November 21, 2025 • 34 mins
With the budget just days away, Rachel Reeves is facing yet another black hole in the public finances - after ditching plans to raise income tax, it’s been widely reported that the government will go for a “smorgasboard” of tax rises and spending cuts to plug the gap, but critics on the left and right say it won’t address the deeper structural rot in Britain’s economy.
So on this episode of The Fourcast, Krishnan Guru-Murthy is joined by two economists with radically different visions for how to turn the country around.
James Meadway, host of the Macrodose podcast and former economic adviser to John McDonnell, argues inequality is choking growth and that only a major reset of wealth, investment and a green industrial strategy can revive the UK.
Catherine McBride served on the last government’s Trade and Agricultural Commission and she thinks the real problem is over-regulation, high taxes and net-zero.
And Channel 4 News’ economics correspondent Helia Ebrahimi also joined the pod to cut through the political noise - and test whether any of their ideas actually add up.
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Transcript
Episode Transcript
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(00:00):
This government has consistentlybeen far too wedded to basically
a a treasury view of the world in which everything is about
balancing the books right now and not thinking about where
you're going to be in a few years time.
And lo and behold, every year the books don't really balance
properly because the economy is in a bad place.
You haven't done the big difficult decisions like how are
we actually going to start taxing the very wealthy in this
(00:20):
country? How do you start to address
these serious structural problems and instead thinking
about a so-called smorgasbord oflittle tweaks forevermore?
We're really making it so difficult for businesses.
They've got higher wages, they've got high electricity
costs, they've got business rates, they've got high rents
and everyone is just going well,bad luck, I'm out of here.
(00:41):
Hello and welcome to the Forecast and the first of our in
depth looks at the budget which is just days away now.
Rachel Reeves is facing a monumental task.
The public finances are still facing a black hole after she
failed to keep enough aside lastyear despite raising taxes by
£40 billion. After raising expectations of a
manifesto busting rise in incometax, it has now been widely
(01:04):
reported that she's changed her mind and will instead go for a
smorgasbord of tax rises and spending cuts which will hit
different people in different ways.
But critics to the left and the right believe this will fail to
address what they see as the deeper structural rot in
Britain's economy. So today we've got 2 economists
with radically different visionsfor how to turn the country
(01:26):
around. James Meadway was chief economic
adviser to Labour left winger John McDonald and now supports
the Green leader Zach Polanski. That inequality is choking
growth and that only a major recess of wealth investment and
industrial strategy can revive the UK.
Catherine McBride served on the last Tory government's Trade and
Agricultural Commission. She's argued in favour of tax
(01:48):
cuts, deregulation and to abandon net zero climate
targets. And our economics correspondent
Helia Ebrahimi is here with me to help us explore all of these
ideas. And Helia, let's start with just
how shaky the ground is. I mean, I, I don't remember a
run up to a budget that has beenso rocky in terms of trying to
(02:10):
plant thoughts in our minds and the markets minds about what to
expect from the budget. Then apparently a complete
U-turn on EU turn. It's chaotic politically, but is
that an indication of how difficult the job?
Is it's difficult because it hits all three problems.
It's economically difficult because you've got this big
(02:32):
downgrade in Britain's economic output and productivity by the
OBR could argue for the Chancellor that that's not
particularly her fault, that it's happening now you've got
this politics erupting. And 3rd and finally, because you
markets are so fragile, you've got to land this budget in a
(02:53):
market where borrowing costs have gone up massively and
you've got to have a credible argument that you can
essentially collect enough revenue to do the kind of
spending that you're talking about.
And that is the central problem.Well, we have.
With us two people who have got very, very different views of
what is fundamentally wrong and let's just get those out first
(03:13):
so that we know where each of you are are coming from.
I mean, James, am I right in saying inequality is where you
start? It would be one of the the
starting points. I mean, look, there's a whole
set of things that have gone wrong here.
I mean, look, counter intuitively I'm going to say
what I think Liz Truss and QuasiQuasen got right, which is that
you need to do something big andwe're in a hole and you need to
(03:35):
do something big to get out of it.
The answer they came up with waswrong.
But a big thing would not be thinking about what the Treasury
spreadsheet looks like of all these little tax rises and
fiddling about and little bits here and there.
And maybe you can squeeze a little bit of a tax relief here
and a little time and he cut over there.
The smorgasbord is a Treasury spreadsheet behind it.
You need a clear sense of political direction on this.
(03:55):
You need a narrative to what thegovernment is doing, something
that's never really had, by the way.
I mean, Rachel Reeves talks vaguely about growth.
Part of the reason that bond markets look askance at this
government is because it isn't very clear about what it's going
to be doing other than crossing his fingers and and hoping for
the best on growth. So there needs to be a clear
story about what we're doing. One part of that story would be
saying, how do we address severeinequality?
(04:17):
How do we address the fact that you have a very large amount of
wealth piling up at the top and most people really feeling the
pinch, which, by the way, increasing taxes on most people
simply add to that problem and of course, add to the kind of
stagnation I think we're starting to see in the economy?
Right. But but going into the budget,
do you think we should be looking at a range of tax rises?
(04:38):
I mean, we'll get into measures,specifically wealth taxes and
things like that in a moment. But you need to be looking at
raising more money. But it's a question of where
from. And that is, you know, standard
treasury answer is go for the really easy things from their
point of view, which is talking about raising income tax, for
instance, talk about changing National Insurance
contributions. I have to say, I think the
employer National Insurance contribution hike last year is
(05:01):
one of the contributing factors to a problem we're seeing with
employments coming into this year that this government has
consistently been far too weddedto.
Basically a a treasury view of the world.
World in which everything is about balancing the books right
now and not thinking about whereyou're going to be in a few
years time. And lo and behold, every year
we're now going through this process where the books don't
really balance properly because the economy is in a bad place.
(05:21):
You haven't done the big difficult decisions that you
ought to have done straight away.
Like how are we actually going to start taxing the very wealthy
in this country? How are we going to start taxing
some of the profits that banks have been making over the last
few years on the back of interest rate rises?
How do you start to address these serious structural
problems? And instead thinking about a
so-called smorgasbord of little tweaks.
Forevermore. OK.
(05:42):
Before we start picking it apart, Catherine, I mean you
come with this from a very different position, don't you?
We need to do big things. I'm with him that all of this
little tiny tax changes here andthere don't do anything.
She, I agree as well that it's her tax raises and not just her.
Sunak's fixing of the tax thresholds is killing the
(06:03):
economy. You know, you can see that they
have raised 7 billion more in September this year than they
raised in September last year just from fiscal drag.
So they gave everyone these pay rise.
Most of it is going in taxes. So people are getting a very
small amount out of what looked like a, an above inflation rate
(06:23):
of a wage rise. And then the inflation rates
been pushed up because you you saw that general inflation is
down slightly from 3.8 to 3.6. But food inflation is up by
4.6%, which is really hitting the man in the street or the
woman in the street, the woman in the supermarket.
And that is purely because of the increase in the minimum
(06:46):
minimum wage and the employer's National Insurance which is
added on to it. So when you push up the minimum
wage and make the employer's National Insurance contribution
15% of that, then you're, you'resort of, it's a double whammy.
And if you look at the food fromfarmer to supermarket shelf,
(07:07):
there are so many minimum wage jobs involved from picking,
processing, packing, packaging, deliveries, shelf stockers,
people working on the tills. Every time every one of those
jobs just went up. And that's why we've got this
massive inflation problem, whichpushes up the yield on bonds.
(07:28):
That's what's killing Rachel Reeves.
I mean, the interest we are paying on debt is ridiculous.
£110 billion we're expected to pay today.
And I think most people don't realize that what we're paying
in debt interest is more than many of the departments that
we're spending on. And it's that disconnect, most
(07:48):
of them, isn't it? More than most of them, more
than defence, more than education.
I mean, you'd have to get to health to to actually be out.
