Transcription
Jeremy, is the UK economy failing right now?
We're doing badly, but I think you can overstate it. And I think if you look at the the trend lines rather than the headlines, people have always been really bearish about the UK. I mean, we we're brilliant at washing our dirty linen in public.
Uh we have newspapers like the Financial Times and The Economists that are read in every corner of the world. And so people know about all our problems. um and they know less about our strengths and at the moment we've got two really big strengths that people don't talk about. Our tech sector which is the third biggest in the world after the US and China and also we have a big defense sector which is obviously sadly very important now with what's happening in Ukraine. So um I actually think we have got great prospects. Obviously, I don't agree with a lot of the decisions the government's taken um which are, you know, take us in the wrong direction, but you know, I've got kids and I'm an optimist for the future of the UK.
Right. So, what are those things you don't agree with that the UK are currently doing, our government?
Well, I think there's two things where I believe that the government is either wrong or failed to understand the challenge. Um, one of them won't be a surprise, Rob, and it's tax. And I just,
oh, we were getting on so well.
I just feel that you look around the world and the countries which have high energy dynamic economies have lower tax levels. North America, Asia, places like China.
Well, Argentina recently.
Yes, indeed. Um but uh places which have high taxes which is mainly Europe including the UK, uh there is less dynamism and that is because if you raise taxes up too high uh you make you stop work being worthwhile and you uh crush what economists call the animal spirits that you need in a modern economy. And so I believe I mean I put up taxes.
Um I had to do it after the pandemic but for me it was always something that was temporary. Uh we had to stabilize the market, show that we were good for the money as a country. But I always thought as we were able to we need to get back on the path to lower tax. So that's one. And the other one is uh a really boring topic but you know as a as a property guy you will totally get this and that is debt. Um, you know, in the property world, you think about mortgages and you know, you watch your mortgage like a hawk and you really care about what's happening to interest rates. Well, it's the same for the country and we've got debt now at 100% of GDP. Our debt interest, this is something very uh not really well known, but it's an extraordinary fact that our debt interest is about 105 billion pounds a year. But for the average household that is about four grand a year in tax. So the average family are paying about four grand in tax not for schools or the NHS or the police but for debt interest.
Wow. And and not repaying the debt just the interest only debt.
It's the interest on the debt. It's not repaying the debt at all. And um by the way that is the average uh household the average household income in this country or the average median 37 grand. Yeah. So many people were paying a lot more than that.
And um the problem is that that money is dead money because money that's paying for debt interest isn't being invested in mobile new buildings or uh new businesses. It's not being spent on consumption. you know, people, you know, more doctors putting more money into the economy by spending their salary. A third of it's going abroad actually to international investors. So, it's it's really big drag on the economy. And I think that we've got to get out of our we've got a tax doom loop and a debt doom loop. And in a way, it's a you know, it don't want to be apocalyptic, but it's a double doom loop. Um, and countries that are successful get out of that. and we can absolutely do that but I don't see any recognition from the government of that.
M so I want to come back to the taxation part cuz I think there's a lot to talk about but um debt so Ray Dalio seems to be going on this parade on many shows. He there was a headline his quote something worse than a recession is coming in my book the only thing worse than a recession is a depression and I know the US is different from the UK but I guess it's linked but yeah he believes that these big nations like the US are in too much debt. They're in a debt deficit. Uh, and you know, people are looking at the UK and the US and not seeing them as investable. Therefore, the money they need to get rid of their debt deficit won't come in. Are you seeing this in the UK? Is this why bonds are really low?
And um, the reason bonds are low in the UK is is slightly different. is a bit more UK specific which is that the markets can't see an economic growth plan that is really going to bring down debt in the medium term.
But Ray Daniel is a very smart guy and I read his book How Countries Go Broke Over the Summer. It's well worth a read.
