Transcription
This is a government that smacks a Labor government that seems to uh have no problem treating with contempt the people who voted for it and to be courting at the very same time the people who never voted for them and never will.
Well, I think the numbers are pretty terrifying. Unfortunately, there are going to have to be tax rises.
Will be one sad episode in a much longer drama.
The FT's own Jillian Tet provice of King's College, Cambridge, welcome. And former Greek finance minister, Janice Verafakis, thank you very much indeed both for coming. Jillian, can you unpick these numbers that are being put out in the papers, including yours? What are they and what do they spell out?
Essentially, what the numbers say is that the productivity in the UK economy, the ability of the UK economy to grow has been a lot lower than people thought. And if growth is lower, then the debt in proportion to the growth gets bigger. And so there's basically a big hole in the finances as a result. How big? And well, these are basically back of the envelope calculations. It could be about 30 billion.
30 billion.
Billion. Yes. And that's basically blow up a lot of the transfers arithmetic.
Jiannis, you were a Greek finance minister with no money. Are you sympathetic to our chancellor with no money?
Of course. What I'm not sympathetic is to the fact that they're focusing on the pain, the symptoms, and not on the causes of the pain. And the cause of the pain, allow me to say from my perspective as an outsider, is the fact that since the 2008 2009 crisis, the great financial collapse, there's been uh almost no net uh productive investment in this country. Indeed, not in Europe as a whole.
So, she's inherited something which she's made worse. Uh well, yes, she she made it far worse by increasing uh in a silly silly manner the national insurance contributions last last year. This was simply tax unemployment that made absolutely no sense. And to think that she only raised about 25 billion a year when at the same time she was giving 33 34 billion every year to the bankers uh through the quantity vising program which she had no reason to give especially Labor Chancellor should not have done that.
I would say that part of the original sin of Rachel Reez's budget approach was to rule out income tax rises because unfortunately there are going to have to be tax rises. um it would be much simpler and cleaner to have income tax rises in my view rather than messing around with measures that have deterred employment. I would disagree probably with Van Yafakus about the importance of having wealth creators in the city of London. I happen to think it was a big mistake to slap on things like the inheritance tax increases because people are fleeing and I also happen to think that the farmers was not particularly helpful either. But I think that keeping it simple is critical right now. Can I look at something that's come from the head of reform or one of the reform politicians, Richard Ty, who says, "We're paying too much interest at the Bank of England to banks that keep their money on reserve." Now, it seems to me that you might agree with that even though you're not a member of reform.
It's my personal tragedy that I have to agree with him. And also and also
officially we have you agreeing with reform. Amazing.
Well, you know, sometimes historical accidents happen. Uh but it is an accident and it's an an even greater personal tragedy that I'm going to say something good about the European Central Bank and nobody can accuse me of being a lucky of Frankfurt. The European Central Bank have not been doing what the Bank of England has been doing. And just for our audience very briefly, when the Bank of England sells off all the assets that they were purchasing during the period of quantitive easing to the bankers, the bankers use this money. They don't use this money. They don't lend it to the private sector. They park it on their reserve accounts with the bank of England and they get the very larger much larger interest rates. Now what the ECB did was to say no you we are going to tear these interest rates. We are not going to give money from the treasury for zero services that the banking sector is providing by parking that money instead of lending it to the private sector. This is a crime against logic.
Well, I think there are many things that Yanis and I would disagree with. However, we both agree that it's absolutely critical to ignite investment in Britain today.
What about that growth? Do you think we could
that would contribute to it? I would agree. I would agree with him.
But he thinks it could contribute 20 billion or more.
34. It's gone up since my view. This is official data for the
Do you do you agree?
Um I wouldn't know about the exact number, but I think it could certainly help.
The top priority right now has got to be to unleash growth, and that means introducing reforms to the pension funds, getting them to invest in the UK. We just had figures coming out today saying that IPOs, initial public offering in the London have collapsed to putting London in the below the top 20. Those are the kind of things which are really depressing and we have to find ways to essentially ignite growth in whatever way we can right now.
And you gave this prescription which would be very difficult for her to say, oh, you remember the manifesto, we're going to do a switcheroo.
I would agree. I understand that politically. I think it was a mistake to say that in the manifesto, but I think the reality is that we do need fiscal responsibility, but I think it's critical to keep the fiscal the taxes simple.
Do you think the simple taxes are going to have to go up and is it going to be simpler for her in the long run to tell the British public that as soon as possible?
Well, if you need to to to plug the hole, you are going to have to increase taxes or reduce spending. If she reduces spending then she will end up like George Osborne take chasing her own tail because GDP is going to go down. The question is who is going to pay the tax? Whom will the tax address? And the the problem with this government is not so much that that they are reluctant to break pre-election promises. They have done it. They have slashed disability payments. So, this is a government that smacks a Labor government that seems to uh have no problem treating with contempt the people who voted for it and to be courting at the very same time the people who never voted for them and never will.
Well, I mean, they've kept the triple lock. So, that's pensioners, millions of them getting 4%,
but they cut disability payments
and they also
and they increase national insurance contribution. That was against their own. They U-turned on the disability payment. That's part of the problem. They haven't got the agency of their majority, have they? That's she can't pull many levers with the Labor U-turn over the U-turn.
Well, they won't let I mean, initially they were never meant to cut disability payments. Then they decided we have to let Jill and they did another U-turn.
If Jillian won't agree with you anymore, don't let her speak.
Exactly. Yeah. Basically, we should not be prioritizing older people at the expense of young working people. We should actually be trying to find ways once again to encourage employment, to encourage investment, in employment in people, and above all else be trying to encourage growth.
So, we're going to have to give you 10 seconds left. Julian, you can go first. And you've only got 10. This budget is going to go down in history, or am I just trying to make News Night interesting in the final minute?
Well, I think the numbers are pretty terrifying. So, from that perspective, absolutely. Yes. I mean, Britain is on the edge of a serious fiscal challenge. Big day tomorrow for UK finances.
No, it will simply be one sad episode in a much longer drama.
Right,
that's a Greek talking about Greek tragedies.
There you are. Thank you very much for