#182 - Julian Jessop - Big Government Broke the Growth Model

Summary

The Peter McCormack Show #182: Julian Jessop – Big Government Broke the Growth Model

Date: June 6, 2026
Host: Peter McCormack
Guest: Julian Jessop (Economist, commentator, and free-market advocate)

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Episode Overview

In this episode, Peter McCormack sits down with economist Julian Jessop to diagnose the malaise afflicting the UK’s economy and society. The conversation orbits around the core premise that Western governments—and especially the UK—have allowed the state to balloon far beyond its optimal size, eroding growth, innovation, and entrepreneurial spirit. Jessop argues that misguided policies, political short-termism, and an ever-expanding regulatory state have created an uncompetitive business environment and declining living standards, all while failing to deliver meaningful equality or social welfare. The discussion explores the roots of these problems, the failings of both left and right populist movements, how policy is driven by "vibes" over evidence, and what an actual turnaround would require.

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Key Discussion Points & Insights

The Decline of the UK Economic Model

• Post-2008: The Turning Point
  Jessop asserts that most of the country’s decline can be traced to after the 2008 global financial crisis, when government intervention and the size of the state ballooned:

  “Since then pretty much everything has gone horribly wrong. The state has simply got too big. The tax burden is close to a sort of post-war record high again.”
  (01:22 – Jessop)

• Productivity Stagnation
  Productivity—output per hour worked—has stagnated:

  “In the UK and in many other countries, productivity has been much weaker since the global financial crisis than before ... it's the best way to grow the economy without damaging the planet.”
  (01:45 – Jessop)

Policy Issues: Complexity, Vibes, and Economic Realities

• The Overregulation Problem
  Rapidly mounting rules—especially ESG regulations—have distracted companies from profitability and productivity.:

  “Companies have lost a lot of the focus on productivity and profits that they had before. And the number of people regulating and managing these rules has significantly increased.”
  (02:44 – Jessop)

• Vibes-Based Policy & Populism
  Both left- and right-wing parties now pander to opinion polls and popular, but unworkable, policies:

  “There are lots of sort of vibe based ideas that have no evidence behind them.”
  (08:31 – Jessop)

  Notable policies critiqued:

  • Minimum wage hikes making businesses unviable.
  • “Dead weight” complexity in tax system with over 90 separate taxes.
  • Misguided interventions like “Eat Out to Help Out” and voluntary supermarket price caps.

• Misplaced Focus on Inequality
  Jessop states inequality is relatively flat and not the central issue; rather, growth and incentives are lacking.

  “However way you measure it, inequality has been pretty flat for decades now and in many cases has actually fallen. So the problem isn't really inequality, it's more the fact there isn't enough incentive to create wealth in the first place.”
  (08:31 – Jessop)

Structural Democratic Failures

• Democracy, Short-Termism, and Policy Ratchets
  Political incentives lead to unsound policies "ratcheting" upward—benefits and protections are introduced and almost never removed:

  “Anytime something is introduced, it's then almost impossible to take it away ... the winter fuel payment ... there's enormous fuss about getting rid of that.”
  (13:41 – Jessop)

• Voters and Political Cycles
  Short-term thinking dominates because politicians focus on the next election and headlines, not structural reform:

  “Politicians in contrast, are always looking for the quick win ... maybe sort of modern social media, they're worried about what the headlines are going to be the next 24 hours or on the next 10 minutes or the next week, rather than thinking beyond that.”
  (33:00 – Jessop)

• Lack of Real-World Experience among Politicians
  Many come from activist, academic, or NGO backgrounds with little experience creating value in a market setting:

  "Most people in government at the moment have no business experience. I mean they're from the charities legal background or they're career politicians...”
  (31:53 – Jessop)

The Problem with Left and Right Populism

• Greens and Reform: Protest Parties without Substance
  Both parties are critiqued for policies that do not survive scrutiny:

  • Greens: Price and wage caps, e.g., proposed 10:1 executive pay caps, are popular but impractical.
  • Reform: Overtime tax exemptions and immigration overhaul are “imaginative,” but "fall apart at the slightest scrutiny."

  “The problem is that a lot of their policies simply don't stack up ... they don't stand up to any serious scrutiny.”
  (17:42 – Jessop)

• Pendulum and Populist Reaction
  McCormack and Jessop note the center--the “Uni Party”—has failed, leading to rising populism, but warn that both radical ends bring their own dangers.

The Benefits of the Free Market & Size of the State

• Free Market Solutions & Spontaneous Order
  Jessop:

  "Hayek had this wonderful idea called spontaneous order ... if you just leave the market to get on with things, or society to get on with things, they'll come up with much better solutions...”
  (27:39 – Jessop)

• Appropriate State Size
  Jessop argues for a radical reduction of state spending, down to about 20% of GDP:

  “You can measure the state in different ways ... I think it could be maybe half that, maybe 20% ... What's happened instead ... is the government has spent enormous amount of resources on things that actually it shouldn't necessarily be doing itself.”
  (48:17 – Jessop)

The NHS, Public Services, and State Bloat

• NHS as a Cautionary Tale
  The NHS is too large and inefficient; other models in Europe and Asia balance public/private and get better results:

  “What's happened ... is the government has spent enormous amount of resources on things that actually it shouldn't necessarily be doing itself. So we've got the hugely bloated National Health Service, which provides one of the worst standards of care anywhere in the developed world.”
  (48:17 – Jessop)

• Competition as Remedy
  Private healthcare and direct consumer choice are beginning to fix gaps, but the state system crowds out innovation.

Education, Young People, and Social Mobility

• Too Many University Graduates
  The current education system is seen as misdirected, producing graduates with little real-world value and inflating youth unemployment.

  “I do now think that far too many people go to university. Something like 50% of young people is the current target. And for many people, university education is not the best.”
  (11:04 – Jessop)

• Voting Age and Maturity
  Both agree that 16- and 17-year-olds are too inexperienced to vote wisely on matters affecting the nation’s finances.

Political Reform: What Would It Take?

• Barriers to Reversal
  Jessop is pessimistic about a near-term turnaround due to systemic inertia and public resistance to unpopular reforms.

• Learning from Abroad: Argentina and China

  • Praises Argentina’s Javier Milei as someone who applied radical free market reforms with some positive outcomes.
  • China’s lack of democracy allows for long-term planning, though Jessop would not endorse a similar system.

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Notable Quotes & Memorable Moments

• On Political Ratchets and Perks:
  "Anytime something is introduced, it's then almost impossible to take it away ... there's a so called triple lock on the state pension ... but it's a very hard battle for politicians to fight."
  (13:41 – Jessop)

• On Minimum Wage Policy:
  “It would take the business from viable to unviable unless I was to let a few people go and work them all myself. So it would cost jobs.”
  (07:56 – McCormack)

• On Complexity and State Exploitation:
  “There always seems to be a default to more rules, more complexity, and a lot of people find a way around them. It’s like the bigger the surface area of the state, the more chance there is to exploit it.”
  (21:06 – McCormack)

• On Spontaneous Order (Hayek):
  "If you just leave the market to get on with things ... they'll come up with much better solutions than anything that a bunch of bureaucrats in a room can come up with."
  (27:39 – Jessop)

• On NHS International Appeal:
  "It's revealing, of course, that nobody has chosen to copy the NHS. Despite everybody saying the NHS is the best healthcare system in the world, nobody has gone close to replicating that model."
  (49:44 – Jessop)

• On Short-Term Politicians:
  "I call it a personality competition to put the most unimpressive people in part [in charge of] the most consequential decisions."
  (35:19 – McCormack)

