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[00:00:00] The Why Curve with Phil Dobbie and Roger Herring
[00:00:04] The campaign's underway. Lots of promises. Building more surgeries, signing up more soldiers,
[00:00:10] free social care, reviving small towns. But how much will it all cost and where will the
[00:00:15] money come from? All fully costed they say, paid for by stopping tax avoidance, efficiency
[00:00:21] savings, ending non-dom status, putting VAT on school fees. But how realistic is
[00:00:26] this? How much room is there really for spending? On the morning after the election, when the
[00:00:31] new Chancellor enters the Treasury and the books are opened, what will they find? The
[00:00:36] Why Curve. Well, the note that they may find. So it was Liam Byrne. Yeah, 2010. He was
[00:00:43] the Chief Executive, Chief Secretary to the Treasurer. So yeah, at the end of
[00:00:47] the last Labour government saying, Dear Chief Secretary, I'm afraid there's no
[00:00:50] money left to regret by David Laws, who was the MP who succeeded in that coalition
[00:00:55] that has echoed down the years ever since. But that's the problem. I mean, what on earth
[00:01:00] actually is there? Because you know, we get told publicly, of course, what's known
[00:01:03] various ideas. But if you actually look at the books, yeah, what's the prospect?
[00:01:08] Well, we know the top line number, though. So we know by then, if you look at
[00:01:10] government debt to GDP ratio, back then it was a little below 71%. Last year, it
[00:01:16] was 97.6%. So if there wasn't any money left then, well, where are we now?
[00:01:21] Even before the pandemic, it had got up to 85%. So from 71 to 85. And then
[00:01:26] obviously just got hit by the pandemic and no one can deny the government had
[00:01:30] no choice but to react to.
[00:01:32] But we've discussed on this show before we talked about the fact that
[00:01:34] well, you know, government can effectively create money. They can do
[00:01:37] that. They can they can do what they need to do. But obviously it has
[00:01:41] downsides.
[00:01:41] Yeah. And the issue is this time around, I mean, everyone is saying,
[00:01:44] Well, no, no, no, we want to don't want to do that. We want to be
[00:01:47] fiscally conservative, both sides of politics. So can you do that? Because
[00:01:50] we've seen what the effect was. I mean, those years of trying to get
[00:01:56] government spending down actually didn't work because government spending
[00:01:58] still went up and they made everyone miserable into the market.
[00:02:00] Well, exactly. We saw we saw the effect on growth. So real net
[00:02:03] domestic product per capita, which is so that's like GDP more or less
[00:02:09] another measure of GDP. But it is real. So it's adjusted for
[00:02:12] inflation per capita. So we get you know, this thing is the real
[00:02:16] measure of how well you're teasing us. What's the number since 2010?
[00:02:19] It has grown by 9.5%. So over 14 years, a little under 0.7% growth per
[00:02:26] year. That's how slow that's how stagnant economy has been. So if
[00:02:30] we want to I feel like the only way you can get out of this is to grow
[00:02:33] your way out of right because you get more tax. Yeah, the same
[00:02:36] thing because of the amount of money. But to do that, they're
[00:02:38] not saying the money to get the growth. Yeah, I'm not saying
[00:02:40] that. They're not saying that they're saying what how you're
[00:02:42] gonna get Oh, well, you know, vat on school fees. Well, yeah,
[00:02:44] that'll do something but not much. Yeah, they're saying you're in
[00:02:47] non dom status. Well, again, it does feel all a bit like tinkering
[00:02:50] at the edges and all the stuff with efficiencies that we'll
[00:02:52] Oh, yes, you know, we can have efficiency and we've only
[00:02:54] thought of that before. Well, maybe we should have done that
[00:02:56] last time. It's ridiculous. So I mean, you know, all these
[00:02:59] things aren't really gonna make much difference. Big idea
[00:03:02] is there's no big ideas in this. If you're not going to
[00:03:05] raise that much money from any of these things, all the
[00:03:07] promises you're making so much harder. Yeah. So it does feel
[00:03:11] like we're going to be stuck in this stagnant economy for
[00:03:14] another term of government. And where's the change going to
[00:03:17] come from? Because, you know, and as I was saying last time,
[00:03:20] it depends on whether you're a Keynesian economist.
[00:03:23] No, that was Milton Keynes.
[00:03:24] Milton Keynes.
[00:03:25] Who had this amazing profile which very few of us have heard
[00:03:28] of him.
[00:03:29] So good they named his hand after him. But I mean, the
[00:03:31] whole Keynes approach obviously was the government
[00:03:33] should invest for growth. But you know, we've got lost in
[00:03:36] the Friedman approach, which is no, it's you know, let's
[00:03:38] try and control the money supply. And if you control the
[00:03:42] money supply, can you really get growth? You know, it's a
[00:03:44] one of the central questions which we don't have the answer
[00:03:46] to. But let's talk to someone who knows about all this.
[00:03:49] Michael Nauer is assistant professor of economics at
[00:03:52] Durham University and he joins us now.
[00:03:54] So Michael, just how bad do you think the situation is
[00:03:57] really because I mean, we were talking just before we
[00:03:59] started. You came on about, you know, what the last
[00:04:03] government inherited in terms of how much debt there was as
[00:04:06] a proportion of GDP. It is that much worse now. So but
[00:04:10] can you get too hung up about that? Because obviously,
[00:04:12] we are part of the world where the debt to GDP ratio is
[00:04:15] worse than it is in the UK. So do we sort of step back
[00:04:18] and go, oh my goodness, we've got to stop spending? Or
[00:04:21] do we say, well, no, if the economy is going to grow,
[00:04:23] then there's got to be some sort of investment, perhaps
[00:04:26] we need to spend a bit more.
[00:04:27] So one of the key reasons why other countries are
[00:04:31] perhaps better able to cope with their high debt to GDP
[00:04:34] ratios is the interest that they pay on that debt. So one
[00:04:39] of the key issues that whatever government comes in
[00:04:42] will face is the sheer amount of government revenue
[00:04:45] that they're going to have to spend on paying off the
[00:04:48] debt. And this is far higher than it was when the at
[00:04:53] the time of the last significant government change
[00:04:55] back in 2010, simply because the nature of UK
[00:04:59] government debt has changed quite a bit in that time
[00:05:03] in particular, for very good reasons in the
[00:05:06] year of low inflation, the UK government chose to
[00:05:10] increase the amount of their debt that was index
[00:05:12] linked. So paid relative to the rate of inflation.
[00:05:16] And of course, that meant in a year of low
[00:05:18] inflation, they could reduce their interest
[00:05:20] payments down, spend less of their revenue on
[00:05:24] paying off their debt. But of course, given what's
[00:05:26] happened over the last couple of years, this has
[00:05:28] meant that the amount of money that's been spent
[00:05:31] on repaying the debt has increased dramatically.
[00:05:34] I mean, over the last year, it peaked at around
[00:05:37] 10% of all of the money that the government was
[00:05:41] spending was simply spent on repaying their
[00:05:45] debts. And in the at least in the medium term,
[00:05:49] that number, yes, it's going to come down, but
[00:05:51] it's not going to come down that much.
