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93% of professionals report that Grammarly helps them get more work done download Grammarly for free at Grammarly.com slash podcast. That's Grammarly.com slash podcast. This is political currency with Ed Bulls and George Osborne. So we're back day two of our budget coverage. We had our hot take yesterday. I've been up doing good morning Britain. We're here again. I've got to say I'm quite tired after all this budget work.
Imagine if you actually Rachel Reeves and you had to deliver the budget and you've been working on this for weeks. I bet she did tons of stuff yesterday. She's exhausted.
Well, I remember you're on such a high and I remember thinking if I can get through my morning interviews the day after if I can get to lunchtime because you also have to attend the opening of the budget debate in parliament. There's a through four day. I would say that's it. You know, I would have that in mind. And then by the time I got lunch time, that's it. And that's me done for months. That's the great thing about being chance you can then most circumstances except when there's a crash you can disappear for a while.
Although there's been a bit of a break of tradition. I think a couple of weeks ago, we were talking about budget media. And I said, I thought chances normally do the budget speech and then go to ground and come back the day after to do all the morning and media around. Rachel Reeves was doing the broadcasters.
You know, the pest and show she loads of media less than that. Did you used to do that? No. No, on the day I'd let the budget speak for itself. I thought the only other house at commons. Yes.
Because that's your thought to think you in the house. Also, you know, you don't want the thing to be starting to unravel and you providing answers to the difficult questions until the next day because you want at least the sort of clean sweep of the, you know, here's the budget. And usually the media will report it fairly straightly on the day. Her first interview with Harry Cole in the sun. And you can imagine because she was, you know, not increasing fuel duty.
There may have been, you know, some desire to do the sun first, but do all those interviews. I'm, you know, I'm not sure to go out there. I spotted that she was down to do the sun interview first after the budget before she gave the budget. And the first thing that came to my mind, she's definitely freezing fuel duty. She wouldn't be doing that. She would not be out to explain her rise and fuel jeep to Harry Cole.
But I didn't see you at the two chairman last night. I went to bed at 8.30. We should explain what to do again at 3.30. I was not in a pub last night. Were you? I was neither. But the two chairman invited either Rachel Reeves went to the pub last night. Did she?
Because there is a tradition that the civil servants in the treasury who've been working on the budget have a bit of a drinks party on the day of the budget. And this time they went to the treasury's favorite pub, which is called the two chairman.
So it's not the red line which people have heard of possibly if you listen to the show on Whitehall. And there are other pubs in the area like the Westminster Arms by the the big conference center by the QE two said, no, the two chairman is the treasury's pub. It's not too chairman. If you think it's like chairman of a board or whatever, these are the two people who used to carry the sedan chair that like Aristocrats were sitting.
And I you know they literally the people who carry those sort of you know chairs with a roof on them. And it's in Queen Hansgate. And I always thought the treasury officials liked it because they probably thought that they were doing all the hard work of carrying the chance.
This is an inter you know, Rachel turned up people think of tradition as being having been around for scores and scores of years. That was not the tradition in our time. In fact, the pattern when we arrived in 97 was there to be a party in number 11 Down Street for all the people had worked in it.
And the first budget day in 97 July 97 there was an issue we had to sort out and Gordon was saying, get me this person, get me that person. And it turned out they were all in the party and all the treasury had gone about six in the evening.
And Gordon said, what the hell is going on? So we moved the budget party back 24 hours. They weren't allowed to go out on the first night. This was in the day when there was budget per do and I guess you know, it hadn't all been discussed and trailed well in advance. But so the budget party was moved back a day, but it was always in Downing Street. You obviously were a bit too tight to have a party in Downing Street. So it ended up in a pub.
Well, I did have some parties in the pub, but I thought it was quite a crowd and Rachel Reeves was signing her red books. I remember that's what if your treasury officials worked on the budget, what you want is a copy of the red book, which is the document that treasury produces signed from the chancellor to the officials saying, thanks so much for your help on the budget.
I was very happy to. She's exhausted if she's out boozing. And then back on the today program and good morning Britain today. Anyway, we will we have not had such a tough 24 hours. So we are we're going to be spending today, delving a bit more deeply into the budget. We did our hot take us today. And so what are the things in the budget that have really caught our eye? Then of course, we're going to look across the pond.
And final days of the US presidential election. And we're going to be asking other financial markets starting to price in a Donald Trump victory. And then we're going to go to another election, which I'm sure many of you may not have noticed, which was the election that took place in Japan. And that led to essentially a hung parliament. And I guess the question we're going to ask is does that matter?
And such a big economy, third largest economy in the world, but it just doesn't really feature in our media. The same way that of course the US election does or our own domestic politics. And we're going to ask should we be paying more attention to Japan? But let's start with the budget. We did our hot take live on YouTube yesterday afternoon at three o'clock after a very frantic 25 minute read of the budget red book and the office of budget responsibility report kind of huge volumes.
Pretty hard to get through. I've got to say 18 hours on. I don't think we did too bad a job of summarizing the issues which were emerging. And if you want to go back and listen to our immediate hot take, you can definitely go and do so on our podcast feed. Or if you want to watch in, you can go to our YouTube channel. That's right. And in that we were talking about the downgrading of growth.
And what was happening to living standards, we actually pointed out, which is around this morning, the fact that public spending growth in years two and three of this parliament are going to be quite tight. And I would think the student for physical studies will really focus on what this is actually going to mean for public spending in this parliament. And that's something we should definitely delve into in the coming weeks. But what are the things which compared to yesterday?
Because often things emerge in budgets in the first 24 hours as you will remember from some of your budget moments. I'm not sure you were expecting to answer questions about skips, pasties and caravans on day two of your budget. So what are the things which have caught your attention on day two? Well, there are a couple of small things like housing benefits frozen next year. Rail fairs are going to go up by more than 4% next year, which are those sort of classic kind of hidden things.
