Welcome to Maren Took's Money the After Show. This is a show where we comment on and digest the conversation that you hear in our regular podcast.
I'm Maren Sunset Web.
This week, John Steppick, Senior, a border at Bloomberg and author of the Daily Money distilled newsletter that is a must read, by the way, joins me to discuss the conversation we had with Paul Johnson, director at the Institute of Fiscal Studies and author of Follow the Money. How much does Britain cost? The answer of course being a lot too much or not quite enough, depending on that where you've said on the political spectrum, John, that was
a fun conversation, wasn't it? And may I say how wonderful it was to have you in the conversation the whole way through.
Very helpful. Meant I had to do significantly less work. Thanks very much.
That's very Katy. You say it was wonderful to be there, Thank you for having me.
You missed the bit where I said I only liked having you excited to do let's work.
You're a great compliment acceptor exactly Now, Listen, what.
We learned from Paul was pretty straightforward. It was the UK is incredibly expensive. It's getting more, much more expensive. You're going to be a big pile of more taxes. We could sort it out, I'm paraphrasing here. We could sort it out by growing, but we don't seem to be very good at growing anymore. Oh dear, Is that a reasonable summary of what we talked about?
Yeah, I mean I think it. Poll's great and he's full of data and fully really interesting points, but he's at a pressing bloke. Yeah, it's basically just you're going to have to pay a lot more tax forever, and your public services are just going to get essentially what.
Well, I mean, it makes sense. You know, we've lost our peace dividend. And one of the points that he made that I think is particularly worth focusing on for everybody is that one of the ways in which we've managed to up a welfare spending to the extent we have, and to spend as much more on the NHS, for example, as we have is because of the feast dividend. Because we've been seeing our defense spending fall and fall and fall and fall down to a couple of percentage points.
So you know, a third of what it used to be, and.
That's turning around.
So we're now, for obvious reason, is going to have to spend more on defense. There's really no way out of that in this geopolitical environment. And at the same time we also need to spend more and more on welfare, on social care, on the NHS because of our aging population and by the way, our population that is not growing as fast as anyone expected it to even a couple of years ago. So it's very hard to see a way out, particularly with our low growth levels.
And we didn't look particularly.
At the speed of UK's growth during that podcast, but if you look at between late nineties nineteen ninety eight two thousand and seven, that period, the UK economy grew at two and a half percent a year the whole way through, and since then we've dipped and you know, one and a half percent is kind of our dream these days, and that's the problem, and it's all about productivity.
Yeah, and that's I mean, that's a really interesting point they make there about the peace dividend, because there's arguably there's an element there that this is all part of the same kind of turning point now where we're now going into a higher interest rate kind of era as well, because the Peace dividend also enabled you know, a massive flow of extra labor into the world market, and that helped keep wages down, et cetera, et cetera, helps keep
inflation down. And now that that's all kind of going into reverse, you've you've got you've get this happening as well.
So yes, so to an ext tent, we kind of squandered the Peace dividend arguably, which is the other reason that's kind of probably left as way lower productivity as well, because we haven't had our you know, our kind of noses to the grindstone, as it were, because we've been able to ease off from that point of view and kind of just enjoy law entry historys and and law hot doal rates for people to get the stupid ideas are proved and things like that.
Stupid ideas, John, Honestly, you mean there, yeah, well let's not go there.
That's not good.
But you know, the key, the key takeaway from when we talked in the second half of the show, we talked we tried to move away from the miseries of taxed and the full on socialization of all risk and everyone's slightly over enhanced.
Expectations of the state.
We tried to move away from that a little bit and start talking about how the UK can grow, what we can do to improve our productivity rates, and that came straight down to what we we often say this in finance, don't we simple but not easy?
I mean, we really really, really really do know how to do it, but we decide not to. I mean it's uh, you know, so sorting out the planning system, sorting out the tax system, if we've just described would be good for growth. We know that investment in sensible investment in infrastructure is clearly important, and not cutting spending on further education and vocational education as has happened over the last fifteen years, also building the roads and airports
and so on. That we need, having a consistent strategy towards competition and R and D and all those sorts of things, and free at trade with the European Union. I mean, all of those things we know would be good for growth.
And you know, Paul says, we know exactly what we need to do if we want to improve productivity and we need to grow. We need political stability, We need to sort out our tax system, which is just absurd. We need to have a good look at the cost of welfare. We need to do something about infrastructure, you know, build stuff, don't cancel stuff. We need to pull back on regulation. We need to do something about our education system.
We need to do something in our planning, and of course we need to return to positive real race of interest. All these things need to happen if we want to be the kind of economy that is productive and growing again. And we had some hints from the Labor Party conference about some of those things, and we had some hints in the Conservative Party conference about some of those things.
You know, both sides know that something needs to be done about the education system to broaden it out, etc. Both sides know something needs to be done about planning, although of course only one is planning on building new cities and ignoring what everyone says about it. So, you know, we know all those things, but we kind of can't do them. There's so much leftogy, appathy, obstruction built into our system that while we know what to do, we
don't want to do it. And that was sort of slightly the most depressing thing that comes out of talking to Paul PAULI you're not depressing in person. By the way, Paul, it's not a depressing person. He just delivers depressing information.
Different we shouldn't shoot the messenger, No, I mean, I think that is interesting. Nor the fact that there's a Lackey political cottage or whatever it is or or will. And I know the people you know, you quite often get told that well, you get the politicians and the political parties that you deserve as voters. But I'm not sure that's entirely fair. I have to say.
I think that.