• On the Path Forward:
  “If you are going to run a big state then you need really impressive people to do that.”
  (36:05 – Jessop)

• On Hope for the Future:
  "I think in many ways the fundamentals of the UK economy are pretty good. We're well placed to benefit from the AI revolution ... if we get dragged back into the overregulated EU model ... [it would be] a risk, but if that doesn't happen, then I think we could be an anchor of sanity, light touch regulation, good business culture, outperform the rest of Europe..."
  (64:23 – Jessop)

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Important Timestamps

• 01:22: Post-2008 economic stagnation, state expansion
• 07:56: Impact of minimum wage on small businesses
• 13:41: Policy ratchets and political incentives
• 17:42: Greens & Reform: protest votes and flawed policies
• 27:39: Hayek’s “spontaneous order” and market solutions
• 33:00: Short-termism and lack of business experience in politics
• 48:17: Jessop on the ideal (much smaller) state
• 49:44: Why nobody abroad copies the NHS model
• 64:23: Jessop’s cautiously optimistic note about the UK's future

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Tone & Takeaways

• Tone: Forthright, often sceptical, occasionally wryly humorous, and unapologetically free-market in orientation. Both men share personal anecdotes of running businesses and dealing with the state, giving the discussion a grounded, practical flavor.

• Takeaways:

  • The UK’s malaise is primarily self-inflicted through outsized government and poor policy choices.
  • Populism on left and right offers little more than superficially attractive but unworkable solutions.
  • Lasting reform would require a radical rethinking of the state’s size and role, an overhaul of the regulatory and tax environment, and a restoration of real incentives for entrepreneurship and work.
  • Ultimately, hope lies in the UK’s inherent strengths and potential to embrace a more dynamic, US-style, free-market model—if the politics can allow it.

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For listeners seeking rigorous economics, candid political critique, and practical business insight, this is a definitive and timely conversation.

Transcript

[A]

Then there was the global financial crisis in 2008 and since then pretty much everything has gone horribly wrong. The state has simply got too big. The tax burden is close to a sort of post war record high again. In the UK we're importing oil and gas, including oil and gas that Norway has dug out from the opposite side of the North Sea from us, which makes no sense at all. There are lots of sort of vibe based ideas that have no evidence behind them.

[B]

So is this really a structural problem of democracy?

[A]

As long as politicians are sort of chasing votes and listening to opinion polls rather than doing proper evidence based policy analysis, then I think this problem is just going to persist.

[B]

The bigger the surface area of the state, the more chance there is to exploit it.

[A]

We have a massive dead weight because of the complexity of our tax system.

[B]

What is the appropriate size of a state?

[A]

Oh, an awful lot smaller.

[B]

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[A]

Very well and very hot, thank you.

[B]

Good. What's gone so wrong with our country?

[A]

Gosh, where to start? I think you have to start going back decades. So things look reasonably good in the early 2000s, but then there was the global financial crisis in 2008 and since then pretty much everything has gone horribly wrong. In particular, we've had a very poor performance on productivity, which is probably one of the most important numbers that economists worry about. It basically is the amount of output people produce for every hour that they work. And that might sound a bit technical, but getting productivity up is the best way to make people worth more to their employers. So. So it's a key driver of living standards and wages, but it's also the best way to grow the economy without doing things like damaging the planet. Because if you can make more with less because the economy is more productive, then everybody can be better off without damaging loads of natural resources. So in the UK and in many other countries, productivity has been much weaker since the global financial crisis than before. Unfortunately, economists can't really agree on what the key drivers of that are. I mean, lots of different things have contributed, some of them struct, some of them to do with the fallout from the financial crisis itself. But some of them also some big policy mistakes that have been made here and in many other countries as well.

[B]

Is any of it cultural?

[A]

Part of it may well be cultural. So if we look at some of the sectors of the economy that were most productive before the global financial crisis, a lot of them are seeing big increases in regulation, some of which have covered things like environmental, social and governance regulations, which some people think is a good thing. Others would see that as overly woke. But the problem there is that companies have lost a lot of the focus on productivity and profits that they had before. And the number of people regulating and managing these rules has significantly increased.

[B]

Yeah, when I talk to different economists, a lot of them say this is all essentially self harm. The route out of this fixing this is relatively easy, but only if you think in the mind of a free market economist, low regulation economist, is that fairly true?

[A]

Yeah, I think there's a lot in that. There are some people who are more pessimistic in saying that this is a structural slowdown. And they point, for example, to things like the diminishing benefits from the IT revolution of the 1990s and early 2000s. I think that's clearly now out of date because we've now got the AI revolution coming through. So, you know, we're probably in the fourth or the fifth industrial revolution already there. They also focus on things like demographics and possibly increases in inequality. Again, I think those factors are overstated. If you get productivity led growth, you can make more from less. And also inequality hasn't actually changed that much over the last several decades. That's not really a key driver of anything. I think it does make more sense to focus on the policy mistakes and I think there are a number of them, but they could be boiled down to the fact the state has simply got too big. So you can look at that in terms of the headline numbers. So government borrowing, public debt is far bigger across the developed world than it was 10 or 20 years ago. The tax burden is close to a post war record high again in the uk. But it's not just the headline numbers, it's the huge amounts of intervention that governments, particularly in the UK are doing in things like the labor market, the energy market, the housing market. All of these things are actually adding to the cost of living crisis, making the economy less efficient and making us all worse off.

[B]

Is this all misguided ideology or do you see it as a way of capturing power?

[A]

Well, I think there are a number of factors there and I think Covid actually was a big contributor here. Obviously the, during COVID the government rightly or wrongly stepped in a lot to run the economy and to help people. I think that's contributed to the culture that if there's any problem, the solution is more government rather than less. So any crisis now, the government comes up with a new wheeze. So in the wake of COVID for example, Chancellor Rishi Sunak came out with the eat out to help out scheme pretty badly conceived. More recently the government has revisited the idea of voluntary caps on prices in supermarkets, which is bizarre because supermarket is already competitive sector in the UK operating on tiny margins. What governments don't do is step back and look at the root causes of these problems, which typically lie on the supply side of the economy rather than demand side. And what I mean by that is that we're not making the most of the resources we have in the uk. So energy is a superb example of this. I mean we're importing oil and gas, including oil and gas that Norway has dug out from the opposite side of the North Sea from us, which makes no sense at all. We're going to continue to need some oil and some gas in particular for the foreseeable future. Why don't we make more of that at home? Similarly, things like planning reforms, we could build a lot more houses, a lot more infrastructure if the government were more serious about planning reform. The Labour government's made some baby steps in that direction, but not enough.

[B]

So is this really a structural problem of democracy?

[A]

Yes. I have to be very careful what I say here because I often end up blaming the people themselves for this. If you look at opinion, we vote for them. Well, this is exactly it. I mean, if you look at opinion polls, there are plenty of economic policies that I think anybody would think are, are mad, that nonetheless poll very highly. And I could pick examples here, both from the, from the left and the right. But one good example that struck me recently was that the Green Party was proposing a cap of 10 to 1 on the ratio of executive pay.

[B]

Yes.

[A]

To the lowest paid person in the organization, which sounds great until you start thinking through the implications of that. So for example, what would that do to the Premier League?

[B]

Yes.

[A]

You know, are you really going to attract top footballers on an annual salary of maybe say £250,000 a year compared to what they currently make per week. So no. Nonetheless, that policy polled extremely highly, you know, 60, 70% approval ratings. So as long as politicians are sort of chasing votes and listening to opinion polls rather than doing proper evidence based policy analysis, then I think this problem is just going to persist.

