sector business investment to get our economy growing. Because I asked the Treasury officials to give me an assessment of how much stronger the UK economy would be today if we'd have grown at just the average rate of OECD economies these last fourteen years, and the answer is we'd be one hundred and forty billion pounds bigger today,
worth five thousand pounds for every family in Britain. We have got to grow our economy. It's the only way to improve living standards, keep taxes low and have the money that we need for our dilapidated public services.
Jenra, you're also promising to reset the relationship with European partners.
Are there any quick wins there to be had?
Well, the Prime Minister is hosting European leaders at blenh And Palace in England today and that's really important as a chance to reset those relationships and foster a new era of trust between the UK and our nearest neighbors and trading partners in Europe, and we're determined to do that.
It doesn't mean going back into the Single Market or Customs Union or bringing battery movement of labor, but it does mean having a closer trading relationship and also building a stronger strategic security alignment with our neighbors in Europe given the threats that we face as a continent, and so Blenheim Palace just today is a chance for us to begin to reset those relationships and foster a stronger relationship between Britain and our neighbors and allies in Europe.
But are there any industries that you would see you again when in terms of parallel kind of you know, some of the laws being together.
Well, there's a number of areas where we would like to make some changes to the deal that the previous government secured. We would like the mutual recognition of professional qualifications to help our services sector, reduce the bureaucracy for our cultural industries when touring around Europe, and a veterinary agreement to help our fantastic food and farming sector in Britain.
That will require negotiation that will require give and take on both sides, but we want to boost our trade, make it easier for great British businesses big and small to sell goods and services right across Europe.
Given the challenges you were mentioning, when can we expect a budget from new September or October?
Well? I said in my first speech as Chancellor of the Exchequer last Monday that before the summer recess I would come to Parliament with an update on the fiscal position, the spending inheritance that this incoming labor government is now having to deal with, and I will set out when we do that statement the date for the budget in the autumn.
But did you see that being a three to five year spending reviewer, does it need to be shorter to make sure that the OBUA doesn't take into the growth you're expecting.
Well, we will set out those the details and the dates when I come to the House of Commons in July. But you know Francing that I want to bring back stability to the UK economy and that gives means giving certainty to businesses and families, the state of the public finances, what we're going to do to put them on a
firmer footing. But all that depends on bringing growth back to our economy so that we can repair our public services, repair our public finances and ensure that living standards increase, that working people are better off by bringing investment, bringing business back to Britain.
But chance for that growth target is it two point five percent for next year or is that something that you'll have to assess.
Our ambition is to have the fastest growing economy in the G seven, with good jobs and productivity growth in all parts of the UK. And that's why all the announcements that I've made since becoming Chancellor, the planning reform, the creation of the National Wealth Fund, the fiscal lock that we've introduced to Parliament today all about bringing the stability, investment and reform to our economy so that we can grow our economy and be competitive in that global economy.
Again, so difficult to put a number on it. I'm not going to.
Put a number on it, and it's the end up to the Office of Budget Responsibility to make those forecasts. But I'm doing everything within my power, working with my colleagues in the Cabinet, to ensure that we are pursuing a pro growth, a pro business agenda to bring investment back to Britain because investment is the bedrock of a strong, successful economy. We have the lowest share of investment of
neg seven economy. I want to turn that around so we can bring good jobs, bring prosperity back to the United Kingdom.
Chance do you worry about wealthy tax payers moving to Europe? What can you tell us about non darmes.
Well, we were really clear in our manifesto if you make Britain you're home. You should pay your taxes here and that's what the outgoing Conservative governments we're looking to do as well. But it is important that we bring in that tax revenue and that if you live here, you should contribute to investment in our health service, in our defense, in our law and order. And that will
happen under this Labor government. But we want Britain to be a really attractive place for investors and businesses and successful wealth creators and entrepreneurs from around the world, and that's why we're determined to unlock our economy for private sector investment through the planning reforms, through the National Wealth Fund, and indeed through the other changes we're going to bring in, whether that's through the skills system or pensions reform.
None. Times will be very different to what the Conservatives announced. The plan that you're expecting for.