That's true. But I think what you were
talking about, where it's the Mervyn King has made the former
governor of the Bank of England has made this observation as
well, that the problem you have with creating fiscal rules which
(08:10):
are supposed to keep the, you know, government honest is that
you become completely myopic about balancing the books, about
making the numbers work rather than thinking what is the long
term strategy for this policy? Right.
I mean, so you're both in a way saying we don't obsess about
balancing the books in a nitty gritty way, but from slightly
different positions, I think. I'm not sure what James thinks,
(08:33):
but I am the taxes I would cut first because the real problem
is there's a lot of things you could do to try and lower
government spending, but they will take a long time to come
through. Catherine, do you think we pay
too much personal taxation? Yes, I do.
In the income tax and the taxes that people can't avoid.
We're we're raising more just because of fiscal drag, so that
(08:56):
we've moved because of inflation.
People have been given wage rises, but so much of that is
puts them into a higher tax bracket.
They're paying more in tax. But if you look at the
consumption taxes, the taxes, the cigarette tax, the tax on
spirits, tax on wine, all of those are down from September
last year. So people are spending less.
(09:19):
And we're, we're really making it so difficult for businesses
that they, they've got higher wages, they've got high
electricity costs, they've got business rates, they've got high
rents and everyone is just going, well, bad luck, I'm out
of here. The, the core of the domestic
economy is small business. The export economy is big
(09:41):
business, but the the domestic economy is small business.
They employ most of the people and we have made it so expensive
for them to employ people and everyone is frozen now waiting
for the budget and by delaying it they've just made everyone
stop. Everyone's not doing anything
till they find out if their taxes are going up.
OK. Well, James, I mean the big
(10:02):
taxes you want to raise are on the richest, Yes.
What do you want to do? Wealth tax and opening up the
question of wealth tax would be a sensible start to this.
And, and that would we'd have toconsider it as a start.
I mean, this isn't like something you do that magically
resolves all your problems. But if you're talking about the
kinds of sums that credible analysis had put out about how
much a relatively small annual percentage charge on very
(10:24):
wealthy people. So if you have more than
£10,000,000 net, let's say you're talking 10 to 20 billion,
that sort of range depending on the schemes you're looking at,
this gets you a long way towardsthe kinds of sums we'd need to
be looking at. Now, I don't view this as all
you'd want to do. I don't think you have an
economy that functions particularly well by exploiting
this kind of perverse one off advantage that we have a lot of
(10:47):
inequality and a lot of wealth not doing very much that you can
put to work. I mean, that's kind of what we
want to happen here. The longer term plan for this is
back to both of us agreeing witheach other.
The core of the economy, small businesses, the core of the
economy. Every day when you go out to
work, when you go and see what'shappening out there, you go to
the shops, it's a small businesslike likely as not.
What do you do to support those local economy?
That to me, and this is where we'll disagree, I think, is a
(11:08):
question of demand for sure. That's how much money people
have in their pockets. But that's not just taxes that
people are paying. That's also food prices, which
by the way, we import 50% of ourfood.
So it's not a question of just saying, OK, this is because
we're paying a few people working in fields here too much.
This is a problem of profiteering elsewhere in the
supply chain. These are really, really big
problems. If you want to start to think
(11:29):
about how you address them in your High Street, I would start
by saying how do you get most people to have more money?
How do you get a pay increase? To most people, that doesn't
necessarily. Mean cutting test actually they
have raised the they have raisedthe minimum wage and that is
part of what companies actually complain about when you go on
the street when you talk to those small companies they're
not just complaining about the tax raise that you saw in
(11:52):
National Insurance employer National Insurance last year.
They also complain that the minimum wage going up has made
it more expensive to employ people.
And it's not just the cost of it, it's employer rights bill,
which which is a big labour policy.
And I think Chris, going back toyour first question, it's about
does the vision for the economy,is it coherent and do the
(12:17):
policies conflict? If you say you want lots of
investment because you want people to build and you're
taking a bet on productivity andAI, is it credible?
If you've got the, if you don't have the energy resources to do
it, if you say you want businesses on site, is it
credible if it makes it more expensive to hire people?
(12:39):
And I think those are the kind of on the ground realities that
Labour have come unstuck. Quite.
But if we can just focus on the wealth tax idea, I mean, why
does the government not believe the numbers that James and Zack
Polanski and others put out? Because they always say it
wouldn't raise that much. The one of the problems you have
with wealth tax is that people say it cannibalises itself
(13:04):
because it essentially people learn how to either put their
wealth somewhere else, they leave the country and so the
amount of money that you actually end up raising is much
less than forecast. There are countries that do have
wealth taxes and those wealth taxes or not huge amounts of
(13:26):
revenue. So I think when you're talking
about what are the intractable problems for Britain, you have
to think are we trying to grow the economy?
Is this about the pie or has this just become about
distribution and that is the problem.
What the government had hoped was it's about growing the pie.
Growth will get us out of this and that hasn't quite
(13:47):
materialised. Well, it's gross.
From where? I mean, the problem the
government has had and all of this is that as far as could
tell, their plan was roughly, wewill be in charge and businesses
will like this and then economicgrowth will happen.
And, and honestly, I don't thinkthere's very much more to it
than that. Like if they had done the the
big harder reform straight away.Rachel Reeves as chancellor in a
government with a huge majority,you've got an incredible amount
(14:09):
of leeway to do some stuff that may even make you quite
unpopular. And what she did was pop up and
say, hey, I want to do some stuff that's going to be
unpleasant and then do nothing for a few months until the
budget, right. It was just this bizarre period
that was exactly when you could have said, OK, this is when we
introduce the wealth tax. This is when there's a big push
on minimum wage. I mean, I do think on the
National Insurance contributionsfor employers, it was, it was
(14:29):
bizarre to have Rachel Reid standing up and saying, you
know, we're whacking up NationalInsurance contributions that all
employers are paying, but then boasting about corporation tax
is still being amongst the lowest in Europe.
This is completely the wrong wayround.
Like if you get a tax businesses, tax businesses
actually have the money, which is the big.
Businesses, that's not to your argument of it.
You get fixated on trying to make the numbers work and you
(14:50):
think if you make the numbers work then it will sort itself
out. But actually the policy on the
ground. But but what's your answer to
the basic criticism of wealth tax, which is that people find
ways to minimise the amount thatyou end up?
So that that's that's built intoyour estimates for this is
something figures here from Aaron Advani at Warwick
University, an expert in these things.
The estimates you get take account of that behavioural
(15:11):
impact, the fact that you're going to get a number of people
'cause they're very wealthy and sophisticated in that financial
way, they're going to try and find ways to get around it.
So. You still think 1% on assets
above a certain amount would raise 10 to 20 billion?
Yes, you've still raised allowing for that behavioural
impact. I disagree entirely.
Almost every country in Europe that's tried a wealth tax has
got rid of it, except for Norwayand Norway's one.
(15:33):
And Switzerland. And Switzerland in.
Spain. Spain.
Spain's got one. Yes, Spain's got.
One, the doesn't raise, these are not big revenue raises.
It should be absolutely clear. A few billions of.
EUR They're very hard to to actually police.
Lots of people think property taxes in this country are wildly
out of date and deeply unfair. I think what hasn't materialise
(15:55):
is a credible policy to update property taxes in a way that
people do think it's fair so that you have.
Wealth tax, that would be probably the wealth that James
is going to tax because it can'tmove, it can't leave.
If you try and tax someone's cash in the bank, then I give it
about 5 minutes before that. That cash in the bank is in
(16:17):
Switzerland, you know it's. And that's what the kind of the
the squeeze middle complain about, isn't it?
That they that they are law abiding citizens and will hit.
A lot of small businesses who own their premises and that's
the same with this inheritance tax that they bought in.
Because if you own the corner shop, that's, you know, your
(16:37):
business and that will be part of the inheritance tax, the
value of the corner shop. So people who presently own
their corner shop, some of them may even live in it, They will
be the ones hit the hardest within in inheritance tax, even
though they were not the people intended to be taxed.