But in some ways, I think the second ever budget is you should sort of take a step back and say, what's the big things happening here? And I think two things struck me from what Rachel Reeves said yesterday. The first is she has moved Britain to a 44% of national income state by which I mean we did touch on this yesterday, but it's a really come home to me this morning. You know, Britain's public expenditure is going to be 44% of our national income.
And that is higher than it was under the Blair Brown years when it was 42%. And it was higher than it was when I stopped being chance limit. It was 39% and it was 39% at the end of the Thatcher major period. So under Tory governments, it's been around 39% under the last labor government was 42%. She has shifted public expenditure up to 44% of national income. She is borrowing billions of pounds to pay for that.
And of course, she's had that big tax rise, particularly an employer national insurance to pay for it. And that is quite a change in the way the British state operates. It moves it closer to the European social democratic model. Of course, ultimately requires those highest taxes to sustain it unless she can get growth to a markedly higher level than it's being projected to be. And there's always been an obstacle in Britain to getting public expenditure up to 44% or 45%.
I mean, labor governments before the Blair government did try this in the 60s and 70s. And fundamentally, you hit this ceiling, which is people won't pay more tax. And you get essentially a tax revolting than the issue in British politics becomes, we're paying too much tax. That's the sort of big picture. She's trying to move Britain to a 44% of national income state, more European.
It's interesting. If you look at the pattern of public spending as a share of GDP, much higher in the immediate post-war period, I think that these kind of numbers, you know, around 42, 43, 44 would be the average of public spending under Margaret Fatcher. But under Margaret Fatcher, the trend was down rather than up.
Of course, if you look in the OBR book, which came out yesterday, the tax rises in this parliament, which are raising the tax share, are predominantly tax rises, which were put in place by Richie Sunack. The Conservative government in the last parliament, in particular, the freezing of personal allowances. And so that rise in tax and the rise in public spending as a share of GDP post-pandemic, that is continued under a conservative and now a Labour government.
And while the Tory rhetoric was to reduce it, they were increasing it. It looks like the Labour rhetoric is now to increase it. I mean, I think maybe we should come back to this in a future podcast. Is this a political choice about the kind of society you want to have? Is it the consequence of demography, the rising costs of health in an aging state alongside it being a more dangerous world and therefore upward pressure on defence spending?
Is this a short term period of higher spending in order to try and get the economy to grow more strongly? Because quite a lot of the spending they're talking about capital investment is growth-orientated, which could be designed to have a bigger economy and therefore over time reduce the spending share in GDP. Another way to say that is, is Rachel Reeves thinking, here's a 10-year plan on growth and rising public spending.
Is she thinking to herself, if I get my tax rises in now and get a bit of growth, then maybe I can be cutting taxes in the run-up to the election. Maybe this is a rather more short term as view. What should I, if we fully know what's in her mind yet, but it would be interesting to unpack whether it matters and why it's happening. But you're definitely right. This is, you know, the cementing of a trend, which is a different trend to what we've seen in the previous 10 or 15 years.
That's what anything else? Well, the other thing that struck me was, I was trying to think, you know, if I've been listening to a Gordon Brown budget. And there was a big missing section in the Rachel Reeves budget on poverty. You know, that was always a big theme of the Brown budgets using tax credits to target child poverty. And I think she only mentioned poverty once in the entire budget speech. There was almost nothing on welfare reform.
Nothing on how she wants to use the instruments of welfare to drive particular outcomes or deliver money to particular groups. As I just mentioned earlier, you know, housing benefit is actually frozen next year. And of course, she didn't reverse the two-child cap that I brought in as Chancellor. So I thought that was quite a missing piece of the sort of labor pit. There's a whole part of the labor tradition.
You know, this much better than me. I do. Of, you know, child poverty action using welfare at the welfare state, you know, you know, what labor positions were described in a progressive way. Entirely absent from the speech. You are right. I mean, that was what I was going to pick up as well in terms of things I noticed. Just small things in passing, first of all, I reckon this issue of inheritance tax on family farms where the limit is a million pounds before you pay inheritance tax.
I think this is going to be one of those things which may become a growing issue in the coming weeks and months. One of those things where you just wonder how's the treasury really thought through all the hard cases? It's quite easy to have a low income, hard working farming family, which have had their farm for generations, where if you actually add up the 100 acres of land and the house, it's more than a million pounds.
And if the dad dies, how the going to sell the farm to pay the inheritance tax? I'm watching that. The other thing which I thought was. I mean, you're just on that. That's where I've had a lot of people get in touch with me already. Yes. And people saying it doesn't just impact, of course, the landowners, but tenant farmers, you know, they maybe have a tendency and then the farm has to be sold by the owners of the land.
And even if you look at the treasury numbers, they say 75% of farms won't be affected. Well, that means 25% will be. And I know what they're trying to do, you know, some very, very wealthy billionaires have bought up a lot of farmland. And there was an inheritance tax loophole in effect for them, which is they can pass that land on without paying inheritance tax.
I looked at this in budget after budget because I wanted to deal with that loophole. And I couldn't find a way around the family farm problem. It's the million pound number. To reach a reason a team that I thought million pounds sounds like a big number. I wonder whether actually when you really dig into the cases, million pounds is a big number or small number for cash poor asset rich farmers.
And we've been here before where the treasury in the long list of budget measures, something's in there. You think surely that's okay, million pounds. And it turns out to be much more complicated. And a hundred labor seats now are rural, by the way.
I think so I'm watching that. The other thing which I thought was interesting, Rachel leaves this morning was saying, you know, living standards rising Paul Johnson, Fune Street physical studies cranked the OBR numbers and pointed out that the living standards projections in this parliament partly because of what's happening to living standards and wages because the employer national insurance will be predominantly passed on to workers in their wages.
