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Well, quite a lot of speculation is getting pretty wide of the mark. But yeah, let's getting to the area which is wide of the mark.
Welcome back to voter Nomics, where politics and markets collide. This year, voters around the world have the ability to move markets, countries and economies like never before, so we created this series to help you make sense of it all. I'm Stephanie Flanders.
I'm Adrian Woodridge, and I'm alegra Stratton.
Well, we started today's show with a bit from my interview with the UK Prime Ministers Keirs Starmer. We got a bit of news out of him, which we will discuss in a minute, But we were speaking at the International Investment Summit in London exclusively and you heard he pushed back against the capital gains tax speculation. But we also talked about the government's plans for regulation, the relationship with China, and his attitudes towards listing companies like Shean,
which has been quite controversial. So we're going to play some highlights from that talk through perhaps the sort of the highs and lows of doing these interviews, the expectations not always fulfilled, and I think as part of this conversation, we wanted to bring in Alvarey, who's a reporter and the Readout newsletter contributor, to get her read on the whole summit really how the government's performed there and in
the previous one hundred days. So Alva, I hesitate to ask, but what would you have tried to get out of the Prime minister if you had been talking to him yesterday? And do you think you would have been any more successful than I will?
Oh?
I think you.
I think you made a valiant effort and as you say, you did get a news line out of him. It's a good waite, which doesn't always happen when people interview kre stars.
I'm always reminded there is this great moment of kind of optimism about any of these kind of interviews, and Elegre will appreciate this, where you've done the brilliant questions, but you've not heard the sort of wordy answers. Yet you think you're going to get this fantastic interview where he answers all these amazing things. And of course, being a politician, particularly prime ministers, you never quite get what you were hoping to get. But we did hear quite a lot from him.
He did commit new. We have this phrase commit news. He did commit news because I think what he said about CGT was interesting. You know, with what sixteen days before a budget or two weeks before a budget and to sort of give any kind of concrete shape, I mean for me, he seemed to be saying, you know what was wider the mark was the number, but that it did feel like CGT will go up.
Yeah, And it came on a day where actually the Chancellor Rachel we've heard quite a lot about her loosening the fiscal rules, or at least changing the fiscal rules to allow more investment. What we heard from her was that she seemed to not think raising the National insurance employer's contribution in some way would be a breach of the Manifesto pledge. I did ask the Prime Minister about that.
I wasn't able to get him on that, but I think it's interesting because obviously economists would not see much difference between those two and I think a lot of people reading the manifesto would not see much difference. But they seem to be making space for that kind of tax increase.
Yes, to me, strategically really odd because you've got this day which is many huge, big bosses coming to the Guildhall and then supports cathedral last night to be serenaded by Elton John to talk about investing into the UK, and then Rachel reads the Chancellor goes out and as you said, say stuff. You know, she crosses the road to have the proverbial fight to say no, we think it's not going to be in breach of the manifesto. That's not the narrative that they should have wanted out
of yesterday. They should have wanted out of yesterday exactly what Kistarma was saying to you, which is a decent line. It shouldn't have been thought of as a top line. But you know, no, Stephanie, everyone I talked to is asking me about planning reform, not about tax I think you know that was never going to be the sort of you know, front page splash. But nonetheless, you know it's a fair point and it probably does reflect some
of the conversations in the room. But instead you then had language from the Chancellor that is more significant.
We probably ought to actually allow people to hear a few minutes of our conversation and This is the first half of the interview. I began just talking about the rather challenging environment in which he was having the summit.
There's been a drum beat of inward investment over recent weeks, which I think demonstrates that although yes, of course we've had to signal that there are tough decisions to make because of the damage that's been done to our economy, we've just got to be straight with people about that.
We do have amazing assets in this country in terms of our skills, our people, our universities, our cutting edge when it comes to technologies like AI, for example, and that's why making that really clear statement of inten today
was very important. And I think quite a lot of the inward investment decisions we've seen, running into tens of billions, are of indication, if you like, of the approach that we're taking in partnership with the investors and the businesses, many many of whom are here today.
I mean, one of the things that you've been clear about was that tax and the chances has been clear about is that difficult decisions will be needed. Tax increases will be needed to pay for that investment in public services that people are expecting and given all the taxes that you've ruled out, there's a lot of concern here in the business community about increases in capital gains tax
and in wealth tax. Now, I know you're not going to want to go into the details of the budget, but are you reassuring the investors here that they have nothing to worry about on that score.
