Rishi Sunak's Path Back From High Inflation and a Tax Scandal

global economy to you. From that clip was part of a running joke in Little Britain, the cult BBC comedy of the and it was doing the rounds A few days ago in a mini Twitter storm over an interview I did with the British finance Minister, the chance of the Exchequer, Rishi Sun. In it, he had explained why he had to wait until next year to raise UK welfare payments in line with rocketing inflation, rather than maybe giving families the help right now. It wasn't because it

was too expensive. It needn't cost anything at all. It was that the system wouldn't let him. Computer says no. Well, you can hear his answer to that and my other questions in a minute. Also, how the mood cooled noticeably when I asked him about recent revelations that his wife had been using a loophole in UK tax law which enabled her to avoid millions of pounds in UK tax

on her foreign earnings. After the Chancellor will be heading halfway around the world to hear from the United Nations Commissioner of Human Rights, the former President of Chile, Dr Michelle Bacheley. I've been talking to her at the New Economy Gateway event in Panama about Russian war crimes, American abortion rights and whether the new president of Chile can

succeed where she didn't worth sticking around for. But first, here's the Chancellor and if you want to picture the scene, the two of us were so seeing in a very swanky new shared workspace in the English city of Stoke on Trent, previously the home of English Pottery, now best known as the headquarters of the Betting Company at three five Chancelor, thanks very much for doing this. We've had

the GDP news today. There's obviously a lot of factors, global factors creating uncertainty for the economy, but we have also created some of our own in the UK and the debate about the Northern Ireland Protocol is obviously casting casting a shadow. Have you analyzed at the Treasury what the economic implications of tearing up the protocol would be.

First of all, on the protocol, I think the government's position is that as it's currently operating, it's poses enormous challenges to the stability of the situation in Northern Ireland. You can see it's become a barrier to re establishing power sharing in Northern Ireland doesn't have cross community consent

and that's a very serious situation that needs resolving. Our preferences is to have and always has been, to have a negotiated settlement with our European friends and partners, and no decision has been taken about you know what the

future direction might be. And we've got your second question. Look, of course that's that's my job to provide the Prime Minister in the government with analysis on policy regarding the economy, and you'd expect me to do that and everything, and of course we do, and we're constantly monitoring everything that's

going on and analyzing that as we go. But we we understand that you could get legislation next week to make it possible to tear up the protocol, and that seems to be what the Foreign Secretary is supporting are you Are you lobbying hard on behalf of the economy to prevent that. I think it's important people know that no decision has been taken. Our preference has always been to have a negotiated settlement, and you said that the

Treasury job to analyze these things. When the protocol was signed, it was very clear that these checks were going to happen, that there would be this kind of impediment to trade.

So that's something that's that's no surprise at all. I think when it comes to the protocol where to recognize that there's a there's a unique situation in Northern Ireland and everyone acknowledged that at the time, and it required a degree of flexibility and a constructive attitude on all sides to recognize the particular circumstances of Northern Ireland to

come up with a solution that would work. And I'm hopeful that continued dialogue and negotiation can't resolve the situation result and the negotiated But just when you're weighing up the impact on the economy as a chancellor, seems clear that you would be pushing for the continuation of the

protocol rather than throwing all of our trade relationship into uncertainty. Well, it's it's important to me, as it is important to the government, that we also protect the Good Friday Agreement, that we resume power sharing in Northern Ireland, that we make sure that Norther Ireland's placed in the Union in the United Kingdom is secure. And it's clear that the Protocol as it's currently operating is is causing on all those things. And that's why we, you know, we wereain

committed to trying to find resolution on that. It's a serious situation and that's something that across government we all feel. One of the reasons why a big trade war with Europe would be the worst possible timing is the cost of living crisis. Our economists estimate that the cost of living squeeze altogether is going to cost the average family well over twenty one pounds this year. You've got, as

a result, real disposable income falling by four percent. We're also expecting to see the economy shrink in the second and fourth quarter. We've already saw today, it shrinks, started to shrink in March. I mean, do you look back now and wish that you had got more ahead of this crisis in the spring statement, rather than yet again having to rush out some emergency medicine under pressure from

from the rest of the government. Well, no, I think it's important that the policy remains responsive to the situation that we're seeing. And in the spring and in February,