It will be the second lowest rise in living standards in this parliament since the second world war. The only one lower is the last parliament. But if you are wanting to go to the next election, saying we've dealt with the cost of living crisis better off with labor alongside improving the national health service, those living standards have to do a lot better than is currently in the OBR numbers.
But I was also going to pick out the poverty point. You write about child poverty in the two child, a little bit barely mentioned, not much on work and getting people back to work. We should have been a big labor theme in the past, but the other theme. I mean, there was almost no mention at all of pensioners.
And pensioners weren't being hit in their savings or in their kind of, you know, as some people were feared. On the other hand, there's nothing positive. I actually asked this morning on Good Morning Britain, Rachel Reeves about this point. And I put to her the contrast between what was in her speech and what she didn't say. Maybe we should just play her now.
And I concluded that in these difficult circumstances, while the cost of living remains high and with a backdrop of global uncertainty, increasing fuel duty next year would be the wrong choice for working together. It would mean fuel duty rising by 7 p per litre. So I have decided today to freeze fuel duty next year and I will maintain this in fact for another year too.
And so, what other viewers will be struggling to understand why if raising fuel duty was the wrong choice for working people when there's a cost of living crisis, why was taking the winter fuel allowance away from lower income pensioners, the right choice when there's a cost of living crisis for them.
So what did she say to that? So she gave quite a long answer in which she said, you know, she didn't want to raise fuel duty, but she wanted to tell us about raising the basic pension and in line with earnings. But she didn't really get to the choice, the choice to protect working people, but not to protect pensioners. And then Kate came in.
I guess one of the criticisms is a betrayal of trust, isn't it? So for people to understand why the tough choices needed to be made and we know your argument about this whole, whatever the figures that can be debated that was found, you know, people think, okay, a penny off a pint, so not bad for drinkers, freezing the fuel, which helps motorists, people that use cars, why should the elderly take the hit?
Well, protecting the winter fuel payment for the poorest pensioners, those who are on pension credit, and we're pleased to be able to do that. But I did think it was right to means test the winter fuel payment. We're also working really hard to boost a take up of pension credit and applications because of our campaign.
And also because of the campaigns of charities to increase take up the pension credit means applications are up by 151%, which means more people will get not just winter fuel payment this winter, but also the additional support potentially hundreds if not thousands of pounds of pension credit as well.
Protecting the poorest pensioners without additional support, but because our commitment to the triple lot for the duration of this parliament, it means that pensions are likely to rise by around 1,700 pounds during the course of this parliament and next April alone by just over 470 pounds.
That's obviously worth a lot more than the winter fuel payment that we're drawing. We have had to make difficult decisions. I'm not going to shy away from that, but because of the decisions that we've made, if you put those together, it now puts our public finances on a firm footing. But the point is, you know, for the last three months on the winter fuel allowance, they've been saying it was something we had to do.
But of course, everything's a choice. And if you say in your budget speech, we've chosen not to raise 3 billion pounds on fuel because of working people, the cost of living crisis, and you've chosen not to extend the freezing personal allowances because you don't want to raise tax on working people. It then does beg the question, well, why have you chosen to take the winter fuel allowance for them, lowering compensioners?
This is not going to go away. And it wasn't solved by this budget. In fact, there was nothing about pensioners in there at all. And this still feels to be like something they're going to have to solve. Yeah, I mean, it also looks now you've seen the whole budget, like such an odd decision back in July, because in the end, what the budget did was it asked employees to pay a lot more national insurance.
And then it targeted essentially wealthy people with private school fees, private jets, you know, second homes and so on. They think wealthy farmers. Healthy farmers as I think. And therefore you go, hold on, there was actually a third bit to this budget. It was just kind of announced in July, not yesterday. But it was in the budget scorecard yesterday. It's actually scored there. Right. And that is taking, you know, this money away from half of all pensioners.
So the three groups of people who ended up paying for the big increase in spending were employers, the wealthy and pensioners. And politically, I think people have assumed the Tory party gets the pension of vote. You will remember the Gordon Brown got the pension of vote by giving things like the Winterfield payment, free TV licenses and so on. You know, there was a determined effort by the last labor government to cement the deal with older people in the country.
And with an older population, you would think that a Labour party thinking about being in office for several terms would be reaching out to strike some deal for pensioners. So they can look at the budget and say, I can see what's in it for me. I know work, poverty, pensioners, so much part of new Labour budgets, not really part of yesterday. I guess people might say, hold on, that was, you know, 20 years ago and the world's moved on.
So I guess I would ask you the question, if you had been giving the budget, what would have been in there that wasn't in there, yesterday? Look, as I've said, work, poverty, pensioners, absolutely. But I think the other thing is, I thought on the growth side, we talked yesterday about the growth numbers being downgraded. She needs stronger growth for rising living standards and also to generate the resources for public spending in the second half of the Parliament.
Because the numbers are going to be very tight for departments going forward. And as I said yesterday, if I was her, I would not be rolling out finding ways to expand the envelope if I do get better growth numbers next year in the year after. I guess the thing I felt was missing was I would like more intellectual strategy on the growth agenda. There was lots of money, money for aerospace, money for pharmaceuticals, money for particular transport projects.
But what is the diagnosis of why our economy hasn't grown, which tells you how we're going to make it grow more strongly in the future? That you could say is because we're outside the European Union and we're cut off from, you know, our biggest single market and they can't solve that. But there is something about the way our economy is working in the last 15, 20 years since the financial crisis, she's different from the past and different from America.