Them, well, there's two differences between what the outgoing government was proposing and what we will do. First of all, we will bring those changes forward by a year, and second we will make reforms, for example, around inheritance tax. It is right that if you make Britain your home you should pay your share of taxes here and an outdo data system based on where your father was born to determine how you're treated in the tax system. That's
just not right. It's not fit for a modern economy. Now, of course we will have rules that if you come to Britain for a short period of time on to comment with work, for example, that we will not be taxing your global income. But if you make Britain your home, if this is your permanent place of residents, then just like everybody else, you should pay your taxes here. What a modern system fit for a modern economy. We don't have that today. Those are reforms we want to bring in Chanson.
When you look at Shean, would you welcome an IPO in the UK?
In the City of London.
Well, I welcome the FCA changes just last week to really turbocharge listings in the UK, and I want businesses to choose Britain as a place to list. For the last few years, we've seen story after story about companies delisting from the London Stock Exchange, listing in New York, listing in Europe. I want to turn that around. I want Britain to be the place of choice to make an IPO to grow your business. That's why I welcome the reforms that the FCA put in place last week.
It's also why I'm determined to change our pension system so we can unlock some of those assets under management to help start up and scale up businesses access the capital they need, so we can keep more businesses here in Britain.
Chance.
The US is also really going quite hard on tariffs with China. We're going up to an election. The UK has not really squared with the EU on ev terrorifts, for example, or the US. How would you deal as a small open economy with China and Chinese tariffs.
Well, we are a small open trading economy and we benefit from those trade links with countries around the world. Both for exports and imports, but also for foreign direct investment. And our view is that where possible we trade, we cooperate, and we challenge in areas where it's important to challenge, but we don't want to close the UK economy down to imports and exports. We benefit from those trade links around the world, including with China.
Chanceller, thank you so much for your time.
Thank you.
With me today in the studio to talk about the interview you just heard as Bloomberg's UK Economy senior reporter Philip Aldrig. Phil thank you so much for joining us now. People have to understand that every time we have a big interview, we're like briefed within a ninch of our lives with all the greatest minds at Bloomberg, and Phil
you're one of them. So we spend a lot of time trying to figure out, you know, what the message of the chancer was, how we'd prepare for questions, what we'd ask her.
What do you.
Think her key message has been. I mean they've done so much in two weeks.
Yeah, they have been very busy. Actually, you speak to the Treasury officials and they were in the immediately after the election that weekend they were working away and there was you know, they wanted to get going fast. The labor government. The main thing, obviously she was trying to the message she was trying to give was that you know, this is going to be a government that has single minded about getting growth, and so prerequisite to that is stability.
And then the mechanism of growth is going to be investment, and a lot of that is the private sector capital that she wants released. And so these were these kind of three things that which sort of guide the agenda and her sort of philosophy of how to get the UK strong and stable.
I thought it was quite telling that actually, so this is her first TV sit down interview since being appointed chancellor. And it's interesting that she spoke to Bloomberg because we speak to businesses. So I don't know whether it was it was more of a pitch for you know, private capital money coming from abroad, or is it with businesses and saying, look, well, achieve growth, but there are going to be very tough decisions ahead.
She clearly wants to win both the investment money and business investment in the UK. She actually said there are no plans that I can draw up in my new office in the Treasury, that are going to work unless we have business buy in, which other was quite a good telling line for exactly how she's thinking about this. So obviously they've their premises as she as she has made clear who she kept saying, I'm going to level
with the public. I'm honest, I'm different. I'm not going to pretend that we can spend when we can't spend, which is which does set up a sort of interesting budget spending review situation in the future. But the fact is that the inheritance is pretty poor, so they don't have much money. So where do you get the growth from.
You have to get it from the private markets. Effectively, you sort of leverage it in and hope that that's going to be the mechanism and obviously the stability of this kind of fiscal lock that they have set up so that the OBI will always judge whether the government is establishing a sort of economic stable economic future by testing any of their spending programs which are thirty pounds or more, so there will be an automatic thing.
Now.
Those things will be absolutely vital to setting the sort of bedrock for the UK to try and build sort of growth trajectory from there.
Who do you think that speaks to? Again, it's almost like self imposing budget rules, right with an independent third party that looks at what you're trying to do and trying to spend. Will that be reassuring for global markets that we're not going to have a list trust moment? And she was very clear that you know she never wants that to happen, or is she trying to do a president so that no matter what happens four or five six years, that you know that mini budget meltdown doesn't happen again.
