261. Dire straits: Should the Royal Navy end the Iran oil blockade?

Summary

The Rest Is Money: Episode 261

Dire straits: Should the Royal Navy end the Iran oil blockade?
March 16, 2026
Hosts: Robert Peston & Steph McGovern

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Episode Overview

This episode delves into the ongoing crisis around the Strait of Hormuz, examining its geopolitical and economic impacts—particularly on oil prices, cost of living, and UK government policy. With the oil price above $100/barrel and energy costs soaring, Robert and Steph analyze the UK’s response to U.S. requests for military aid, the risks of military involvement, and the domestic economic fallout. They scrutinize government options for supporting citizens and businesses, and preview the growth strategy soon to be outlined by Chancellor Rachel Reeves.

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Key Discussion Points & Insights

1. The Geopolitical Crisis in the Strait of Hormuz

• The third week of the Middle East crisis has led to the Iran blockade of the Strait of Hormuz, disrupting 25% of global seaborne oil ([01:29]).
• US Pressure: Donald Trump is requesting support—ships, drones, and elite forces—from allies like the UK to reopen the Strait.
  • “Trump has said explicitly that he wants China, Korea, Japan, France, Britain, all to give maritime support…” (Robert, [01:29])
  • US is less hurt by oil price rises due to energy independence, but Europe and Asia are feeling the shock.
• Russian Gains: Russia benefits from soaring prices and partial sanctions relief.
  • “The soaring oil and gas price is incredibly good for Putin... he’s softened sanctions on Russia... This is enormously beneficial to Russia.” (Robert, [03:42])

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2. Potential UK Involvement: Ships and Drones

• UK government not ruling out “sending British assets into the Strait of Hormuz,” but highly reluctant.
• Risk of military escalation—drones could be seen by Iran as direct involvement, leading to slippery slope ([10:48]).
• New Warfare Tech: Focus on unmanned surface and submarine drones used for mine detection, due to the presence of advanced “smart mines” deployed by Iran.
  • “These are drones that sit on the surface of the water... but the other thing that everybody’s terrified about is that Iran has what are known as smart mines...” (Robert, [07:37])
• Political Calculation: Starmer refuses to send warships but considers mine-hunting drones; however, even limited involvement raises escalation risk.
  • “If they do that, is that not us getting involved anyway?... doesn’t it feel like we would become part of it anyway?” (Steph, [10:50])
• US Pressure Tactics: Trump links support in the Strait to NATO and Ukraine, hinting at reduced US aid if Europe doesn’t comply.
  • “It’s not a million miles from blackmail. He’s basically saying, help me in the Straits of Hormuz, or we will scale back even more our support for Ukraine.” (Robert, [12:36])

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3. Economic Fallout in the UK: Cost of Living & Energy

• Wholesale gas prices up 60%; fertilizer +30%; heating oil doubled ([00:27], [16:18]).
• Heating oil market is unregulated—suppliers responding to market shock with cancellations and dramatic price hikes.
  • “People who’ve agreed prices... that order’s either been cancelled or they’ve been told... it’s now double.” (Steph, [16:18])
• Government Response Pending: Details still emerging for coming support packages, likely to be means-tested.
  • “All the signs are that they are going to sort of means test the support they give.” (Robert, [17:59])

Means-Testing Challenges

• Difficulty in fairly targeting aid: Farmers or others may appear solvent on paper, but fuel costs wipe out profits.

• “If the government… gives blanket support across the board for energy bills, frankly, in the current climate, that’s totally unaffordable.” (Robert, [19:09])

• Risks of negative market reaction (if aid too broad) vs. political backlash (if too narrow):

  “If it doesn’t give the money to everybody, there could be a political backlash because some very vulnerable people might end up not receiving it.”
  (Robert, [26:32])

• “The working poor... they literally cannot afford to pay all their bills.” (Steph, [26:16])

Past Precedents

• Reviews the £78–80bn cost of the previous Truss/Hunt blanket energy relief ([22:05]).
• Blanket support now is fiscally impossible; targeting aid is politically toxic and technically tricky.