Well, I'm not going to get into the details of the budget. You wouldn't expect me to, but neither are I'm going to shy away from the fact that we've got difficult decisions to make. The last government left a twenty two billion pound black hole and we're not going to walk past that. We're going to have to deal
with it. So that'll be tough. But what have been able to be very clear with investors and businesses is because growth is the number one mission, then decisions, whether it's on the budget or anything else, will be determined by whether they help growth or not. So that's the
lens through which we're seeing this. But I have to say the discussion here, we've had intense discussions all day long last night as well with a number of people in the room that we've got to know over the last two years, so this is the first time we meet it. All of the discussion today has not actually been about tax. It's been about planning. It's been about
the regulatory environment. It's been about getting infrastructure moving much more quickly and the sort of apparatus of government working to that common end. That's the real discussion that's going on here. That's the real focus. And actually, contrary to perhaps what people might think, tax is not the first thing that businesses and investors are raising with me. First thing they're raising with me is is it really your
number one mission? Is it going to be stable and strategic and for the long term, to which the answer is yes, And are you prepared to do the tough things on execution and the deliverables, which is about, you know, the length of time it takes from investment decision to
actually seeing a project materialize. That's where I think we've been able to do a lot of reassurance that yes, we understand that and we're determined to do the follow through on growth that is desperately needed for investors, for our country and for the jobs of the future.
Forgive me, Prime Minister, but I think a lot of people they may not be talking about it to you. But a lot of people are worried. In this sort of vacuum that we've had quite a long wait for the budget. There's quite a lot of what might be might be just crazy speculation around where capital gains tax might go, for example, so something like a thirty nine percent rate. Can you reassure people that whatever the change is, it won't be anything that signifant.
Well, quite a lot of speculation is getting pretty wide of the mark. But is the market there is. Yeah, it's get into the area which is wide of the mark. But I'm not going to fuel the speculation because we can go on like this for a very long time until budget day. Everybody knows until budget day none of that is going to be revealed. It was important that when we came into office, into government, we looked at
the books, we assess the state of the economy. We needed to understand the damage that's been done and that twenty two billion pound black hole is a real problem that we've got to deal with and make sure that we go through all the processes necessary for a properly thought through budget. So that's why we put the timing as it is. It's the right timing. But equally, it's been really fantastic to have this investment summit just a few weeks before the budget, where the mood music here
is very upbeat. People are talking about a real opportunity now to invest in the UK, comparing it as a relative advantage across the world. We want to seize that opportunity and take it boward with many of the investors that are here.
You're looking at books, but obviously people are also just sort of checking when they think about I know you're not going to reveal what's on the budget, but when they're thinking about what you've committed to and what you've not committed to. For example, the pledge not to increase natural insurance contributions. Most people I talk to think that if you increase the employer side of that, the employer contribution,
that would be breaking that pledge. Can we without getting into the budget, can I just check that is your understanding that that would be breaking that pledge.
Well, you're saying, without getting against.
The publict it's your pledge.
We made commitments in our manifesto and we intend to deliver on those commitments. Beyond that, I'm afraid you'll have to wait for the budget for the details. For very obvious reasons, we're still weeks away from the final assessment in the budget.
I guess that what feel you said, it's the right timing for this summit. It does feel a bit odd that for those people in the room, people who are doing deals today, you can't promise them that the basic tax environment for entrepreneurs, for business, for wealth in a couple of weeks time won't be completely different.
Well, they're very interested that corporation tax is capped. They know exactly where that is in the long term. They're very interested in the fact that we're able to say that because we've got a good, strong majority in government, we're able to make decisions based on years, not months,
with a clear strategy. They're very very interesting when I talk them about being a mission driven government, a government with a real sense of purpose measured over years, with one central purpose, which is wealth creation translated into jobs in different parts of the United Kingdom. That's the sort of stability that they're looking for, and that's the conversations we're having. They're very pleased to hear that from a government.
I'm very pleased about the clarity. There's no end of people here today have said the clarity of the message is really welcome. It's now the follow through, which is actually the execution of it. What are you prepared to do when it came to planning, what you're prepared to do when it comes to regulation. It's not just the number of regulations, it's the inconsistency of regulation that we
need to deal with. And when I'm able to say with real confidence and certainty and clarity, yes, we're going to deal with that, that leads the decisions, in my view, to make the sort of investment that we've seen in recent weeks, which is very welcome. These are not just big numbers, although they are big numbers, they translate into jobs around the United Kingdom, good, well paid, secure jobs. And that's the change we promised at the election and the change that I'm determined to deliver on.
Just looking at the summit, do you think they did what they wanted to do and what do you make of this tax speculation?
