Transcription
If you tax people enough, they will leave. Pay taxes here.
If you could rewind the clock, Quasi, and go back just before you were UK Chancellor, what advice would you give to yourself?
The Chinese army is the largest army in the world. Their army is 2 million people. We've got twice as many on benefit. It's kind of crazy. Okay.
How do we reverse all the damage done?
They've got to deal with spending.
Do you think Rachel Reeves is qualified?
I think she's potentially a fall guy. She lied about her CV. That to me is serious. So, we invented capitalism and we're going to go down with socialism.
If the left get in, they could do a lot of damage. The dollar in 2020 is worth 25% more than it is today. That's 5% depreciation every year. I mean, that's extraordinary.
And if Nigel got in and he called you up and he's like Quasi, come be my chancellor?
In all candor.
How bad is the state of the UK right now compared to what you've seen? So I think it's very similar to where we were in the 70s, the 1970s. And in those days, so in in some ways we're better in that the income tax in those days was top rate was 83%. On earned income on unearned income, you were paying 97 and a half% something crazy 95%. We're not we're not there now, but a lot of the dynamics are the same. You know, a lot of young people are leaving the country. You will have friends, you will have uh relatives uh in their 20s and 30s who are looking to to immigrate. Um many of them won't come back and that's precisely because they just see there aren't the opportunities here and I think the 70s was the last time that that was the case.
What would push you over the edge to leave?
To leave the country?
Yeah.
I've said in all candor um and I know we're among friends. I've said if if the left get in in 2029 whenever the election is that is a big you know people have to ask serious questions because you will have had you'll have another three years from where we are three and a half years and then potentially another five um on top of that where I think a they could do a lot of damage.
So when we were having lunch the last time you said 15 years ago everyone was coming to London. It was the place.
It was.
It was. Yeah. Yeah. And now it feels like they're all going the other way.
Yeah. I mean, I think so. London has great strengths. Okay. It's got the English language, it's got restaurants, theater, whatever culture you want is here. And a lot of, you know, rich foreigners say to me, you know, I I would pay more to stay in London as opposed to go to Milan or Dubai or wherever else. But there comes a limit. Um, you know, if you increase taxes enough, people will will will leave. And that's what they that's what they're doing. And it's not just about, you know, mansion taxes or um, you know, the the income tax or anything like that or capital tax. It's the whole culture.
Yeah.
You know, there's there's an anti-wealth a catch used to talk about the culture of envy. You know, that that is rearing its head now. And and and people just, you know, who are successful don't feel welcome here. And I think that's a big problem. It's not just about the headline rates or the actual tax. It's about the environment, the atmosphere, which is not very uh conducive to to investment and wealth creation.
Did you see the meme going around Dubai property real estate agent of the year?
Rachel. Yeah. Yeah. Yeah. Yeah. I've heard a version of that with Milan. But you look at Milan. You look at Milan. I mean, I looked I look, you know, obviously I did some preparation before I came here. Not too much, but uh but but you look at you look at Milan. I mean the property prices since 2019 have gone up about 40% there.
Wow.
And in in London about 7% 8%. So it's a massive difference.
And that's because uh of the tax of the tax issue?
100%.
And a lot of people you know they like Milan but they they don't you know there's a lot of bureaucracy. They don't speak Italian. You know they're not the culture is different. Um and they find London a lot more congenial. But actually if you tax people enough they will leave. Do you think there's things we can learn from Dubai? A lot of people tend to be going there.
Yeah. So, I think what I love about Dubai and Hong Kong in the old days is they had very low taxes. And what low taxes mean is you can actually save money. You can actually build capital. You know, if if the state takes 50% of your income, you know, you don't have to be an Einstein to, you know, you've got to work so long even just to get savings. Whereas I knew people back in the day and this is when, you know, we were growing as an economy. They go to Dubai, they work there maybe four years and they saved a pot of money because they were being taxed at 9%.
And then they could buy a flat or a house in the UK. A lot of people used to do that. And that if you're young, you know, your late 20s, early 30s, that's a great advantage in life to be able to come to back to the UK age 30 or 32?
And buy a house. How brilliant is that? And going to a low tax jurisdiction allows people obviously to save a lot more money far quick more quickly. M and that's a good thing.
Yeah. Yeah.
Do you think Rachel Reeves is qualified to be the UK Chancellor?
Well, look, I mean, who's qualified? I think Rachel, so having been there, I actually feel sorry for her and I said that people say, "Really?" And I, you know, the idea that there's some magical Labour chancellor waiting in the wings. They would do exactly what she's doing. They would do exactly what she's doing. So, you know, whether it's Rachel from accounts or whatever you want to call her or West Streeting or Angela Raining or any of these people, the idea that they're going to do different things is completely for the birds. Whoever is in this Labour government doing that job would have done exactly what she's done.
So, you So, she's not really pulling any strings.
I don't I don't I I mean I don't think she I think she's potentially a fall guy, but you know, if you looked to the the news over the summer, it was all about how number 10 had appointed Minute Shafi, who ran Columbia University. She's in the economic team. They put Torsten Bell who I mean, he's the man tax guru. They he used to run a think tank. They put him in the treasury. Uh the Labour backbenches are cracking the whip as well. They they didn't do uh welfare uh the welfare reforms. you got the OBR. So, the idea that this lady who's sitting in number 11 has full autonomy is is for the birds. There's a whole bunch of other uh interests that that that are driving this thing. So, I I is she qualified? She lied about her CV, which I think is terrible. Um but but actually,
How did she keep her job then?
Yeah. So the the serious thing, you know, when she said she'd done uh 10 years at the Bank of England and she'd done six and then she said she was an economist at H boss and wasn't she was some sort of bank official, that to me is serious because actually a lot of people in the private sector would would have been fired for a lot less. Um that that that I I am worried about. There's a there's a habit I think there. Um but you know, would she would anyone else in that party do anything differently? I don't think so. So apparently Labour have now raised taxes by about 70 billion.