Petrol and Transport Costs

• Price spikes at the pump now a key political and social issue, contributing to general discontent and perceptions of government inaction ([27:27]).

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4. Political & Domestic Challenges

• Tension between fiscal discipline (Rachel Reeves’ pledge) and urgent support needs.
• Warnings about possible panic buying and further political risks if energy or petrol shortages are feared ([29:04]).
• The dilemma:
  • Overly generous aid = market/lender panic.
  • Narrowly focused aid = missing many vulnerable groups, possible backbencher rebellion.

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5. Paths to Economic Recovery: Rachel Reeves’ Upcoming Growth Strategy

• The bigger economic question: shifting focus to growth as the only sustainable escape from repeated crisis-funding ([30:05]).

• Upcoming Mays Lecture will outline three pillars:

  1. Devolving Powers: More decision-making to leaders in UK’s major cities to tackle productivity/living standards gap.
  2. AI Diffusion: Rolling out artificial intelligence in public/private sectors.
  3. Improved EU Trade: Dynamic alignment with EU rules, particularly in chemicals, to ease trade costs ([32:02]).
     • Political controversy: Some rules set in Brussels for smoother UK-EU trade.

  “It’d be interesting to see whether she gives us more detail about which other sectors... she’s relaxed about having rules imposed on them by Brussels. But the prize from all of that is it becomes way cheaper for those important export industries to trade with the EU.”
  (Robert, [33:43])

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Notable Quotes & Memorable Moments

• On new warfare:

  “It’s the computer game version of warfare where you’re sitting somewhere else.”
  — Robert Peston ([07:37])

• On Trump’s tactics:

  “It’s not a million miles from blackmail.”
  — Robert Peston ([12:36])

• On cost-of-living realities:

  “People who I see at our local food bank all the time... literally cannot afford to pay all their bills.”
  — Steph McGovern ([26:16])

• On government dilemmas:

  “Giving it to everybody... lenders to the UK reacting very negatively because this would be, in their view, another example of how vulnerable the public finances are.”
  — Robert Peston ([26:32])

• On the growth plan:

  “Why do you need to do this to announce your growth plans in a lecture in a university? Like, it feels so, so out of date. Just get yourself on YouTube...”
  — Steph McGovern ([31:48])

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Important Segments & Timestamps

• Start of Middle East Crisis & Oil Price Impact — [00:27]
• Importance of the Strait of Hormuz, Trump's Demands — [01:29]
• Benefits to Russian Economy — [03:42]
• UK Government’s Position on Military Support — [05:48]
• Risk of Military Escalation with Drones — [10:34]
• Trump’s “Blackmail” with NATO/Ukraine Support — [12:36]
• Impact on UK Heating Oil Prices/Market Unregulation — [16:18]
• Means-Testing Aid Challenge — [17:59]
• Cost of Past Support Schemes, Fiscal Limits — [22:05]
• Political Risks and Social Impact of Petrol Price Rises — [27:27]
• Growth Plan Preview & Upcoming Mays Lecture — [30:05]
• Three pillars of economic strategy outlined — [32:02]

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Tone & Language

• Engaged, conversational, yet analytical—balancing Steph’s pragmatic, every-person perspective with Robert’s in-depth policy analysis.
• Peston’s urgency and expertise set against Steph’s on-the-ground, community-aware inquiries.
• Frequent use of analogies and accessible examples to demystify complex policy and market moves.

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Summary

This episode is an incisive exploration of the UK’s “dire straits”—caught between global geopolitical crises and domestic economic anxieties. As oil blockades squeeze supplies and energy prices soar, the UK government faces impossible choices: risk deeper military entanglement, blow a hole in public finances with blanket support, or risk leaving millions in the cold. The episode sets the stage for pivotal policy announcements, with listeners urged to watch the Chancellor’s forthcoming May’s Lecture for the next phase of Britain’s economic response.