I think that they are pretty happy with how it went yesterday, All things considered. They feel like they hit the lines that they wanted to. I mean the line that you've got our d of care Starmer. Clearly they wanted to send that thing, or they show that they do make exceptions when they think budget speculation is too of the mark, And clearly they wanted to shoot that dining ratio.
So was licensed to go and say that.
I think so. I think probably yeah, And in the notes, if pushed, you can say this, you definitely don't want to give the opposite impression. I would imagine that's how it went, even though probably ideally he would have stuck to the line that you mentioned Allegra and then on the employer nix. I think, and we've had a little bit more from Keir Starmer as well, and not saying the same as Rachel reeves, This seems like something that they do clearly intend to do, unless it's all kind
of mind games. But I think I think that they feel like they have just enough space or plausible deniability to say that this wasn't a manifesto Pleasure wants fluttering.
They've given a very positive assessment of what's going on, but let me be a little bit more negative. First of all, they're very incredibly confused with their messaging. They've spent the last few weeks telling us that Britain is a basket case in all sorts of ways. Its infrastructure is crumbling. It made this dramatically stupid mistake of leaving the EU, and now they're saying to all these people invest here. That's a very odd way of going about government.
And secondly, about the Starmer speech, this is sort of we tend to think of this in terms of cat and mouse. We try and get him to say things that tell us what's going to be in the budget, and he tries to stop himself from doing that and keep the surprise there. But I just wonder if that's not the right game to be playing. A better game would be providing a sort of intellectual framework that justifies
what you're doing. Of course he can't give away what's in the budget, but what he must do is set up a set of visions of tactics and all of that sort of thing, and he just doesn't do that in this interview.
Yeah, well, you were all smiling when I mentioned the employer nix and the government rolling the pitch for that. I wonder what you make of that. It does look like that is what the government intends to do as
one of its main revenue raisers. In budget No. I think that they feel like they can just about make the case that this isn't breaking a manifesto commitment, that it's sufficiently ambiguous, because the Tories were pushing them to rule it out during the election campaign, so you could plausibly make an argument that it wasn't in the manifesto itself. I think they feel like they've got enough space there and then this raises enough money in one way.
But reinforced the sense on the part of the electorate that even if they were not lying directly, they were really trying to pull the wall over people's eyes and undermine trust in the electorate. We know, really that they made a lot of us about not raising these big taxes, and now they seem to be squirming around in order
to be able to do it. They may be able to get away with they've got a vast majority, they may have left themselves wiggle room, but we don't want to be governed by people who are looking for wiggle and.
That kind of great independent judge of these things. Paul Johnson, who's the head of the Institute for Fiscal Studies, came out yesterday and said it would be a straightforward breach of the manifesto, and I think Adrian is right. You play with fire when you have an apathetic electurate that thinks they're all the same and don't talk to you straight.
But the impression I get from all of this is that we're going to tax labor more heavily, increase the cost of employing people, and we're going to tell employers how to employ people. I mean, we're going to make lots and lots of rules about workers' rights, which you contributes to the extent of regulation and which diminishes your power as a manager to manage. I think both of those are very dubious moves for a government that believes in wealth, supposedly believes in wealth creation.
But this is one of those times where I think the politics versus the economics, if you just look at the economics, you know the reason they are in this hole talking about wealth taxation, talking about capital gains tax, which they don't really want to be talking about when they're trying to attract investment and support growth, is because they've ruled out reversing these most recent nationals surance cuts,
which the country really couldn't afford. They cost twenty billion pounds, and I think there's a world in which they could have said, you know, we're not raising ASTRA insurance beyond what they were a year ago, but we don't think these recent cuts, which by the way, you've barely noticed, are affordable, and we are going to reverse those now. Who knows whether they could have done that, but if they effectively do that via the employer contribution, it doesn't
actually make a bit. It doesn't affect employment anymore or less. To do it on the employer side. On the employee side, they'll be doing it in a politically cack handed way. But a lot of economists would say, yeah, that makes sense because we couldn't afford those recent cuts anyway. One thing I wanted to get onto after that part of the interview was this tension between the focus on ethics
and the focus on attracting investment. I think comes up big time, particularly in relation to Chinese companies, but also Sheen, the online retailer so controversial that it has not been able to list in the US because of accusations around forced labor of Weiga workers in Shinjang. And I was quite interested. I mean, Alva, do you think this is going to be an issue for them because the previous government.
We're trying desperately to get Sheen because a lot of other people don't want to list in the UK anymore. But this is quite controversial.