we had a sense of what was happening. In particular, we had clarity on energy prices because the price cap was increased in April by about seven hundred pounds and we announced in advance of that the support that was going to accompany that increase, and it's worth about three fifty pounds for a typical households, about half the increase. And then on top of that overall I've just said it's two thousands. So that doesn't feel responsive. But that's

just one aspect of what we're doing. And if you if you look what's happening in a few weeks time, for example, there's a very significant tax cart coming in for thirty million people in work. That's well, it means that most people in work, the vast majority, seventy of them, will see a net tax cut in facts worth three pounds. The combination of our fuel duty freeze and fuel duty tax cut, the largest ever cut to fuel duty that's

worth another hundred pounds for a typical family. The national living wage has just gone up but a few weeks ago. Again that's worth about a thousand pounds a year to someone working full time on the national living wage. So you put all these things together, there's quite a lot of support in place. But I've always said I'd stand ready to do more as the situation evolves, particularly with energy prices where the price cap will will most likely

go up again in the autumn. And I'm focused now on I'm out and about across the country, listening to people, hearing what's on their mind, what they're worried about, to make sure that we can get our policy right. And that's the thing that I'm focused on now. Don't You've mentioned that lots of the measures actually were to help working families, but we have there's a big hit for

anyone who's reliant on on state benefits. And that's a very simple thing that could have been done that actually would have been cost neutral, would have been to spread the uprating across two years, so instead of getting a well below inflation increase in benefits this year, and what will probably be a well above inflation increased next year.

You could have spread it over two years, and I know there may have been some technical problems with that, but have you worked out how to do that, because it obviously can make Actually there are quite the technical problems. That sounds like an excuse, but the operational is actually technically complicated and it's not necessarily possible to do that for everybody. And actually many other systems are built in a way that they can only be done once a year.

And the decision was taken quite quite a while ago before you managed to put the further you designed the furlough scheme. For most of the world of the UK popular work. The welfare system works in a in a very different way, and we're constrained somewhat by the operation of the welfare system, so it can't be done for everybody in that way, but we are still supporting people.

I recognize there's always going to be families in a particular circumstance that it's you know, I can't particularly forecast sitting at a desk and in the treasury, and that's why we've given councils before and now up to a billion pounds of discretionary funding because the local councils are best place to know those very vulnerable families who for

whatever reason aren't quite getting the help they need. So those councils now have the funding that they can provide direct support to those families a little bit extra as well. And you've talked about council's We've done a very careful look at what's happened on the leveling up agenda across the country, since everything that we can get on very latest because obviously most of the time you have got

rather old data. But the things that go right up mostly to the spring of this year, the gap between London and Southeast and everywhere else is growing on every measure except life expectancy and the number of people on benefits. And that's only because London has leveled down. Those things have got worse. In London. Here salaries on our monthly salaries have fallen behind the London and Southeast by another

three hundred pounds. I mean, it's an impossible task that you've been landed with this leveling up agenda and you're not It doesn't feel like the government's really putting the money in the effort in to make a difference on

any of these measures. So I haven't seen your report yet, so forgive me for not having cited exactly the figures, and they're slightly different to the figures that I've looked at previous slee where what you saw was a much stronger recovery and jobs and wages outside of London and the Southeast. So I'd be interested to have a look at your report. I think in general at the period that you're describing is obviously the period of the pandemic, and so it's a child that's been a challenging time

for the economy. But that said, we are very committed to leveling up. You know, what does it mean to me? It means making sure people wherever they happen to grow up and live in the UK feel that they've got fantastic opportunity ahead of them and that they also have enormous pride in the place where they get to call home. You know, we're sitting here and Stoke, which has received a huge amount of investment in the town here, or the cities here or the collection of towns, and also

investment in the transport infrastructure. And I've been here multiple times to visit local businesses in the community, and actually there's an enormous sense of positivity and optimism here about what's happening. Were blue bergs, So we obviously we're very focused on the financial services on the city. You had a fantastic career in the city. You've also been in

high office for several years. It's very easy to lose track of how the rest of the world sees things, and I just I have to ask you, it's been a few weeks since the story broke, do you have a better understanding now of why even your supporters found it extraordinary that your family was organizing its tax affairs to to limit UK tax So, my my wife's her own person. She's an independent businesswoman. She's made a statement she's my wife. Is I think people would find extraordinary

if she was my property, I wouldn't. I wouldn't presume to dictate my wife to tell her what to do. She's an independent business person and she's always followed all the rules. She's paid taxes in the UK on her UK earnings and international taxes on her international earnings, very much within the rules. But she recognized that, you know, there was a call to go beyond the rules and she made that decision herself to pay both UK and

foreign TA. You didn't think it was extraordinary. I just wonder whether you think you often talk about being a good husband and being a good sitter, and do you think being a good citizen, a good husband, a good leader is only about sticking to the rules and doing what's legal. But I do think about part of being a good husband is not presuming to dictate to my wife what to do, because she's an independent person and I support her decisions. And now to Panama and the