James. Wealth taxes.
I mean, the first one is, look, This is why you set a high
(17:00):
barrier to entry on it. You say, OK, it's £10,000,000
rather than like it's going to capture every corner shop in the
whole country. This does not seem to me like a
sensible way to do it. But the other bit is like the
fact that something is difficultand that rich people don't
necessarily all want to pay this.
And let's overstate that, by theway, there is a group out there
called Patriotic Millionaires ofpeople saying they want to pay
the taxes. The in Iceland, every year they
kind of crown a tax king or queen who is a person who's paid
(17:22):
the most tax because they have apublic, publicly searchable
record. The British public I, I feel,
are not. Maybe we're not there yet, but
let's not overdo, let's not overdo the fact that every
single multi millionaire out there is just itching to leave
the country at the slightest, you know, marginal increase in
the amount of taxes they pay. First one.
The second thing is that if it'sdifficult, this isn't a reason
not to do it. We have a very efficient
(17:43):
government department in the form of revenue and customers.
They're pretty good at working out how much money people and
companies have. They have specialist expertise
in that. One of the things this
government has got right, by theway, is beefing up that
specialist expertise. So if you want to know how much
value someone has and how much property is actually worth and
what they own, then fine. We can get tax inspectors to do
that and we can make sure that this is done properly and it's
(18:04):
done effectively and efficientlyby the very good people at
Revenue and Customs and you start to raise the money.
It does. It does seem to find the odd
objection to wealth taxes that well, the rich are just better
at avoiding tax legally than everybody else, so it's too
difficult. Well, that's what France
discovered and France got into this month before anyone else,
because the rich probably don't hold their assets in their own
(18:26):
name. They will hold it in a family
trust or they'll hold it in the company.
They'll hold it in an offshore company.
They will find a way to hold their assets, to preserve their
assets, which is why they're rich in the first place.
The, the aspiring middle class will get hurt by this because
they don't really know how to protect themselves.
And, and if it doesn't raise a lot of money, we, we started
(18:51):
saying don't do the nitpitty things.
Go for the big taxes that raise the most money.
And now we're talking about introducing another level of
tax, which will just be a boon to tax accountants.
I can guarantee you there'll be another layer of tax accountants
in London. And it's when it's when politics
(19:11):
becomes about messaging. So instead of getting a big
revenue raiser, you create tax policies that tell your base or
tell a particular part of your party that you are doing
something, you're against a particular group of people.
And that can be obviously, if you've got a vision for the
economy, that's where the contradictions happen.
But on on it is. Also anti aspiring, so if you're
(19:34):
a young person and you're doing your new computer business or
whatever, you know they're already moving to list in New
York. We've already seen IPOs have
just disappeared in London. Everyone goes to New York to do
their IPO. If we've got a wealth tax here
and you don't have a wealth tax in New York, where are you going
to do your IPO? It's going to take them two
(19:56):
seconds to go. We're going to New York.
You know, there are some things we can do to get business to
grow. Now, if James is helping the
Green Party, he might not like this, but I'm very much against.
The energy profits levy and the first thing the Labour
government should have done because it is really hitting
traditional Labour voters who used to work in the oil and gas
(20:18):
industry and work in all of the manufacturing industries that
hang off that they should have just said that was a really
stupid Sunak idea, nothing to dowith US Gov.
We're out of here, you know, because it, the oil and gas
industry already paid 40% tax itwhen everyone else was paying
19%. And that extra tax was as a, a
(20:43):
payment to the government for the, the rights, the mineral
rights if you like. And that worked for everyone.
So we had very big industries working out of the UK.
Now we've closed that industry down.
So this additional tax, which has taken their tax rate from
40% to 78%, which they said was a windfall, but the the actual
(21:05):
price has come down. So people have stopped taking,
they've stopped producing oil and gas in the UK.
Instead we're importing it from Norway and we're importing it
from Norway with money we don't actually have.
You know it, it's crazy. Trade should be balanced.
And the one thing the UK should not need to import is oil and
gas. And instead we are doing that
(21:28):
now, if you want to have a greeneconomy, and I don't mind that,
we can do what Norway does because Norway exports its its
gas because it doesn't use it itself.
It gets hydroelectric power. In the same way we could get
more wind power or do more nuclear and export our gas.
This is a big industry, or it used to be one of our big
(21:50):
industries. I mean.
Well, it's look, the the fundamental problem with the oil
and gas we face and Norway facesas well, is that production in
the North Sea has been decliningsince about 1999, two thousand.
That's when it peaks. That's actually not.
True. That is true.
So that's what's happening with production over the period of
time is that? Norwegian one has increased.
The UK went down because we stopped allowing people to to
(22:12):
get new licences. On the Gulf side, Norway, on the
gas side, Norway has got a little bit more out of some of
its fields, but this is a declining, ageing field.
It's the hard sort of physical facts, the geology.
The thing is that after a while it gets harder and harder to get
the oil and gas out of any givenfield because you've got all the
easy stuff. And that's what we're running
into with the North Sea. That's the first that's true.
Actually, so, so that is what's happened with the North Sea
(22:33):
because really we've been, yes, like the late 1960's, the first
sort of drillings took place there, right?
So it's an old field and it's a hard field to get things out of
because it's underwater, right? So it's difficult and expensive
necessarily. To do ground as.
Well, the thing we could have done, although this is a bit of
a you wouldn't want to start from here.
The thing that we should have done is instead of allowing from
the late 70s, early 80s onwards of free for all, one of the
(22:55):
lowest tax fields anywhere on the planet is what we had in the
North Sea. And allowing those profits to be
made handsomely by people operating when it was a a rising
field, when you're getting more production out of it by the big
oil and gas companies back in the 80s.
This is something we shouldn't have done then.
We should have been taking thoseprofits that should have been
publicly owned resources and public money we could have used.
(23:16):
We didn't do that. And then we didn't do what
Norway did, which was set up in the early 1990s, a sovereign
wealth fund, to take at least some from that money and turning
into savings. That sovereign wealth fund that
Norway has on the back of what it got out of the North Sea
makes Norway one of the richest countries on the planet.
This is one of the biggest investors in shares anywhere is
now the Norwegian sovereign wealth fund.
(23:37):
Now, we could have had all that,but we didn't.
And now we have a declining mature field that you're not
going to get much more out of and a pressing requirement, I
would say, to start to think about alternatives to oil and
gas production, which is exactlythe point of why you're looking.
At net zero, yes, we are and we.Should do more of it, of course.
That doesn't mean we can't a sell out coal as everyone else
who's got coal is selling coal. China's still using coal, India
(23:59):
is still using coal. Germany and then the Czech
Republic and Poland are all using coal.
We could supply them with that coal.
Instead, they're burning lignite, which is you, but we
both know is the worst type of coal to burn.
We, I don't believe the North Sea is running out of oil and
gas. I know that there's a lot there.
The point is Catherine, I mean you actually think we should
scrap all on net 0 targets, don't you?
(24:22):
No, no, I want to get rid of thethe energy profits levy.
It was a ridiculous. That's the only thing you would
change. Well.
I think if you can get. That you would keep the targets
for 20. 15 I would also, I thinkthere, I think most targets are
ridiculous. I think putting our targets into
law is where we went wrong because most other countries
haven't done that. So they're all going, yeah, it's
(24:43):
a nice idea, we'll work towards that, but no one is close to it
but. What are you saying it costs us
to have these norms? Well, a, we've done three
things. We converted our coal-fired
electricity to gas and that halfthe emissions involved with
electricity production. Then we main got landfill under
control because methane from landfill is the next biggest
(25:05):
source of of carbon emissions orcarbon.
It's actually methane emissions,but it breaks down into carbon
dioxide. And then the third thing we did
is we exported our industry to China and then we gave ourselves
a Gold Star. You know manufacturing was 16%
of EU KS economy in 20 in 2000 and it's now half of that, it's
(25:26):
now 8% and that. So when we say we have their
emissions, will we also have? What are you saying we should
do? Solutions for the future?