[B]

Yeah. The minimum wage 15 pound was also another one which I took particular issue with as somebody employs people on a minimum wage in a coffee shop I have and it would take the business from viable to unviable unless I was to let a few people go and work them all myself. So it would cost jobs. And this vibes based policy, it's something I'm taking particular issue with at the moment Judy, because it's, it feels like the state is completely acting in the interest of power and the disservice of the country and the economy.

[A]

Well, you're right, there are lots of sort of vibe based ideas that have no evidence behind them. So one in particular is the idea that this has now become a massively unequal country. So people keep saying that inequality, whether you define that as income inequality or wealth inequality, has massively increased. Actually pretty much however way you measure it, inequality has been pretty flat for decades now and in many cases has actually fallen. So the problem isn't really inequality, it's more the fact there isn't enough incentive to create wealth in the first place. And at the other end of the scale there are lots of disincentives to work. For many people it's much easier to be on benefits than to take paid employment. Recently we've had more statistics showing that young people in particular are struggling. So you know, unemployment amongst young people is, has spiked again. The last time it rose this quickly was, was during COVID and before then it was during the global financial crisis. And one of the key reasons why it's risen is the government has intervened in all sorts of ways that make it much less attractive for employers to take on young people. The national minimum wage is a, is a key part of that. There's also sort of additional rules and regulations that would make an employer reluctant to take on somebody new because they have to give them lots of extra employment rights from day one. So they're not going to do that. And of course the people with no experience to prove their worth are precisely those people who are young and entering the labor market for the first time.

[B]

Well, if anyone who's dealt with an employment tribunal will know the system is set up to protect the people who primarily don't deserve it and exploit it. And I mean I've got experience with it myself, but I feel like we've lost a bit of common sense. I don't know what your first job was. I did a milk round. I didn't have any employment rights and I did paper Rounds and I worked in the shops. And I think we're actually doing a disservice to young people by not making it easy to sack them, because when it's easy to sack them, they perhaps have to go home and think about why they got sacked and learned from it. And I. I've. Sadly, there's like an entitled class of young people. Not all of them. There's some brilliant young people, but there is an entitled class of young people.

[A]

Yeah, I think there are a number of problems. By the way, my own personal experience in the year off I had between school and university, rather than travel around Greece and Italy like lots of my contemporaries did, I actually worked in a greengrocer's for six months and that was a really useful introduction to the world of work. And arguably that's one of the most useful things that I did in my teens and twenties.

[B]

Did you get paternity pay rights?

[A]

Well, fortunately I was too young for that to be an issue, but I very well remember the chap who ran the greengrocers. Suffice to say he was from Essex and probably pushed a barrow at some point in his life. And I think I would have got short shrift if I'd asked for any sort of those additional rights. I think there are problems now at a number of levels. For example, the university system. I obviously benefited from going to university and I was lucky enough to do so at a time when you didn't have to pay. So maybe I'm not in the best position to talk, but I do now think that far too many people go to university. Something like 50% of young people is the current target. And for many people, university education is not the best. They should be going for most of technical practical apprenticeships and training courses like that. So first of all, they're being pushed towards the wrong thing. Secondly, the things they learn at university are not necessarily helpful for the real world.

[B]

So activism?

[A]

Well, yeah, I mean, they spend loads of stuff learning about Marxist class theory and so on, and they did no understanding of the. Of the real world. And while I'm still on one of my hobby horses, another aspect of that is giving votes to 16 and 17 year olds.

[B]

Yeah.

[A]

The vast majority of whom of course, are still kids living at home and dependent on their parents, so they have no experience of the real world. And again, going back to myself, I would have dreaded to know how to vote when I was 16 or 17. Yeah, well, quite possibly I would have done the opposite to my dad on principle, but no, I think There was a. We have gone too far in assuming that 17, 16, 17 year olds in particular are in a position to make these, these big decisions often impact on the finances and the economy as a whole.

[B]

Well, I, I quite like the idea of not giving a vote to youngsters till they're 25, but at the same time not, not make them pay income tax or stamp duty. So this is a sacrifice. You can get, you get, you get a job and you can keep your money, but you don't get to vote.

[A]

Yeah, I think there's always a debate about where the dividing line would be. I think we've got to a position now where we do give enormous numbers of rights and responsibilities to 18 year olds. So it does seem reasonable that, you know, a lot of them will be in work or struggling through university. I think it's reasonable that they should have a vote. But 16 and 17 year olds, I think definitely not.

[B]

Do you think this is reversible yourself? And I don't just ask that technically, if you were Chancellor the Exchequer, I mean, do you think the country has the appetite to turn this around?

[A]

I. Don't be pessimistic. I think at the moment not would be my answer. I think there are two points there. First of all, there's sort of a ratchet in the system here. So anytime something is introduced, it's then almost impossible to take it away. So if we think about, I've had a go, if you like, at young people, let's have a go at older people now. So for example, Gordon Brown introduced the winter fuel payment as sort of a one off that was just topping up pensions and wasn't intended to be permanent. But there's enormous fuss about getting rid of that. There's a so called triple lock on the state pension. That again might have made sense 10 years ago when the state pension was relatively low and when the alternatives like workplace enrollment were not fully developed. But it now makes perfect sense to get rid of the triple lock. But it's a very hard battle for politicians to fight. So once something is introduced, people are very reluctant to see it go again in terms of the broader debate as well. Again, a pessimistic point here is look at the parties that seem to be riding highest in the poll. The Greens and reform, both of which are basically promising very popular things, but without any clear idea of how they're going to be paid for or what the wider economic and financial implications of that would be. But as I say that between them they're probably polling more than 50% in the poll. So it's very difficult to break that cycle.

[B]

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[A]

Well, if turning around to try and make it a more positive point, I think a lot of this is a, is a protest vote against the, the two established parties and if, if one or other of them can get their act together, then perhaps somebody could come through in the center ground. I also think the longer that time goes on, the more that some of the internal problems within the Green Party and reform will be exposed. Thinking they're partly as some of the dodgy candidates that they have both chosen, but also the fact that a lot of their policies simply don't stack up. They don't stand up to any serious scrutiny. So it's possible that, you know, that somebody will come through in the center. I'm not sure who that would be. See, we're recording this before the, the makerfield by election, which will be a make or break for the, for the Labour Party. Fascinating to see who emerges from that in the background, Kemi Badenoch does seem to be doing a very good job of, you know, restructuring the conservatives and doing some good longer term thinking. And her personal popularity has improved, but that's not clearly yet being reflected in the polls. I'm hopeful though that maybe a few years time things will look very different and a more sort of mainstream party will come through, but with much better ideas than either of those two main parties have had in the past.

[B]

Well, it feels like the established parties are struggling to capture the youth. I mean however well Kemi Bain does, I just can't see her capturing because the small number of conservative minded young people. I just want to talk about reform a little bit there. So for me, why the green policies don't stack up are pretty self evident. You only have to watch Zach Polanski and for a short amount of time and realize he's just repeating old socialist bullshit. But, but reform themselves, you know, what do you see within their policies that doesn't work?