Yeah, about that.
So look what happened in two years. Yeah. Well, barely in in 18 months actually. They they got in. So re rewind the clock and it's incredible how much has happened in a relatively short time. The election was on the 4th of July. No. Well, yeah, it was the 4th of July. Independence Day. 4th of July 2024. That isn't that long ago. It's about what 16 months. So they get in in July, they say, "Oh, we the Tories left us with a 22 billion black hole." Half of that was the was the trade union deal. Because if you remember, they whacked up uh train drivers pay. They did a deal with nurses. They did a deal with doctors. So half of the 22 billion black hole was the public sector deal that uh pay deals that they did. So it was 22 billion. We contested the figure, but give them the 22 billion. Then in uh November last year, they raised taxes. I remember opening up the Times, 35 billion increase. It wasn't 35 billion, it was 40 billion. They raised 40 billion in taxes last year and and 25 billion of that um you know 50-60% was all on national insurance for employers people like you Rob.
You know, you collectively paid 25 billion of that 40 billion and she said at the time, you know, the evil Tories left such a mess this is a stabilizing budget I won't come back for more she pretty much said that this is a one-off 40 billion raise and of of course yesterday what was it 26 billion some people say it's towards 30 looking at the fine print so as you say you're right it's at least 66 maybe up to 70 billion uh in two budgets uh and that's a huge amount of money and and a lot of that is going to deal with with welfare so 26 billion if you look at the thresholds I think it's roughly about 8 billion and the 8 breaks down beautifully three billion is scrapping the uh cap on two two child uh the benefits for two children so that you can have more if you have more children you get benefits. That's three billion and 5 billion was the welfare reform that they didn't get through. So the entire income tax um increase in terms of freezing the threshold is going to to welfare essentially.
How does that make you feel?
I'm concerned because I think actually my biggest fear is that they get back in and it won't be the Labour party. It'll be a coalition of the left. Labour, the Greens, maybe a bit of Lib Dem in there, SNP might have four or five, who knows? That's my biggest fear because then you'll get a you'll get a much more left-wing government uh than if you can imagine it you have today. That's my biggest fear. Um but but we've got to just accept the fact they're going to they're going to be running uh the country for another three years. My real fear also is that in that time, you know, we've looked at their first two budgets. They've raised 40 billion the first time. They raised 26 billion in tax this year. They've got another three years of budgets. And do I think they're suddenly going to balance the books and not raise taxes? No, I don't. I think they're going to raise taxes every single year they're in. And that frightens me.
What's the likelihood now with all the millionaires leaving of an exit tax or taxing on worldwide income?
So the exit tax I think is definitely on the cards because they leaked it. Do you remember?
It was in the paper.
And so if it's in the paper, it's come from somewhere. It's not journalists just making it up and they the journalists would have been briefed by either someone within the Labour Party or someone within the Treasury. So the fact that it was even in the paper suggests to me that they're looking at that because otherwise why would they why would that be written about?
Um so and I think
It's an exit tax, not just a desperate last.
It's a desperate last. So I think and I said earlier that the way I see the dynamics of this parliament is the fractured left will pull Labour to the left because they'll they'll realize at some point the only way they've got a chance is by appealing to the Greens, the SNP in Scotland, Plaid Cymru in Wales, the Islamic State Independence Party, whoever Corbyn. The only way they can get back is by appealing to as many of those people as possible, getting as many of those people to vote Labour. And the way you do that is you throw red meat to the crocodile and an exit tax might be a bit of red meat. They've done the man they brought in the mansion tax. They could increase that. I didn't think they'd do that this year. I thought that would be a desperate last minute. But because they couldn't raise income tax and all the rest, they thought, "Okay, we'll do that." They can do this stuff. If they're doing badly enough in the polls and they want to rally the left, they can they can do all of this sort of thing.
If you own a company?
Yeah.
And you look at your management accounts, you could probably get your costs down 10 or 15%. Without anything radical, I think above 20, you're going to have to do some radical things.
So, a saving of 10 to 15% of the economy is what 150 plus billion.
Yeah, that's on there.
Why do they refuse to make any cuts? Do you know?
I made exactly the I I remember when I became chancellor I thought we were spending then about a trillion pounds in the budget three years ago four years ago.
So do you think it's probably more now?
Yeah, it's about 1.2 trillion something like that. It's gone.
Right.
So we're spending a trillion pounds. I thought okay 5% of a trillion is 50 billion.
Okay. And as you said, any one of you here running a business or even your on your personal um finances, you could you could probably take 5% of your costs down without too much stress.
Yeah.
So, I made exactly the same point that you did mentally. Why can't a government do that? You know, you should be able to save 50 billion. And actually the reason why you can't do that or it's hard to do that. You could if you really wanted to is all the interest groups, every single interest group there is rightly they're going to say, "Well, where are you going to cut?" Well, no, we want we we're not going to um take a cut. We're not going to take a pay cut. We don't want our benefits cut. We don't want this cut. And of course, they're going to say that. That's that's and and you need a government that's strong enough and believes in itself enough and has got a mandate, which Labour did. they've got a majority of 160-70 to say actually we've got to reduce the spending. You got to be tough and that is the thing that nobody in well not for a very long term has been prepared actually to do to reduce spending and even not reduce spending just slow the increase of spending because it's just simple maths. If you can grow the economy faster than your increase in spending, happy days.
But if your increase in spending is faster than you can grow the economy, that's not sustainable in the long run.
Yeah. Okay. So, what can we do to grow the economy? What should we do?