New Economy Gateway. It's an event that's an offshoot of the Singapore New Economy Forum that Bloomberg holds every year in November. As I write this, I'm looking at a long line of container ships out my window queuing to get into the Panama Canal. So yes, it is a good place to talk about supply chains and the future

of global trade. We've been doing that a lot in the last couple of days, but we've also been doing that a lot on this podcast, so I thought you might be more interested to hear my conversation with Dr Michelle Bachelor, Commissioner for Human Rights for the United Nations, and President of Chiday between two thousand and six and twenty ten, since we were talking to an audience in Panama,

we spent a lot of time on Latin America. But I started by asking her whether Vladimir Putin all members of the Russian military should not be tried for war

crimes in Ukraine. Well, I have to say that we have had admission there from two thousand and fourteen that had been a monitory and reporting all kinds of situations and making a lot of reports to the human rights councils sense the South of fourteen and after the twenty fourth of February, they're still there working there, identifying and receiving a lot of information allegations of violation of human rights, on on how prison of war have been treated, if

there are allegations of arbitrary killings or actually usual killings, is there any allegations on gender based violence and rapes? And our job as the Office of the High Commissioner is to to get all that in mention to verify it, to see with what are facts that are real and which are not, because in this kind of situation we need to ensure that the information we share with the world and of course with the media as well, are facts that are real. But it's not for us to

say whether something is a war crime or not. There is a particular if I would say, methodology to identify if delegations are a reality, and we do that. We are also asking to preserve evidence because the only possibility of defining war crimes is on a tribunal with evidence based But let me say something. The war in Ukraine is not a war that can be seen only as a terrible and it is violation of international humanity law

and international human wrest law. That is one terrible thing, and it has had so many casualties and grievances, etcetera. But I have to say the war in Ukraine has provoked and will continu needed to provoke a three dimensional crisis or food, energy and finance, as oil, fertilizers and food prices are character ticketing and there will be serious effect in Latin America and the Caribbean, already deeply affected

by the COVID nineteen pandemic. Pricing christ is particularly affect more of a population if we continue with high levels of inflation, with lack of enough food, with people having not any support there will be a big social unrest. I'm certain about that. I mean, when when something happens in the country, but the leaders are trusted, that leader can speak to the country then say, look, we are

facing this issue. We did not produce it, but we're having the consequences, and we're going to deal with this and this and this and this manner that if there's no trust in institution, they are not trust in leadership, it could be much worse. Just briefly, to go back on on Ukraine, I mean, obviously, sitting in Latin America, it has its own experience of of being next to a very large neighbor and that neighbor involving itself in

its affairs. And the US has been very vociferous about calling for Russian officials to be prosecuted for war crimes, despite the fact that the US has itself refused to join or be bound by the International Criminal Court. Do you do you think that's tenable? Do you think that is a constructive contribution? Well, I believe that the definition of war crime is not political. It has to be udicial after a criminal investigation, and uh and and and

and that's what we will stand for. And to have all the information needed to ensure that there is the process, that there are serious investigation, and that all the evidence is for source or that whoever the mechanisms that have to decide to make those definitions, who have all the informations that it is needed if the US is calling for it, and yet the US is by definition and not willing to have any of its own officials or military members be tried on the same terms that that

that suggests it is political, and that devalues the term. Surely, well, there's a lot of politics in all these issues. Of course, of course I would like that every country in the world is is a member of the i c UH and that's not the DISH. And we have three of the P five that are not ratifying the SEC and the wrong statute. So there is an issue there, and even Ukraine has not ratified the wrong institute. But but there are other ways, anyway to investigate identified perpetrators and

hold them account. You talked about the risks that might come and the problems that could be exacerbated by rising food and energy prices. In this region. We have seen a surge in authoritarian tendencies. Nikara was the most recent example. When you look at the region, what are you which countries are you most worried about and how how do you want to how do you think we can start to redress that democratic deficit build trust as you mentioned earlier, Yeah,