What? What are you saying we should do
and what would it save us? Well, two of the biggest things
that we have open on the table right now is big data centres,
AI and quantum computing have been at industry events in the
(25:48):
last two weeks on that. And the big hold up with all of
those guys is the cost of our industrial electricity.
OK, We are the most expensive developed nation for industrial
electricity and the City of London, your TV studio.
Everything runs on electricity and we have made that far too
expensive and a lot of it is taxation.
(26:10):
OK, James. It's a great legacy of
privatisation and the the poor set up for privatisation in
particular. You're getting the electricity
markets like there are solutionsto this.
It is ridiculous that we have a a marginal pricing situation in
electricity markets in this country, which is set by
effectively the most effective electricity that can be sourced
at the point of sale. If you had longer term contracts
(26:32):
for electricity production, if you did stripped out some of the
attempts to generate profits from this system, then we could
start to reduce seriously the amount that people face both at
home when you have to pay for electricity and major industrial
users on major industrial users.I mean, I think this one of the
problems the government is goingto run into I think fairly
rapidly and he's running into isthat it is really caught the bug
(26:53):
on data centres without demonstrating very clearly what
the economic benefits are to people in this country building
these things that you're talkingvery resource intensive
facilities, you know, 100 MW facility here, there and
elsewhere which employ maybe 100, 200 people, right?
So the jobs benefit isn't there.But you're talking at the same
time about the electricity cost of the town of 30,000 people.
(27:13):
The case hasn't been made. And if you start to think if
you're Rachel Reeves sitting thetreasury saying, well, let's
build some data centres to get out of this hole, I'm sorry,
this isn't going to be how the world works.
What are you going to do about the real productivity challenge
in this country which sits therein a great mass of small
businesses with lots of potential to do more, lots of
local economies with potential to do more that have been
starved investment over the last15 years or so.
(27:35):
Why are we continuing really looking if you're the Treasury,
they keep talking about Oxford, Cambridge, London, that's where
we're going to spend. Why not spending in the rest of
the country? Why not building Crossrail for
the north? Why not improving railway lines
and bus services up and down thecountry?
The small gains in productivity is what we should be thinking
about. Not big superstar.
Here's 100 billion or whatever crazy number it is for a data
centre up in the North East. For instance, I.
(27:57):
Want to give Catherine a chance to kind of, I suppose, another
big idea sort of thing before werun out.
Of time well one of the ones is deregulation because it's sort
of free and that should appeal to Rachel Reeves where if she
can deregulate and just make it easier for a company to say get
a bank account set up in the UK list in the UK change our
(28:19):
listing rules you know do some things that are pretty simple
you could raise money they're. Doing a bit of that, haven't
they brought in someone from Amazon to be head of the CMA?
I mean, they, they are trying todo that.
They're trying to do it and get scored on it by the AVR.
So they're they're. Yeah, they're trying to do it.
But you know, Jeremy Hunt was talking about the Edinburgh
(28:39):
reforms. You remember them.
You know, there's a whole lot ofthings they've been trying to do
in the city pretty much since weleft the EU.
And so few of them have been done.
And that's deregulation is probably as useful to our
economy as any tax break and it's something we have to look
at because we have regulated ourselves into a corner.
The conflict comes when you're saying to businesses, come and
(29:02):
invest, we've got a infrastructure problem in this
country, we want you to build here, we need roads, we need
nuclear power, we need wind farms, we need companies.
But then on the other hand, and you say we need pension funds
and then on the other hand, it'sslightly contradictory then
possibly if you have this other messaging that's happening.
(29:23):
But all but deregulation, it's always spoke spoken about in the
sort of the language of, well, regulation is just kind of bad
is it? Isn't regulation about
protecting people and stopping disasters and scandals like the
2008 financial crash and, you know, regulation and all sorts
of fears is basically about saving lives, stopping
(29:43):
malpractice. I I mean, it's not all bad is.
It it's not all bad and from a city perspective, it really
helps you, you know, clients aremore inclined to invest in your
fund if they feel that there is someone regulating it, but
regulating it to the point wherethey know that you are not
stealing their money. But they shouldn't, you
shouldn't regulate to stop people losing money.
You know, if you've made a risk,if you've understood the risk of
(30:06):
what you're investing in and it goes down, that's your problem.
And many people I know know are getting debanked because there's
just, and people say, oh, it's political and it's going, no,
it's not political. It's just that once you are a
public person, the extra paperwork the bank has to do to
open your, to keep your account open is more than it's worth to
(30:27):
them. Unless you're borrowing a lot of
money and they're going to make a lot of interest on you.
It's just too expensive to bother and people take it
personally and you're going, no,it's actually just profit and
loss account. Someone in the accounts
department went it costs us 2000lbs to keep this account open
and we're only making £1000 on it.
Therefore we're closing the account and that's because of
(30:48):
the paperwork, that's because ofknow your client.
That's all of that stuff. Just not convinced that making
it cheaper cheaper for a very wealthy person to open a bank
account is going to do very muchfor for most of the people out
here. Look, there's a there's a sort
of fundamentally different vision of what the economy is
doing and how it operates and ultimately who it works for
that's at work here. A version and I prom really
deregulation is OK fine. We'll, we'll slash and burn
(31:10):
loads of regulations all over the place.
You've mentioned a few, make it cheaper to open bank accounts,
that sort of thing. It's like it doesn't address the
underlying problems we're up against in this country, which
is actually I think increasinglynow a problem of demand that
people are spending more and more money and stuff that
doesn't do much for their local economy.
That is, for instance, spending more and more on food, more and
more on electricity, on gas, on some of that, even on those
(31:31):
taxes that people are starting to feel the pinch on.
You're not addressing that if you're saying what can we do
about a sort of distant supply side problem in the financial
system, which is that it costs less to open a bank, bank
accounting UAE than than in London, which to me feels like
you're not getting to the heart of the problem here.
So the issue with deregulation is that you get a lot of talk
about this and it looks like exactly as you said, hey, it's
(31:52):
all free and we should just do this stuff.
First of all, it doesn't really happen, at least not on the
scale where it's OK, here's a real Big Bang.
We'll RIP up everything. We're going full Javier mile
right now. That's.
What they're trying, they're trying to RIP up everything on
planning, to your point, Krish, which is that regulation clearly
is there to protect people, It'sabout getting the balance and
the incentives right. If you looked at the sort of
(32:13):
annual general report of a majorhouse builder like Barrett
Homes, it's about 100 pages. Over 50 pages of it is it's
green agenda, but it comes down to working out how much CO2
emissions were in the building of the home, right down to how
far their workforce had to travel to get to the site.
(32:36):
And it's like we really need thehouses.
So can we stop tying them up in really this minutiae?
Because everything that you build a house with bricks,
cement, steel, they are all quite CO2 intensive to produce,
but they last a long time if youbuild it.
I mean, I live in a house that was built almost 200 years ago
(32:57):
and it's still doing really well.
And it was built out of pretty much the same stuff, bricks and
mortar, probably wood rather than cement, but you know, it's,
it's along that line. So we are, we are looking too
much at say the CO2 emissions atthe tailpipe, as you say, rather
than the length of how long willthat house last?
Are we building houses to last, rather?
(33:19):
Than we're not building them at all.
Well, now we're not building, but half of that is because of
the regulation of building and some of the taxes the the new
landfill taxes, the fact that ifyou're over 18 meters, which I
think is about 6 stories, why? Have a private house builder at
all? Why not just have a pub publicly
owned house builder? If we want houses built fast,
wouldn't this be the quick way to do it if the government says
(33:40):
we need houses built quickly? Well, then we get back to we get
back to the train line. I'm sorry, you know that the
government is not showing itselfto be good.
Why? Why?
Why? Show me one thing they've built
that went on time and on. Budget.
But do we need public? Do we need more houses to be
built? Yes, yes.