So, I think um we've got to as a country my I I keep coming back to this. I think they've got to deal with spending. they've got because what's happening now is that the the spending tail, if you want to put it that way, is is wagging the dog of of national productivity in the economy and it's all driven by spending. You know, I don't think Rachel uh Reeves wanted to to increase taxes. It's just that, you know, she's got these backbenches who won't let her reduce spending and in order to pay for it, she thinks she has to, you know, clobber the rich in inverted commas. And it's madness, but that's what's driving all of this. You know, you've got four million people on benefits in this country and there are no sanctions. They don't have to look for work. You got about 9 million on on on on benefits, but at least 5 million of them have to normally, you know, go out and and look for work. 4 million they just get the benefits willy-nilly. And you know, in a country of 70 million, which we are now, adult population, I don't know, 45-50 million, 4 million people receiving benefits is a hell of a lot.
Isn't it quite a high percentage of the people who can work?
Yeah, it is. It's a very high percentage. And in terms of I I did this sort of experiment. Just a thought I like thinking in terms of concrete examples. The Chinese army is the largest army in the world. They've got a billion and a half people. Their army is 2 million people. Okay? It's the largest army in the world. We've got twice as many on benefits with 70 million people. It's kind of crazy. Okay. I mean, you know, so that I think it's a real problem. But check those figures. I'm not I'm not The army might be two and a half million, but it's not more than that. The figures vary, but we've got almost twice as many, if not twice as many people as the Chinese army on benefits.
And a fraction like?
Fraction of the population. And that is the largest uh army in the world, the largest of any army.
Anyway, just ponder that. And that's where this thing has got out of control. And and it's tough. It's very hard. Um, and unless people grapple and I to be fair to Labour, I mean I don't like being fair to them, but um to be to be fair I remember ministers I mean I do GMB Good Morning Britain every week and I remember ministers coming on that program saying this is unsustainable when they were trying to prepare people to to for the welfare reforms that were going to save the 5 billion that Darren Jones and others said this is unsustainable. Of course they don't say that now because they've just gone with the flow.
Yeah. But uh but they were right to say that we can't sustain this.
So if you were given more time when you were chancellor, what would you have done?
So I think where we went wrong and I've said this to Liz, I've said this to other people is if they're going to be if you're going to be unpopular, you got to try and be unpopular doing the right thing. Okay? And I think grappling with expenditure. It's not just about benefits. Um, it's about the whole gamut of government, the waste, all of that. Unless you grapple with that and it's going to be hard, uh I I don't see how you can reform this because the logic of the OBR and all of that is that, you know, you've got a lump of expenditure which you have to cover um and and you've got to raise taxes and we try to reduce taxes, but they the markets were like, well, who's going to pay for all of this stuff? That's why they freaked out. And also because we rolled it out very quickly. But I think that unless you actually grapple with expenditure um it's very difficult to see how you get off this uh you know this roller coaster. If you look at the net debt to GDP ratios so the actual indebtedness just look at the G7 most of those countries certainly the US certainly France certainly Italy certainly Japan uh so that's four of them all four of those are running debt to GDP of more than 100%. So the debt is more than the the size of the economy. In our country it's about 95-96%. And so you're living in a world where uh there's more and more indebtedness. That indebtedness has gone up sharply. In 2005 when I first ran for parliament the the debt to GDP in this country was 36-37%.
Wow.
You can't believe it. You cannot believe it.
And so we've got this massive increase in debt. And ultimately if you're very indebted and no one will say this because they can't say it but inflation works in your favor.
Yeah.
Okay. So if you've got a massive debt a little bit of inflation kind of chips away at that. So one has to always interrogate when they say we're going to deal with inflation. You've always got to slightly interrogate that because if you're a debtor inflation can work in your favor. The other thing particularly in the US that they don't want to do, you've got masses of debt, massive amounts of debt. The interest rate becomes critically important at that point. So you want to lower the interest rates as much as possible. And what the the Fed has done in the past and could do again is essentially print money to buy T bonds. And how that works is that obviously if you buy bonds that puts up the price of bonds and that means the interest rate goes down. It's like a seesaw.
So they're just lending money to themselves.
That's right. So when interest rates go up, bond prices fall. And that's what did for our government. That's what did for me actually with the LDI. When interest rates go up, bond prices fall. When bond prices rise, interest rates fall. So what they do is they buy lots of bonds to bid up the price of bonds and that lowers the interest rate. that there. So, so you're essentially at that point
Um printing money. QE is a version of that. Easing is a version of that.
Um some of the economists talk about fiscal repression. You're forcing investors in your paper to to to accept lower interest rates.
Um and in that environment, look at the price of gold. has gone up 50% this year because people are worried about all this indebtedness being paid for financed by print by by the printing press essentially. So looking in the next 5-10 years I think there is a high risk actually of um paper currencies fiat money really losing its value and I'm not just saying that in the future if you look at the last 5 years I was a stunned about this the dollar in 2020 I mean you can't remember 1978 you can remember 2020 I think um we could all remember 2020 that wasn't that long ago. The dollar in 2020 is worth 25% more than it is today. So, so what you could buy for a dollar in 2020, you have to pay $1.25 today. So that's, you know, in straight line terms, that's 5% depreciation every year roughly for 5 years. I mean, that's extraordinary. And do I think that's going to stop? I don't know. Probably not. It could do. They could decide, right, we're going to balance the books and we're going to be very disciplined, but I wouldn't bet on it. And clearly the market and others are buying uh some of them are buying uh cryptocurrencies, bitcoin, many people are buying gold to protect their wealth against this depreciation.
So a lot of people then say that they think maybe this is the beginning of the end of fiat currency and maybe a gold standard or even now people are talking about a bitcoin standard needing to come back.
Now you're a historian of money. I've studied the history of money. This is not abnormal. Currencies do not last thousands of years. Many of I think the average is 65 or 70 years a currency lasts.
Sure.
So, you know, this can't go on forever where in order to maintain something, you have to keep getting into debt. So, do you think we could go back to a gold or a Bitcoin standard? Would that be a good thing?