[00:05:54] So this is index linked bonds that they
[00:05:56] issued. So what exactly out of a proportion of
[00:05:58] all the bonds they were issuing then what
[00:05:59] proportion would index linked? It seems I mean,
[00:06:01] in hindsight, it's very easy to say, well,
[00:06:03] that was a bad idea, wasn't it? But they do
[00:06:04] what they need to do at the time, don't they?
[00:06:06] Exactly. And I mean, the key benefit of these
[00:06:09] interest index linked bonds, of course, was
[00:06:12] that they faced a lower baseline interest rate
[00:06:15] than the non index linked bonds because the
[00:06:19] index linking was meant to provide an added
[00:06:21] benefit on top. But and I mean, it worked
[00:06:24] very well for the early 2010s. They were
[00:06:28] able to keep interest payments relatively low
[00:06:31] compared to the size of the debt. But then,
[00:06:34] of course, we have the inflation spike coming
[00:06:38] through and the interest payments rose to
[00:06:41] match. Yeah, because what we're dealing
[00:06:43] with is I mean, we should put the
[00:06:45] historical context, of course, 2010s were
[00:06:48] dealing with the aftermath of the of the
[00:06:50] economic semi collapse almost and the
[00:06:53] consequences of that. And then, of course,
[00:06:54] we had the covid period after that, all of
[00:06:56] which were those kind of tides or winds
[00:06:59] that drove the economic fortunes.
[00:07:01] And now we're moving into a position after
[00:07:03] all that, hopefully.
[00:07:05] So are things settling down in a way that
[00:07:07] will make that easier for things like
[00:07:09] government debt or worse?
[00:07:11] So again, it depends if we're talking
[00:07:13] about the long run versus the short run.
[00:07:15] I mean, over the next year or so,
[00:07:19] you've still got inflation that is
[00:07:21] persistent. Yes, it's coming back down to
[00:07:24] target, but there are expectations for
[00:07:27] it to tick up again in the next
[00:07:30] year or so, possibly peaking around
[00:07:33] three percent again index link
[00:07:35] debt relative to that.
[00:07:37] But at the flip side, in 2010,
[00:07:41] they had the benefit of the non index
[00:07:43] linked debt. So those parts that they
[00:07:45] weren't paying relative to the rate of
[00:07:47] inflation, they were borrowing in an
[00:07:49] era of much lower interest rates.
[00:07:51] So Bank of England base rate was
[00:07:54] close to zero, has been close to zero
[00:07:56] since that period of time, whereas of
[00:07:58] course now it's
[00:08:01] above five percent and it's predicted
[00:08:03] to stay that high.
[00:08:05] So yes, the
[00:08:07] index linked story may be getting
[00:08:09] a bit better, but then the non
[00:08:11] index story far less optimistic
[00:08:14] than it was in 2010.
[00:08:15] Can we get a bit carried away running
[00:08:17] worrying about this debt though?
[00:08:18] I know, you know, the
[00:08:20] rationale that this is debt which,
[00:08:22] you know, we are placing on our
[00:08:24] on our children because they're the
[00:08:26] children and because they're the ones
[00:08:28] who are going to have to pay it back.
[00:08:29] You can, of course, just issue more
[00:08:31] bonds to cover the money that you're
[00:08:32] having to spend on bonds.
[00:08:33] And ultimately, if it's owned by the
[00:08:35] central bank, I mean, that's another
[00:08:37] factor of government.
[00:08:37] That's what's happened in the, you
[00:08:38] know, since the pandemic, isn't it?
[00:08:40] The central bank basically has been
[00:08:41] buying up a lot of these bonds.
[00:08:43] So it's sort of like one arm of the
[00:08:44] government paying interest or not
[00:08:46] needing to pay interest because it's
[00:08:48] you know, it's government money
[00:08:49] whichever way you look at it.
[00:08:50] Does the debt really matter?
[00:08:51] I suppose is the point.
[00:08:53] So it would matter a lot less
[00:08:57] if the two key parties hadn't made
[00:09:01] the promises that they've made,
[00:09:03] particularly as far as government
[00:09:05] income and government revenue is
[00:09:07] concerned.
[00:09:08] So if they had not made promises
[00:09:11] to not change income tax,
[00:09:13] to not change VAT,
[00:09:15] to not change national insurance,
[00:09:17] to not change corporation tax,
[00:09:19] then we could perhaps be far less
[00:09:21] concerned about the debt because
[00:09:23] they'd have more flexibility to
[00:09:25] temporarily increase taxation of
[00:09:29] one kind or another, pay it off,
[00:09:31] get it back down to more manageable
[00:09:33] proportions of government
[00:09:35] expenditure and then reduce the
[00:09:37] taxation to match.
[00:09:38] But that's one thing.
[00:09:40] I mean, the question is sort of
[00:09:41] clumsily asking was if the
[00:09:44] money moves on to the balance
[00:09:45] sheet at the central bank and
[00:09:46] just sits there, I mean, what's
[00:09:48] to stop it sitting there for a
[00:09:50] long time?
[00:09:51] So that, again, that worked in
[00:09:54] the era of low interest rates and
[00:09:56] in particular in the era of
[00:09:58] quantitative easing.
[00:09:59] But given the challenges that
[00:10:03] the Bank of England's faced
[00:10:04] over the last few years,
[00:10:06] they're unwinding that.
[00:10:07] So we're now moving into an
[00:10:09] era of quantitative tightening
[00:10:11] where they're trying to
[00:10:13] effectively offload some of
[00:10:15] this debt.
[00:10:15] So the scope for the Bank of
[00:10:17] England to take on board the
[00:10:20] increases in debt is going to
[00:10:23] be reducing because they need to
[00:10:25] be using quantitative tightening
[00:10:27] alongside interest rates to
[00:10:29] fight inflation.
[00:10:30] So the reasoning behind that is
[00:10:32] just to explain the logic
[00:10:33] behind that, though, the
[00:10:34] reason why they need to take
[00:10:36] bonds that they've bought and
[00:10:38] put it back on the open
[00:10:40] market. What's the rationale?
[00:10:41] What's the reasoning behind
[00:10:43] quantitative tightening?
[00:10:44] So it's because in the era of
[00:10:46] quantitative easing, they
[00:10:48] couldn't do much with interest
[00:10:50] rates. They were at or close to
[00:10:53] zero, at or close to the
[00:10:55] lower bound.
[00:10:55] So the main tool that they had
[00:10:58] in order to at the time
[00:11:00] promote inflation, get it
[00:11:01] back up to target was
[00:11:03] quantitative easing.
[00:11:04] But we're in a very
[00:11:05] different world now.
[00:11:06] We're in a world where no,
[00:11:08] they can't afford to be
[00:11:11] carrying out vast quantities of
[00:11:13] quantitative easing because of
[00:11:15] the potential impact on
[00:11:17] inflation.
[00:11:18] If they carried out as much
[00:11:19] quantitative easing as they did
[00:11:20] in the early 2010s, then not
[00:11:23] only would inflation not be
[00:11:25] reducing down to target, but
[00:11:26] if anything, it could be back
[00:11:28] on an on an upwards
[00:11:29] trajectory.