If you look at the US, there's been much more dynamism in the America economy in recent years as it's grown. And dynamism is measured by the creation of small businesses and people who are moving from one job to another job and hopefully to a better job as part of improving the productivity process. Our economy has been much less dynamic in recent years, partly because I think the furlough scheme stopped people moving from one job to another.
They stayed in the same job. And how do you make your economy more dynamic? And I would have been talking about competition, opening markets, trying to drive the dynamism of the economy, backing new entrants, backing the startup firm, backing the new venture capital idea, trying to find ways which you can say we're not just rewarding with money, the big firms, but trying to make this economy more fast moving, looking for the new ideas.
And I think it's part of that also. There was very little in there about place-based growth, about what's happening in the big cities, in the city regions. There was a reference to there being more spending flexibility for the West Midlands and the Greater Manchester Mayor, but how are we going to make those places more connected, more dynamic, more small businesses being created?
And that, I think that enterprise message, that dynamism, maybe the kind of thing which we were trying to encourage with the cuts in capital gains tax, something which says we're on the side of the market economy, as well as the fair market economy. I think there could have been a bit more of that. Yeah, I think if I had approached it as a Labour Chancellor, rather than the Conservative Chancellor, I think I would have also had my answer to how do you get growth in the economy?
Because the striking thing about the budget, is that at the end of the period, the economy is very sluggish, and the OBR says nothing in the budget really makes a difference to growth in this parliament. And if you think of what Kirsta and Rachel Rees had said in the election, they said growth is the number one mission of this Labour government, and growth solves a lot of the problems of how do you fund your public services?
And they've ended up with a budget which is we're raising taxes to put more money into public services, and the growth and enterprise component is missing. Now you can either go for the Brexit years, used to call Singapore on Thames approach, how you make Britain the home of hedge funds and private equity and very low tax.
The Brexiters said they were going to deliver that, but they ended up putting up taxes and increasing the size of the state and increasing red tape and doing the exact opposite of what they said. I think actually, the sort of Blair Brown period did try a bit of that, certainly I tried a bit of it, with as you say, for example Gordon Brown's cuts to capital gains tax, which were a big boon to some of those industries.
So then in some ways Labour is sort of deliberately rejecting that strategy. If the Tories sort of carelessly rejected it by mistake, if you like. I think Rachel Reeves is very clearly doing it, shutting down the non-dom regime and putting up those sorts of taxes. But where's the alternative? And I thought there was a, I'm glad you picked up it because I noticed these ideas of sort of single budgets for Manchester, Birmingham and so on.
Which is quite a radical idea of it's followed through, which is we're not going to tell you anymore how much you've got to spend on transport or skills or what it happens to be. We're just going to give you a single pot of money and you decide you the elected mayor and your local councils you decide. If they see that through, that would be quite revolutionary. And it would be another big step in devolution and you could certainly argue that's part of a regional growth plan.
I would say it's something number 10 should be on to make sure it's actually delivered because the instincts of the Treasury and the other white all departments will be to sort of pick away at that. And I guess you know, the overall thing that I also thought was missing and I was thinking if I was a Labour Chancellor I would have put in was reform of the public services.
Lots of money for health, particularly in the next two years, quite a lot of money for schools, not very much money for other departments, home office budget is actually being cut quite a lot in the next couple of years and the transport budget has been cut.
But I would have accompanied that with reform. If you read the latest book, the Tony Blair wrote on leadership earlier this autumn, you know, he's very clear that putting money into public services without reform was possibly an early mistake of the Labour period and you know they got on to the reform agenda a bit.
Later, there was nothing in return for this big slug of money for the NHS and certainly the commentary, including from people inside white all has been can the NHS really use that money to noticeably improve the productivity of the NHS. I mean, Regerie says she wants to see productivity growth in the NHS, but productivity growth has actually been declining and although the Tories were putting more money into the NHS, the number of operations and the light were starting to decline.
So I thought that was the other bit, the sort of new labourish bit that was missing, which is here's the money, but the deal is the money comes with reform and that's your moment of maximum leverage as the centre as the Treasury in number 10 to enforce that on the NHS. And if you've just handed them the money, maybe the moment's passed.
There was one little thing that they did do yesterday, which may be a straw on the wind on public sector reform. I don't know how significant this is going to be, the Treasury has always been very skeptical about spend to save.
They're quite like the idea of HMRC spending on more tax and spenders to bring in more tax revenue, but when other departments say if we spend more it will save money, quite skeptical, they did say yesterday that in the case of DWP, the Work and Pensions Department, they would spend on fraud investigators as a way of reducing welfare fraud.
And they could keep the games from the savings from tackling welfare fraud. And I wonder whether as part of this reform agenda, if you expand that idea more widely and you start thinking about what happens if you reduce smoking, does the NHS get the benefits of that? If you tackle through things like share start or the teenage share start offending by young people, does the department get a benefit from that?
Maybe there's also something happening there, which is interesting. Anyway, we can keep an eye on that. The other thing we should just mention before we run out of time in this section is the Office of Budget Responsibility.
I know that you and I were a bit worried that the OBR picking a fight with Jeremy Hunt. Well, he's the OBR doing a report on notionally the 22 billion black hole, which Jeremy Hunt got very upset about and was writing letters to the Cabinet Secretary and suggesting it was being politicized. But this was going to be a problem for the OBR. Interestingly, we interviewed Jeremy Hunt this morning, a validictory interview because he said he's last interview ever, Shela Chancellor.
And he said that in fact, he got this wrong. The OBR didn't try to play politics with what the last government did, what ministers did. And of course, if you look at what the OBR said on the impact of the employer's national insurance on wages or what they said about growth, I mean, they were saying some pretty tough things for Rachel Reeves as Chancellor. As well, how do you think the OBRs come out of this budget?