Yeah. And I think the the sobering thing about that book is that even the US is not immune to the laws of gravity when it comes headto-head. And you know, up till now, the US, which by the way, we're on 100% of GDP. The US is 123% of GDP. So they've got,
you know, their debt like 10 times more than us, something like 30 trillion or something.
It's huge because they have a much bigger GDP than ours. Yeah, but um it has traditionally been the case that because the dollar has been the world's premium currency, what we call the reserve currency, so everyone wants to hold dollars, that um the US hasn't had to follow the rules that everyone else has had to follow and they've been able to borrow quite freely. But after Trump did his Liberation Day tariffs, the markets went funny.
He did because I I'd put £300,000 into the stock market like the day before. So I felt that.
Dear me. Gosh. Yes.
I just hold it. So it's fine. But but that he said, you know, his phrase was the market's got a bit icky. But the truth is that, you know, even Trump can't buck the markets and even America now has to recognize the risks. Now, is is Ray Dalio right that we're we're going to head for a mega correction, the once in 80year correction? Well, you know, I'm not an analyst or an expert, but what I do know,
but you were the chancellor of
I was the chancellor. Yes, that's true. But I wouldn't I wouldn't feel qualified to predict whether the world was heading for one of those big corrections. But what I think was interesting was that he said underneath that every seven to eight years you have a more minor correction and that is something that's in Rachel Reeves's power to avoid if she takes action now she can avoid
what could she do then
she could say to the um markets that over the course of the parliament uh we will never increase public spending by more than the growth in the economy for example and that would persuade markets that we were going to be responsible with our spending. She could reform welfare which would relieve a lot of pressure on the finances and that would mean that taxes wouldn't have to go up so much. She could make a big push on public sector productivity and say look we want to pay public sector work as well but anything above inflation has to be paid for with productivity increases which is the rule in the private sector. So, you know, there are lots and lots of things that she could do which I think would help get all those numbers that are beginning to flash red uh start to look a bit more healthy.
And why isn't she doing any of those?
Well, part of it is because she is a center-left chancellor and uh people on the left have tended to believe that uh you can borrow your way to growth. I mean, we heard it again from Andy Bernham this week, and that's, you know, something where people on the right tend to be more nervous of debt mounting up. Um, and also she doesn't have a problem with higher taxes. I mean, you know, I think her she's um you she's one of the more sensible ones on the Labour side, I hasten to add, but I think her worldview is is quite 1997. You know, the economy will be fine. I just need to tax a bit more and spend a bit more on public services and that's that's what a Labor government will do. But because of the levels of debt, you have to do a lot more if we're actually going to get the economy grow. So I mean the 1990s or 30 years ago and things change.
Can can she not see that we're spending too much on welfare? Productivity could come from getting people back to work. Is this you? I'm an entrepreneur and I started from nothing and I worked hard and I felt down sometimes and I didn't phone the doctor get signed off for a few months. Not everyone does that, I know, but I think it's been easier to do that. And actually, do you know what made me feel really good? A good day's work. Made me feel really good afterwards, even if it was hard. And we're told we need to build 1.5 million houses. So to me, why don't we, you know, get some of the people off welfare, off the streets, give them apprentice jobs, manual work, brick layers, you know, roofers, build these houses. They'd save a lot of money, they'd improve employment. Am I naive?
Do you know I have exactly the same view, but maybe that's not a surprise because I also set up and ran my own business in 14 years before I went into politics. And um you know you I think hit the nail on the head when you said you know after a good day's work you feel good.
You do. Yeah.
And at the moment we are signing off about a thousand people every single day as being not just too ill to work but too ill to even look for work. And the majority of that is for mental health reasons.
Wow.