[00:11:30] So, yes, they've got more scope
[00:11:32] to use interest rates as a
[00:11:34] tool to fight inflation, but
[00:11:36] they can't have one part of
[00:11:37] their activities on the
[00:11:39] quantitative easing,
[00:11:40] quantitative tightening side of
[00:11:41] things fighting against the
[00:11:43] other in the form of interest
[00:11:44] rates.
[00:11:45] Quantitative easing was putting
[00:11:46] more money into the economy.
[00:11:47] So that was the inflation risk,
[00:11:48] is that right?
[00:11:50] Exactly.
[00:11:50] So quantitative easing, the
[00:11:51] theory went that you put
[00:11:53] more money into the economy,
[00:11:54] you stimulate demand and
[00:11:55] therefore stimulate
[00:11:57] inflation because the Bank of
[00:11:58] England's target is
[00:12:00] two sided.
[00:12:01] So it's considered to be just
[00:12:03] as much of a failure if
[00:12:05] inflation drops too far
[00:12:07] below target for the Bank of
[00:12:08] England as it is if it goes
[00:12:10] too far above target, which
[00:12:14] not the same in other parts of
[00:12:15] the world.
[00:12:16] So quantitative tightening is
[00:12:16] going to take money out of the
[00:12:18] economy then at a time when
[00:12:19] presumably we want to say,
[00:12:21] well, we want to grow
[00:12:21] ourselves out of the
[00:12:22] situation we're in right now
[00:12:23] rather than just face more
[00:12:25] stagnation.
[00:12:26] So wouldn't quantitative
[00:12:27] tightening right now just
[00:12:28] make the stuff worse?
[00:12:29] In terms of the prospects
[00:12:31] for economic growth,
[00:12:32] absolutely.
[00:12:33] But we could make the same
[00:12:34] argument about interest rates
[00:12:37] increasing as far as they did
[00:12:39] acting as a dampener on
[00:12:41] growth.
[00:12:41] But the ultimate aim of the
[00:12:43] Bank of England,
[00:12:44] their primary objective is to
[00:12:46] fight inflation.
[00:12:47] And once they've managed that,
[00:12:50] then their secondary
[00:12:52] objective is to promote
[00:12:54] growth and promote economic
[00:12:56] activity.
[00:12:56] But their primary objective
[00:12:59] is focused on inflation.
[00:13:01] So until they get that back
[00:13:03] under control and back to
[00:13:05] target in a sustainable
[00:13:06] fashion using their terminology,
[00:13:09] they can't be seen to be
[00:13:11] pursuing policies that run
[00:13:13] counter to that.
[00:13:14] So that's the kind of the
[00:13:15] macroeconomic position as we
[00:13:16] go in, as we say,
[00:13:17] imagine the new chancellor
[00:13:18] going in on July the 5th
[00:13:20] and looking at things.
[00:13:21] What we're saying is in
[00:13:22] terms of spending more
[00:13:25] in having effectively
[00:13:27] increasing government debt
[00:13:29] is not a good prospect,
[00:13:30] as we said.
[00:13:31] And as you say,
[00:13:32] the parties have nailed
[00:13:33] their colors to the wall
[00:13:34] in terms of not increasing
[00:13:36] income tax,
[00:13:37] not increasing VAT
[00:13:39] and various other things.
[00:13:40] So is there actually
[00:13:42] much wiggle room there,
[00:13:44] things that can be done
[00:13:46] in terms of the nation's
[00:13:47] finances to meet any
[00:13:49] of the kind of commitments
[00:13:50] that they've talked about?
[00:13:50] I mean, on the taxation side,
[00:13:53] pretty much no.
[00:13:54] It's the promises
[00:13:56] on those big four
[00:13:59] that accounts for 70 percent
[00:14:01] of the money that's
[00:14:02] coming into the government.
[00:14:04] So unless they want to
[00:14:06] stick up the other 30 percent
[00:14:08] dramatically,
[00:14:09] even more dramatically
[00:14:10] than has happened
[00:14:12] in the past,
[00:14:12] there's very little they can do
[00:14:14] on the income side.
[00:14:15] So unless they want to
[00:14:17] increase fuel duty,
[00:14:19] alcohol duty, tobacco duty,
[00:14:21] things like that
[00:14:22] to unprecedented levels,
[00:14:24] it's not going to be enough
[00:14:26] to compensate for what
[00:14:27] they've effectively given up
[00:14:29] on their promises
[00:14:30] on income tax and IVAT
[00:14:32] incorporation.
[00:14:33] So they can't do anything
[00:14:34] on the income side.
[00:14:35] They can't do anything
[00:14:36] in terms of increasing
[00:14:38] their expenditure
[00:14:39] and growing their debt,
[00:14:40] because that could be well,
[00:14:42] that would just add to
[00:14:43] the situation where we are now,
[00:14:44] but also could be inflationary
[00:14:46] if it's putting more,
[00:14:47] even more money
[00:14:48] into the economy.
[00:14:49] They're between a rock
[00:14:50] and a hard place, aren't they?
[00:14:51] Exactly.
[00:14:51] And even on the expenditure side,
[00:14:54] again, some of the promises
[00:14:55] they've made
[00:14:56] are going to be very costly.
[00:14:58] So the triple lock on pensions
[00:15:00] in particular,
[00:15:01] it's if you look at
[00:15:02] the amount of money
[00:15:03] that's spent on the pensions,
[00:15:07] it's around 20 percent
[00:15:09] of the amount of money
[00:15:10] the government spends
[00:15:11] is on the state pension.
[00:15:13] So by maintaining
[00:15:15] the triple lock on that,
[00:15:17] maintaining the increase
[00:15:19] and as the conservatives
[00:15:21] have committed to then increasing
[00:15:23] the thresholds to match,
[00:15:25] that's a significant
[00:15:26] portion of government
[00:15:27] expenditure, which again,
[00:15:29] they've promised
[00:15:29] to do nothing to.
[00:15:30] And you combine that
[00:15:32] with what they've said
[00:15:33] on defense expenditure,
[00:15:34] which again is a big chunk
[00:15:36] of expenditure.
[00:15:37] It means that pretty much
[00:15:39] the only thing they can do
[00:15:40] is cut everything else
[00:15:42] very significantly indeed.
[00:15:45] But Michael, one of the things
[00:15:46] they've been pushing quite hard
[00:15:47] is ways in which what we've got
[00:15:49] can work better.
[00:15:50] So, you know,
[00:15:51] they talk about efficiencies
[00:15:52] within the public finances
[00:15:54] and within the civil service,
[00:15:55] within services.
[00:15:57] But also they talk about pulling back
[00:15:59] on tax avoidance, for example.
[00:16:02] Is that I mean,
[00:16:03] is any of that,
[00:16:04] assuming whatever base level
[00:16:06] we imagine can come out of it,
[00:16:08] of any significance
[00:16:09] in addressing public finances?
[00:16:10] So yes or no,
[00:16:12] particularly on the efficiencies
[00:16:15] in the public sector.