[A]

Well, first of all, I'll be positive about reform. They are at least thinking out of the box. And over the last couple of years they have come up with some very interesting ideas. So for example, a big increase in the personal allowance, so a large number of people will be lifted out of paying income tax, which would obviously increase the incentive for them to work. It would help, typically help poorer people more than it helps anybody else. And also it might result in quite substantial savings on the welfare bill. So they are willing to think originally. However, they're now starting to come up with policies that rather like some of the green ideas again fall apart at the slightest scrutiny. The most recent one was a plan to Exempt overtime above 40 hours a week from income tax, which again it sounds like a good idea and I understand the logic of that. It's rewarding people who are going the extra mile or working the extra hour. So the grafters as they put it. But it's got a number of problems and one is that it's actually not particularly well targeted because people with overtime arrangements tend to get paid extra for those overtime, so they're already rewarded in that way. It wouldn't help for example, a single mum doing a part time job who needed to work an extra shift to make ends meet because she wouldn't qualify under the 40 hour rule. So it's not necessarily a fair way of doing it. I think it would be an additional complexity in the system as well. It'd be relatively easy for some people to game it.

[B]

Hey, I work 100 hours a week here?

[A]

Yes. Yeah. I'm guessing you're self employed, so of course you wouldn't benefit from this scheme at all. So that's another example.

[B]

I would give the company to my son and ask him to give me a job.

[A]

Exactly. And interestingly, I think reform was trying to copy a, a scheme in the US here, which itself hasn't worked. Well. What they won't appreciate me saying is that this scheme has actually already been tried in France. They tried this scheme of basically exempting overtime from tax and all that happened is that relatively well off people with clever accountants fiddled their arrangements to make sure that more of their hours counted as overtime than was previously the case and pocketed the difference. Most lower paid people saw no benefit at all and the economy as a whole simply suffered because tax revenues were being lost. So it's a nice idea and again, I'll give credit for Reform for being imaginative, but I don't think it would actually work. And I think that's part of the problem. There's a habit of promising things and then very quickly they unravel when economists or tax experts, wherever else it might be business people have a look at the scheme and work out and say, actually no, this isn't going to stack up.

[B]

There always seems to be a default to more rules, more complexity, and a lot of people find a way around them. It's like the bigger the surface area of the state, the more chance there is to exploit it.

[A]

And a particular problem there is that if there are lots of rules and regulations, that's particularly damaging for smaller businesses that find it harder to get around those. But it also cements the position of big businesses. So big businesses love this because they can have massive HR teams and lawyers and compliance people working their way around the system and lobbying the government to keep them.

[B]

Of course, I mean, like I said, I've got, as people know, listen to this podcast. I've got a little coffee shop in my town. I don't make any money and I never will because we try and do a really good coffee. But once you add in the minimum wage, employment rights, the energy costs, the business rates, it's not possible to make money doing this business. But actually I used to have a bar as well. I've got rid of that. The amount of time I spend on administration, regulation, accountancy, hr, these are all hours I could be spending running the business. I don't get to. And. And it just becomes guests to a point. It's like, how do I compete with Starbucks? I have A HR department.

[A]

Yeah.

[B]

Have process, you can't compete with it. And I just. It's quite interesting that I often find that people from the left have vibes based policies that they seem to think work but end up benefiting the people they dislike.

[A]

I mean, it's a, it's a huge problem throughout the economy. We, we have a massive dead weight because of the complexity of our tax system. So I think we have at least, you know, 90 separate taxes now in the UK on, on different things. At least one of them is on something that actually no longer exists, but we still got it. So the. It's an enormous disincentive and a particular problem there is that politicians tend to tie their hands. So ahead of the last election, Labours said that they wouldn't raise the basic rate of income tax or any of the rates of income tax or VAT or corporation tax. Now, in the unlikely event that I thought it was a good idea to raise more money through tax, I would do it by increasing one of those taxes. I would probably do vat, I might do income tax, but they've tied their hands there. So instead they have to faff around and do things at the margin. So in this case, they increased employer national insurance contributions, which they argued didn't break the letter of the manifesto, even though it clearly broke the spirit. And of course that just saddles more costs onto employers. As Rachel Reeves herself said when she was Shadow Chancellor, it's a tax on jobs and it's one of the things that's contributing to the weakness now in the labour market.

[B]

Well, was it Reagan who said every tax on a business is a tax on people anyway?

[A]

Yeah, Reagan said an awful lot of very, very sensible things.

[B]

Yeah.

[A]

And Thatcher, of course, at the same time as. Well, there's a.

[B]

There's a lot of criticism of Thatcher at the moment. I'm. I'll be honest, I'm quite the fan for the limits. I know I was quite young when she. Yeah, I was there at the tail end, but I, from my understanding of history and understanding of politicians, which isn't great, and somebody asked, they put a thing up on Twitter this week, rank these Prime Ministers in order. It was like our last 10 of which she actually, I think, was one of them, which was amazing. And I looked through the list and after Thatcher, I really struggled. I quite like Liz Truss because I think she understands economics and we can debate her execution, but I looked across everybody else and I was like, I don't think we've had anyone else who actually understands Economics. Although Richie Sunak this week said he wants to teach financial literacy in schools.

[A]

Yes, well, where to start? Well, first of all, I actually know both Rishi Sunak and particularly Liz Truss. I was briefly one of her economic advisors before, before she became Prime Minister.

[B]

Great.

[A]

So I think, I think she got it. I think though she executed the plan very, very badly. She did too much too quickly. And also she was very unlucky. In particular, the, you know, what is described as her mini budget. Just remember, it's actually quasi quateng's budget, not, not necessarily hers, was delivered at the same time as lots of other things were happening. So the bank of England was starting to sell government bonds back onto the market. So the bond market was fragile, interest rates were rising around the rest of the world. So she was unlucky in her timing, but again, at least she was somebody willing to think out of the box. And I think she does and did back then. Recognize that you need to really shake things up. Just continuing as we are now is not good enough.

[B]

Do you think if she could have held out, things would have actually turned out pretty good?

[A]

Yeah, I think probably. I mean, there's enormous focus now on the collapse in the bond market and particularly in the mortgage market in the week or two after the mini budget. But the markets were already starting to calm down. I think if she'd been able to held her nerve and not sack her chancellor and replace him with somebody who's always going to reverse everything that she'd done, maybe she could have survived. So I, I think it's a, I think it's a shame that she went partly for her personally, I find it difficult not to feel some human sympathy for her, but also because it's, it's sort of cast a shadow over anybody similar who comes along with an equally bold agenda because they'll just be accused of being Liz Truss again.

[B]

Yeah, she's been in that seat three times. Yeah. And I read the book before anything's up there.

[A]

Yeah, yeah.

[B]

And I've kind of got to know and I actually feel the same. I actually feel like she's kind of the best Prime Minister. We didn't have, we didn't really have a chance to see as Prime Minister, are you responsible for her free market Austrian ideas?

[A]

Did you give a. Hayek? Well, I'm a. I am a. If I describe myself as anything, I describe myself as a classical liberal and I often quote myself find myself quoting people like Hayek or going all the way back to, to Adam Smith and Ricardo and John Stuart Mill. So I'm somewhere between the classical liberal and Austrian school.

[B]

Yeah. And so why, why, why is it so niche? Because it was something I was only introduced to.

[A]

Yeah.

[B]

You know, in the last few years I mentioned I discovered Bitcoin, and they're all. Yeah, they're all Austrian economics. And I was told to read Adam Smith and I was told to read Milton Friedman and Hayek and I'd work my way through various books and Soul is another one. And to me it's all common sense. Well, why does I struggle with that?