Well yeah, I think that privately the government says that they're open to this. I read that as they are pretty keen really like they do want more listings in London and this would be a record size of listing. They've had meetings with Shean quite a bit privately, even
in opposition. This is something that they do want to see happen, but they're careful about the language around it because, as you say, there's a lot of concern on the labor backbenches and just in Parliament in general about the employment practices of Shean, and they've managed to avoid too much scrutiny on it. But I think it will come to a head. There are some people who are clarly keen to raise this in Parliament in the coming week. So I think it was good that you pressed him
on that. The way that the government always gets around this when they're asked about it is they say, well, if they're listed in London, they would be subject to UK employment regulation. And so I think it was good that you said, what does that actually mean? Does that mean that they have to stop using workers in Shinjang? What kind of reassurances will you need? And it was the first indication from Kure Starmer that actually they will
need to do that. My understanding is that they've given she In reassurance is that they won't block any attempt to list. But if they need, actually she And to change a big part of their employment model, then I think that that's pretty interesting. I mean, she and I think has always rejected the suggestion that they use slave labor.
I think Britain's in a very difficult position in the relationship with China because we can't trade as much as we'd like to on the tech side, so we have to redefine what our trading relationship is. And you know, a fast fashion company doesn't pose national security problems, so that's the sort of area where we ought to be doing that. But you know, again there's this tension between on the world one hand, the focus on investment at any cost or and on the other worker's rights at
any cost. And you know, saying we're going to we're going to be much more concerned about workers' rights. But on the other hand, we're going to trade with somebody who uses very dubious sources of labor.
In But do you think it actually should be disqualifying for the UK Stock Exchange to have if it turned out they had forced that. It was, of course the question you always have one question, you wish you'd ask three more twice.
If they use force labor, absolutely they shouldn't be they should not be allowed to listen on the UK Stock Exchange. Again, as I was saying earlier, these are very mixed messages.
So maybe we should listen to that bit of the interview and then see whether he's come out with a coherent policy. So you talked about mission led government and ethics led governments obviously in a feature. But there is another company, Sheen, which was considered to be such a rogue operator in the U s that it hasn't been able to list on the US stock market. It was too controversial as working practices. But it seems that your government is continuing their sort of open arms policy for
she wanting Sheen to list here. Is that right?
Well, I think we've got to get the balance right, and clearly we've got to have standards, high standards. We do have high standards, not least for example in rights at work, and I addressed that in my speech here today to say look better rights and protection for people in their workplace are good for growth. So we're clear where we stand on standards, but we're future looking, we're
pragmatic and subject to those standards. Then, yes, we do want investment into the United Kingdom because we desperately need growth in this time. We have had meaningful growth in the economy in the United Kingdom for fourteen long years. We're determined to turn that around.
But just to be clear on that, so the government would need to be sure that she's not using forced labor in Hinjang before it could list in the UK.
I'm not going to get into individual businesses. What I will say would be very about it. Standards and high standards do matter to us, so of course we'll be looking at any issue that goes to high standards, with
a particular feature on the rights of the workforce. We've been really clear that we see that as two sides of the same coin when it comes to growth, good employment rights and protections and a lot of drag on growth they're fundamental for growth, and I think pretty well all good businesses understand that, which is why in many cases they've already put in place some of the rights and protections that we are bringing forward in legislation on China.
And you had an interesting conversation with there it shmitt that this morning that touched on China. I'm interested. You know, right now we have the Chinese Army holding drills around democratically governed Taiwan, which they admit are a rehearsal or a practice for a full naval blockade of this place that produces most of the high quality advanced chips in the world. I'm just wondering. I mean, we have the Foreign Secretary on his way to Beijing later in the week.
Do you worry about the timing? Do you worry about the signal that sends on a week that the army is literally practicing potentially an invasion or a blockade of Taiwan.
Well, the approach i'd take is this that national security has to come first, so that's the number one priority, and therefore, of course we challenge where it's necessary to do so. But we're also pragmatic and we want our country to move forward and to succeed. So challenge where it's necessary, but there are areas not.
Necessary when they're really well, we have kind of practice challenged.
We do challenge, I myself spoke to the President. We do challenge where it's necessary to do so. But you know, we are pragmatic as well, and we need to make sure that we get that balance right when it comes to our relation with China.
I mean, just to follow up on that, when you say pragmatic, it feels like you're going to be more pragmatic than the previous government. They ceased inter that sort of major nomic cooperation, the dialogues, other things. When China imposed the National Security Law on Hong Kong. Are we sort of officially saying we're over that now.
Well.
I think the problem with the last government is they veered from one side of the road to the other side of the road and then back again, and that just led to a pretty chaotic approach. I think everybody understands the national security first approach that we must take and will take. Everybody understands that we do challenge where it's necessary to do so, but equally when it comes
to I don't know, for example, climate change. We're going to have to work with countries like China because it's the only way that we can all go forward.