Well, I feel very much like a parent with the OBR because I helped give birth to the OBR and now it's a teenager 14 years later. And I was a bit worried that it was losing sport amongst conservatives. I mean, there's a kind of Liz Truss argument that it's sort of anti-growth. I think that's absolute nonsense. You know, you can certainly do things which you can chat. You can say, look, the OBR says this tax cut is not going to save money. I'm going to prove them wrong.
The OBR doesn't stop you having a quite radical Tory budget. But I got worried that when Jeremy Hunt, he's a very decent guy. And by the way, you know, we should note a long career in public service and ends it that period today. It's at least on the front line, I'm pretty sure it's all six with people on both sides saying nice things about him.
You know, when he said that the OBRs being politicized over this rab about the 22 billion pound black hole, it made me worried that it was going to lose its bipartisan support. And I actually thought, you know, maybe the OBR has been a bit naive in getting into this being used by the Labour government in this way. But all credits of Richard Hughes and the OBR, they've dispelled my doubts. They've got Jeremy Hunt to actually say, look, I got it wrong.
And they cause quite a lot of problems for Rachel Reeves, which is kind of what the OBRs there to do. And I thought this was an interesting response from Richard Hughes who runs the OBR when he was quizzed by Sophie Ridge on Sky. I mean, the number that Rachel Reeves has kind of put on it is a 22 billion pound black hole. Is that a number that you accept?
Well, the 22 billion pound number is a mixture of the government's decision to fund that side of pressures and also the cost of new policies, which the government's announced since the March budget. So, you know, nothing in our review was a legitimization of that 22 billion pounds. What we did find is there was 9.5 billion pounds worth of information about spending pressures that existed at the time of the March budget, but it was not the square.
So that's Richard doing a great job. But first of all saying, look, we don't stack up this 22 billion. But by the way, the Tories did conceal from us some of the hidden public expenditure pressures. There's no one thing labor of said now we're going to be much more transparent with the OBR. The OBR is going to hear all about the in-year budget pressures from the Treasury.
That's our new act of transparency, which is great for us as people who do a podcast, great for members of the public. I tell you what, it's going to be a bit of a nightmare of the Treasury. They've actually added another rod of their own back because you know, pressures do emerge mid-year and then sometimes they disappear and you can shuffle money around. There will be an additional search light on that bit of the Treasury prison camp or the Bob wire.
It'll be harder to get people over the wire at that place. Look, that is definitely right. It is a tightrope for the OBR and I was worried a bit in advance. But to be fair to Jeremy Hunt, look, the OBR was not standing up some of the crazy things which, Liz Trust or quasi-quarting wanted to say in their budget, not least because they were prevented from actually doing a review of their budget in advance.
Jeremy Hunt, in a great act of public service, I mean, it may have been Shardon Froger as well, agrees to step in and become the chancellor to bail Liz Trust out of that massive hole she was in. Great thing he did. I think he did a fair, he bailed the country out. He didn't bail her out. We didn't bail her out. She was less than half of the wayside.
I was worried though him is one thing to say. You have to have the confidence as chancellor to say, sometimes, to the office of budget responsibility. I disagree with you on this. You wrote what you want, but we're going to do what we're going to do because we're the government. In exactly the same way, the bank of England, you can say to the bank of England, you raise interest rates if you want to because you're independent, but we have a different view from view and we're going to say so.
But to charge the OBR or the independent bank of England with being politicised and therefore not to be trusted or part of a conspiracy, that is undermining institutions which are important in making our economy run in a better way. Jeremy looked like he was doing that and he has now said he was wrong and the OBR has done another very good independent job.
He just wants to say that she disagrees with the OBR, say it. But while the OBR is there being well-led and being careful, but confident in the judgments it makes, then the British economy is in a better shape than it was before we had the OBR. Every now and then with your teenagers you get a bit worried, are they going to go off the rails? They generally don't and you can end up being proud of them as they reach maturity and go out into the world.
On that note, talking about the dangers of immaturity and teenage behaviour, are they going to go off the rails? And undermining institutions and questioning the constitution and thinking there's a big conspiracy and basically trying to dismantle your democracy, shall we talk about Donald Trump and the US elections, which are next week we will come back and talk about that after this. When the energy is high and the music is right, pushing past your limits becomes that much easier.
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Welcome back. So just five days ago until polling day in the American election is Kamala Harris going to be the first ever female president of the US is Donald Trump amazingly going to return to the White House. The betting markets have him ahead. The polls all say it's just too close to call in all of those individual states. I'm flying out on Monday.
I'm going to be in America next week for good morning Britain for the elections, but you just flown in. I think from what are those sort of banker financial conferences you go to in your new financier kind of life and times. What was the mood? He's just come back from re add in Saudi Arabia where they have where they have a big event called the FII which is sort of.
And he got all the big company chief executives and the big Wall Street figures there Douglas Alexander was there from the British government. The trade minister the trade minister and I was on the plane back with some of the government officials who had gone there from the UK. It's interesting at that conference is that the general view is Trump's one and of course you're quite right to say the polls are neck and neck in all these key states. No one really knows what the turnout is going to be.
And that's absolutely critical if younger women turn out then Kamala Harris will win if younger men turn out the maybe Trump will win because it's got a big gender divide. If you're asking the money people you're following the money to use that famous expression from the Walter K scandal. Then the money is saying Trump's one and it's not just in the betting markets where now Trump is the clear favorite kind of two to one on to win the presidential election if you want to go and put a bet on.
But the stock the stock market has risen pretty substantially last couple of weeks and some stocks of sectors that people think will do well under Trump. At least in the short term because he won't be as regulatory as the Democrats he will take off regulations or point to the key Washington regulators people who are more capitalist to be like those stocks are doing well. So you might notice that some of the tech stocks have really done well in the last couple of weeks.