[A]

I think partly it sounds quite cynical, the idea that you should just let markets and businesses get on with it. Most people seem to prefer the idea that the government can oversee things and that carefully chosen bureaucrats can make better decisions than the market can. But Hayek had this wonderful idea called spontaneous order, as he called it. And as you know, that's the idea that if you just leave the market to get on with things, or society to get on with things, they'll come up with much better solutions than anything that a bunch of bureaucrats in a room can come up with. And the price mechanism is superb example of this. Price mechanism is brilliant at sending signals to customers and to businesses about the supply and demand. If you layer on top of that competition, then you end up with much, much better results than anything that the government can ever come up with. To me, that's Economics 101. The problem is that at the moment there seems to be this war on prices. So the government is increasingly regulating the prices of everything. I mean, energy, housing. So rent caps are back in favor again. Wages, minimum wages. And another example there is the way that courts are increasingly deciding what the appropriate comparative rate of pay is for somebody working in a shop compared to working in a warehouse. It's generally the case that warehouse workers are paid more than shop workers on tills. The courts are deciding that this is some sort of inequity, that this needs to be corrected. Whereas in fact, that if people wanted to work for the higher pay in warehouses, there's absolutely nothing stopping them from doing so. So let the market decide, but no the courts or the newspapers or the government, whoever feels that they can do a better job of deciding what the appropriate price is.

[B]

But why do you think it's such a hard sell?

[A]

I think people like the comfort blanket of assuming that the government is there to protect their back. They. They also perhaps like people to. To blame. So this is the debate we often have around profiteering. So, you know, if prices go up it's easy to say, well, it's the fault of the oil companies or whoever else it might be. So let's, you know, victimize or make the oil companies the problem and we're going to go after the managers and so on and then let's replace them with nicer people. Let's nationalize everything so that my mate Colin or Deirdre will run it instead. We know they're nice people because they've got a nice allotment. It's sort of moving away from the market deciding and the market is basically just a collection of individuals, including consumers, who are making decisions and instead replacing those individual decisions with one or two big collective decisions. And what's frustrating for me is that pretty much every historical example of that has shown that that system doesn't work. Yeah, I mean a simple, simple experiment. North Korea versus South Korea.

[B]

Turn the lights, put the satellite up in space.

[A]

Yeah. East Germany versus West Germany.

[B]

Yes.

[A]

I mean you have two perfect control experiments there where the free market has completely outperformed the state control.

[B]

I'll give you another one. Poland versus the United Kingdom.

[A]

Yep, that's actually a very good one. A lot of people are horrified by the prospect that Poland will overtake the UK at some point in the next five to ten years on living standards. But you know, why not Polish people? Well educated, hard working. The tax system is very straightforward, the planning rules are very straightforward. This is a, an economy that is, is well run and good luck to them.

[B]

Do you think some of it just comes down to short term thinking in that the political cycle is the social media cycle, now it's the panic cycle. And I mean I, I look across both front benches really just see, yeah, a number of really unimpressive people with very little experience, you know, and so what would we expect?

[A]

Yeah, I think there are two problems there. One you, well you touched on both of them. One is that most people in government at the moment have no business experience. I mean they're from the charities legal background or they're career politicians of one way or another. Even some of those with economics backgrounds, I think they've rather inflated how much economics experience they really have.

[B]

I know what you're talking about.

[A]

Yeah, exactly. So that's part of it. These are not people who naturally think in terms of markets and businesses and so on and they're by and large supported by for example the trade unions that have a even more sort of warped view of, of how the business world should, should work. So that's, that's point one I think also there's a, there's the broader point here that, sorry, I've actually lost what you are.

[B]

So I think one, I pointed to experience. The other point is the short term political side. Sorry, yes, it's kind of out because realistically. Yeah, it's like when you run a business, you, you think both short and long term, how do we make payroll this week? But also where do we want to be in 10 years?

[A]

Yeah, yeah, no, I think that's. So there are two problems. One is that a lot of people in government don't have any real business or real world experience. The second problem is the time horizons. Now a lot of people say that businesses can be quite short termist, the City in particular. That's really not true. A business will quite happily make a long term investment and you can see that in the stock markets by the fact that there are lots of companies that haven't yet made profits and probably won't make profits for a very long time. They're nonetheless very highly valued by the markets because they can see the potential. So the markets, including the financial markets, are good at taking longer term views and being patient. Politicians in contrast, are always looking for the quick win. That's partly because of the five year electoral cycle, but partly because maybe sort of modern social media, they're worried about what the headlines are going to be the next 24 hours or on the next 10 minutes or the next week, rather than thinking beyond that. And there are lots of examples that I could give, but one of my favorites was, I think it was Nick Clegg when he was a Liberal Democrat minister in the coalition government under Cameron, saying in 2012 that we weren't going to build any nuclear power stations because they wouldn't come on stream for another 10 years. If he'd made a different decision, we would have had more nuclear power in 2022, which would have been fantastically timed for the fallout from Russia's full scale invasion of Ukraine and the energy crisis that resulted. So there is a perception that politicians or bureaucrats can make good long term decisions, but really they can't. And the final example there, and this is one of the few positive things I'm ever going to say about China. One of the reasons why China is successful is because they don't have regular elections and that means that politicians can think longer term. China is a great long term planner. It has not just sort of a five year plan, but plans well, well beyond that. And it does things that no government in the west would do equally if it wants to get things done quickly, it can. I think the Chinese will be looking at how long it's taken us to build HS2 and we'll just be laughing. I honestly think we will colonize Mars more quickly, then we will complete HS2.

[B]

Well, look, one of the things that really gets to me, Julian, is like I've got some friends who've run successful companies, I've got to meet some really successful businessmen over time and these people are highly competent and, and if, you know, if the CEO of a large company, Tesco, moves on, you know they're going to be using the best head hunter there is to find the best CEO they've got available who can steer that Tesco ship. And you know, Tesco is, the business is. But if you look at the size of the economy that we have as a country. Yeah, we don't take that same approach. What we have is a, I call it a personality competition to put the most unimpressive people in part the most consequential decisions. And I just wonder like at what point do we go, we can't keep, it's not working as a nation. Do we say this is not working?

[A]

Yeah, well if, if we are going to have a big state economy and obviously I don't think we do, if we are, we want serious people to run it and we should be attracting them. So civil servants are arguably massively underpaid compared to what the same person could earn in the private sector. I mentioned China as a model earlier. I mean, actually Singapore might be an even better model here. If you look at the people that are top officials and top politicians in Singapore, they have really impressive cvs. I mean they've often been so top figures in the military or business or academia or perhaps all three of those, they're really impressive people. So if you are going to run a big state then you need really impressive people to do that.

[B]

But that's what we used to do. I listened to an interview with John Major. He said the problem with the political class is that we did used to have impressive people come from business and the military into politics and now we don't. I mean, I, I don't know about you, I, I could probably name on one hand the actual politicians I rate. Can I even either do that many?

[A]

Well, I could, I could.

[B]

You probably know more.

[A]

Yeah, I could probably actually name a name a few. I think I mentioned one of them already. I mean, looking backwards though, interestingly, I feel fond now for the era of, of Tony Blair and, and Gordon Brown. Yeah, exactly. Not in terms of what they actually did, but they, they, they were very efficient in the way that they did it.

[B]

Yeah.