Does that have to be done at a profit to a house builder?
No, it doesn't. So why not just have a
(34:02):
nationalised house? Well, if you're concerned.
Is a good incentive, the profit incentive, it's a good.
Let's come back and do a a podcast about housing, but we've
got to leave it there for now. But thank you very much indeed,
all of you for for this particular forecast.
In a couple of days time, we're going to be focusing on the
politics of the budget rather than the economic ideas.
(34:22):
But for now, bye bye.
This government has consistentlybeen far too wedded to basically
a a treasury view of the world in which everything is about
balancing the books right now and not thinking about where
you're going to be in a few years time.
And lo and behold, every year the books don't really balance
properly because the economy is in a bad place.
You haven't done the big difficult decisions like how are
we actually going to start taxing the very wealthy in this
(00:20):
country? How do you start to address
these serious structural problems and instead thinking
about a so-called smorgasbord oflittle tweaks forevermore?
We're really making it so difficult for businesses.
They've got higher wages, they've got high electricity
costs, they've got business rates, they've got high rents
and everyone is just going well,bad luck, I'm out of here.
(00:41):
Hello and welcome to the Forecast and the first of our in
depth looks at the budget which is just days away now.
Rachel Reeves is facing a monumental task.
The public finances are still facing a black hole after she
failed to keep enough aside lastyear despite raising taxes by
£40 billion. After raising expectations of a
manifesto busting rise in incometax, it has now been widely
(01:04):
reported that she's changed her mind and will instead go for a
smorgasbord of tax rises and spending cuts which will hit
different people in different ways.
But critics to the left and the right believe this will fail to
address what they see as the deeper structural rot in
Britain's economy. So today we've got 2 economists
with radically different visionsfor how to turn the country
(01:26):
around. James Meadway was chief economic
adviser to Labour left winger John McDonald and now supports
the Green leader Zach Polanski. That inequality is choking
growth and that only a major recess of wealth investment and
industrial strategy can revive the UK.
Catherine McBride served on the last Tory government's Trade and
Agricultural Commission. She's argued in favour of tax
(01:48):
cuts, deregulation and to abandon net zero climate
targets. And our economics correspondent
Helia Ebrahimi is here with me to help us explore all of these
ideas. And Helia, let's start with just
how shaky the ground is. I mean, I, I don't remember a
run up to a budget that has beenso rocky in terms of trying to
(02:10):
plant thoughts in our minds and the markets minds about what to
expect from the budget. Then apparently a complete
U-turn on EU turn. It's chaotic politically, but is
that an indication of how difficult the job?
Is it's difficult because it hits all three problems.
It's economically difficult because you've got this big
(02:32):
downgrade in Britain's economic output and productivity by the
OBR could argue for the Chancellor that that's not
particularly her fault, that it's happening now you've got
this politics erupting. And 3rd and finally, because you
markets are so fragile, you've got to land this budget in a
(02:53):
market where borrowing costs have gone up massively and
you've got to have a credible argument that you can
essentially collect enough revenue to do the kind of
spending that you're talking about.
And that is the central problem.Well, we have.
With us two people who have got very, very different views of
what is fundamentally wrong and let's just get those out first
(03:13):
so that we know where each of you are are coming from.
I mean, James, am I right in saying inequality is where you
start? It would be one of the the
starting points. I mean, look, there's a whole
set of things that have gone wrong here.
I mean, look, counter intuitively I'm going to say
what I think Liz Truss and QuasiQuasen got right, which is that
you need to do something big andwe're in a hole and you need to
(03:35):
do something big to get out of it.
The answer they came up with waswrong.
But a big thing would not be thinking about what the Treasury
spreadsheet looks like of all these little tax rises and
fiddling about and little bits here and there.
And maybe you can squeeze a little bit of a tax relief here
and a little time and he cut over there.
The smorgasbord is a Treasury spreadsheet behind it.
You need a clear sense of political direction on this.
(03:55):
You need a narrative to what thegovernment is doing, something
that's never really had, by the way.
I mean, Rachel Reeves talks vaguely about growth.
Part of the reason that bond markets look askance at this
government is because it isn't very clear about what it's going
to be doing other than crossing his fingers and and hoping for
the best on growth. So there needs to be a clear
story about what we're doing. One part of that story would be
saying, how do we address severeinequality?
(04:17):
How do we address the fact that you have a very large amount of
wealth piling up at the top and most people really feeling the
pinch, which, by the way, increasing taxes on most people
simply add to that problem and of course, add to the kind of
stagnation I think we're starting to see in the economy?
Right. But but going into the budget,
do you think we should be looking at a range of tax rises?
(04:38):
I mean, we'll get into measures,specifically wealth taxes and
things like that in a moment. But you need to be looking at
raising more money. But it's a question of where
from. And that is, you know, standard
treasury answer is go for the really easy things from their
point of view, which is talking about raising income tax, for
instance, talk about changing National Insurance
contributions. I have to say, I think the
employer National Insurance contribution hike last year is
(05:01):
one of the contributing factors to a problem we're seeing with
employments coming into this year that this government has
consistently been far too weddedto.
Basically a a treasury view of the world.
World in which everything is about balancing the books right
now and not thinking about whereyou're going to be in a few
years time. And lo and behold, every year
we're now going through this process where the books don't
really balance properly because the economy is in a bad place.
(05:21):
You haven't done the big difficult decisions that you
ought to have done straight away.
Like how are we actually going to start taxing the very wealthy
in this country? How are we going to start taxing
some of the profits that banks have been making over the last
few years on the back of interest rate rises?
How do you start to address these serious structural
problems? And instead thinking about a
so-called smorgasbord of little tweaks.
Forevermore. OK.
(05:42):
Before we start picking it apart, Catherine, I mean you
come with this from a very different position, don't you?
We need to do big things. I'm with him that all of this
little tiny tax changes here andthere don't do anything.
She, I agree as well that it's her tax raises and not just her.
Sunak's fixing of the tax thresholds is killing the
(06:03):
economy. You know, you can see that they
have raised 7 billion more in September this year than they
raised in September last year just from fiscal drag.
So they gave everyone these pay rise.
Most of it is going in taxes. So people are getting a very
small amount out of what looked like a, an above inflation rate
(06:23):
of a wage rise. And then the inflation rates
been pushed up because you you saw that general inflation is
down slightly from 3.8 to 3.6. But food inflation is up by
4.6%, which is really hitting the man in the street or the
woman in the street, the woman in the supermarket.
And that is purely because of the increase in the minimum
(06:46):
minimum wage and the employer's National Insurance which is
added on to it. So when you push up the minimum
wage and make the employer's National Insurance contribution
15% of that, then you're, you'resort of, it's a double whammy.
And if you look at the food fromfarmer to supermarket shelf,
(07:07):
there are so many minimum wage jobs involved from picking,
processing, packing, packaging, deliveries, shelf stockers,
people working on the tills. Every time every one of those
jobs just went up. And that's why we've got this
massive inflation problem, whichpushes up the yield on bonds.
(07:28):
That's what's killing Rachel Reeves.
I mean, the interest we are paying on debt is ridiculous.
£110 billion we're expected to pay today.
And I think most people don't realize that what we're paying
in debt interest is more than many of the departments that
we're spending on. And it's that disconnect, most
(07:48):
of them, isn't it? More than most of them, more
than defence, more than education.
I mean, you'd have to get to health to to actually be out.
That's true. But I think what you were
talking about, where it's the Mervyn King has made the former
governor of the Bank of England has made this observation as
well, that the problem you have with creating fiscal rules which
(08:10):
are supposed to keep the, you know, government honest is that
you become completely myopic about balancing the books, about
making the numbers work rather than thinking what is the long
term strategy for this policy? Right.
I mean, so you're both in a way saying we don't obsess about
balancing the books in a nitty gritty way, but from slightly
different positions, I think. I'm not sure what James thinks,
(08:33):
but I am the taxes I would cut first because the real problem
is there's a lot of things you could do to try and lower
government spending, but they will take a long time to come
through. Catherine, do you think we pay
too much personal taxation? Yes, I do.