We could we could we could do a blended version of it. And what people don't we talk about history and dates. What people don't realize is that this paper money fiat currency standard for a better phrase has only really been around since 1971 which is a bit before I was born I take it but you know if you look at gold that was 2 and a half thousand years for 2 and a half thousand years you know the Persian Empire the Athenian Empire the Roman Empire they all had gold the British Empire they all used gold and then we've had this 54 year 55 year period where everything's on paper so do I think paper currencies going to last 2,000 years they're No way.
There's no way that's going to happen.
So what the transition is, it might be a version of some sort of gold and bitcoin standard. Could be a blended version of it. And this was discussed in the 40s, you know, they because they Bretton Woods people like Keynes said, "Why don't we have a blended currency?" But they went back to gold. But there were there's always been talk about some kind of monetary standard that can hold its value uh better uh frankly than than than paper money which is what we have now.
But then the downside of that a lot of people don't understand that you need a bit of inflation to have economic growth don't you?
Well so there's a great book um
Otherwise people don't because the problem with a bit sorry to interrupt the problem with a bitcoin standard if bitcoin is deflationary is no one's going to spend the money they're just going to hoard it.
I don't think so. I mean a lot of things so a lot of the things that we buy are actually in in a cycle of deflation. So a flat screen TV relatively is is cheap.
You just people just buy the bigger one.
Yeah. Yeah. They can do that. But actually for a lot of the things that we buy, we see deflation. And deflation is good because it means that you're spending less money to buy exactly what you did before. I mean the classic example of this is a computer. If you wanted to buy a computer in 1960,
You know, that would have cost you maybe $10 million, something like that. Crazy. But of course over time through innovation and technology
The cost of a computer
With far more capacity has gone down. So deflation yes and no it's not it's not universally a bad thing. It can actually pre-cage innovation and all the rest of it.
But but in order
In terms of money needs to have some inflation surely for people to be encouraged to spend it.
No. So I I don't agree with that. I mean I think that's very much a post-war um mentality. You know, if you look at the the classical gold standard, which you know, between about 1717-1715, something like that, 1717, prices were actually very stable, very stable. And there's a great broadcast, I think it might even be on YouTube, but John Maynard Keynes in 1930 talking about the the depression and he said, you know, a bushel of wheat in Liverpool sold last week for a price lower than any time since the reign of Charles the Second. Okay, so this is 1930 and he's saying that for the for the last, you know, a bushel of wheat sold in Liverpool for a price lower than it had done for 200 whatever years. That's the sort of world they were living in. And you just need to read, you know, or look at um period adaptations of Trollope and Dickens and all those writers and you can you don't have to read them very much to see that they had a their view of money was basically that it was a standard it was a standard value. I'll tell you one anecdote. There's Cadogan Square. There's a not Cadogan, Sloane Square, the Cadogan family. There's a what is it? Is it a Peter Jones? Does anyone know Peter Jones there at the top? I had a friend who was the the manager there 25 years ago. And the the thing was that every year she was in negotiation with Lord Cadogan about the ground rent. And I'm like, why is he? He goes, "Yeah, because his great-grandfather, whoever it was, did a deal where we could get the whole shop for £8,000 a year, which in 1900 was amazing." And we just kept and he just kept it the same. But of course, you know, 1900, they didn't realize inflation was going to completely rip up uh those values. And of course, this guy is saying, "Well, you know, we got to renegotiate this." He goes, "No, we we're getting it for eight grand a year. That's what your your granddaddy agreed to." So this this idea that inflation is inevitable and is always going to it's a it's a relatively modern one,
But
They could grow the economy when with with a solid um price uh a stable price,
But with all this increased debt, surely they can't they're not going to be able to control inflation.
So So you're right. The the world we're in now because we've got paper currencies um and fiat money is one where we print more money and the value of the currency goes down. M
Um and that that ratchet seems pretty unavoidable to me, particularly at the level of indebtedness. But all I was questioning was this idea that you can have economic growth, you can't have economic growth without inflation, which which is clearly wrong because they they grew the economy in the 19th century. It's just that the standard of value was was the same. So you're looking at productivity. You're not looking at
Right. Do you see what I mean?
Yeah. Because I suppose on the other side of the argument, if you earn a pound, you feel like it's your right that that pound is still worth a pound next year and the year after and the year after and the year after.
That's right. And that was the that was the that was the understanding. I mean, you look at interest rates, for example. Um, you know, for for the the old bank rate was 5%.
And for most of the 19th century, it was around that. Um, and that was that was a stable money standard. For about 75 years, it was it was the bank rate was 5%. Um, and that and they lived they lived in that world. They could still make money. They could still invest. They could innovate. They could do all those things. They invented things. They invented steam. They invented a whole bunch of stuff.
But they didn't need inflation to grow their economy. They innovated and were more productive.
Are the middle classes now the new working class under Labour?
100%. 100%. Because actually the the the what you look at the again history, I mean that's my bread and butter. The whole concept of working class was people who were working because in those days they didn't have a welfare state. It was tough and people worked and they worked until they dropped dead pretty much. And it was only when we brought in the old age pension in 1909 and I trivia question. What was the age at which we brought in the old age pension in 1909 110 years ago? What?
Any any any?
I'm going to go younger than 55.
It was 70. War.
It was 70.
The life expectancy wasn't 70.
Exactly.
Because because those Edwardian parliamentarians, they weren't thick.
No.
They said, "Okay, we're going to bring in a we're going to bring in a pension." It was at 70 and your life expectancy at 70 was about 18 months.
It's like a pat on the back. Here's a turkey for Christmas. Well done, mate. And you know, you you see your way. And what people like me did over the last over a hundred years was we lowered it. So it went down to 65 in I think 1928. Um and then in 48 the Labour government said okay we'll have 60 for women because it was the same. And also in those days it wasn't you know the women in the workplace was not so common but they they brought it down and and and we've basically lowered that that pension age and now it's going up again but but it's not as high as it was 110 years ago.
Wow.
I knew people would go lower but actually it's it's it's extraordinary.
