Welcome to In the City, Bloomberg's podcast connecting you to the conversations and the stories shaping the world of finance. Now with me for this episode is a group that you will continue to hear a lot more of on in the City. Of course, listeners, no a legra, who's here?
Hello?
And recently we also heard the opinion columnist Adrian Woolridge.
Good afternoon, this is fun.
We all got dragged in here at two pm on a Wednesday because Jeremy Hunt has just finished delivering his budget, maybe his last one before we go to the elections, and I don't know what we've actually make of it. All budget day he confirmed a lot of widely expected things.
Absolutely, I think everything big in that had been very very widely trialed. There was nothing really exciting or new in it.
Is this a good or a bad thing? So Marcus Ashworth, also from Bloomberg Opinion said, look, he was outraged because it's really Parliament that should have heard about this first. Does it make a difference or is it just to try and make sure that the markets they are not surprised and they kind of get a sense of the voter.
So how modern media management works? I mean, you can be as outraged as you want, but it's the newspapers that hear first in Parliament that he has last.
As a former Treasury head of communications, I've had a strategic communications. I hate it. I really hate it. And I tried to do when I was in the Treasury. I tried to do a budget where nothing leaked because it so you've got leaking and then you've got pre managed briefing, which is mostly this. But I think some of the managed briefing is because you assume it's going to leak, so you're kind of trickling out what you
want and the narrative you want. This is not me as my former treasury self, but rather the people in there right now and in the recent budgets, they're managing the narrative so they can try and manage their people, and otherwise something gets lead and they can't manage that story. So it's sort of the tour in goes hand in hand, but you are ending up with a situation like today
where you almost have nothing left. And Marcus, dear Marcus is getting outraged on behalf of Hansard and parliamentarians, and rightly so. But there's also a sort of sense for the rest of us around where is that kind of stake craft where we are used to budgets and not
so long ago where it was real surprise. There was one though, which was the child benefit, which was not quite so extensively, and I think I think that is something that's potentially interesting around the kind of voters they still want to be trying to connect with.
I get a sense it was a big problem with expectations management over this budget. A month or so ago, the expectations that their arose were quite big, that this would be quite a big budget, that they had quite a lot of headroom for maneuvering, and then the OBR came back, wait a bitute, I don't think you've got that money. And the money available for giveaways seem to contract over the last month, and the government was then caught in ketchup trying to brief the manage expectations down a bit.
And what was this a budget for? Is it really to get voters? The fiscal head room was so small that actually there's not you know, they couldn't really have done a bazooka or anything like that.
Yeah, it was. It was not as a Jeremy Hunt fan it was not brilliantly handled because, as you say, Adrian, you went from a situation where almost as soon as the last fiscal event finished, they were briefing there'll be more, there'll be more, there'll be more. And then they've been in a situation where they've kind of kind of pair
back what the more is. And that is in the context of you know, a set of back benches who were just desperate for more, and so they you know, potentially they'll be quite happy today because they'll think the job is done of you know, another tax cut has been achieved, and you know that is fundamentally Sunakan Hunt's kind of loadstar, philosophical creed, etc. So I think they won't be too focused on Eeke, we kind of got ahead of ourselves there and we got away with it.
And whether or not they did get away with it, I mean, we've yet to see, as we're recording this so early, but we've yet to see what the backbench opinion will be, whether it was a nothing burger or whether actually they feel he's done enough.
Against that, I'd say two things. One is that it was quite a political budget in the sense that he was quite constantly trying to draw red lines between himself and the opposition. You're the high tax party, you're the undisciplined spending party, where the low tax party riskal responsibility. And he also got to dig at the Liberal Democrats, which I thought was quite interesting since they're quite an important opponent. And the second thing was the issue of
trying to cut National insurance even further. There were promises that double taxation of income is a very bad thing. We want to get rid of it, or at least reduce it. I can think of two impossible interpretations of that. One is that there's going to be another significant fiscal event before the next election. This was indicating that the election would be some time off, or the other was just throwing a bit of red meat at the backbenches to make sure upset.
But I wonder also whether the Chanceller was really speaking to the markets. Right the memory of Liz Truss frankly lives on, and so maybe it was better not to royal or panic the markets, then, you know, deliver an underwhelming speech.
One of Labour's better sort of barracks, I thought, was where's Liz? Some new was shouting, because.