[00:16:16] So in terms of GDP,
[00:16:18] yes, if they're able to achieve
[00:16:21] large increases in efficiency,
[00:16:23] then that will increase GDP.
[00:16:26] But in terms of the actual tax
[00:16:28] take, it entirely depends
[00:16:30] what what they then do
[00:16:32] as far as the size
[00:16:33] of government is concerned,
[00:16:34] because they can do
[00:16:35] one of two things.
[00:16:36] They can either keep the government
[00:16:38] the same size, employ
[00:16:40] just as many people,
[00:16:41] but have them doing more things,
[00:16:43] having a better, bigger government.
[00:16:45] Or they can take those efficiencies
[00:16:48] and use them to cut the size
[00:16:50] of the government employment share.
[00:16:53] And the issue with
[00:16:54] the second of those is
[00:16:56] where do those people then go?
[00:16:58] Are there the opportunities
[00:17:00] for them to move
[00:17:01] into the private sector?
[00:17:03] Is the private sector
[00:17:04] going to be able to pick up
[00:17:06] that employment slack
[00:17:07] and again, if you look at
[00:17:09] what's happening in terms of vacancies
[00:17:12] in the short run,
[00:17:13] the answer is still probably no.
[00:17:16] Longer term, yes,
[00:17:17] far more cause for optimism,
[00:17:18] but short term, far less scope
[00:17:21] for them to pick up
[00:17:23] any of those workers
[00:17:24] that the government does want to
[00:17:26] to cut as a result
[00:17:27] of these big efficiencies.
[00:17:28] They so they join the unemployed,
[00:17:30] they get the benefits associated.
[00:17:32] So in effect,
[00:17:33] they are taking money
[00:17:33] out of the system
[00:17:34] rather than in some way balancing
[00:17:36] the fact that they're
[00:17:37] no longer being an expense
[00:17:38] on the government's balance sheet.
[00:17:39] Exactly.
[00:17:40] And of course, all of those people
[00:17:42] employed in the civil service,
[00:17:44] they're all going to be paying income tax.
[00:17:46] They're all going to be
[00:17:46] paying national insurance,
[00:17:48] which, of course, will go away
[00:17:49] if they exit the labor force.
[00:17:51] So, Michael, what's going wrong?
[00:17:53] Because, you know,
[00:17:54] if we go back a couple of decades,
[00:17:56] I mean, we we seem to be better off.
[00:17:59] We didn't have, you know, austerity.
[00:18:02] We we didn't have the long
[00:18:05] national health service waiting lists.
[00:18:07] We didn't have as many potholes
[00:18:09] in our roads.
[00:18:10] I mean, there's more cars on the roads.
[00:18:11] I guess that might be part
[00:18:12] of the reason to do that.
[00:18:12] And some of them are
[00:18:13] heavy electric cars.
[00:18:14] But I mean, what's
[00:18:16] why are we not able
[00:18:17] to even cover the basics now?
[00:18:19] And yet we seem to be getting
[00:18:21] deeper and deeper into debt.
[00:18:22] What's changed?
[00:18:23] So the big thing that's changed
[00:18:25] is productivity in the UK.
[00:18:28] So simply the amount of output
[00:18:30] that we're producing per worker.
[00:18:33] So prior to the financial crisis,
[00:18:35] that was improving very comfortably.
[00:18:38] We had rising productivity,
[00:18:40] high levels of investment.
[00:18:42] But then during the financial crisis,
[00:18:44] it collapsed and it simply
[00:18:46] has never recovered.
[00:18:47] Productivity growth post crisis,
[00:18:49] so post 2008, has never been
[00:18:52] sustainably as high
[00:18:53] as it was pre crisis.
[00:18:55] And there's so what happened?
[00:18:56] Why?
[00:18:57] Well, there's a huge
[00:18:58] number of explanations out there.
[00:18:59] One of the big ones
[00:19:01] is collapsing investment.
[00:19:03] So if we look at the amounts
[00:19:05] that firms, that companies
[00:19:07] are investing into machines,
[00:19:10] investing into capital
[00:19:12] of one kind or another,
[00:19:13] it fell after the financial crisis
[00:19:16] and it's never really recovered
[00:19:18] to the same level
[00:19:19] as it was before.
[00:19:20] And one of the key ways
[00:19:22] we can make workers more productive
[00:19:24] is to give them
[00:19:25] the machines to do so.
[00:19:26] But if companies aren't investing,
[00:19:29] then that investment
[00:19:31] simply isn't there,
[00:19:32] particularly if it's then
[00:19:34] not coming from the government,
[00:19:35] which, of course,
[00:19:36] in the era of austerity post 2010,
[00:19:40] it wasn't coming
[00:19:41] from the government either.
[00:19:42] So many services have slowed down.
[00:19:44] So if you're ill
[00:19:45] and you can't get seen to,
[00:19:47] then you're not going to be working.
[00:19:48] If you want to get the train
[00:19:49] into into London
[00:19:50] from where we are,
[00:19:52] I'm guessing at one stage
[00:19:54] is a 50-50 chance
[00:19:55] that you get there
[00:19:55] and back on time.
[00:19:56] Now, you know, I'd say
[00:19:57] it's maybe 20% chance
[00:19:59] you won't get back at all.
[00:20:00] You know, it's like so.
[00:20:02] It's hard to work efficiently
[00:20:04] because the infrastructure around you,
[00:20:06] whether it's at the corporate level,
[00:20:07] the company you're working for,
[00:20:08] maybe not investing in the machinery,
[00:20:09] but also at the public level.
[00:20:11] It's that is holding people back,
[00:20:13] I think, isn't it?
[00:20:14] Exactly.
[00:20:15] And one thing we've got to remember
[00:20:17] about investment
[00:20:18] is that you need to do
[00:20:20] a certain amount of investment
[00:20:22] on a rolling basis
[00:20:24] just to stay where you are,
[00:20:26] just to fight against the fact
[00:20:28] that things depreciate,
[00:20:29] that machines wear out,
[00:20:30] that infrastructure doesn't last forever.
[00:20:33] So if you're not meeting
[00:20:35] that that that lower level
[00:20:38] of investment,
[00:20:39] then, as you say,
[00:20:40] everything's going to deteriorate.
[00:20:42] And over the era of austerity,
[00:20:45] that level of baseline investment
[00:20:47] simply wasn't taking place.
[00:20:49] And we're seeing the results now
[00:20:51] in terms of, as you say,
[00:20:52] potholes and transport, etc.
[00:20:54] So to summarise our problems,
[00:20:56] is it just that one word, austerity?
[00:20:58] So austerity didn't help,
[00:21:01] but the evidence is mixed
[00:21:04] as to whether it was needed,
[00:21:06] because the issue is,
[00:21:07] if if austerity didn't happen,
[00:21:10] what would have happened to debt?
[00:21:14] Austerity happened.
[00:21:15] They were succeeding
[00:21:17] in getting the government
[00:21:18] debt pile down,
[00:21:20] in reducing the amount
[00:21:21] of government revenue
[00:21:22] spent on debt.
[00:21:24] And then Covid hit
[00:21:26] everything fell backwards
[00:21:28] quite quickly.