Yeah. Um and Victorian Edwardian Britain, you know, they were they were very I I imagine to be people like my friend Jacob Rees-Mogg very tough financiers,
You know, and and they weren't going to give much away and that was what that was the the pension age.
So why are the middle class now being the work?
So essentially, so you've got a you've got a welfare state that we talked about with its issues. Um you've got a culture where not just one person doesn't work ever. You've got two or three generations of people who are living on the welfare state and they're not working-class people. They're not working. I mean, they might, you know, socioeconomic thesis be described as working class, but they're not actually working class. They're not working. And the people who are working and paying taxes are the the middle stratum of society. The really rich can go off and do whatever they want. But the but that but that whole I'd say between about 40 grand and half a million something like that that's the where most of the taxes are earned and and and extracted uh and all of those people um work essentially.
And is it things like fiscal drag and inflation that pulls people down into working class as well.
Yeah. So so I think fiscal drag is huge. So, you know, if you're earning, you know, my old constituency, uh, just outside London, people earning 70, 80 grand a year, good wage, but they're not rich, but they were paying, you know, you know, easily paying the top rate, 40%.
Um, and you know, they're commuting, their commuting costs are very high.
Yeah.
You know, using the train.
Um, and and those are working people,
You know, they're the middle class working people. So, that's a very interesting question and I think there's a lot to be said for that. M
Lot to be said for that.
The 4 million people on benefits who don't have to look for a job, they're not working class.
They're not working.
No.
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Yeah.
Piece of propaganda almost I think um what is the media like and has the media lost the country? Do we not believe in the media?
So look, I think with the B I mean Andrew Marr said it. He didn't, you know, he didn't hide the fact he he believes and you can look at the quote the BBC should be a progressive, you know, socially progressive enlightened um social democrat organization. I don't think he used the word social democrat, but if you read what he says, that's exactly, you know, he he didn't even hide it. He says, you know, we should be for the underdog. We should be for, you know, ethnic minorities. we should be and that's a view that you know that's fine if he has that but it's not the job of the that's not what the charter says
Um and I think a lot of people uh in the BBC and also actually in the civil service do think that their job is to is to act as act as kind of watchdogs against you know people like me trying to trying to cut benefits they genuinely think I'm I am a civil servant and my job is to protect the most vulnerable um against you know right-wing governments but that isn't the job description, but a lot of them take on a moral um a moral purpose. And the other thing you got to remember, many of you, I suspect, aren't civil servants in this room, um but the way it's structured, the way the civil servants is structured is that you might, let's say you you hire in the treasury a thousand graduates or 500, whatever, a proportion of them, maybe half after 3 years are going to are going to leave. So it's a very sharp pyramid. And the ones that leave tend to get jobs either in the Bank of England or the private sector. The ones that go to the Bank of England after three or four years might go into JP Morgan or whoever. The point is that graduating class 10 years down the line is is is probably a third of what it was. And and who do you think stays there? they the the people who stay are probably people who haven't got the opportunity to get another job for whatever reason because they're not performing or they're not ambitious and or they're ideologically committed to the public service which is great but that comes with its own biases and and and interests. So a lot of the time they they're they're regulating things that they don't really have an interest in. So when I when I look at Treasury saying, "Oh, we're going to we're going to, you know, get rid of inheritance tax loopholes and we're going to put inheritance tax on farms," I guarantee none of those people have ever worked on a farm or their kids are farmers. They don't they're legislating about stuff they don't understand fundamentally.
Um and and that's because of the culture in which they they subscribe to. It's not their fault,
But that's just the the environment of the civil service. So my view is, you know, and I remember when I was Secretary of State, I was Secretary of State. I was 45 when I was Secretary of State. I remember thinking my equivalent, a 45-year-old who's been here 20-25 years since leaving school or university is is probably got a certain worldview that won't necessarily be shared by people in this room. Let me put it that way.
I.e. Marxist.
They could be Marxist. They could be eco-warrior zealots. They could be, you know, really have a social which is good, you know, social conscience. They're driven by things that, you know, a lot of business people are motivated by, but not to the point that they're going to devote their whole life to being in the transport department. Okay. I had a school friend and I went up to the the transport department. And uh I said, "Angus, I hadn't seen him for about 20 years, 25 years." I said, "Angus, what are you doing?" He said, "Oh, I work in the in the Department of Transport." I thought, "That's amazing. And how long have you been doing this job?" "Oh, 22 years." I'm like, "What? You've been here?" Not no Quasi, not at this desk. I was over there for 19.
And that you know and he's a good guy and he's smart but that's what that's he's an official to his fingertips and all I'm saying is that the way they think what they think of their responsibilities is completely different to someone in the private sector and it's the job of the minister to to try and mold them and shape them to drive what the government's doing and I don't think we do enough of that uh as a political culture we let them just run it.
M so what I can't get my head around is I try and be open-minded but I can't understand how any government can say things like government money or government funded and it seems to be a Marxist view or a left view that the government generates money.
That's what they yeah.
How how do they generate money? They take it off producers. They take it off the
Private. So there was and it the best illustration of that kind of mindset. I remember when Obama ran for president in 2008 the first time and he was this great, you know, shining sort of figure and he was on the left and there was a guy called Joe the plumber. Okay, Joe the plumber and he became this sort of Republican icon and Joe the plumber was talking about tax cuts and all the rest of it and Obama just said, "Well, you know, you think you're a businessman, Joe the plumber or whoever." It's like, "Yeah, but who who made the roads? uh who um pays for the schools that your kids go to, who um you know provides the infrastructure, the support for your business." He doesn't think of business people being innovators or entrepreneurs. He basically thinks that the state, the government enables you and everyone in this room to do whatever business that I mean, it's crazy, but that was very much when I when I saw him say that, I said, I totally get I get their mindset. They they they think government comes first and that everything else that anyone does is almost like a not a blessing but it's almost like a gift that the government with the government money is giving to entrepreneurs and and and innovators which is completely insane.