of course we are being following. I mean even before the war and before COVID, we have been following several countries in the region and looking at the human right situation. As you may know, these countries are like we have been working strongly on Venezuela for for a long time, and we have been identifying there which are the issues, the challenges, the problems, and also identifying which other possibilities

to to improve the protection and promotion of human rights. Uh. I mean in Venezuela has a good economic growth that is welcome. It is key though that this grow needs to be used to ensure people can have an adequate standard of living. And I continue to encourage the lifting of sectorial sanctions to contribute to reliving the needs of the most vulnerable people in Venezuela. I do believe that

sanction individual sanctions can play important role. But when you have sectorial sanctions, what it happens is that the people who are the most vulnerable ones are the ones who are affected because they're not enough money for supporting the health system, the social protection system, the education and so on. On Nara, Yes, we have many people have been arrested in the context of of one elections and these are extremely concerning. We have been calling the authority to release

all those avertuality chain UM. The government has continued to cancel the legal status of society organizations and universities and we have also called authority to restore those status because those organizations have been avituality dissolved or sanctioned. And of course there is a new law that cons terms as a lot on engeo, further restricting the functioning of civil society, contrary to the country's human rights obligations. I think Nicaragua

must remaining international agenda. Last March, the Humans Council adopted resolution that allows my office to continue monitoring on reporting on the human situation in the country and it established a group of human rights experts with an accountability mandate em parallel to the mandate of my office. UM. We are also being concerned about the Salvador about the state of emergency, which led to more than thirty thousand people being arrested and the subsequent amendment to criminal law and

criminal procedural law. I mean, we recognize I have to say I've been haven't been in Offer myself. I understand that security and how you deal with delinquency is a very, very challenge challenging issue, and I recognize the challenges posed by gang violence in sal Salvadore. But we have to do things not only I mean, the intention can be good, but we have to do it in a way that

you respect international humorous law. There's so many countries. I think we could spend twenty minutes those and people will be fascinated to hear what you think. But let me just come back on Venezuela, because many people were surprised to see you recommend the lifting of sanctions last year against Venezuela, despite their not having been a significant improvement

in the situation. And I noticed that there have been ninety three incidents that your Offers has seen related to restrictions on Venezuela's civic and democratic space just since last autumn, and yet you've said again that you are in favor of lifting sanctions. Is that because you don't think they are the right tool for Venezuela and do we use

them too much in other places? Well? As I mentioned before Stefanie, we differentiate indie visual sanctions, sanctions to individual people who you could think are responsible for violation of human rights or and they need to be held accountable, from sectorial sanctions. We are against sectorial sanctions, not only in Venezuela, in everywhere because what happens at the sectorial sanctions usually hurt the poorest. That I have to tell you.

When I visited Nicara at Venezuela into southern nineteen I spoke to people who are not a pro government and mothers and doctors of hospitals or children hospitals who were affected by the sanctions. Even though it's some sanctions are supposed not to include medicine medical supplies, there is a lot of overcompliance. Banks do not want to risk anything, so what happened. For example, I was speaking to some

some doctors. They have these children who needed a kidney transplant and there was no possibility to do it in the country, so they were sending these children children to Italy or Argentina. But the banks will won't send the money to those places, so they won't accept it and many children die because of that. So that's what I mean. I mean, when you're doing some sanction, you need to think exactly who you are impacting, and usually you don't

impact the powerful, impact the more vulnerable people. The dynamic you mentioned is very visible in Afghanistan. Briefly on the political prospects for Venezuela. What are you hoping will be the political solution? Do you think you can have a free and fair presidential election in four Well, I am a chronic chronic optimistic, if I might say, because otherwise I will have to give up. I always say use these words of Desmond Tuto, who used to say I'm

a prison of hope. And so I hope that parties will sit together understanding that they need to think on Venezuela as a whole and which could be the best political dialogue to ensure that in twenty twenty four they are fair to bearn and very participative elections. And I hope this will be resumed soon. You mentioned the challenges of office. You're conscious in your criticisms that how challenging

it is to be. On the other side, we have seen new governments come in on a wave of optimism in Peru, Ecuador, Honduras and certainly your own native country, Chile, and very rapidly lose support. If you look at the new President of of Chile, Gabrielle Boreck, he seems to have lost support very quickly. And so, as someone who's been in very much in that situation, what's your advice to him? How can he come through on on that