[A]

So I think, you know, Tony Blair clearly had a good grasp of what he wanted to do and how to, to deliver it. I think he and Gordon Brown made a, made an effective team. I think Tony Blair was particularly good on the, on the world stage and the domestic and foreign policy, but he left the economics to Gordon Brown. I think Gordon Marron made an enormous number of mistakes and he was responsible partly for over complicating the tax system, but also he prevented us from joining the euro. He reigned back some of Tony Blair's more sort of euro fantasist ideas there. So that was a pretty competent government, I think, picking a conservative one. I think David Cameron was pretty good. I think they managed the fallout from the global financial crisis pretty well in terms of getting the public finances back on track and they significantly improved productivity in the public sector. That's something that is hidden in the data. So people focus a lot on the idea that there are big cuts in public spending. There weren't, by the way. Public spending continued to increase, but it was controlled and spent a lot better. And that was basically the last period when there was a significant improvement in public sector productivity. It's still far too low and of course it's now going backwards because all the government is doing is throwing more money at it rather than structurally reforming it. So we have had a few times in my conscious adult lifetime when we've had fairly competent politicians, but more recently it's become fragmented and the extremes seem to be winning and whatever is popular gets support, regardless whether or not it stands up to serious scrutiny.

[B]

What would you say is extreme right now? I think it's always a interesting question to ask people.

[A]

Well, a couple of examples and I'll have a go both at Green and reform here. In the case of Green, the one I mentioned earlier, the idea of a massive increase in the regulation of prices and wages and rents and that sort of thing, I mean, that really is taking us back to the worst days of East Germany and elsewhere. And it's not just economic theory, but every historical example has shown that if you cap rents or massively increase minimum wages, it ends up hurting the very people you're supposed to help. So you get a reduction in the quality and supply of housing, you get a big increase in unemployment. You only have to look at France, where the minimum wage is relatively generous and youth unemployment is even higher than ours. So that's one Extreme on the left, if you like, another extreme on the right is that I think reform has gone too far in terms of clamping down on immigration to the extent of saying to people who perhaps might have been here for 10, 20, 30 years and contributing to society and fully integrated, you're foreign, you've got to go. So I think that has gone too far on the right.

[B]

Isn't this just like the pendulum though? The middle grounds failed, we're naturally gonna.

[A]

Yeah, and hopefully it is like a pendulum which will swing back towards the centre, but the centre has to change. I mean, quite rightly, a lot of people on the right criticized Labour and the Conservatives together of being this, if you like, the Uni Party of just slightly tweaking the same economic policies. And I absolutely agree that reform is right on that we need to radically reform the way that we run the country and reduce the size of the state. Though ironically, in lots of ways I think reform is planning to do the opposite. So it actually seems quite keen on nationalization and maintaining the triple lock and things like that that are heading in the wrong direction.

[B]

It does feel like, it almost feels like things have to get a lot worse for people to actually realize that they're. Because the thing that bothers me is that most people, I mean, I've got a basic grasp of economics, nothing near that, probably what you have. And I think my grasp of economics is pretty elite compared to the general public. And if people don't really understand economics, do they really understand what they're voting for? And I think it's a real issue.

[A]

I think that that's a, that's a very good point. Part of the problem is that we are actually a relatively well off country. I know it may not feel like it, but a good example of this is Japan, which I think people understand is a relatively well off country. It's had next to no growth for decades now. But because it starts from reasonably comfortable position, people can sort of put up with things. It's rather like boiling the frog is the other analogy. You don't realize sometimes until it's too late. So in that sense a crisis would be no bad thing in terms of how we change it. I think one change that will be very helpful is that when people are presented with a policy proposal, the trade offs are properly explained to them and opinion polls tend to be very bad at doing this. So they tend to say things like, do you think the minimum wage should be raised to £15 an hour or £20 an hour or something like that. Yeah, motherhood and apple pie. I'd love it if everybody were paid more. But if the trade offs were explained, it was said even if this resulted in a big increase in unemployment, then I think people would change their minds,

[B]

but they would lose their policies. So if the Greens had to explain that. See, this is one of the things I don't understand is I've watched Zach Polanski repeatedly talk about rent controls. Every single time on Twitter. I reply just to explain to you, rent controls always and everywhere. Increase the customer rent, reduce the quality, they harm the people you want to help. And lots of other people are replying to him, so he must be aware people are saying this. So is he, is he stupid? Is he socialism? Socialism hasn't been tried properly. Is he just power hungry? I don't understand why somebody doesn't spend the time doing the research.

[A]

Yeah, I think there are a couple of problems there. One is it's simply not his worldview. His worldview is that markets are bad, that landlords are evil, that bosses are greedy. And that is a very much rooted in his sort of class war view of the world, that, you know, the vast majority of people in his viewers are being ripped off by a tiny minority. That, that's just his. His worldview.

[B]

But hold on, there's a. If you let that play out, there's an end state to that which is catastrophic.

[A]

Well, that's where the second point comes through, that there's always a few very clever people who are able to come up with reasons why this time it's different. So you can present them with 100 case studies of how rent controls have backfired and they will say something. Ah, but we've learned our lessons from that. And this new scheme is better because of xyz. So you find a handful of clever people and actually Zach Polanski has found a number of people who appear to be credible, who, you know, are quite good at talking about these things.

[B]

Gary Economics.

[A]

Yeah, Gary Stevenson is one. Various others I can mention as well, who, who, who have a sort of veneer of intellectual responsibility, respectability and appear to know what they're talking about because they allegedly were top traders in the city or whatever else it might be. So it's that combination of having a sort of worldview where the policies are promoting a right and also a handful of people are willing to egg him on and provide him with the sort of intellectual ballast that he thinks he needs.

[B]

Do we need you in your kitchen with a beanie on? Given economics lessons?

[A]

Yeah, I'm very tempted to do that sometimes it's hard though, because I just don't have such an attractive backstory. I can't claim half the things that Gary Stevenson claims to have done.

[B]

Well, you can. He's done it.

[A]

Yeah, that's true. It's not, I mean, my style is try and change things in, in back rooms. And I, I do do that. I, I do advise, you know, politicians who. So they do listen to my size. Yes. Yeah, some do.

[B]

Some do.

[A]

Yeah.

[B]

This, let me ask you, what do you make of what Malay is doing in Argentina and how much of the good news is real? Are you into the weeds of that?

[A]

Not into the weeds as much as I would like to be, but I think that is a very positive example to bring to the surface. Not least because when he was elected, I think a good 100 plus of the usual suspects, economists in particular wrote the usual collective letter saying this is all going to go horribly wrong and the result will be a surge in poverty and a collapse in the economy and everything. Of course, pretty much the opposite has, has happened. And I remember seeing him do a number of, well, podcasts and other sorts of interviews where he's talked very eloquently about really basic economic concepts that we don't hear enough about. So the Laffer Curve, for example, the idea that if you raise taxes beyond a certain level you actually end up with less revenue because of the behavioral effects that respond to that. He's argued passionately against nationalization because of the way that it damages competition and harms consumers, because you get businesses run very, very inefficiently. So there are lots of examples where he's gone back to the first principles and to your point, that was an example of an economy that was absolute crisis which needed to be turned around. So maybe sort of Argentina style crisis followed by melee would be a good outcome for the uk.

[B]

Do we have a melee in the uk?

[A]

I not sure we do. Hopefully we won't do somebody quite as radical. I'm quite hopeful that Kevin Badenoch is moving in the right direction. I think she started to gain the gain public trust and she's one of the most popular, maybe I should say least unpopular politicians in, in the country. So she's herself been seen as doing a good job. She's also playing a long game, which I think is really important. So rather than rushing out with loads of short term policy announcements that fall apart very quickly, as both Reform and Greens have done, she's thinking about the bigger issues like net zero, like the approach to the financial services sector, like the appropriate size of the state and the level of public spending and tax. Not all of those plans have, have come forward yet, but we're still potentially a couple of years away from the election, so we'll see.