Um, it's the other way around. It's the it's it's actual private enterprise that's providing money for the government to do whatever it.
Well, the private enterprise built the roads contracted by the government.
That's right. So So even that but they but they The reason I mentioned that is I remember watching it on television thinking just you know the scales dropped from my eyes. I said this guy genuinely believes that the government is why we have all these businesses and why we have a a good private enterprise system. That's he genuinely believes that.
And the other person who believed that was Gordon Brown. He was very similar. He thought the state was was a great enabling force and allowed all these people you, me and everybody else to do whatever it is we wanted to do. I mean, I I get that it's a valuable service if we're unwell, but but how can someone either be so ignorant or so arrogant to think that it is the creator?
Yeah, they do. They think they think how.
They think and and I think it's because they don't know business. They don't have anyone in their family that has ever been in business.
You know, they can be academics. Gordon Brown, you know, his father was a a minister in the church. uh Obama had, you know, whatever background he had. They the the thinking is they they don't understand private enterprise and they think somehow that that the state was always there and that private enterprise is something that just you know the state allows through its benevolence but that's obviously complete nonsense because you look at it private you know in the 19th century the state barely existed you know G the spending to GDP was like 5% or something you know there was a pre-enterprise system um but they don't they don't think of it like that. And if and so far they do think like that. They think that was bad and they think now we're progressive. We've got more state. I remember had a debate with uh I went I was literally like this with Tony Benn.
Remember does anyone remember Tony Benn?
Yeah, everyone does. We're all old.
Um and and I remember him saying we were in some debate. I can't remember it was a literary festival or something. You know, I was a young Tory MP. He was getting on and he basically said um well look at the war. you know the state we won the war through state planning so why can't we win the peace through state planning and I thought oh my god I can totally see how he thinks like that because he thinks well, you know, everything should be like on a wartime footing where the state commandeers everything and it's bonkers.
But that was very much and I think I think we talk about history but I think the world wars did change Britain and a lot of people like Tony Benn coming out of World War II certainly thought well we all clubbed together the state ran everything to defeat Hitler So why can't the state run everything forever?
Um and I think that's very wrong.
But I can see how this thinking to answer.
Your question, uh, comes comes about. And I think there are historic reasons in in this country why, you know, we've gone left, um, quite severely. Whereas we invented capitalism, you know, Adam Smith, trading, all of that stuff that was here, uh, before anywhere else, the industrial revolution, but we've become very socialistic. So, we're going to be like Kodak, who invented digital photography, and then went bust because they didn't do digital photography. So, we invented capitalism and we're going to go down with socialism.
Yeah, I mean, that's a risk. I actually am more a risk.
Yeah, I think I'm more optimistic. I think, we had a chat in the hallway. The first thing you shook my hand and you said, "This is socialism."
True or true?
Yes. Yeah, I did say that. But I don't think, but I don't think the socialism is forever. I, I think fundamentally, and I've said this before, when in these gatherings with you, I think fundamentally Britain is about risk-taking and entrepreneurship. I mean, everyone in this room, you know, we've all grown up here and you've all, you know, plotted different paths in terms of entrepreneurship. There are, there are lots of countries where that doesn't happen.
They do look to the state or they do look to the military or whatever for employment. But actually, you know, we've got this individual. We still have an individualistic culture. You know, we're mavericks. We want to try different things out. We don't want to be told what to do. I still think that that's a a fundamental thing. It might be eroding, but I think in the end, that will kick in and prevent mass socialism being adopted.
But who knows?
Yeah. So, you've said cut spending is important.
Very.
Put that to the side. What else can we do to get growth?
So, once you've cut spending, then you can start thinking about cutting taxes. And you've got to work out which taxes are the best ones to to to reduce. And I think for me, corporation tax is something that I would very much focus on. And that was why I backed Liz Truss, actually, and because we were going to increase corporation tax from 19%, which was universally very competitive, to 25%. And if we'd just stuck to that, you know, things might have been different. But that, to me, was a very fundamental, uh, incentive. You know, lots of you, I mean, I also construct my affairs around a company. Um, and actually, it's, it's, it's nicer to be able to pay even 25% than 45% on on income. And, and, you know, Greens will say, well, they should equalize the two, but then you're going to kill any incentive for anyone to to to to form a company. So, corporation tax is very important. I think business rates, and I think they have tinkered around with them, um, to give them some credit. Uh, I think business rates are very important as well.
In, reduce them.
Yeah. Yeah. Yeah. And, and I think I think we've got to think about incentivizing investment. Income tax is important and I want to reduce that. But if I had to choose one or the other, I would look at capital taxes on, well, corporations, uh, on investment, even dividends, that sort of thing. Investment income, investment opportunity.
Yeah.
Should be encouraged. Why in the UK do we not just tax businesses a lot, but the thresholds are so low?
They're very low.
Like in America and Dubai, it's hundreds of thousands before you get anywhere near any top brackets.
That's right. Um, as I said, they introduce things very lightly and then the threshold, all of a sudden, the thresholds just stay forever and more and more people pay more and more. You look at inheritance tax, you know, very low levels. I mean, in America, I think it's $12 million. So, anything up to $12 million, you're not paying inheritance tax on.
Um, and, and that kind of makes sense. I'd love to see something like that here.
But, but no, everything's at a much lower level, and more and more people get dragged into the into the net.
How do you think Donald Trump's doing in America?
I think he's doing pretty well. I mean, I'll I'll say, I mean, I don't agree with tariffs. Okay. I never ever would would agree with that.
I mean, you have to have some, though, surely.
No.
Yeah. So, so the argument for tariffs is you reciprocal trade.