In the income tax and the taxes that people can't avoid.
We're we're raising more just because of fiscal drag, so that
(08:56):
we've moved because of inflation.
People have been given wage rises, but so much of that is
puts them into a higher tax bracket.
They're paying more in tax. But if you look at the
consumption taxes, the taxes, the cigarette tax, the tax on
spirits, tax on wine, all of those are down from September
last year. So people are spending less.
(09:19):
And we're, we're really making it so difficult for businesses
that they, they've got higher wages, they've got high
electricity costs, they've got business rates, they've got high
rents and everyone is just going, well, bad luck, I'm out
of here. The, the core of the domestic
economy is small business. The export economy is big
(09:41):
business, but the the domestic economy is small business.
They employ most of the people and we have made it so expensive
for them to employ people and everyone is frozen now waiting
for the budget and by delaying it they've just made everyone
stop. Everyone's not doing anything
till they find out if their taxes are going up.
OK. Well, James, I mean the big
(10:02):
taxes you want to raise are on the richest, Yes.
What do you want to do? Wealth tax and opening up the
question of wealth tax would be a sensible start to this.
And, and that would we'd have toconsider it as a start.
I mean, this isn't like something you do that magically
resolves all your problems. But if you're talking about the
kinds of sums that credible analysis had put out about how
much a relatively small annual percentage charge on very
(10:24):
wealthy people. So if you have more than
£10,000,000 net, let's say you're talking 10 to 20 billion,
that sort of range depending on the schemes you're looking at,
this gets you a long way towardsthe kinds of sums we'd need to
be looking at. Now, I don't view this as all
you'd want to do. I don't think you have an
economy that functions particularly well by exploiting
this kind of perverse one off advantage that we have a lot of
(10:47):
inequality and a lot of wealth not doing very much that you can
put to work. I mean, that's kind of what we
want to happen here. The longer term plan for this is
back to both of us agreeing witheach other.
The core of the economy, small businesses, the core of the
economy. Every day when you go out to
work, when you go and see what'shappening out there, you go to
the shops, it's a small businesslike likely as not.
What do you do to support those local economy?
That to me, and this is where we'll disagree, I think, is a
(11:08):
question of demand for sure. That's how much money people
have in their pockets. But that's not just taxes that
people are paying. That's also food prices, which
by the way, we import 50% of ourfood.
So it's not a question of just saying, OK, this is because
we're paying a few people working in fields here too much.
This is a problem of profiteering elsewhere in the
supply chain. These are really, really big
problems. If you want to start to think
(11:29):
about how you address them in your High Street, I would start
by saying how do you get most people to have more money?
How do you get a pay increase? To most people, that doesn't
necessarily. Mean cutting test actually they
have raised the they have raisedthe minimum wage and that is
part of what companies actually complain about when you go on
the street when you talk to those small companies they're
not just complaining about the tax raise that you saw in
(11:52):
National Insurance employer National Insurance last year.
They also complain that the minimum wage going up has made
it more expensive to employ people.
And it's not just the cost of it, it's employer rights bill,
which which is a big labour policy.
And I think Chris, going back toyour first question, it's about
does the vision for the economy,is it coherent and do the
(12:17):
policies conflict? If you say you want lots of
investment because you want people to build and you're
taking a bet on productivity andAI, is it credible?
If you've got the, if you don't have the energy resources to do
it, if you say you want businesses on site, is it
credible if it makes it more expensive to hire people?
(12:39):
And I think those are the kind of on the ground realities that
Labour have come unstuck. Quite.
But if we can just focus on the wealth tax idea, I mean, why
does the government not believe the numbers that James and Zack
Polanski and others put out? Because they always say it
wouldn't raise that much. The one of the problems you have
with wealth tax is that people say it cannibalises itself
(13:04):
because it essentially people learn how to either put their
wealth somewhere else, they leave the country and so the
amount of money that you actually end up raising is much
less than forecast. There are countries that do have
wealth taxes and those wealth taxes or not huge amounts of
(13:26):
revenue. So I think when you're talking
about what are the intractable problems for Britain, you have
to think are we trying to grow the economy?
Is this about the pie or has this just become about
distribution and that is the problem.
What the government had hoped was it's about growing the pie.
Growth will get us out of this and that hasn't quite
(13:47):
materialised. Well, it's gross.
From where? I mean, the problem the
government has had and all of this is that as far as could
tell, their plan was roughly, wewill be in charge and businesses
will like this and then economicgrowth will happen.
And, and honestly, I don't thinkthere's very much more to it
than that. Like if they had done the the
big harder reform straight away.Rachel Reeves as chancellor in a
government with a huge majority,you've got an incredible amount
(14:09):
of leeway to do some stuff that may even make you quite
unpopular. And what she did was pop up and
say, hey, I want to do some stuff that's going to be
unpleasant and then do nothing for a few months until the
budget, right. It was just this bizarre period
that was exactly when you could have said, OK, this is when we
introduce the wealth tax. This is when there's a big push
on minimum wage. I mean, I do think on the
National Insurance contributionsfor employers, it was, it was
(14:29):
bizarre to have Rachel Reid standing up and saying, you
know, we're whacking up NationalInsurance contributions that all
employers are paying, but then boasting about corporation tax
is still being amongst the lowest in Europe.
This is completely the wrong wayround.
Like if you get a tax businesses, tax businesses
actually have the money, which is the big.
Businesses, that's not to your argument of it.
You get fixated on trying to make the numbers work and you
(14:50):
think if you make the numbers work then it will sort itself
out. But actually the policy on the
ground. But but what's your answer to
the basic criticism of wealth tax, which is that people find
ways to minimise the amount thatyou end up?
So that that's that's built intoyour estimates for this is
something figures here from Aaron Advani at Warwick
University, an expert in these things.
The estimates you get take account of that behavioural
(15:11):
impact, the fact that you're going to get a number of people
'cause they're very wealthy and sophisticated in that financial
way, they're going to try and find ways to get around it.
So. You still think 1% on assets
above a certain amount would raise 10 to 20 billion?
Yes, you've still raised allowing for that behavioural
impact. I disagree entirely.
Almost every country in Europe that's tried a wealth tax has
got rid of it, except for Norwayand Norway's one.
(15:33):
And Switzerland. And Switzerland in.
Spain. Spain.
Spain's got one. Yes, Spain's got.
One, the doesn't raise, these are not big revenue raises.
It should be absolutely clear. A few billions of.
EUR They're very hard to to actually police.
Lots of people think property taxes in this country are wildly
out of date and deeply unfair. I think what hasn't materialise
(15:55):
is a credible policy to update property taxes in a way that
people do think it's fair so that you have.
Wealth tax, that would be probably the wealth that James
is going to tax because it can'tmove, it can't leave.
If you try and tax someone's cash in the bank, then I give it
about 5 minutes before that. That cash in the bank is in
(16:17):
Switzerland, you know it's. And that's what the kind of the
the squeeze middle complain about, isn't it?
That they that they are law abiding citizens and will hit.
A lot of small businesses who own their premises and that's
the same with this inheritance tax that they bought in.
Because if you own the corner shop, that's, you know, your
(16:37):
business and that will be part of the inheritance tax, the
value of the corner shop. So people who presently own
their corner shop, some of them may even live in it, They will
be the ones hit the hardest within in inheritance tax, even
though they were not the people intended to be taxed.
James. Wealth taxes.
I mean, the first one is, look, This is why you set a high
(17:00):
barrier to entry on it. You say, OK, it's £10,000,000
rather than like it's going to capture every corner shop in the
whole country. This does not seem to me like a
sensible way to do it. But the other bit is like the
fact that something is difficultand that rich people don't
necessarily all want to pay this.