[B]

What is the appropriate size of a state?

[A]

Oh, an awful lot smaller. You can measure the state in different ways. I mean, state five, it's about 40% of national income, should look at taxing or spending. I think it could be maybe half that, maybe 20%. There are certain things that the state has to do, even I say this as a free market economy, so certain things that the markets will always under provide. So there's what economists call public goods, which in practice means things like national defense, criminal justice system, environmental protections, those sorts of things. You also need a basic welfare safety net which the government recently has to provide, and also the basic levels of healthcare and so on. Just again, a safety net. But if you tot up the costs of those, it's hard to get much above that sort of 20% of GDP figure. What's happened instead, unfortunately, over the last 10, 20, 30 years, is the government has spent enormous amount of resources on things that actually it shouldn't necessarily be doing itself. So we've got the hugely bloated National Health Service, which provides one of the worst standards of care anywhere in the, in the developed world.

[B]

Why don't people want to hear that, though?

[A]

Well, that's a debate that is starting to shift, interestingly.

[B]

But if you have that conversation, if any politician has that conversation, this like, oh, they just want to sell off the NHS to their millionaire friends. Yeah, it's like a sacred term.

[A]

I agree. I mean, it is a difficult debate because anytime you talk about reform with the nhs, and in particular more private sector involvement, people immediately point to the example of the US where the healthcare system is awful. Yeah, it is awful, but that is not the model we should be looking for. They're much more successful mixed public private models in Europe and in Asia that we would be copying. And it's revealing, of course, that nobody has chosen to copy the nhs. Despite everybody saying the NHS is the best healthcare system in the world. Nobody has gone close to replicating that model.

[B]

But I think I steal that from you.

[A]

Yeah, but I think, I think the argument is shifting because you are seeing this sort of the split in the polls. On the one hand, everybody's saying the NHS is wonderful, but at the same time, many of the same people saying, actually my granny had to wait six months to get her hip Fixed or whatever. They realize that in practice it is bad. We've seen also recently with the resident doctors or junior doctors strikes as that big problems in the nhs because actually people got a lot treated a lot better when the resident doctors weren't working because the consultants took over. They're more experienced, just got the job done more quick, more quickly.

[B]

I also think there's been like a free market response. I don't know if you have this near where you live, but on our high street in Bedford, we have a place called the Millick Centre. It's private doctors. And I remember trying to get a doctor's appointment three weeks. This was a few years ago. Somebody said to me, have you been to the medicine? I was like, no, it's like 50 pound for an appointment.

[A]

Yeah.

[B]

And so I phoned them up, they said, yeah, we can see you in phone in the morning, we see you at 2:00'. Clock. I was like, yeah, great, yeah, paid my 50 pound when you want to have my appointment. And I've never been back to the doctor since because I do. I go five times a year, four times a year, my kids go. Partner goes. It's very quick. It's. It's additional services. Blood test. Yeah, we do your blood test now, the results in two days.

[A]

Yeah.

[B]

Gives us. Cool. Oh, yeah. And you're getting a proper. You're getting a service, like getting your car serviced, like any kind of other service you pay for. And, and I've told people and they've told people and everyone's using this place now. And I think in doing that, people have realized, oh, I get this great service here which I pay for and I get this terrible service here that's full of drunks and.

[A]

Yeah.

[B]

And queues that I don't pay for on. The staff are stressed. Maybe there's something going on here.

[A]

Yeah, I mean, I think there are basically three fundamental problems with the nhs. One is the funding, so it's overly dependent on the treasury and the government of the day. So funding is not reliable. The second point is the lack of competition, which is holding back innovation. And then the third factor is it's very heavily unionized and again, doctors are very resistant to. To change. So there are plenty of things that could be done in the NHS by people who are not fully qualified doctors and you probably get a better service, but doctors resist that. What's interesting, though, is that there are some parts of the NHS that are now starting to work pretty well. So to your example, where there are two GP surgeries that I could be signed up to. I'm lucky enough that I'm signed up to the really good one and I can order prescriptions through the NHS app very quickly. I can get things done pretty much within 24 hours, so that works. But it's very hard to switch from one GP surgery to another. So competition has broken down more generally. We talk about this being a National health Service, but astonishingly, loads of things, you'd expect a big bureaucracy to be good at that. In fact, it isn't. So, for example, GPs don't share medical records with hospitals. I have a relative who was being treated by two separate hospitals for two separate conditions and they just weren't talking to each other. Which you would think would be a benefit of a National health service is that they would be talking to each

[B]

other, but you would require a system to be built and funded that has to go through a strange procurement process that perhaps spends tens of millions before a single line of code is written. Yeah, you know, it would be the NHS version of HS2.

[A]

That's the problem. I mean, the NHS, of course, would only want to have one system as well, for which it would massively overpay. And we saw the problems with that with the Post Office scandal. Whereas if you've got competing private companies, they would find different solutions and the best one would win. So the lack of a competition there is a fundamental problem. Plus the government is just terrible at it. If we take things like digital ID cards, I'm not massively fundamentally opposed to the principle of a digital ID card, but the government will mess it up in some way. I'm not sure exactly how, but they will.

[B]

Well, they'll take forever to do. Won't work to begin with.

[A]

And it will leak somewhere.

[B]

It will leak somewhere and all your data will be out there and then you will hear about some weird example where your IDs been used for something. I'm massively against digital IDs. I don't want to go anywhere near them. So what does give you hope within politics? Well, let's talk about Makerfield, because I think it's an interesting one. Oh, it's fascinating. I'm so intrigued. There's. There's so many mini battles. Yeah, I'm intrigued. Part of me wants to see Andy Burnham win. Not because I particularly rate him. I think spending 135 million pounds for two pound bus fares isn't the one you think is, especially if it's 200 million a year afterwards. But I'm intrigued for him to come in and see which path he takes, which I think would be more left wing and more redistribution, which would be more failure. And so, you know, let's accelerate this. But I'm interested in the battle between them and reform will do. But I'm also really intrigued. This opening kind of battle lines between reform and Restore, it's all in different directions.

[A]

It's extraordinary, isn't it? Trying to explain it to somebody who's arrived from Mars or the United States or wherever would be very, very difficult. How has this position arisen?

[B]

Well, I think. Sorry to interrupt. I think it's that. I think these battles as the one we had up in Manchester recently is. I think it's the country's trying to figure out what it wants to be.

[A]

Yeah, yeah. Well, first of all, if we look at Makerfield itself, I think Burnham will probably win it purely because of his personal vote. I think he's the only nationally recognized politician who actually has a positive favorability rating and he is a local lad, so he's not being parachuted in. So I think his personal vote helps. I think there's a danger that the Reform candidate, the. The plumber, some of his personal vote is dissipating because of some unfortunate things he said on, on social media. So I think if it's primarily a battle between personalities, then, then Andy Burnham, Andy Burnham wins, but that's not. Not certain. And Andy Burnham has already made some big missteps. I think it's no secret he's relatively enthusiastic about, you know, joining or rejoining the European Union or at least aligning more closely, which isn't going to go down well in a largely reform voting area like Makerfield. I think also he's been sort of blowing in the wind a bit too much. He's already done, I think, half a dozen U turns over the last week or so.

[B]

It's typical for a Labour guy, right?

[A]

Yeah, but it's not. I mean, if you're promising change, then you need to have a stronger vision of what that change is going to be. And I think all he's really got at the moment is I'm not Keir

[B]

Starmer, I'm Andy Burnham, Mayor of Manchester.