Bitcoin has done incredibly well because Trump has seen as being more pro the crypto industry than Kamala Harris. So the money is all now flowing towards Trump a Trump win and if Trump doesn't win then there'll be quite a big kind of market correction doesn't mean that's a I'm not saying by the way that's a bad thing and you could certainly make an argument that Trump's economics and his tariffs and you know the sort of unsettling approach to geopolitics is not great for the economy.
But on the straightforward what's happening in the stock market there's an assumption now that Trump is going to win. I was looking at this after the New York Times just from a few days ago by Nate Silver the kind of famous American pollster and the headline was here's what my gut says about the election. But don't trust anyone's gut even mine and in that piece he says my gut tells me that it's going for Trump.
He doesn't really know it may be that those financiers are right kind of to feel this you know the last two American presidential elections Trump was underestimated 2016 and 2020 he did much better both times and the polls were saying in advance and so you can think well if it's neck and neck maybe it's going to go for Trump in the 2022 midterm elections.
Trump candidates did much worse and the Democrats did much better than expected but of course at the time Trump himself wasn't on the ballot and also abortion was like a big deal in America at the time pretty bigger a more salient issue at that particular moment after the Supreme Court is right now.
The Republicans have been losing elections around the world and the Democrats are no different inflation has been a big problem for them they're not getting a big benefit from the growing economy because people still feel worse off in this parliament maybe it ought to be Trump winning and Trump definitely wants that sense of you know I'm going to win I'm the momentum so that if he doesn't win in the end he can then say call foul and say it's all a comment on the other hand maybe Nate Silver is right to say don't listen to everybody's gut.
And maybe it is really tight and maybe it is going to turn on turnout on the day and maybe Carmel Harris who is clearly working really hard to motivate her vote but also to say and her rhetoric about you know Trump being a fascist to people who may not turn out to vote at all we know if they come out it will be because they feel that you know there's something to be scared of and she's trying to get them out maybe it's tight.
Do you think maybe it also helps her if people start to think actually Trump's winning because sometimes Trump you know I think gets the advantage of people saying oh he's not going to win and then my got you know you kind of surprises people this is actually forcing people to focus on the consequences of a Trump presidency or all there's you know on the other hand you want to have the big Mo with a week to go.
And there's no doubt that you know that Trump has got that momentum I feel you know Camila Harris is sort of having to respond to Trump which is not really where you want to be just a few days out do you think your financiers.
I've thought this through I mean you know if Trump wins this time compared to last time he's much more organized you have more of a mandate mass deportations huge tariffs on countries around the world you have a mandate to do these things and a mandate to do these things they were going to be a lot of things.
And a mandate to do these things over four years and of course if they win you know the Senate and the House as well they can actually really deliver that mandate do you think the people you within. Read have thought about four years of a Trump government and decided this is what we want for the world economy and for our businesses.
I think it is true that amongst the American business community there are more Trump supporters than there were back in 2016 it was very eccentric to support Trump back in 2016 and there were one or two people who went out on a limb and said they were pretty pro Trump for example Steve Schwartzman the founder of Blackstone huge private equity business you know was what sort of noticeably was alone among sort of top Wall Street people.
Now I think you find quite a lot of senior Wall Street people saying publicly that there's a lot that Trump saying that they like and the big shift is in the tech community in California were quite a lot of big tech founders who used to be very Democrat very liberal you know now swung behind Trump you see it in some of the venture capital firms that are used to be where the Democrats raised a lot of money they would fly into San Francisco and do these big fundraisers Trump now does that.
And you know of course sometimes you just sort of see the elephant in the room we discussed this on our podcast Elon Musk who is the world's richest man he's probably the most famous business person in the world is actively campaigning day in day out for Donald Trump he's sort of become the running mate I mean.
But he's got direct commercial interest in the Trump agenda whether it's the money from the federal government or the protection for his domestic kind of electric car business when you think about kind of global financial business guys in America do they really think over a four year view a Trump America actually allowed with a mandate free form is going to be good for American capitalism for the global economy for freedom and democracy I mean well they all lost their mark.
Well I think it's a very good question because you would think they would think through the consequences of all these tariffs and the sort of tearing up of the international order and you know the potential confrontation with China and so on. But it's interesting it fundamentally I think we have seen here in the UK Camila Harris as you know completely fresh new candidate a big change from Joe Biden in terms of energy and of course you know
the first female president. Unfortunately from her point of view I think a lot of Americans still see her as continuity Biden and she's running as the incumbent she's not the change candidate Donald Trump is the change
and Americans we're just discussing the bridge you know economic situation on this broadcast in the US economy is being way better than the bridge economy has done over the last few years but it's also high inflation Americans don't feel better off they did four years ago they blame the incumbent for that and so if you ask Americans across the board would they be better off under Trump a clear majority say yes much higher than those who actually say they're going to vote Trump so the sort of Trump lead on the
Trump would you be better off under Trump is bigger than the Trump lead of your question are you going to vote for him if you think back to David Cameron in 2005 look he'd been part of the normal among problems 10 years before he had five years to establish a new direction for the conservative party we thought the
former was not going to find it possible to do that shift in what was you know three years from 2021 to 2024 it took Neil Kinnick and Tony Blair and John Smith in between over a decade to do it Carball Harris is trying to suggest a moving on and change in a few months she doesn't have much time to define as a right and she was the vice president she was the number two right but also to the extent she had her own positions when she was fighting Joe Biden for the nomination back in
2019 2020 these were positions which are markedly to the left of the positions that she now wants to fight this election on and she's not unlike Keir Starmer had or David Cameron that long period to allow herself to go through that political transition so I would think quite a lot of Americans don't quite know what she stands for if she doesn't stand for continuity Joe Biden to the extent they know
that they may think well the previous Carmel Harris is not somebody I want to vote for which is why she's going to fight so hard to say I've changed my view on immigration or on fracking or on taxation she was not dealt a good hand if she wanted to be a successful candidate in the selection by Joe Biden standing down so late and you know she had a bit of a push in the polls to begin with but not enough
him standing down so late meant that she could get the nomination without a fight that's true and I think you know she basically ran out of a steam that the high point was the debate against Trump which where she clearly won and she got under a skin but she was not then able to take that lead sustain the momentum flesh out who is Camara Harris what is she for basically shut down some of the sort of wild elements of the Democrat party which put the backs of middle America up I thought there was
such an interesting episode this week which which through a light on first features of this presidential action which I'm sure some people are followed in the bridge media. This is called color attention but if you swing it together it's really interesting so this is the row about garbage trash and it all started with a rally at Madison Square guns in New York a massive rally which by the way the Trump critics compared to the new and back rallies which is sometimes people do have Trump to range and syndrome or to the rally which is not going to be a lot of things.