If you look back to sort of before the pandemic, it never happened that you would have it's one percent of GDP of either spending uncosted spending or uncosted tax carts will have to the OBR is obliged to step in and do an assessment of you know, what is the scale of the black hole that this will cause so effectively will make the government, any government nervous about doing anything which is uncosted because they know that they're
going to have someone breathing down their necks straight away. Now, the clear point of that is because we had the LDI crisis or whatever it is that you will if you're effectively giving any future government reason for thought or just a pause for thought before doing these uncosted, big, uncosted things. So yeah, that should be reassuring to the to the asset managing manager market, to the guilt markets, et cetera. That should, in theory, prevent another l d
I type trust mini budget problem emerging. So I mean that's I mean, she's definitely talking to the big pools of capital out there that are going to be buying government debt. And she did name she actually named Aviva and Legal in General as some of the backers for her National Wealth Fund, so that you know, she's saying, we are getting these these you know, buying from the investment community.
What's the one question you wish she answered.
It's tax rises. What do you get which which tax is going to go up? And actually you did ask that when is the budget? She said that we're going to tell you when the budget is at the end of July. And that is itself is a little bit of a revelation because it does suggest that the budget won't be until that the earliest budget will be is October. Because it's kind of this ten week leading period for
the OBR. Will there be one year spending review or a more comprehensive spending review so that the one year one would just give them time to see if their growth plans worked. Now, these are really important judgments to make, because if you go for a big comprehensive three or five year spending review right now, the public finances are not strong enough to support, like, you know, a load of spending without massive tax rises that would accompany it.
If you wait a year and you get the growth which they say they're going to do, then maybe you just have fewer tax rises to pay for this. These spending requirements for the public services, which she described as dilapidated. So I wish she'd answered those questions as she, of course she judged them being politician. I did think that this this she did say about she.
Was quite interesting.
Yeah, on China, I mean that was like our last question, you know, given everything that's happening in the US with the noise and of course the US selection of the fact that they're really bashing China really hard, and even the EU is getting on board with her ups against Chinese EV's, she was much more measured, like careful even.
Yeah, I thought that was that was quite striking. I mean, if you think about what's going to happen if if Trump wins, and you look at what's happening, as you say, with the EU and Chinese evs, and she was like, we are a small, open trading economy. We like imports and exports, we need foreign direct investment. It was like, you know, it's absolutely if you're gonna if you are staying up where we want people's money. You can't say that at the same time as saying, you know, we
think China is a security risk or something. So that was that was that was very sort of subtly revealing. And also you asked about she or Hervey, you said the sort.
She didn't say the words she I mean, I know what still no one knows how to pronounce it, despite us doing like a whole podcast on it with with Andrew Felstead. But she she welcomes IPOs. This would be a controversial one though.
Yeah, it was quite striking before the election actually that we had Johnny Reynolds the Labor Business Secretary now and Kemmy bad Knock, who was the business sectary for the Tories, and you had Johnny Reynolds saying, yeah, we would, you know, we think that you should have these kind of companies in the UK so we can keep an eye on them. And Kemy's bad Knock's version of events was no, that
she was much tougher. She was like, there's questions about, you know, whether the labor rights and other controversies that Shine is is facing, so that obviously labor do you know, they see themselves as a sort of they're going to be one of They're going to be careful, as you said, it's perfect word, but they're going to be careful about any decision making because they're so acutely aware that the future for the country, in their minds, depends on the
investment that we get from the from the capital markets and from the private sector and from businesses.
Which is why she wouldn't really talk about a growth figure, right. I mean, kirre Stormer floated at two point five percent growth target, but then she wouldn't be pinned down on a specific number.
I suspect that Kirstama regrets getting pinned down. He was pressed and pressed in it, and so she was gonna try not to repeat.
She succeeded.
Yeah, exactly two points, I mean, is very ambitious. So and I think she's probably aware that two point five percent you're given that. I mean, you know, the Bank of England has ours has its estimate of our sort of growth potential that little more than one percent. So for us to be achieving sort of two point five percent regularly, that would be a step change.
Yeah, she said what she wanted to be the She wanted the UK to be the fastest growing G seven economy.
Yeah, that also depends on how the others do.
Smart answer, Chancellor Phil, Thank you so much, thanks for listening to this week's In the City from Bloomberg. The episode was hosted by me Francin Laqua. It was produced and sound designed by Moses and production support by Summersati. Brendan Francis Newman is our executive producer. Sage Bauman is Head of Podcasts. Special thanks to Philip Aldrig and the Chanceller of Rachel Leaves. Please subscribe, rate, and review wherever you listen to podcasts.