[00:21:29] So the financial crisis
[00:21:31] responding to that
[00:21:33] was very expensive.
[00:21:34] It required a lot of government
[00:21:36] expenditure, which,
[00:21:38] of course, required
[00:21:40] a lot of borrowing.
[00:21:41] But again, the this isn't
[00:21:44] to say that austerity
[00:21:46] is entirely to blame.
[00:21:47] If we look at what was happening
[00:21:49] to UK debt prior
[00:21:52] to the financial crisis.
[00:21:54] Yes, it was decreasing,
[00:21:56] but perhaps not decreasing
[00:21:58] as fast as we would have
[00:22:00] ideally wanted, given
[00:22:02] the very favourable conditions
[00:22:04] in the wider economic
[00:22:06] situation at the time.
[00:22:08] But isn't there a danger?
[00:22:09] What we also saw
[00:22:10] that through that austerity,
[00:22:11] though, a number I gave
[00:22:13] just before you came on,
[00:22:13] if we looked at real net domestic
[00:22:15] product per capita
[00:22:17] over the last 14 years,
[00:22:18] it's grown basically
[00:22:19] a little under 0.7%
[00:22:21] growth per year.
[00:22:22] So a pretty stagnant
[00:22:23] economy for a long period of time.
[00:22:26] If we if we're forced
[00:22:27] into that situation
[00:22:28] where we have to have more austerity
[00:22:30] because we just can't borrow
[00:22:32] because the the interest
[00:22:33] costs are too huge,
[00:22:35] we're just going to continue
[00:22:36] with a stagnant economy.
[00:22:37] This is the whole argument
[00:22:38] about investment in order
[00:22:39] to to increase productivity,
[00:22:42] which is what you've been
[00:22:42] talking about, Michael,
[00:22:43] that, you know, you
[00:22:44] you're in a vicious cycle
[00:22:45] of underinvestment
[00:22:47] and then under
[00:22:49] production as a result.
[00:22:50] And it just goes worse.
[00:22:51] So what about a virtuous circle?
[00:22:53] Is there an argument made for saying,
[00:22:54] yes, OK, the debt is what it is,
[00:22:56] but at least it's a way out
[00:22:58] of the crisis we're in.
[00:22:59] And that's clearly
[00:23:00] an argument being made
[00:23:00] on some political side.
[00:23:02] So it's certainly
[00:23:03] an argument that could be made.
[00:23:04] But the other side
[00:23:06] of the vicious cycle
[00:23:08] is effectively on taxation.
[00:23:11] So it's the theory of
[00:23:14] how much do we want to take
[00:23:15] short term pain
[00:23:17] in order to get long term gain?
[00:23:19] Because in order to invest,
[00:23:21] yes, we could borrow,
[00:23:22] but we could also
[00:23:24] effectively tax more now
[00:23:26] in order to grow the economy,
[00:23:29] have to tax less in the future.
[00:23:31] So with investment,
[00:23:33] it entirely depends on,
[00:23:35] well, how effective
[00:23:36] do we think this investment
[00:23:38] is going to be if we think
[00:23:39] that the economy will grow
[00:23:42] fast enough
[00:23:42] that we'll be able to pay off
[00:23:44] the debt and reduce
[00:23:46] the debt as a proportion of GDP?
[00:23:48] Then yes, that's
[00:23:49] that's the optimal way to go.
[00:23:51] But questions do arise.
[00:23:53] Well, how effective
[00:23:55] is this investment going to be?
[00:23:57] Is it just going to get us
[00:23:59] back to where we were?
[00:24:01] Or is it going to push us beyond?
[00:24:02] And if you tax heavily as well,
[00:24:04] then people spending less.
[00:24:05] And also it deters
[00:24:07] investment.
[00:24:08] A lot of people would say
[00:24:08] that private investment
[00:24:10] will simply not want to come here
[00:24:12] if the if the tax burden
[00:24:13] is too high for them.
[00:24:14] That's that's been a pretty
[00:24:15] standard Tory argument
[00:24:17] for a long time.
[00:24:17] Or if the tax is high
[00:24:19] and there's ways of avoiding the tax,
[00:24:20] you're going to find those ways,
[00:24:21] even if you stay in the country.
[00:24:23] So, for example,
[00:24:24] you know, you could put
[00:24:25] you could you could put more money
[00:24:26] into your into your pension scheme
[00:24:28] rather than spending it
[00:24:28] sort of day to day
[00:24:29] in the real economy.
[00:24:30] Exactly.
[00:24:31] And but that's
[00:24:33] depends on what we're taxing.
[00:24:34] Are we taxing effectively
[00:24:37] people consuming
[00:24:38] or are we taxing people
[00:24:40] who are saving or businesses
[00:24:42] that are that are saving?
[00:24:44] And if you look at
[00:24:45] some of the countries
[00:24:46] around the world
[00:24:47] that have grown quickest
[00:24:49] over the course of the last decade,
[00:24:51] they're ones where they save
[00:24:54] a much greater proportion
[00:24:56] of the pot of money
[00:24:58] of their of their GDP
[00:25:00] than we do.
[00:25:01] We have persistent
[00:25:02] low rates of saving in the UK.
[00:25:05] So taxation that's aimed at
[00:25:07] rebalancing that,
[00:25:09] at shifting things
[00:25:10] out of consumption
[00:25:11] and into savings.
[00:25:12] Well, that's one way
[00:25:14] we could could approach
[00:25:15] increasing investment.
[00:25:17] Well, let's let's look at it
[00:25:18] in a slightly different way, Michael,
[00:25:19] because we sort of said, look,
[00:25:20] is an enormous problem.
[00:25:21] There basically isn't.
[00:25:23] We're in a vicious cycle
[00:25:24] in terms of not having the means
[00:25:26] to do what we want to do.
[00:25:28] But on, as we said,
[00:25:29] July the 5th,
[00:25:30] the new chancellor comes in
[00:25:31] and looks at what's there.
[00:25:32] Essentially, if there is
[00:25:33] if there aren't the options
[00:25:34] and there may be,
[00:25:35] but not many of getting money
[00:25:37] from elsewhere, various things.
[00:25:39] What about reparsing out
[00:25:40] what's already there?
[00:25:41] You know, moving money
[00:25:43] between different jars,
[00:25:45] if you like, that might
[00:25:46] actually help things
[00:25:47] in the most active way
[00:25:48] in terms of the economy.
[00:25:50] You know, we know
[00:25:51] that money has to go to the NHS.
[00:25:52] We know that money has to go
[00:25:54] in the current climate,
[00:25:55] potentially, I suppose,
[00:25:56] into defense,
[00:25:57] which has certainly been committed to.
[00:25:59] But where are the ways
[00:26:00] in which they could do that
[00:26:01] without actually damaging
[00:26:02] the economy?
[00:26:03] So again, there's
[00:26:05] very little scope for them
[00:26:07] to shuffle this around,
[00:26:09] given the promises
[00:26:11] that they've made,
[00:26:12] particularly, as I said before,
[00:26:14] on on pensions.
[00:26:15] But there is scope
[00:26:16] for them to do it.