Yeah. So, you know, if you're a total free trader, the other country puts a 20% tariff on your goods. A a a classical free trader would say, "We're not going to retaliate." But I think that's unrealistic. So, you retaliate. And when he came in and he said, "Look, China is a big problem." He said that from 2015, and you will remember in 2015, I was there, 2015 or 14, President Xi came to England and pretended to like bitter with David Cameron in that pub in Oxfordshire. I mean, we were we were like this with China. And, and Trump, to be fair to him, was one of the first Western leaders to say, "No, China is a problem." And, you know, I've been to China. I've seen factories in China. They use, uh, they don't have health and safety like we have. They use, um, what could only be described almost as slave labor, prisoners, all sorts of things. You know, my kids, I've got a four-year-old and a one-year-old. They have these little ducks, you know, in the bath. Any any parents, you know, with young kids, you got these ducks, they're all made in China, those ducks, all of them. Um, and the people making them are a lot of them are prisoners. They're people who aren't being paid. So, yes, slap trade, uh, tariffs on China to equalize it. I get that. But then, you know, he's doing it all around the board. I think about 140 countries that he slapped tariffs on. And I think that's that's regressive. Having said that, they raise a ton of money and, um, I don't think they're going to get rid of them. I think even if the Democrats came in, they wouldn't get rid of them because a lot of American business is helped by, you know, it's a tariffs are defensive. They keep other competition out of your country. Um, so a lot of productive interests, production interests are going to support keeping the tariffs.
So, and this is an example of one guy reaching the highest office and totally bringing a sea change in global trade. I think if it wasn't for Trump, nobody was going to put these tariffs. He's been banging on about tariffs for 40 years. Uh, but even your bog-standard Republicans, they're like me. They don't like tariffs. Uh, and, and the Democrats don't like tariffs. Um, so it's just an example of one person totally changing the dynamics. Um, and so in his own terms, doing what he says he wants to do, I think he's quite effective.
M. I mean, more and more people are saying to me now that they feel, even people in politics, by the way, not just entrepreneurs, that maybe the people that run our country need to be business people with business experience, need to be entrepreneurial.
Yeah.
What do you think?
I think that's true, but I think, I mean, I was in the House of Commons for 14 years and even in those years, it was less and less attractive. You know, you could go into the House of Commons 15 years ago and you could keep up your business interest. It was much easier to do that. Uh, now, yes, you can have them, but you've got to declare everything. People frown on it. People, you know, you're a greedy so and so for doing this or that. That's just wrong.
Um, you know, you go back to 50, 60 years. It was good to have MPs who had lots of different interests. They could bring something to the debate.
They knew about logistics. They knew about agriculture because they were farmers, a lot of them. They knew about the law because they were lawyers. Whereas now you've got a large section of professional politicians who know nothing other than politics and policy and scheming in an abstract way. They don't really have experience of the economy, of the life of the country.
And I think I think it'll get, it could get worse. Um, and that's why you get these student politicians, essentially.
You know, who all they've done is be a president of a of a of a student union, and then become a special adviser, and then become a speech writer, and then become an MP, and then become a minister. It's kind of crazy.
Nigel Farage and Reform. Do you think they'll get in and do you think it would be a good thing if they got in?
So, I think it's 50/50. We're still far out. Anything can happen. I feel that the the polls say a bit more, don't they?
Yeah. But I I just, you know, things can can and they you can see now, I mean, this absurd thing about, oh, you said such and such racist things in the '70s. He was a teenager. They're digging. I mean, that says to me, they are desperate to stop him.
You know, they are desperate. You know, if you're digging up something that some guy said in '77, you know, when he was a teenager at school and trying to use that and weaponize that, you are desperate.
M. You've kind of lost every every argument and you're literally just trying to tear this guy down. And that says to me that they are very, very committed, particularly the Guardian and the left, to stopping him.
So they're worried.
They are clearly. I mean, why would you to so this is he said this in 1978, literally.
I mean, do you, I mean, you, you weren't alive then, but you know, makes it hard. But does anyone, does anyone, I mean, I mean, people said all sorts of crazy things. We were having a chat. You, no one remembers what they said when they were 17 or 21. And also the culture was different. The jokes, the humor, the band was different.
So, I know people in the city, respectable lawyers, lovely people, pretty centrist. You know, they said all sorts of crazy things that I remember when they were kids, you know, people did. And so to bring that up says to me, these people aren't serious. They will do anything to stop him. So there's that left, you know, conspiracy or or, you know, agglomeration of interests to stop him. And I also think that, you know, what he's doing is very difficult. It's never happened before. Okay, if you look at what Nigel has done, he's created a new party essentially and he's on the point, as far as the polls are concerned, of forming a government. That never happens. You know, we've had great policy bladon, whoever you want to name, Thatcher, they all worked within the, they never created their own party.
And won an election. They were all part of the system, if you like. So what he's doing is pretty extraordinary. And, and that's why I would price it at kind of 50/50 because it is an extraordinary thing that's happening. He could do it. Trump did it, but even Trump
took over the Republican party. He didn't create his own party.
Yeah. Um, and he deliberately didn't because he was part, he had a Reform Party actually in 2000, but he realized that the best way to actually become president was to join one of the established parties. He just had to work out which one.
Yeah.
Um, but so what Nigel is doing is is extraordinary and, and, you know, it's, it's, I'll believe it when I see it. I think the, a lot of forces who will work against him. I think the left are going to go nuts. Um, and let's let's see it. Now, do I think it'll be a good thing? In some ways, I think it would be a very good thing because it'll, it'll, it'll throw open the system. You know, one of the, I've talked about the civil service, you talk about, and I said he's got three obstacles. The House of Lords, that's all human rights lawyers, basically. I mean, broadly, that's their center of gravity. You've got the judiciary, again, which has its own biases, I think. And then you've got the, um, you know, the civil service. So, he's got these big institutional challenges. And at the moment, he's the only one, his party, the only ones who are going to challenge a lot of those orthodoxies. I don't think we should abolish all those things. Of course not. But we got to try and challenge people's thinking because, you know, whatever's happening isn't isn't working so well. So, in a way, I can see why people would vote for them. I think that they, there are a couple of things, a few things they need to iron out.