[A]

Yeah, I mean, you touched on this as well. I mean, Manchester is not an obviously big success story as he likes to claim. So some parts of inner Manchester have done very well and the wealthy people around that area have benefited, but it hasn't really rippled out. A lot of it, of course, is dependent on.

[B]

It's trickled down.

[A]

Yeah, exactly. Central government, finance as well. So it's relatively easy to run a city like Manchester. That has lots of natural advantages. Anyway, whether you can translate that into the country as old. I also, and this is a more personal judgment, I have recently heard him speak, which I hadn't done before. Not terribly impressive.

[B]

It's like a history teacher to me. Yeah.

[A]

I mean, so somebody's supposed to be charismatic.

[B]

Yeah.

[A]

So I think his. His big appeal is he's not Keir Starmer. And that. That's unfortunate. That doesn't really, you know, replacing Starmer with Burnham doesn't really change anything in the. In the rest of the economy. It's still. The economy is still a mess. Does Burnham have any better answers? I think the answer to that is no. I mean, Starmer's already pretty left wing in terms of what he's done, and you just get more of the same under Burnham. So it's a tricky one. There are some alternative scenarios, though, that I think are really interesting. One is that if reform does win, then it wouldn't surprise me, actually. If Starmer stays the course, it clings on. He clearly thinks he's got a. A mandate to govern for five years, come what may. If his most credible candidate, a replacement, is. Is Burnham, and Burnham can't beat reform, then maybe Starmer stays on.

[B]

What is. Sorry, what is the path to a leadership election? A challenge. What. I don't understand the process. If Burnham wins, can you. How does it actually become a thing?

[A]

Yeah, well, basically, somebody has to get 20% of the current MPs to call for an election and nominate them to be the. To be the candidate within the Labour Party. Within Labour Party. So if I'm A correct, that's 82.

[B]

Is that their own rules or is that.

[A]

That's their. That's their own rules. So the key point here is that we're talking about who is going to be the leader of the Labour Party. In principle, the leader of the Labour Party doesn't have to be Prime Minister, but in practice, of course, if you're leading the Labour Party, you would be Prime Minister as well. So talking here about the leadership rules, so the way that this would work is that, you know, somebody would say, let's have a leadership contest. Somebody would get 82 people to nominate them and there'd be a contest then in which Starmer would automatically participate. If you wanted to, you wouldn't have to get 82 MP. Well, I think he. Again, I think he probably would. I think there are enough people who are more scared about the alternatives. That they'd stick with him. And interestingly, there are some people in the financial markets who would prefer that as well. Every time there have been concerns that either Starmer or Rachel Reeves might. Might go, the markets have reacted negatively.

[B]

Well, because they think it'll be more.

[A]

Because the alternative is worse. Yeah, that's the thing. So Rachel Reeves in particular has bought a little bit of credibility in the markets with what she's done on the amount of fiscal headroom. So she's built a bit of extra wriggle room into the budget. The markets haven't liked the way that she's done that because she's done it by raising taxes, not by controlling spending. But she's seen as committed to fiscal stability and the fiscal rules and so on in a way that other candidates, particularly Andy Burnham, maybe are not. So I think there are probably some people in the market, some people, maybe the Labour Party, who think better the devil, you know.

[B]

Yeah.

[A]

So the question then is, is his authority strengthened or weakened?

[B]

In this scenario, there could be momentum behind Burnham.

[A]

Yeah. On the other hand, if. If Keir Starmer sees off the threat from Andy Burnham and we're streeting and Angela Rayner and so on, he might get a bit of credit for sticking with it. But either way, the problem is that nothing changes in the economy. They still don't have a plan. So in a sense, whoever is the labor leader, the problems are still exactly the same. We're still facing the cost of living crisis. We're still facing all the problems, the labor market, housing market, the Indian market. And labor doesn't have a plan, whoever their leader is.

[B]

I also think it's going to be intriguing if, If Andy Burnham does win. And it's close, but it's close with RESTORE taking a chunk of the vote.

[A]

Yeah.

[B]

What that does, what that means for reform, what that means for momentum of Restore, what that means for the right over the next few years.

[A]

Well, right. There's a similar debate, of course, on the. On the left.

[B]

Yeah.

[A]

With all the talk of, I mean, the Greens, as I understand it, still have a candidate, but that candidate has been badly discredited.

[B]

Yeah. She was decolonized farms.

[A]

Yes. Yeah. So it's probably too late now for anybody to do a, you know, electoral pact, but it's possible that RESTORE will, at the final analysis, say, don't vote for us, vote reform. It's possible that the Greens. No, I don't think you want to. If I were. If I were Restore, then I'll be quite happy to get 8% of the vote, even if that means that labor win, because you've clearly put down a marker and that's good leverage for future elections. It's only, of course, one by election.

[B]

Yeah, of course.

[A]

Albeit a particularly important one. So if I were Restore, I'd probably play the long game and, and take those 8% of the vote and say, look, we, we have to be involved.

[B]

We had Rupert Lowen here last week.

[A]

Yeah.

[B]

Yeah. He was very interested in him. One of the things, I like that he said. He said he wants to take a chainsaw to the state in such a way he would make Melee blush. Yeah, well, I could. I'm listening again.

[A]

Again, I'd love to see the details of that, but that's, that's the right way of thinking about it. And actually he's probably more of a. A small, small state person than some of the people now running Reform, so. Yeah, maybe that could be incredible alternative.

[B]

Yeah, I think it's. I think it'll be interesting to see it play out. I almost think of it as a little bit of a clown show. I think the thing, one thing I would be worried about is Andy Burnham winning and then Phoenix. A good time to call an election early through some momentum. And I think it would be a mistake.

[A]

I. I think. I think it'd be incredibly unlikely that he would, he would do. I know people talk about no mandates. He wouldn't have a mandate. So maybe he felt it's the right time to call an election. And there is some opinion polling suggesting that, you know, a Labor led by Andy Burnham could actually beat reform. But why risk it? You. You've got a big majority already. I, I would be very surprised if they call an early election. And there's no precedent, of course, in recent times for it. Any, any number of changes of, of Prime Minister under the Tories and no general election. So he, he doesn't. There's no precedent that would force him to. To call an election.

[B]

It's. It's all very dysfunctional. What gives you hope, Julian? Should we finish on some positivity?

[A]

Yes, I, I mean, some, some positives. I'm not. I hinted earlier that I'm, I'm a fan of Cammy Badenot. I think the Conservative Party is moving in the right direction. I think that as the next election approaches, naturally both Greens and reform will dial back on some of their, Their dafter policies. So I think that would be a good thing. I think in many ways the fundamentals of the UK economy are pretty good. We're well placed to benefit from the AI revolution. Certainly compared to the rest of Europe, I think we've got a better chance of moving more towards the US economic model that's more successful rather than getting dragged back into Europe. But of course that depends on various other things happening. I am, you know, I'm a Brexit optimist, so I'm very concerned about the eu, UK reset in the direction of travel there. I think there are risks if we get dragged back into the overregulated EU model, but if that doesn't happen, then I think we could be, you know, an anchor of sanity, light touch, regulation, good business culture, outperform the rest of Europe, become a bit more like the US again.

[B]

Oh, fingers crossed. I hope, I hope you're right. Thanks for coming in, talking to me, Julian.

[A]

Thank you.

[B]

I have a bit more hope now, fingers crossed that things will turn out better. Like you, I'm a. I'm a free market guy and I hope we restore some sanity in this country. Thanks for coming in.

[A]

Okay, thank you.

[B]

Thank you to everyone for listening. We'll see you soon.