And let's overstate that, by theway, there is a group out there
called Patriotic Millionaires ofpeople saying they want to pay
the taxes. The in Iceland, every year they
kind of crown a tax king or queen who is a person who's paid
(17:22):
the most tax because they have apublic, publicly searchable
record. The British public I, I feel,
are not. Maybe we're not there yet, but
let's not overdo, let's not overdo the fact that every
single multi millionaire out there is just itching to leave
the country at the slightest, you know, marginal increase in
the amount of taxes they pay. First one.
The second thing is that if it'sdifficult, this isn't a reason
not to do it. We have a very efficient
(17:43):
government department in the form of revenue and customers.
They're pretty good at working out how much money people and
companies have. They have specialist expertise
in that. One of the things this
government has got right, by theway, is beefing up that
specialist expertise. So if you want to know how much
value someone has and how much property is actually worth and
what they own, then fine. We can get tax inspectors to do
that and we can make sure that this is done properly and it's
(18:04):
done effectively and efficientlyby the very good people at
Revenue and Customs and you start to raise the money.
It does. It does seem to find the odd
objection to wealth taxes that well, the rich are just better
at avoiding tax legally than everybody else, so it's too
difficult. Well, that's what France
discovered and France got into this month before anyone else,
because the rich probably don't hold their assets in their own
(18:26):
name. They will hold it in a family
trust or they'll hold it in the company.
They'll hold it in an offshore company.
They will find a way to hold their assets, to preserve their
assets, which is why they're rich in the first place.
The, the aspiring middle class will get hurt by this because
they don't really know how to protect themselves.
And, and if it doesn't raise a lot of money, we, we started
(18:51):
saying don't do the nitpitty things.
Go for the big taxes that raise the most money.
And now we're talking about introducing another level of
tax, which will just be a boon to tax accountants.
I can guarantee you there'll be another layer of tax accountants
in London. And it's when it's when politics
(19:11):
becomes about messaging. So instead of getting a big
revenue raiser, you create tax policies that tell your base or
tell a particular part of your party that you are doing
something, you're against a particular group of people.
And that can be obviously, if you've got a vision for the
economy, that's where the contradictions happen.
But on on it is. Also anti aspiring, so if you're
(19:34):
a young person and you're doing your new computer business or
whatever, you know they're already moving to list in New
York. We've already seen IPOs have
just disappeared in London. Everyone goes to New York to do
their IPO. If we've got a wealth tax here
and you don't have a wealth tax in New York, where are you going
to do your IPO? It's going to take them two
(19:56):
seconds to go. We're going to New York.
You know, there are some things we can do to get business to
grow. Now, if James is helping the
Green Party, he might not like this, but I'm very much against.
The energy profits levy and the first thing the Labour
government should have done because it is really hitting
traditional Labour voters who used to work in the oil and gas
(20:18):
industry and work in all of the manufacturing industries that
hang off that they should have just said that was a really
stupid Sunak idea, nothing to dowith US Gov.
We're out of here, you know, because it, the oil and gas
industry already paid 40% tax itwhen everyone else was paying
19%. And that extra tax was as a, a
(20:43):
payment to the government for the, the rights, the mineral
rights if you like. And that worked for everyone.
So we had very big industries working out of the UK.
Now we've closed that industry down.
So this additional tax, which has taken their tax rate from
40% to 78%, which they said was a windfall, but the the actual
(21:05):
price has come down. So people have stopped taking,
they've stopped producing oil and gas in the UK.
Instead we're importing it from Norway and we're importing it
from Norway with money we don't actually have.
You know it, it's crazy. Trade should be balanced.
And the one thing the UK should not need to import is oil and
gas. And instead we are doing that
(21:28):
now, if you want to have a greeneconomy, and I don't mind that,
we can do what Norway does because Norway exports its its
gas because it doesn't use it itself.
It gets hydroelectric power. In the same way we could get
more wind power or do more nuclear and export our gas.
This is a big industry, or it used to be one of our big
(21:50):
industries. I mean.
Well, it's look, the the fundamental problem with the oil
and gas we face and Norway facesas well, is that production in
the North Sea has been decliningsince about 1999, two thousand.
That's when it peaks. That's actually not.
True. That is true.
So that's what's happening with production over the period of
time is that? Norwegian one has increased.
The UK went down because we stopped allowing people to to
(22:12):
get new licences. On the Gulf side, Norway, on the
gas side, Norway has got a little bit more out of some of
its fields, but this is a declining, ageing field.
It's the hard sort of physical facts, the geology.
The thing is that after a while it gets harder and harder to get
the oil and gas out of any givenfield because you've got all the
easy stuff. And that's what we're running
into with the North Sea. That's the first that's true.
Actually, so, so that is what's happened with the North Sea
(22:33):
because really we've been, yes, like the late 1960's, the first
sort of drillings took place there, right?
So it's an old field and it's a hard field to get things out of
because it's underwater, right? So it's difficult and expensive
necessarily. To do ground as.
Well, the thing we could have done, although this is a bit of
a you wouldn't want to start from here.
The thing that we should have done is instead of allowing from
the late 70s, early 80s onwards of free for all, one of the
(22:55):
lowest tax fields anywhere on the planet is what we had in the
North Sea. And allowing those profits to be
made handsomely by people operating when it was a a rising
field, when you're getting more production out of it by the big
oil and gas companies back in the 80s.
This is something we shouldn't have done then.
We should have been taking thoseprofits that should have been
publicly owned resources and public money we could have used.
(23:16):
We didn't do that. And then we didn't do what
Norway did, which was set up in the early 1990s, a sovereign
wealth fund, to take at least some from that money and turning
into savings. That sovereign wealth fund that
Norway has on the back of what it got out of the North Sea
makes Norway one of the richest countries on the planet.
This is one of the biggest investors in shares anywhere is
now the Norwegian sovereign wealth fund.
(23:37):
Now, we could have had all that,but we didn't.
And now we have a declining mature field that you're not
going to get much more out of and a pressing requirement, I
would say, to start to think about alternatives to oil and
gas production, which is exactlythe point of why you're looking.
At net zero, yes, we are and we.Should do more of it, of course.
That doesn't mean we can't a sell out coal as everyone else
who's got coal is selling coal. China's still using coal, India
(23:59):
is still using coal. Germany and then the Czech
Republic and Poland are all using coal.
We could supply them with that coal.
Instead, they're burning lignite, which is you, but we
both know is the worst type of coal to burn.
We, I don't believe the North Sea is running out of oil and
gas. I know that there's a lot there.
The point is Catherine, I mean you actually think we should
scrap all on net 0 targets, don't you?
(24:22):
No, no, I want to get rid of thethe energy profits levy.
It was a ridiculous. That's the only thing you would
change. Well.
I think if you can get. That you would keep the targets
for 20. 15 I would also, I thinkthere, I think most targets are
ridiculous. I think putting our targets into
law is where we went wrong because most other countries
haven't done that. So they're all going, yeah, it's
(24:43):
a nice idea, we'll work towards that, but no one is close to it
but. What are you saying it costs us
to have these norms? Well, a, we've done three
things. We converted our coal-fired
electricity to gas and that halfthe emissions involved with
electricity production. Then we main got landfill under
control because methane from landfill is the next biggest
(25:05):
source of of carbon emissions orcarbon.
It's actually methane emissions,but it breaks down into carbon
dioxide. And then the third thing we did
is we exported our industry to China and then we gave ourselves
a Gold Star. You know manufacturing was 16%
of EU KS economy in 20 in 2000 and it's now half of that, it's
(25:26):
now 8% and that. So when we say we have their
emissions, will we also have? What are you saying we should
do? Solutions for the future?
What? What are you saying we should do
and what would it save us? Well, two of the biggest things
that we have open on the table right now is big data centres,
AI and quantum computing have been at industry events in the
(25:48):
last two weeks on that. And the big hold up with all of
those guys is the cost of our industrial electricity.
OK, We are the most expensive developed nation for industrial
electricity and the City of London, your TV studio.