Right?
Like, you know, Nigel until very recently was in favor of scrapping the two-child care cap. That was a very popular policy. And I think you've got to have individual responsibility at the center of a welfare system. You can't have a situation where people can come to this country, have 10 kids and expect the state to pay for them all.
Yeah.
I think that's wrong. Um, and, and he, I don't think he, you know, he gets, but then you got to distinguish between British citizens and other citizens and it's, it's a mess. So, just have a cap. Um, and then I think he's right to say he's got to start thinking about spending, but then people will ask him, "So, what are you going to cut?" And then there'll be scare stories. So, it's a, it's a long road for him.
But I think that's a way in which you can, you can, you can shake things up.
Yeah.
And to be honest with you, I thought Kem did a good job yesterday. I thought I thought she really stuck it to, uh, uh, the labor to Rachel. And I'm very interested in, as a Tory, as a Tory, I'm very interested in what the Tories have to say because I think there's potentially some sensible stuff.
But it seems to me, you know, to to put it very bluntly and and simply, you've got a left block, which is Pli, Labor, Lib Dems, on and off, uh, SNP, uh, Gaza Independence. You've got the left Greens, and then you've got a right block, which is just Tory and Reform. And, and one of these blocks is going to win. I know who I want to win. I don't know what the configuration of seats will be, but I definitely would rather have them win than a coalition of the left.
And if Nigel got in and he called you up and he's like, "Quasi, come be my chancellor."
He can't afford me.
Even Nigel.
But, but actually, I speak to him. No, but I speak to him.
I speak to him a lot and, and I, I, I, I want, I want to feel that I can put some input into the. Yeah. I've said to myself, look, I'm 50. I don't want to get back to the House of Commons or the Parliament, um, you know, immediately and I've got other things. I'm doing other projects that I'm very engaged with that you know about.
Um, so I'm, I'm, I'm a friendly ear, if you like, and a friendly voice, but, um, I think I think leave others to do the the theatrics of politics.
If you could rewind the clock, Quasi, and go back just before you were UK Chancellor, what advice would you give to yourself?
Funny enough, it was the advice that Liz Truss says that her late majesty gave to her. Pace yourself, which was, I don't know, she, I knew the Queen a little bit, the late Queen. And, uh, she had incredible judgment of people, incredible experience, intuition, and she clearly saw something in Liz that that said to her, "Just pace yourself." And, and actually, Liz was good enough to to to write that in her book. That's the one thing. And then the second thing is, you know, if you're going to try and reduce taxes, you've got to try and reduce spending. I mean, I might be, I'm not a Reaganite, but even if I were a Reaganite, the markets aren't Reaganites, and you've got to try and show some degree of discipline on expenditure before they give you the the benefit of the doubt on tax cuts. Um, that's, that's those are the two bits of advice.
If we have a more right-leaning government at the next election, how do we reverse all the damage done?
So, I think some of the stuff can be done quite quickly. So, I would abolish the mansion tax. I think they can do that because even according to their figures, it's it will raise 400 million. Uh, I would get rid of that immediately. It's not a huge amount, you know, compared to the three billion that you're spending on the two-cap, uh, you know, getting rid of the two-cap child cap on two two children. So, you can do that. I think some of the stuff that Nigel said about a flat rate, you know, 300 grand and you're done. You know, in Italy, it's 200,000. So, once you pay €200,000 a year, you you've paid it. And I worked out, you don't have to be an Einstein to work it out. You know, if the top rate is 45% and you're paying 200,000, anyone earning over half a million, which is a lot of money, but anyone earning over half a million, it's probably incentivized to go to Italy. Now, there are other things, family, you know, lifestyle, language, all of those things. But it's, it's, it's given the fact they're mega mega wealthy people, the £200,000 is quite a low. And I, and I think in London, in England, you could charge maybe 50% more than that. And you think that would bring in more overseas?
I think it would. I think people, people, you know, very wealthy people I know say, "If I paid had to pay 300,000 a year to live in it and that was I was done, I would do that in a heartbeat." Um, so that's one thing you could do. I think you're going to have to get tough on things like, you know, mental disability because the welfare bill isn't, you know, it's not just because people are more disabled, is that there's a whole raft of people who have mental illness and essentially qualify for disability benefit through their mental illness. Now, I think that should be interrogated much more closely because essentially now it's like we used to have self-certified mortgages. It's almost like that.
"I'm depressed."
Self-cert mental health.
Yeah. Yeah. I mean, I wouldn't I wouldn't press the point too much, but yeah, it seems to me.
I mean, it's not very hard to strike yourself off work, is it?
Yeah. And also the thing with mental health is that there's it's, it's you can't see it. You know, when we brought in disability, you know, we'd had wars and people like didn't have arms and they didn't have legs. You could see who was disabled and it was it was. And then we said, "Okay, there's mental health and mental issues and we, I get that."
But the problem with that is that you can't prove anything. You can't, I mean, who are you to say to someone who says, "I've got mental health issues, I can't work." "Oh, just pull your socks up." You know, that's what we would have said 30 years ago, but you can't say that now.
So, and that, and they've tried to successive governments, us included, have tried to rationalize that and go through a process because otherwise it is like a self-certifying thing and that can't be right. Is there anything we can do to bring entrepreneurs here and encourage innovation and productivity and growth and business, all that sort of thing?
So, I think I think you've got to have a stable environment.
I think you've got to lower taxes. You've got to lower regulation.
And I think if you, if you did that for a whole parliamentary term, I think the whole, the picture would be totally different.
Wow.
I think it would be totally different.
And then you'd have the momentum. But otherwise, everything gets stuck and, and it's not moving in the way that we we want to see it.
Quasi, thank you very much.
Thank you. Heat. Heat.