In the chamber but I think the thing I was most interested to see was that they didn't pay for it by reducing spending into the next parliament, but it's due to increase by one And the rumor that was quite quite again probably pre briefed by Hunt's advisors, was around do you pay for that, which is what many backbenchers would like, by reducing public spending, And he was quite keen to to make heavy weather of the fact he'd not chosen to do that because I think you know,
we've talked about it on this pod. In fact, we've the three of us together have talked about this just last week, this idea that they that the evidences, the polling and people are against tax cuts over reducing public spending. So him sort of swerving that, like clearly looking at it, contemplating it because it would have appealed to some of his people, but deciding not to do it, I think was probably the right decision. I think that it would have it wouldn't have been very Jeremy Hunt.
I mean, the guild sales are a little bit. I mean, he did and this is something that Alex Wickham put in the in the blog that if you look at it from a rational point of view. I think there are seven points where actually taxes are more or less going up. And there's you know, the non darm system is abolished, there's a new vape tax, so one off increase in tobacco duty, business class air duty is going up, Holiday home lendings regime will be abolished, and multiple dwellings
relief will be abolished. So all of that is money coming in absolutely.
And again I think you know a political budget in that it was drawing lines with labor. But in fact what's so interesting is that both Labor and the Conservatives are quite close together on all sorts of things. And you know, the stealing of Labour's clothes on the non dom was one interesting example of that. But we have a sort of generally fairly managerial, sensible approach by both the Labor Party and the Conservative budget. This is not the world of Corbyn or the world of Liz Trast.
It's the world of centrist politicians. One thing I did think was interesting in the in the budget, and I think is worthy of conversation is the issue of productivity improvement, Because on the one hand, productivity improvement can sound like nothing. You might say, all we want greater efficiencies. Everybody wants
greater efficiencies. What's wrong with that. But on the other hand, we do have to get a productivity increase from the public sector if we're not going to tax ourselves to death, or if the public sector isn't going to fall apart.
And the worst and quite interesting ideas mentioned about the use of it and various other things about particularly in the National health services and trying to spread that we have had a fall in productivity since the pandemic and we do need to drive productivity growth in the public sector. So that that was an attempt to talk about it seriously.
I think, yeah, I felt to me like that was almost the sort of Jeremy Hunt legacy item that he wanted to say. This is distinctively me. This isn't something you'd have heard soon act. I mean, I'm sure you know fairly kind of out of his textbook too, but sort of this is the thing, the one thing that he will have done in depth, because it wasn't. Normally in budgets, you hear these things and they're just glancing references.
But actually this one he went through all the different public services and listed how they could be used in granual detail, granular detail.
And he was in charge of the National Health Service for five years, so he knows just how much money is not efficiently used, and there is a potential with it and the rest of it to improve form filling and bureaucracy and things like that. So well, if we can't improve the productivity of the public sector, we're in a real mess.
The US, of course, have done it really differently. I mean, They're product activity is kind of going through the roof thanks to also immigrating.
In the private sector. In the public I mean, the world's most wasteful, wasteful health service is the United States Health Service is incredibly bureaucratic because of so much duplication. The other thing I thought was quite interesting politically, and he kept making this point, was that we want to boost national productivity without just relying on lots of cheap immigrants.
He made that point over and over and over again, almost as if to say, the central offer from the Labor Party is just bringing in more immigrants and boosting the overall size of the economy rather than boosting productivity. I'm not quite sure why he was doing that, but it was a point that he made at least three times.
Yeah, and no, I agree with that. I think it's also interesting because he was you described it earlier, Adrian,
as you know, stealing the labor clothes. It's interesting because it's not just that he's stolen labor clothes, but he's also stolen their money because they were going to be doing certain things and you know, you know, we can do this sort of little extra labor things that make it worth a labor government because we're going to have done non doms and and other measures, and he's now taken that, and so it changes the baseline as everyone will know.
What's the first thing that labor would actually reverse if they came into power in this budget?
Is there anything hard to think actually hard for them to come into power and increase national insurance or something like that. And again, central to Rachel Reeves's policy is addressing the making work pay, which she's been talking about a lot very recently. And the other thing about making work pay is trying to reduce the number of people who are a working agement not working. Again, that's another area where both parties singing from the same hymn styt rightly so, I think.
So while we've been speaking what they've gone on. Is that Richie Sunac in his leadership manifesto in twenty twenty two, remember that he promised an income tax cut, so a more vanilla straightforward rather than you know this this this making work pay next cut.
Now.
Of course it's powerful because I think that's where the Conservative politics is going to come in the next few weeks, which is they will grumble that they have you know, yes they've got this, but they wanted more, and so Starmer is having fun on that front. It's difficult because is it necessarily something that labor would would do better? So it's you know, he's just having fun making the pain for the internal party Conservative politics even even more painful.