I mean, of course, some of this is problems with their own making, and then there are challenges, as you hint, Madrian, that are about the world and Britain in the world. You know, Britain having been We've talked about this for Germany, but Britain also has a lot vested in a model
of globalization which no longer exists. Is not it financially in a position to do what the US has done, And that comes up very much what I was trying to get to in the interview with regard to China more generally, you know, And in fact he had done the Prime Minister had done an on stage session with the former head of Google, Eric Schmidt, where Eric Schmitt was actually at some point actually seemed to be almost sort of not lecturing, but sort of explaining to the
Prime Minister how the world was these days, that he was actually going to have to choose, and Britain wouldn't be able to choose China, it would have to choose the US, and it couldn't be confused about that. And I thought That was quite telling, because this is a government that is struggling with being open to China, wanting to have that relationship in a world where that's becoming
harder and harder. So he talked there about they always fall back on pragmatism when they haven't got anywhere else to go. But Adrian, do you think it's practical to have for them to reopen some of these channels for economic dialogue and all these things that even the conservatives thought they couldn't sustain after the Hong Kong National Security Law.
First of all, it's very difficult to do that, but secondly, the United States is really confronting written with the choice you either side with us or who side with China? And now we're no longer part of the EU, that's an even more pressing, pressing choice and we will have to side with the EU. And just saying well, let's go for fast fashion is not a way forward. So David Lamon is going to have a very difficult time in China making sense of me in.
The week where they're practicing having a blockade of Taiwan. Absolutely absolutely, I mean, Alva, what's the on the labour side, how much nervousness is around China or they've just got too long a list of other things to worry about.
I don't hear it come up very much. I think probably it will more. I think it doesn't in the context of what you do. Aren't sanctions on Chinese goods? Definitely there are labor MPs even when they were candidates. People thinking about Britain's industrial strategy and how you manage that, whether you put tariffs on Chinese evs and things like that.
How much do you think that this is a government that is slightly split and conflicted on some of these big questions, and just because huge majority in such an early stage, we're not seeing it yet.
I think that it's interesting. Also, as Adrian was talking about with the Workers' Rights Package and then trying to attract investment, I guess labor has been in opposition for so long and had in some ways. You know, they're accused of not being well prepared in some ways, they've had too long to think about what they would do
in government. And some promises are very very old, and some things are newer and a response to challenges today, and something like the workers Rights Package is very old that these aren't very old commitments that they have made. This is the sort of thing that they feel like a labor government should do, Like there's no point in being in power if you can't do something like that. And then so then they find themselves in this situation where they've got their old promises and their new promises
and they're facing a different directions. Different people in the cabinet prioritize different values, and then it doesn't come coherent too one overarching domestic narrative. That's been the big criticism even from people within government of their the past one hundred days, that they don't have leadership from the front. Keir Stammer saying, this is the overall thing.
I think we're going to come back to this quite a lot. And there's this I think, Alva, what you were bringing us back to is that sort of hole at the center, you know, when people go back to it's an unfair comparison because there haven't been many more effective Number ten operations than the ninety seven Tony Blair operation.
Just the depth of talent there, the seniority of the people there, the David millerbands that ever butt, Jonathan Powell's all those people that is clearly lacking in this government.
And well people weren't senior, were they They were quite most of them.
Well this is where they not, but they were. But they were people who had been with the Prime Minister for a very Tony Blair for a long time. They had all been together for four or five years. And I think that's one of the key things. There's not of that kind of text is so important though you and the social media.
Social media has fast forwarded the demand for people to react to negative news. The scrutiny is so intense and so you know, you can have three news stories within a day. And it's also we've now got this kind of sense of real voter discontent, which that government was you know, you know, either at the start of orhad.
Everything that everything is also of raw talent, and I just don't think there's the raw talent here that there was in in in ninety seven.
But I think this goes back to the unfair comparsion. There isn't that raal talent on the other side either them. This is the best government that we couldn't have.
I think that's true. That's true, all right.
On that happy note, Albert Adrian let Thank you very much, and I'm sure we will return these topics. Thanks for listening to this week's photon Nomics from Bloomberg. This episode was hosted by Me Stephanie Flanders with Allegra Stratton and Adrian Waldridge. It was produced by Summer Sadie, with production support from Chris Martinlou and Isabella Ward and sound design by Moses and dam Brendan Francis Newnham is our executive producer and Sage Bowman is Head of Podcasts, with special
thanks to Secure Starmer and Harris Broad and Alviray. Please subscribe, rate, and review this podcast highly wherever you get your fix of podcasts