[00:26:17] But it would not be popular
[00:26:20] and it would be
[00:26:21] potentially quite regressive
[00:26:24] because one of the key areas
[00:26:26] of expenditure at the moment
[00:26:28] is on social protection.
[00:26:30] And if they really felt
[00:26:33] that it was important,
[00:26:34] they could shuffle money
[00:26:35] out of that.
[00:26:36] But that will hit
[00:26:37] the poorest in society
[00:26:39] far worse than it would
[00:26:42] other ways of shuffling
[00:26:43] things around.
[00:26:44] But again, the
[00:26:47] the the ways in which they can
[00:26:49] can shuffle these expenditures
[00:26:51] around is it's limited,
[00:26:53] given what they've already said
[00:26:55] in both of their campaigns.
[00:26:57] You talked about savings.
[00:26:58] If we could encourage people
[00:26:59] to save more,
[00:27:00] that means that there's
[00:27:01] more money for investment
[00:27:03] and that would help
[00:27:04] businesses grow and help
[00:27:06] with our productivity.
[00:27:07] That only applies, of course,
[00:27:08] if that saving is invested
[00:27:11] in new initiatives or in growth.
[00:27:14] I mean, all that saving
[00:27:16] just finds itself
[00:27:17] going into the share market
[00:27:18] or into housing,
[00:27:19] and it just pushes up
[00:27:20] asset prices without necessarily
[00:27:22] any productive growth.
[00:27:23] Is there a way that you can
[00:27:24] avoid that happening?
[00:27:26] Yes. So this is
[00:27:28] focusing more on
[00:27:29] the taxation regimes
[00:27:32] for companies themselves.
[00:27:34] It's how do companies
[00:27:36] use any extra money
[00:27:38] that comes in?
[00:27:39] Because yes, we shuffle money
[00:27:41] into into the stock market.
[00:27:42] That's easy, Michael.
[00:27:43] Share buybacks.
[00:27:44] Exactly.
[00:27:45] So the companies get the money
[00:27:49] and it's then how do we
[00:27:51] encourage them to spend
[00:27:53] it on investment
[00:27:54] and not on share buybacks?
[00:27:56] And that's where
[00:27:57] the corporation tax regime
[00:28:00] plays far more of a role.
[00:28:02] The move to full
[00:28:04] discounting of investment.
[00:28:06] I mean, the issue at the time
[00:28:08] was it was only temporary
[00:28:10] in order to meet
[00:28:11] the fiscal rules.
[00:28:12] But if it was made
[00:28:14] longer term, then perhaps,
[00:28:16] yes, that would encourage
[00:28:17] companies to not engage
[00:28:19] in these, as you say,
[00:28:20] the share buybacks,
[00:28:20] but actually invest
[00:28:22] into the longer term.
[00:28:23] But only if they thought
[00:28:24] there was no alternative.
[00:28:25] I mean, what's in that
[00:28:26] sort of situation?
[00:28:28] There's been widely claimed
[00:28:29] people go to better tax regimes
[00:28:31] where they can.
[00:28:32] Or more to the point,
[00:28:33] they feel as though
[00:28:34] the economy is growing enough
[00:28:35] that it's worth investment.
[00:28:36] I mean, you can you can
[00:28:37] create a very healthy
[00:28:37] environment for for businesses
[00:28:39] to invest.
[00:28:40] But if they think, well,
[00:28:40] hang on a second,
[00:28:41] people are not buying anything,
[00:28:43] you know, that the economy
[00:28:44] has stagnated.
[00:28:46] That's just not the market
[00:28:46] for what we produce,
[00:28:47] in which case, you know,
[00:28:48] they're going to be reticent,
[00:28:49] irrespective of how
[00:28:50] favorable the conditions
[00:28:51] are for them to invest.
[00:28:53] Yes, absolutely.
[00:28:54] And this is where
[00:28:56] we start to look at
[00:28:57] the different types of companies
[00:28:59] because we're we're not
[00:29:00] just a domestic economy.
[00:29:02] It's yes, the domestic
[00:29:04] market is very important,
[00:29:06] but global markets also
[00:29:08] play a significant role.
[00:29:10] And it's how much scope
[00:29:11] is there for these companies
[00:29:13] to be more optimistic
[00:29:15] about their global prospects
[00:29:17] than perhaps their
[00:29:18] domestic prospects?
[00:29:19] So here's the thing.
[00:29:20] I mean, it's a shame
[00:29:21] we're only touching on this
[00:29:22] sort of like as we get
[00:29:22] towards the end of the
[00:29:23] interview.
[00:29:24] But I mean, isn't that's
[00:29:25] the us and them, isn't it?
[00:29:26] In the in the global sphere,
[00:29:28] there's those companies
[00:29:29] that are those countries
[00:29:30] that are net exporters.
[00:29:32] And then there's countries
[00:29:33] like the UK that are
[00:29:34] net importers.
[00:29:35] And if I have not had anybody
[00:29:38] talking about improving
[00:29:39] our exports during this campaign,
[00:29:42] and yet it seems like
[00:29:43] the direction you have to take,
[00:29:45] the focus has to be on
[00:29:46] on growing by selling more goods
[00:29:48] or services overseas.
[00:29:51] Yes, either selling more goods
[00:29:54] and services overseas
[00:29:55] or one way or another,
[00:29:57] reducing our dependence
[00:29:59] on on imports,
[00:30:00] because imports, of course,
[00:30:01] are the flip side
[00:30:03] of the equation.
[00:30:04] Every piece of furniture
[00:30:07] that we import is something
[00:30:09] that's not being produced here
[00:30:10] and being sold here.
[00:30:12] And imports, of course, taken away
[00:30:14] from everything else
[00:30:15] when we're calculating GDP.
[00:30:17] So on the other hand,
[00:30:18] the pound has been rising
[00:30:19] quite a lot in the background
[00:30:21] of all this,
[00:30:22] which obviously doesn't
[00:30:23] help with exports,
[00:30:24] but, you know,
[00:30:25] makes our imports cheaper.
[00:30:27] I mean, in a way,
[00:30:27] these kind of international tides
[00:30:30] could actually lift us
[00:30:31] to a point where things are better.
[00:30:33] Yeah, but that fluctuates,
[00:30:34] doesn't it?
[00:30:34] With the pound,
[00:30:35] it's been pretty consistent
[00:30:36] over the last three
[00:30:37] or four years now.
[00:30:38] It has, but it's the always
[00:30:40] a question of, well,
[00:30:41] how much of that is
[00:30:42] is driven by temporary
[00:30:44] versus permanent changes.
[00:30:46] And of course, if we look
[00:30:46] at the interest rate
[00:30:48] that the Bank of England
[00:30:50] has set compared to
[00:30:52] particularly the interest
[00:30:53] rate in Europe,
[00:30:54] we are far higher,
[00:30:55] which, of course,
[00:30:56] makes the UK
[00:30:57] far more attractive,
[00:30:58] pushing up the pound.
[00:30:59] But as that starts to hopefully
[00:31:02] unwind over the near future,
[00:31:04] will that act as a dampener
[00:31:06] on the on the value of the pound?