Everything runs on electricity and we have made that far too
expensive and a lot of it is taxation.
(26:10):
OK, James. It's a great legacy of
privatisation and the the poor set up for privatisation in
particular. You're getting the electricity
markets like there are solutionsto this.
It is ridiculous that we have a a marginal pricing situation in
electricity markets in this country, which is set by
effectively the most effective electricity that can be sourced
at the point of sale. If you had longer term contracts
(26:32):
for electricity production, if you did stripped out some of the
attempts to generate profits from this system, then we could
start to reduce seriously the amount that people face both at
home when you have to pay for electricity and major industrial
users on major industrial users.I mean, I think this one of the
problems the government is goingto run into I think fairly
rapidly and he's running into isthat it is really caught the bug
(26:53):
on data centres without demonstrating very clearly what
the economic benefits are to people in this country building
these things that you're talkingvery resource intensive
facilities, you know, 100 MW facility here, there and
elsewhere which employ maybe 100, 200 people, right?
So the jobs benefit isn't there.But you're talking at the same
time about the electricity cost of the town of 30,000 people.
(27:13):
The case hasn't been made. And if you start to think if
you're Rachel Reeves sitting thetreasury saying, well, let's
build some data centres to get out of this hole, I'm sorry,
this isn't going to be how the world works.
What are you going to do about the real productivity challenge
in this country which sits therein a great mass of small
businesses with lots of potential to do more, lots of
local economies with potential to do more that have been
starved investment over the last15 years or so.
(27:35):
Why are we continuing really looking if you're the Treasury,
they keep talking about Oxford, Cambridge, London, that's where
we're going to spend. Why not spending in the rest of
the country? Why not building Crossrail for
the north? Why not improving railway lines
and bus services up and down thecountry?
The small gains in productivity is what we should be thinking
about. Not big superstar.
Here's 100 billion or whatever crazy number it is for a data
centre up in the North East. For instance, I.
(27:57):
Want to give Catherine a chance to kind of, I suppose, another
big idea sort of thing before werun out.
Of time well one of the ones is deregulation because it's sort
of free and that should appeal to Rachel Reeves where if she
can deregulate and just make it easier for a company to say get
a bank account set up in the UK list in the UK change our
(28:19):
listing rules you know do some things that are pretty simple
you could raise money they're. Doing a bit of that, haven't
they brought in someone from Amazon to be head of the CMA?
I mean, they, they are trying todo that.
They're trying to do it and get scored on it by the AVR.
So they're they're. Yeah, they're trying to do it.
But you know, Jeremy Hunt was talking about the Edinburgh
(28:39):
reforms. You remember them.
You know, there's a whole lot ofthings they've been trying to do
in the city pretty much since weleft the EU.
And so few of them have been done.
And that's deregulation is probably as useful to our
economy as any tax break and it's something we have to look
at because we have regulated ourselves into a corner.
The conflict comes when you're saying to businesses, come and
(29:02):
invest, we've got a infrastructure problem in this
country, we want you to build here, we need roads, we need
nuclear power, we need wind farms, we need companies.
But then on the other hand, and you say we need pension funds
and then on the other hand, it'sslightly contradictory then
possibly if you have this other messaging that's happening.
(29:23):
But all but deregulation, it's always spoke spoken about in the
sort of the language of, well, regulation is just kind of bad
is it? Isn't regulation about
protecting people and stopping disasters and scandals like the
2008 financial crash and, you know, regulation and all sorts
of fears is basically about saving lives, stopping
(29:43):
malpractice. I I mean, it's not all bad is.
It it's not all bad and from a city perspective, it really
helps you, you know, clients aremore inclined to invest in your
fund if they feel that there is someone regulating it, but
regulating it to the point wherethey know that you are not
stealing their money. But they shouldn't, you
shouldn't regulate to stop people losing money.
You know, if you've made a risk,if you've understood the risk of
(30:06):
what you're investing in and it goes down, that's your problem.
And many people I know know are getting debanked because there's
just, and people say, oh, it's political and it's going, no,
it's not political. It's just that once you are a
public person, the extra paperwork the bank has to do to
open your, to keep your account open is more than it's worth to
(30:27):
them. Unless you're borrowing a lot of
money and they're going to make a lot of interest on you.
It's just too expensive to bother and people take it
personally and you're going, no,it's actually just profit and
loss account. Someone in the accounts
department went it costs us 2000lbs to keep this account open
and we're only making £1000 on it.
Therefore we're closing the account and that's because of
(30:48):
the paperwork, that's because ofknow your client.
That's all of that stuff. Just not convinced that making
it cheaper cheaper for a very wealthy person to open a bank
account is going to do very muchfor for most of the people out
here. Look, there's a there's a sort
of fundamentally different vision of what the economy is
doing and how it operates and ultimately who it works for
that's at work here. A version and I prom really
deregulation is OK fine. We'll, we'll slash and burn
(31:10):
loads of regulations all over the place.
You've mentioned a few, make it cheaper to open bank accounts,
that sort of thing. It's like it doesn't address the
underlying problems we're up against in this country, which
is actually I think increasinglynow a problem of demand that
people are spending more and more money and stuff that
doesn't do much for their local economy.
That is, for instance, spending more and more on food, more and
more on electricity, on gas, on some of that, even on those
(31:31):
taxes that people are starting to feel the pinch on.
You're not addressing that if you're saying what can we do
about a sort of distant supply side problem in the financial
system, which is that it costs less to open a bank, bank
accounting UAE than than in London, which to me feels like
you're not getting to the heart of the problem here.
So the issue with deregulation is that you get a lot of talk
about this and it looks like exactly as you said, hey, it's
(31:52):
all free and we should just do this stuff.
First of all, it doesn't really happen, at least not on the
scale where it's OK, here's a real Big Bang.
We'll RIP up everything. We're going full Javier mile
right now. That's.
What they're trying, they're trying to RIP up everything on
planning, to your point, Krish, which is that regulation clearly
is there to protect people, It'sabout getting the balance and
the incentives right. If you looked at the sort of
(32:13):
annual general report of a majorhouse builder like Barrett
Homes, it's about 100 pages. Over 50 pages of it is it's
green agenda, but it comes down to working out how much CO2
emissions were in the building of the home, right down to how
far their workforce had to travel to get to the site.
(32:36):
And it's like we really need thehouses.
So can we stop tying them up in really this minutiae?
Because everything that you build a house with bricks,
cement, steel, they are all quite CO2 intensive to produce,
but they last a long time if youbuild it.
I mean, I live in a house that was built almost 200 years ago
(32:57):
and it's still doing really well.
And it was built out of pretty much the same stuff, bricks and
mortar, probably wood rather than cement, but you know, it's,
it's along that line. So we are, we are looking too
much at say the CO2 emissions atthe tailpipe, as you say, rather
than the length of how long willthat house last?
Are we building houses to last, rather?
(33:19):
Than we're not building them at all.
Well, now we're not building, but half of that is because of
the regulation of building and some of the taxes the the new
landfill taxes, the fact that ifyou're over 18 meters, which I
think is about 6 stories, why? Have a private house builder at
all? Why not just have a pub publicly
owned house builder? If we want houses built fast,
wouldn't this be the quick way to do it if the government says
(33:40):
we need houses built quickly? Well, then we get back to we get
back to the train line. I'm sorry, you know that the
government is not showing itselfto be good.
Why? Why?
Why? Show me one thing they've built
that went on time and on. Budget.
But do we need public? Do we need more houses to be
built? Yes, yes.
Does that have to be done at a profit to a house builder?
No, it doesn't. So why not just have a
(34:02):
nationalised house? Well, if you're concerned.
Is a good incentive, the profit incentive, it's a good.
Let's come back and do a a podcast about housing, but we've
got to leave it there for now. But thank you very much indeed,
all of you for for this particular forecast.
In a couple of days time, we're going to be focusing on the
politics of the budget rather than the economic ideas.
(34:22):
But for now, bye bye.
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