So I think you know the rally which happened in New York in Madison Square Gardens in the run up to 1939 there was schools of pro Nazi rallies on the East Coast and across America in that period and that is also an illusion. Yeah I mean you know this was not the near back rally but nevertheless it was a big event Elon Musk spoke Trump spoke but the line you spoke for the first time. She turned up the line is back I'm sure that's all part of some complicated financial settlement mind the scenes.
No maybe we shouldn't say that. I think it's funny to say it can be the you know you get to then the headlines then however are taken by a comedian I you know he describes the island of Puerto Rico which is a kind of complicated constitutional position is actually part of the United States of America but it's not a state and he described it as an island of garbage right and people
outraged by this and once he's done this it all takes off the only garbage I see floating out there is just supporters first of all you clarify this comments but let me be clear I strongly disagree with any criticism of people based on who they both are I think that the comment by really both of them because you really two of them about being garbage maybe 250 million people
they shouldn't be talking that's like the horrible fail this is the deplorable failure and I think this is worse actually the Joe Biden to make that statement it's really this way so he's done the joke Joe Biden then blames the Trump supported this is millions of Americans for being garbage Camila Harris is stuck as the incumbent because she has to she's been quizzed about what Joe Biden saying which has been one of her big
pages in the campaign and then Trump sort of jumps out of all of the normal boxes and constraints of the normal politicians and turns this thing that started off as his problem into his advantage and literally dresses up as a garbage man and turns up at a rally in a in a garbage truck in a Trump on the side and you just ask yourself like how is that you know that's totally
the same side the rules of the political game that you and I used to play sure it's like it's like you putting attacks on pasties and then turning up a week later wearing a white hat and a coat at a Greg's restaurant and saying at least I know what a Greg's past years unlike Ed Miliband and turning it to your advantage you didn't do that but you know I probably should have done yeah I mentioned it but I do think it speaks to lots of
Americans which is Trump supporters say things that are outrageous Camila Harris is stuck as the incumbent the Democrats often confuse the sort of Trump outriders for the millions of people who are voting for Trump and find appeal in his message and then finally Trump is just able to constantly grab the agenda so we
find days from the presidential election and what's the topic of conversation it's like the Democrats have insulted half of America and you know and we'll see what happens on Tuesday it's still incredibly close and you know whatever the financial markets can be completely wrong they were
completely wrong about Hillary Clinton they were completely wrong about the Brexit referendum so they can be completely wrong about Trump turning in 2024 but at the moment you have to say the indications are it seems to be leaning his way definitely the momentum is with Donald Trump and in a week's
time when we're back with our regular podcast we may know what the result is although you know it could be uncertain for days and days and days and days and if we possibly can maybe we'll try and do a day after the election hot take as well from America and we can sort of
reach the American mood next Wednesday in the meantime though we're looking ahead to an election which is just coming up in America and we're going to end by looking back to an election which has just happened in Tokyo and across Japan we'll talk about that next.
So we've been saying on this podcast that it's been hard for incumbents and incumbents been losing elections around the world and a good example is what's just happened in Japan now they had changed Prime Minister this is the leading Liberal Democrat party in Japan which is basically run Japan for almost all of the post-war period and they had a new Prime Minister who called a snap an early election sounds familiar to British listeners after a corruption scandal yes so which also sounds a bit
familiar so this is Prime Minister Ishibe he calls the selection people don't expect him to have a pumping win but never necessarily expect him to win but the result is it's essentially a hung parliament it looks like he may not survive or there's any been Prime Minister for a few months and there's even a possibility that you might get a non-liberal government in Japan which has happened in fact when I was Chancellor there was a non-liberal government in Japan but it was the only time
and I thought we just you know people don't talk about Japan much in British politics and that is in itself interesting because it's the third largest economy in the world after the US and China and it's become so much more important in terms of sort of geopolitics it used to be hugely neutral after the Second World War it was you know there was essentially a sort of aligned with the United States but no one paid much attention because it
didn't have an army or an army that could project overseas and its government changed all the time that's of course all now shifting as tensions in East Asia rise we've just had North Korea send its soldiers to Ukraine and just shows how the world is connected and becoming more difficult and dangerous and I thought it was just interested to pause on and ask the question do we kind of ignore Japan and our peril or is in practice the case these Japanese governments come and go
and there's not much you can do at a political level to engage with the administration there.