[00:31:07] Exactly.
[00:31:07] I mean, it's bond market.
[00:31:08] I mean, if the Bank of England
[00:31:11] drops interest rates
[00:31:12] faster than the
[00:31:14] than the Fed does
[00:31:14] in the United States,
[00:31:15] watch the pound come down.
[00:31:17] But the idea that we earn
[00:31:19] more from exports,
[00:31:20] I mean, it's not the same
[00:31:21] as the government spending,
[00:31:22] but it is extra money
[00:31:23] coming into the economy,
[00:31:24] isn't it?
[00:31:24] And that's got to be.
[00:31:25] It is a way that the country
[00:31:27] can collectively get wealthier.
[00:31:28] So we have that investment
[00:31:30] for productivity.
[00:31:31] We just need to sell
[00:31:32] more stuff overseas.
[00:31:33] And then all these promises
[00:31:34] the politicians make
[00:31:35] could be fulfilled.
[00:31:36] And yet no one's
[00:31:37] talking about it.
[00:31:38] Exactly.
[00:31:38] It's exports is one of the key areas
[00:31:41] where we have the potential,
[00:31:44] given the situation
[00:31:47] for things to get better.
[00:31:48] But as you say,
[00:31:49] no one's really talking about it.
[00:31:51] It's very domestically focused
[00:31:54] as far as economic policy
[00:31:55] is concerned.
[00:31:56] I haven't figured out yet
[00:31:57] what we can explore.
[00:31:58] Maybe not.
[00:31:59] Michael, just as we come
[00:32:00] towards the end of this,
[00:32:01] do you do you find when you hear
[00:32:02] politicians making
[00:32:03] the kind of promises
[00:32:04] we've been hearing and you
[00:32:05] and you know what the figures are?
[00:32:06] Do you just kind of wonder
[00:32:08] what where they're where they're
[00:32:10] living, what they're thinking about?
[00:32:11] Or you hold your head in your hands.
[00:32:13] I mean, what's your feeling about this?
[00:32:14] So I from an economic perspective,
[00:32:17] yes, I'm like, well,
[00:32:19] you're making all these promises
[00:32:21] for political reasons
[00:32:23] and very valid political reasons.
[00:32:25] But you're not being
[00:32:27] completely forthright
[00:32:28] about the trade-offs.
[00:32:29] And it does get frustrating
[00:32:31] sometimes when they aren't
[00:32:33] telling us very clearly
[00:32:35] what the downsides are
[00:32:37] in the way that they're so open about
[00:32:39] what the upsides are.
[00:32:41] Yes, no rise in income tax,
[00:32:43] national insurance, etc.
[00:32:45] But what is the trade-off?
[00:32:48] And I think we haven't
[00:32:50] from my perspective
[00:32:51] heard as much about
[00:32:52] the trade-off as we would like.
[00:32:54] But of course,
[00:32:55] anyone talking about
[00:32:56] the trade-offs is likely to happen.
[00:32:58] What happened to Theresa May
[00:32:59] in 2017?
[00:33:00] So keeping Sturm
[00:33:02] makes for much better politics.
[00:33:04] And do we get more productive
[00:33:05] if we become a more
[00:33:06] egalitarian society as well?
[00:33:08] I mean, is that something else
[00:33:09] that's not talked about a great deal?
[00:33:11] So we're promising all of this money
[00:33:13] for old age pensioners,
[00:33:14] some of them,
[00:33:15] you know, not means assessed.
[00:33:16] Some of the in fact,
[00:33:17] you know, we're even saying
[00:33:18] we'll give you
[00:33:19] tax breaks that didn't exist before.
[00:33:22] And yet, you know,
[00:33:23] a lot of these people don't need it.
[00:33:24] We've got we have had,
[00:33:26] you know, if you look at
[00:33:26] the Gini coefficient,
[00:33:27] it's been increasing,
[00:33:29] I think in the 80s.
[00:33:30] This is the international
[00:33:31] measure of inequality.
[00:33:32] Yes.
[00:33:32] So if everyone's got the same,
[00:33:34] it's one.
[00:33:34] If only one person
[00:33:35] knows everything is zero.
[00:33:37] So you want to be as far away
[00:33:38] from zero as possible
[00:33:39] to get to a more egalitarian
[00:33:40] society in the in the 80s.
[00:33:41] We're in 0.25.
[00:33:43] Now I think we're more like 0.35.
[00:33:47] France is on 0.3.
[00:33:49] America is on 0.4.
[00:33:52] But it's getting worse.
[00:33:53] It's the point if we had
[00:33:54] a more egalitarian society,
[00:33:57] then perhaps money
[00:33:58] would be getting to the people
[00:33:59] who are more likely to spend
[00:34:01] rather than have money
[00:34:03] wrapped up in share portfolios
[00:34:04] that might not be that productive.
[00:34:06] That would be a good thing,
[00:34:07] wouldn't it?
[00:34:07] So again, it's we the detail
[00:34:11] is important.
[00:34:12] So one of the key things
[00:34:13] that's been happening
[00:34:14] to inequality in the UK
[00:34:16] is that it's been very focused
[00:34:18] at the very highest
[00:34:20] end ends of the spectrum.
[00:34:21] So the very richest in society,
[00:34:23] whereas in other countries,
[00:34:25] the inequality has been rising
[00:34:27] because of a burgeoning
[00:34:29] middle class at the expense
[00:34:31] of the poorest in society.
[00:34:32] And if we look at those people
[00:34:34] that are most likely to save
[00:34:37] in a way that is beneficial
[00:34:38] for investment, etc.,
[00:34:40] it is those middle classes,
[00:34:42] whereas the very richest,
[00:34:44] they're internationally mobile.
[00:34:45] They can just buy another yacht.
[00:34:47] Exactly.
[00:34:47] They buy another yacht.
[00:34:49] They offshore their wealth
[00:34:51] all around the world.
[00:34:52] So, yes, the types of inequality
[00:34:55] that we have been seeing in the UK
[00:34:56] have been particularly damaging
[00:34:58] because it's been taking away
[00:34:59] from the poorest in society
[00:35:01] who prop up consumption.
[00:35:03] It's been taking away
[00:35:04] from the middle earners,
[00:35:06] who are the ones who most likely
[00:35:07] to save for the benefit
[00:35:09] of the domestic economy
[00:35:10] and funneling it towards
[00:35:11] the richest,
[00:35:12] who are far more likely
[00:35:14] to benefit other parts
[00:35:15] of the world than they are
[00:35:16] the UK.
[00:35:17] So you address that through tax.
[00:35:19] And that's a tax issue, isn't it?
[00:35:21] But then we're not going
[00:35:21] to touch tax according to...
[00:35:24] So it's a tax issue.
[00:35:25] But again, the issue
[00:35:26] with those high earners is
[00:35:28] they are internationally mobile.
[00:35:30] So is it better to get
[00:35:33] the amount of tax that we do
[00:35:37] at the rates that we charge
[00:35:39] or to increase it
[00:35:41] at the risk of all of them
[00:35:43] moving to other parts of the world?
[00:35:44] One of the central issues
[00:35:45] in the various promises
[00:35:47] that have been made.