I mean, I want to ask, you know, how do you want elections in this case? Is it actually just making sure that the budget is not inflationary so that the Bank of England can get on with cutting rates, which would help with mortgages and make people feel a bit richer.
I don't think this makes much difficient in the election. I think basically people are exhausted by the Conservative Party and they want to change. I think that they're trying to change the narrative. I mean that the Conservatives are I don't think there's much room to do. It's people have made up their mind.
So I think a slightly different thing which is in the same room, which is I think it's necessary but not sufficient in that old phrase, in that you know, they needed to not drive the car into the wall today, but equally they've got you know, they've got a lot of work ahead of them whenever that next general election is.
The British isa I thought was really I mean, we knew, but actually I don't know whether I mean we knew because the chances we're told us, but homebuilders got a little bit of a lift on the back of it. I mean, does it make a difference to the British psyche.
Well, I'm interested, you're probably interested in.
What I think. We're all interested. But it is a fundamental break with free market economics or Thatcherism and other countries have it right. Oh yeah, absolutely, I can other countries are moving in a similar sort of direction. But it does just show how different the world is now from the nineteen eighties that instead of you know, deregulating the flow of money, we're trying to encourage the flow of money. Of bension schemes into our own economy.
But is that the only way you get growth? In a way, but it's the most assured way.
A way.
It's it's a kind of you did see, you know, like an arsenal or a range of measures today. I'm not saying it was, you know, necessarily going to going to kind of pep up growth by you know, the rates we were used to seeing years ago. But but but you did, you know, the British iSER is part of that raft of you know, what they're doing in the City of London, how they're changing listing, et cetera.
I don't know how long this stuff takes to turn around, right, like, you know, how long whether it if we think that there's a general election this year, whether or not any of this is going to be tickling up growth that quickly. I'm not sure if the Chancellor was here he would say it is when we have been the Minister City Minister Bi Mafalami on this podcast must be a month ago, now, you know, he sort of acknowledged that, didn't he found that this is long term stuff.
I think also that they would say that pension funds are unnecessarily and unreasonably nervous about investing in the in Britain and I think that maybe some truth about that.
It's definitely actually just tweeted an obi Ar NuGet, which is that the spending numbers from twenty twenty five onwards. She says may not have changed much, but real spending per head will be flatter filing after this year, so watch for headlines on that that actually it's not you know, spending because of the population increase is going to diminish per person, which.
Is partly why you're starting to hear more and more on the immigration debate from as Adrian said earlier, three mentions or more from the Chancellor. But I think I think they will. I mean, you know, if we think that Jeremy Hunt was the safe pair of hands Chancellor, I think that that is unchanged today.
Do you just right?
Okay? And there was you know, if we think about earlier in the week, Bloomberg pieces around traders being nervous, thinking, oh my god, what is he going to do because he's at the poll this week that showed the Conservatives going to the lower ever level, lowest ever level since ipsos Mori started recording in nineteen seventy so you know, traders thought he's going to be so nervous contemplating those kind of numbers, He's going to try and inhale mary Well, I don't think he really did that.
Now where does this leave Labor. I heard two things from Labor. One is that they think they've got quite a number of hidden pockets of money, a certain amount hidden pockets of money that they will be able to get hold of and use which would be very interable. I don't know the answers to that. Then, they haven't told me that, but that's interesting since the Tory Party has tried so hard to find these things. But they
will talk about that. And the second thing I think is the reorganization of the machinery of central government, the sort of things that the Dominic Cummings talked about and then annoyed of, probably so much that nothing really happened. We haven't had much actual reform of the central machinery of government. I think you might, but a new government might come in and starn't try to try to do that sort of thing. So I think that Labor it
won't have a lot of extra money. It may have a bit more than we think, and it may have an agenda for sort of institutional reform which will be used to try and drive our government productivity and efficiency.
But it is hard. It take very long time. It's like moving an oil tanker.
If we have a labor budget at some point soon it's going to be a tricky budget. And all of these, all the politics that we're looking at with the kind of the fringe of the party will be flipped. They have the same dynamic going on. It's not going to be kind of kumbay our.
That's a long time ago by our politics.
My daughters just recorder. It's very much in my life right now. Cracking chuin.
Perfect way to end the party. Thanks for 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 wherever you listen to podcasts, rate, review, and subscribe. It does help people find the show. This episode featured me Francin Laqua with like Rostratton and Adrian Woolridge. It was produced by Someersadi and Moses Handham. Additional editing by Rishi bou Jakol.