optimism that brought him to power. Well, I mean, first of all, and I spoke to him that when I was chilling summer, I told him there has been so huge expectations on your government from enormous amount of people, and I have to tell you, Mr Pressing, I told him big expectations can never be met because usually there are unrealistic expectations because people want changes but in a months, in two months, but many of the more transformational changes will take a bit longer. They had to deal with

issues that are very challenging for any government. COVID nineteen is still covegn nenteen pandemic. The economy with the covination and the consequences of COVID on the economy and the employment UH and now the consequences of higher levels of inflation due to the war. So clearly, I think for

any leader, this is a very challenging moment. My only recommendation could be always speak openly to the people, to explain the challenges and explain what you're going to do to address these challenges, but on the other hand, to to explain that there are no magical solutions. The other thing that has happened, I guess is there's all this process of a new Chilean constitution that's been going on

created also a lot of expectations. It was good because the country through that has channeled the social outburst of to South and nineteen in a democratic and participatory process, but also something very interesting because a completely paritarian the one fifty four members of the Constitutional Assembly are fifty fifty women and men, and that's it's really new, and it means that a lot of processes has included the

gender perspective and so on. But of course he has taken time, and people want solutions now, wants changes now, and it will be until the fourth of September when there will be the referendum where this new constitution can be approved or not by the people. So I think they're leaving a lot of challenge. I think do you think it would be approved? Do you think it will be approved. I hope it will be approved. I think

it should be approved. I think one of the challenges that they have is to be able to communicate better to the people so people can understand what is it about. Because some people are more concerned, of course, of working, having food, you know, the the normal concerns of somebody and not being able to get in touch in detail with these issues. But I think it's a great opportunity

and I hope it's approved. So we're going to run out of time, but I had to ask you one question, especially given given your record in speaking up for for women's rights. We've had big demonstrations in the US this weekend over the potential for Supreme Court overturning abortion rights in in in many states in the US. When you look at the continent, some would say the biggest or one of the larger democratic democratic deficits that's opening up

is potentially in the US with the constitution. They're becoming quite a polarizing force. Um, do you think the U s should perhaps take a leaf out of Chile's book and have a have a constitutional Convention have some kind of way to address this deficit. Well, let me tell you first that the League document from the U. S. Supreme Court does not constitute the final decision from the court.

Uh And and I think that possible decisions taken at the national level in the US to revert more than five decades of protection of sessional dicty health and rights through raw and way are very concerning. And we're really concerned about because we believe it could be a massive setback for human women's right contrary to the international human

rights standards. Medium and women in the U S could be affected by the decision, especially those with low income and belonging to racial and ethnic minorities, because evidence showed that highly restrictive laws have a disproportional impact of marginalized

group of women, in particular women living in poverty. Globally, unsafe abortion is a didn't cause of maternal death, and evidence has shown that restrictive abortion laws do not reduce incidence of abortion, but drive it underground make it more likely to be unsafe. Do the US needs a constitutional process, Well,

I'm not sure there is appetite there for that. And I suppose are the American cities of the one who needs to answer that, because I know constitutions can open many other issues that maybe they don't want to open it right now the discussion. But I hope in this issue that women's women's rights can be respected because we do believe that even um, I mean, everybody can have options, choices, and what states need to ensure that women have those options.

What state cannot do is to impose a certain perspective, but needs to ensure that all women's according to their own beliefs, religion or decisions on their own autonomy, on their voices and so on, can have access to all the different options, and not to try to ensure that some things are not available, particularly to the most vulnerable and poorists and marginalized groups of people in the country. United Nations Human Rights Commissioner Dr Michelle Bachelor, thank you

so much for joining us. It's been it's been wonderful to have you. Thank yourself. Fanny. Well, that's it for this episode of Stephanomics. Next week will be in Davos for the World Economic Forum. I don't know yet what we'll be talking about, but I know it will be different from Panama and Stoke on Trent. If you want more economic news and analysis before then, check out the

Bloomberg News website and follow as Economics on Twitter. This episode was produced by Megas Hendrickson even though you had COVID and Summer Saudi, with special thanks to Do To Michelle Bachelet and the right Honorable Rishi Sunak MP. Mike Sasso is executive producer of Stephanomics and the head of Bloomberg Podcast is francesco leav