I mean, one thing I would say that was interesting about the reaction of the Labor Party conference and the tone that Labor Party took in making the house building announcement. They're kind of big front page grabber. Is I think that shows that the at least the national conversation on infrastructure and specifically in house building is shifting in the direction of moving away from you know, theoretically everyone being an INMBI a kind of not in my back garden
kind of person. And I think that's kind of positive because it shows that there is that kind of mood swing towards look, we're kind of fed up, let's get
stuff done. I mean, obviously The issue is then when you get into the weeds of it, you end up waiting because it's one thing, so okay, since labor are saying this, but I was recently talking to somebody about that whole nutrient neutrality thing which labor blocked, and that's literally kind of preventing the kind of instant kind of you know, shovels in the groundwork on something like one hundred thousand odd houses and a one hundred thousand odd houses in the grand scheme of how many we we
say we need or want to build is a small amount, but on an annual basis, it's an awful lot. And the point is you could start all of them now if you kind of got rid of this somewhat minor environmental kind of rule. And that's the problem. You sort of you get into that and immediately you know, like most of these regulations were put in place for a reason and because some pressure group was annoyed about them
in the first place. There's a lot of very small special interests, and I don't I don't know what it will take for our politicians to start running raiding rough short over those special interests. I feel that there's a real ridiculous level of sensitivity in the part of leaders. That is incredibly overblown. And I don't I really don't know where it comes from.
Well, everybody, everybody wants to look like the best person, and it's easier to do it by you know, approving Well, you know, some of these pressure groups are very strong, and the things that they say are very valid. You know, we must protect this type of animal, that type of animal,
this type environment, or that type of environment. And the bigger picture is much harder to sell, you know, And the housing is very hard to sell to communities when it's when it's about putting up larger states on the edge of towns without increasing and improving the infrastructure around those towns. While the idea of having new towns is a lot better than the idea of having new housing estates tacked onto existing towns that don't have the infrastructure
capacity to deal with them. So, you know, I quite rather like that that idea of Kastarmers, let's just build nice new towns. He's in cahoots with the king, really, isn't He does that a pounded bree everywhere.
I'm all over that all over.
That king tells is the true, Poppet myself being to live a party as that will be interesting.
The King has been absolutely right when it has come to building whole new towns. Everybody loves a boundary, everybody loves living in it.
It looks nice. No one protests about a poundbury.
So this idea of building attractive, not hideous, attractive new towns, whether they offend architects or not, because everything attractive does seem to offend the modern architect If you put those up in new spaces with the infrastructure they required, that the shops, the GP surgeries, the opticians, etc. Rather than tacking them onto the edge of existing towns and expecting those towns just to you know, take it. I think you won't have the same problem that we've had for
the last couple of decades. So I was very very pro that idea from Kiostarmer, and pro a couple of other ideas as well, very very not pro some others. But we won't go into that now.
Yes, probably it's not.
Probably does not.
I mean, the one last thing I would say is that, and we did discuss this with Paul, that there are a lot of things in the taccess them which are I'll.
Just dafted new taxes that should come in.
I mean, I mean so many ways that you could make it better than it than it is. I mean, we have this absurd situation where we've got National Insurance contributions which are just attaxed. There's no relation to anything that people are entitled to, which you pay on earned income. So if you're a wage sleeve like me, you pay lots of that. If you're a partner at a professional services company, you don't. If you're self employed you pay
a lot less. And if your income is coming from rents on a property happened to earn or shares what you don't pay anything. You don't pay any National insurance on pension payment in payment that actually don't pay it on pension contributions either. So number one, just admit that this is just a tax on income and get a lot.
I mean, they add the result obviously of layer upon layer of basically stealth taxes, and you know corn merchant moves by successive chancellors. But again it feels like one of those things if somebody just kind of spoke to the public in a slightly rational way, particularly if it's a new government and they're a bit more popular, and they've got a wee bit more leeway and an honeymoon period and said, they see how these stupid marginal tax rates, we're gonna get rid of them and we're going to
replace them. Me is something that's perfectly fair and it's still progressive, but one that doesn't stop people from deciding to earn more money because they're going to get punched in the face as soon as they got over, you know, one hundred thousand pounds, fifty thousand pounds, et cetera, et cetera. So I'd like to see someone talking about that. And again it's one of these weird things where what you probably need is a leftish identified party getting any power.
It do always something, because then it doesn't look as if they're going behind to the wretch, whoever their wretch you can consider it to be. So, you know, I Fraechel re uses less than then that strikes me as making a lot of sense.
You know, this is really important, John, because what when you listen to both parties at the moment actually talking about growth. They talk about growth as though growth is something you can force, something you can make. They talk about creating jobs and all this kind of things so they can somehow make it happen. And that's not how it works. And what you've just described is the opposite thing. It's let growth happen, you know, let an economy grow.
The moment we're always talking about forcing it. Now, you can't force economic growth. What you can do is create the correct infrastructure. Step back and let it happen. You need to create an environment that allows growth. And that's something you.
Don't hear talked about, Everet.
It's always about the big government, big state, pushing it, making it, creating it things that you and I, because we're getting old, simply are not possible.
And no, unfortunately, Bill, I see how long it's these at a fashion. The only thing that will stop. That's the point vigilities. Weirdly enough, and yeah, at least they seem to be shown some things that can help. Even the law, I'm still not convinced that they actually properly exist.
Well, we'll come back to this. We'll come back to this another day. But I would like to finish our conversation John with an Adam Smith quote. I believe all conversations should end with an Adam Smith quote, and this one is particularly relevant to everything that we've just been talking about.
You ready, yelp.
The uniform, constant, and uninterrupted effort of every man to better his condition is frequently powerful enough to maintain the natural progress of things towards improvement, in spite both of the extravagance of government and of the greatest errors of its administration. Thanks for listening to this week's Marin Talks Money the after Show. This episode was hosted by me Meren Somerset Web alongside John Steppek. It was produced by Someersidi additional editing by Blake Naples.