Uh anxiety, depression. Well, every doctor I ever met when I was health secretary, they said, you know, if you've got mental illness, you need social contact. You need to be with people. You need those work colleagues, the the water cooler moments, the, you know, the postwork drinks, the uh the the friendships that build up in the world of work. But if you park someone on benefit, you're taking them away from all that social contact, all that sense of selfworth. And you know what's going to happen is the mental illness will get worse. And not only that, but if by saying you've got anxiety or depression, you get entitlement to universal credit health component or personal independence payment. You then create a worry that if that person gets better and they tell the authorities they got better, they could lose their benefit. So you create the risk that you're actually locking people into a life on benefit. And it's really I mean we were getting the numbers on benefit down until the pandemic. It's something that has uh come up and bite us after the pandemic. But you know from Rachel Re's point of view just let's put ourselves in her shoes for a moment. Um, if she got the benefit bill down to where it was in 2019, just before the pandemic, that saves nearly 50 billion quid a year and she wouldn't have to put up a single tax.
And isn't that not what they're saying the black hole is now?
So, isn't that just a quick she would be able to avoid all those tax rises which are so damaging to the economy. But actually, of course, great for business because you're creating the workers that businesses can hire and also most importantly of all great for the individuals involved.
I mean, you know, I know these are all kind of numbers, but you know, we the NHS has a worldleading talking therapies program for people with anxiety or depression. And I happen to know it cost about a billion quid a year to run. You could save with some of that 4950 billion you're saving from the benefits reform. You could double the amount of people that we put into anxiety or depression talking therapies and we're doing them a massive favor. You know what we're saying is if you're not well, we're going to make you better and it's so much more healthy for the individuals and for society.
So why are Labour not doing anything about this?
Well, they tried in the summer, but they did it in a very hamfisted way. Um, and they said, "This is all about getting 5 billion of savings." And um, obviously for Labour MPs, that was very challenging. What they should have done is said, "Here is a thoughtout program, not a rush program, but a thoughtout program that is going to make life better for people who've lost their jobs or people who are unwell. And, you know, we're going to do this big expansion in mental health. We're going to have a big expansion of uh physiootherapy for people who've hurt their back. And you know, if you want to know how to do this, you don't have to look very far. Look at somewhere like Denmark. I mean, they are so good at getting people into work and keeping people in work. Um and um you know if we had this if we had the same number of disabled people in work as they have in Denmark, there'd be 600,000 more disabled people working in the UK.
Wow.
So you know there's so much we can learn from how other countries do these things.
Yeah. I was having a lunch with Quasi as I told you recently and he said when you look at the numbers of the people actually working i.e in the working age and able to work i.e. over 18 etc. Onethird of those aren't working. Is that is that about right? Does that sound about right? So about 11ish million out of about 33ish million able to work. Sounds crazy.
It's it's um it's the 11 million is right. It's actually 41 million for the whole of the UK. That might be the England number,
right?
But it's basically a quarter. A quarter of adults are not in work. And Rob, here's the thing which makes
I li some of them. They can come and apply to here's the thing that is so ridiculous. At the same time, we're trying to deal with an aging population, growing numbers of older people, more people retired. So actually we need more of the adult age population to be in work in order to make sure we can afford the services that our parents and grandparents are needing.
I I'll ask again and you've sort of answered it but maybe in a more direct way. Why aren't Labor doing this?
Well, I think they now are beginning to understand that they need to do this. The trouble is they've wasted a year and they've lost a lot of momentum. And in politics, uh, your golden period is when you're brand new in the job and people are giving you the benefit of the doubt.
They don't hate you yet.
They don't hate you yet. Yeah. I'm afraid it happens to all of us. I mean, when I was health secretary, I was, you know, the most unpopular man in the country. So, it happens to everyone.
Um, and they've they've lost a lot of political capital in in uh the last year. But, you know, they are also looking to regain credibility. And I would say that for, you know, business people like yourself, Rob, um, you don't care the party label. You just want a government that's got solutions to the big problems we face. if they came up with a plan for welfare reform, a plan to uh sort out the productivity in the public sector, which is often so woeful, if they came up with a plan to deal with our debt, I think you'd say, "I don't mind if it's Labor. This is sounds like a good plan, and we got to get behind it." So, I think it's actually the key to how they get out of the hole that they're in as well.
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