[00:35:47] Sounds like whichever party we have,
[00:35:49] they both face the same issues.
[00:35:50] They've got so little room to move.
[00:35:51] I wonder really what's going to change
[00:35:53] from July onward?
[00:35:55] Exactly.
[00:35:56] Given the promises
[00:35:58] that both parties have made,
[00:36:00] the wiggle room is the same
[00:36:02] on both sides.
[00:36:03] And let's leave a note.
[00:36:05] Someone just leave a note.
[00:36:05] There is no wiggle room.
[00:36:06] Let's just pass it on to the next one.
[00:36:08] Michael, thank you so much
[00:36:09] for doing that for us.
[00:36:11] We shall see what wiggle room
[00:36:12] they do manage to find
[00:36:14] on July the 5th,
[00:36:15] I suppose, or thereafter.
[00:36:16] Good stuff.
[00:36:16] Thanks, Michael.
[00:36:17] Great talking. Thank you.
[00:36:18] So in short, yeah,
[00:36:19] I mean, I don't know.
[00:36:20] Have we got...
[00:36:21] Is anything going to change?
[00:36:22] No, almost nothing.
[00:36:23] Nothing.
[00:36:24] But at least we're going
[00:36:25] to have an election.
[00:36:26] We'll have a lot of face
[00:36:27] a day out, is there?
[00:36:28] What's the shame we don't do in...
[00:36:29] A day out?
[00:36:30] Well, you're getting
[00:36:31] down to the polling station.
[00:36:32] You know what?
[00:36:32] In Australia, there's always
[00:36:33] a sausage sizzle
[00:36:34] at the polling booth.
[00:36:35] Yes, because they're
[00:36:36] forced to vote, aren't they?
[00:36:37] You're forced to give out.
[00:36:38] And so everyone thinks
[00:36:38] all we may as well
[00:36:39] make the most out of it.
[00:36:40] There's always sausages there.
[00:36:42] That's the important thing.
[00:36:43] It is the important thing.
[00:36:44] But what apart from sausages
[00:36:45] actually helps a campaign?
[00:36:47] This is an interesting question.
[00:36:48] All the campaigns
[00:36:49] been going on,
[00:36:49] all this sort of going
[00:36:50] to places with people
[00:36:51] with high vis jackets
[00:36:52] on behind you and hard hats
[00:36:54] and making promises.
[00:36:55] I mean, does it work?
[00:36:56] The sizzles could
[00:36:57] actually be the answer.
[00:36:58] Maybe it is.
[00:36:59] What is it that works
[00:36:59] in a campaign?
[00:37:00] Is it is it TV debates?
[00:37:02] Yeah.
[00:37:03] Is it on social media
[00:37:04] where, frankly, most of our
[00:37:06] leaders, I'm afraid,
[00:37:07] look a bit...
[00:37:07] The most successful campaigns
[00:37:09] have something to do with water.
[00:37:10] I just feel as though
[00:37:11] if you can appear at a water park
[00:37:12] or go and go on something
[00:37:14] and fall into the water.
[00:37:15] Yeah, I think, you know,
[00:37:16] earlier on we've seen
[00:37:18] a bit of that.
[00:37:18] Yeah.
[00:37:19] No, I mean, you know, do...
[00:37:20] But it's just looking stupid.
[00:37:21] Yes.
[00:37:22] Does that help?
[00:37:22] Well, maybe.
[00:37:23] Boris Johnson made a bit
[00:37:24] of a career out of it.
[00:37:25] Yeah.
[00:37:26] But look what happened to him.
[00:37:27] So, you know,
[00:37:28] he won.
[00:37:29] For a bit.
[00:37:29] Yeah.
[00:37:30] I mean, this is the thing.
[00:37:31] What is it that actually works?
[00:37:32] In fact, does anything work?
[00:37:33] Do I mean, are you...
[00:37:34] Is how much of the dial
[00:37:35] has actually changed?
[00:37:36] Well, the question is,
[00:37:37] is it important to get noticed
[00:37:39] or are you...
[00:37:41] Or do you have to tell people
[00:37:42] what they want to hear?
[00:37:43] Or do you...
[00:37:44] Dara said,
[00:37:45] and this is a very risky approach
[00:37:46] to actually tell people
[00:37:47] what you think they should know.
[00:37:49] You know, so if...
[00:37:50] Because otherwise,
[00:37:51] and if it's just telling people
[00:37:52] what they want to hear,
[00:37:53] it's lowest common denominator stuff,
[00:37:55] isn't it?
[00:37:55] Which is obviously why
[00:37:56] we've seen the return of Farage.
[00:37:58] Well, indeed.
[00:37:58] And then there's the whole thing
[00:37:59] about manifestos.
[00:38:01] You know, we get very excited
[00:38:02] when the manifestos are published
[00:38:03] and who on earth apart from
[00:38:06] even political journalists,
[00:38:07] they really sit down
[00:38:08] and read through
[00:38:09] the whole blessing thing.
[00:38:10] Well, it's I mean,
[00:38:10] it's normally our complete
[00:38:11] work of fiction anyway,
[00:38:12] isn't it?
[00:38:12] No one believes them.
[00:38:13] Exactly.
[00:38:13] So what is it that actually cuts
[00:38:15] through and does anything?
[00:38:17] You know, how much actually changes
[00:38:18] and what makes the difference?
[00:38:19] Yeah.
[00:38:19] And how much of it is money?
[00:38:21] You know, does it...
[00:38:22] Is it the part of it?
[00:38:23] Paying people to vote for you?
[00:38:23] Well, you could be...
[00:38:25] Actually, it might be the most effective.
[00:38:26] What are you announcing?
[00:38:27] It's just around the companies,
[00:38:28] the companies,
[00:38:29] the parties that have got
[00:38:30] the most money
[00:38:32] to spend on promotion.
[00:38:33] Do they...
[00:38:34] Well, of course, Reform Party
[00:38:35] is a company, interesting.
[00:38:36] Interestingly so.
[00:38:37] Yeah.
[00:38:38] Well, maybe they'll win it.
[00:38:39] Maybe they'll start
[00:38:40] a whole new sphere of politics.
[00:38:41] Anyway, we are going to...
[00:38:42] But that's the question
[00:38:43] out of all of it.
[00:38:44] It's a question of what you do,
[00:38:45] but it's also how much money
[00:38:46] do you have behind you.
[00:38:47] And is that a key element of success?
[00:38:48] What's the best way to spend it
[00:38:49] that actually makes a difference?
[00:38:51] Yeah.
[00:38:51] In other words,
[00:38:52] should the Tories
[00:38:53] actually just save the money
[00:38:54] for next time?
[00:38:54] Yes, because they look, you know,
[00:38:55] in fact, whichever way you fancy,
[00:38:56] we're fine.
[00:38:58] And then do what else...
[00:38:59] Well, then we'll talk about
[00:39:00] all that next week.
[00:39:01] Yeah, on the Y-Curve.
[00:39:02] Join us for that.
[00:39:02] We'll see you then.
[00:39:03] Thanks for listening.
[00:39:03] Bye.