Look I bet very many of our podcast listeners won't even have clocked the Japanese general election last weekend and they're in a bit of a sort of a crisis although you know may not be that turbulent a crisis in Japan things don't tend to be hugely turbulent but I was thinking back to 1988 when I first flew to America went out to be a graduate student at Harvard arrived just a month or so before the US presidential election Mike DeCarcus up against George Bush senior and at that time the big
foreign policy debate in America was about Japan this fast growing economy which had been investing in not just Japanese real estate and companies but American real estate companies as well the yen dollar exchange rate hugely significant at the time there was a Democrat Richard Gephardt who was a big standard bearer of we must tackle this Japanese protectionism Larry Summers who I was first lectured by back then in 1988 was the economic
advisor the young economic advisor advising DeCarcus about this terrible Japanese threat to the American economy well done Donald Trump also he was just a businessman but then he was he was making a big deal about the threat from Japan why we needed
Japan to be almost certainly at the time the Japanese economy was so inflated in its real estate bubble that the land upon which the Imperial Palace in the center of Tokyo was located was worth more on current prices at that time than all the land in the whole of California such was this sort of huge real estate bubble and you know what at that time when I was at Harvard I don't remember there being a single conversation in the Kennedy school classes I was at in the economics department about
the rise of China as an economic competitor to America just on anybody's radar and then you have this massive stop market crash in Japan huge bad debts in the banking system the beginning of a period of very slow growth stagnation in the Japanese economy they can't
sort out the bad debts in the banking sector because nobody wants to admit to how badly it's gone wrong they didn't do the kind of turn around of bad debts you saw after the financial crisis in the UK and the US in 2007 2008 2009 and you just have
some stagnation and also big demographic challenges and aging population people saving like mad because they're worried about how they'll pay for their retirement this economy is essentially stagnated now for 30 years during which as you said it's economic salience in the global
stage has sunk to such an extent that people don't really talk about the yen or the Japanese challenge really at all I mean do you remember as a chance how was it for you the Japanese relationship well it was always quite friendly I mean I I had my opposite number was a guy called asso finance minister asso tarot asso and I did several visits Japan including actually a very memorable visit to Fukushima the site of the of the nuclear disaster and tsunami that preceded it and I went to the school
overwhelmed by the tsunami I really remember that visit and I I was in Japan earlier as is one of my favorite places to visit in the whole world but it's interesting that you know when I was a child and a teenager a lot of the innovation of what was coming out of Japan you know I'm this is going to date me but things like the Sony Walkman was the big kind of step forward now you think of the big tech companies they're American we've been talking about some of them on this
podcast all their Chinese Alibaba 10 cent tick tock and so on and you know those Japanese companies then there's not a big tech player that's emerged in Japan let alone in Europe and that's for another conversation and Japan just doesn't sort of punch politically in the way that it used to there was a period under primers to Abe who was assassinated a couple years ago where actually Japan did kind of take
it's if you like rightful place on the world stage he was a very forceful Prime Minister with a very sort of hawkish view of Japanese foreign policy sometimes controversial and then that now has been assassinated and the theory of you know if we're entering a period of kind of political turmoil in Japan it's fairly unlikely that there's even the prospect there's less likelihood of any kind of Japanese leadership
and that is quite a big challenge in East Asia because it puts a lot of the weight on the United States to try and manage East Asian relations to keep career in Japan aligned South Korea and to deal with this new challenge which is this strange alliance between North Korea and Russia
the interesting thing though is I mean you know Japan is still a rich country and it's been a very stable country even without growth there's not been sort of huge protests with this political challenge but not really political change and as you say Japan emerging as a much more of a
foreign policy player but there's a second thing which I thought was just worth picking up which is a political challenge because recently in the FT Robin Wigglesworth and Martin Wolf under the headline is China turning Japanese high saving big fall in real estate prices hard to deal with the consequence of that in terms of bad debts in state enterprises hard to use monetary fiscal policy to get the economy really moving they're talking now about
coming out invest our way out but you need to consume your way out is there a danger that China is going to go down the Japanese road and if it does about a golden brown so often when he did trips to China saying it's a tinder box it's a tinder box is place you know can you really hold a place of this scale with this poverty and this regional inequality together and amazingly China has done so they've defied all of the critics who say
no no this model can't work can China like Japan work its way through this economic change without political instability is China following the Japanese road I think the thing is China is more likely to be if it's got a problem a big economic problems at the moment we should probably come back because president she has publicly acknowledged for the first time there are economic problems in China but it's more and more I think
economists would call the middle income trap because you know incomes in China store third of those in the US and so they're sort of trapped in that stage that sometimes countries can get into where they develop but they get themselves out of extreme poverty and then they just don't kind of move on to the fully developed stage I think Japan I think the question is more for Europe and the UK are we the ones who are turning
Japanese you know if we've now had look at these growth numbers we talk about in the budget if the UK economy is only going to grow 1.5% for the rest of this decade I know that's what it's been growing out in recent years aren't we the ones who are turning Japanese that's by the way my link to that great song by the vapors I think we're turning Japanese you played that yet on your band no but actually maybe we should do that in an EMQ's record recommendation is interesting isn't it because if
you think about we started off talking about Britain and the need for growth knowing that you know we've had Brexit and how will Labour see off the reform for it the next election we then move on to talk
about America low growth you know potentially a return to Trump Trump populism quite anti-democratic certainly anti-globalization and Japan low growth but despite the election was that last weekend still a stable place and if Britain and Europe continues to follow Japan down the low growth road does
that lead to the kind of growing political instability which you know I think we're seeing signs of that takes us away from being you know the Japanese model from dealing with low growth with stable resignation into something much more dangerous and potentially volatile in the end all these
populations are asking the question am I better off than I was five years ago well look that is all for this episode thanks to everybody who tuned into our YouTube live hot take and as I said earlier you can go and watch that on our YouTube channel if you fancy it or listen on our
podcast feed I think I'm turning Japanese I think I'm turning Japanese I really think so do do do do do do do do it thank you it's coming into my head now we will be back with more budget questions as well as questions on some other topics with EMQs you can get that tomorrow
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