Transcript

[Steph McGovern]

Starmer is refusing to send warships to help reopen the Strait of Hormuz, but ministers are considering sending these, like mine, hunting drones. So it's somebody manning them from somewhere else.

[Robert Peston]

It's the computer game version of Warfare. Hello, and welcome to the Rest Is Money, with me, Robert Peston.

[Steph McGovern]

And with me, Steph McGovern. So we are now in the third week of the Middle East Cris. The oil price is still over $100 a barrel. You know, wholesale gas prices are up 60% since this all started and lots of other important costs are going up too. You know, we've talked about fertiliser key for farming, that's up over 30%. So today we're going to look at what Starmer is going to need to do to try and control the rising cost of living here, which is inevitable from all of this and where the UK's plans for growth sit in this too. But first, Robert, let's start with this request now by Trump to get everyone on side to help get things moving in the Strait of Hormuz. You know, we've talked about how important this strait is for. It's a key bit of waterway for getting through lots of, you know, like the oil and gas and the fertilizer and everything else. This is a really important bit of waterway. And now Trump's asking for our help, isn't he, on getting movement? What's your take on it?

[Robert Peston]

So this is, I think, possibly the biggest sort of moment in terms of how the international community responds to Trump's and Israel's war since the war began. Trump has said explicitly that he wants China, Korea, Japan, France, Britain, all to give maritime support ships and drones as part of an American led effort to keep the Strait of Hormuz open, or to open it. I mean, actually, sort of strikingly, overnight, two Indian tankers did go through the Strait of Hormuz. The Iranians obviously have decided they want to keep India on side and so they let those two tankers through. But broadly, oil and gas is not flowing and it is a fifth of all water bound oil goes through the strait. Sorry, it's 25% actually of all water bound. It's a fifth of essentially of all global demand goes through the strait, which is why the price has gone up. Now, Trump's argument is this is doing more damage, this rise in the oil and gas price to Europe and Asia than it is to America, and therefore Europe and Asia should now come in and help his war effort, as it were. And he's right, it is doing more damage to the rest of the world for the very simple reason that America is self sufficient. Because of massive investment in fracking over the last 20 odd years, America is pretty much self sufficient in oil and gas. And actually, as a result of this soaring oil price, companies, American companies are sort of minting it.

[Steph McGovern]

Yeah, they are. There's a windfall for some of them,

[Robert Peston]

as is Trump's friend, Vladimir Putin. The Russian economy has been in terrible trouble in recent months, but the soaring oil and gas price is incredibly good for Putin. And we shouldn't forget Trump has also done this extraordinary thing, which is he's softened sanctions on Russia in an attempt to get a bit more oil and gas flowing. But again, this is enormously beneficial to, to, to Russia.

[Steph McGovern]

We're proud to say that the rest is money is powered by Octopus Energy. This year. Greg Jackson is back to answer another question. Now, this is something that we see a lot that I wanted to ask you about. When you're building a business from scratch, like what's the most important thing early on? And what do people get wrong?

[Greg Jackson]

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[Steph McGovern]

What surprised you most when you were launching Kraken?

[Greg Jackson]

You know, the great fun of launching Kraken was it was the engine that powered Octopus to grow. Ultimately, it's the biggest energy supplier in the UK with, I think, the best service, but we were able to license it to our rivals as well. So the interesting thing is the world is more complicated than you think and your competitors will work with you if it's in their interests.

[Steph McGovern]

Cheers, Greg. Right, well, you'll be hearing more from Greg throughout the year, but now let's get on with this episode.

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[Robert Peston]

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[Steph McGovern]

without people in them. So it's somebody manning them from somewhere else.

[Robert Peston]

It's the computer game version of warfare where you're sitting somewhere else. And what they're mostly used for is detecting things like mines, right? The sort of traditional sort of mines that sort of bob around. But the other thing that everybody's terrified about is that Iran has what are known as smart mines. And these sit and hide on the bottom of the Strait of Hormuz and are almost impossible to detect because they're often made of materials. The various detection equipment, sonar and the rest, find very hard to pick up. Now, some of these, it's possible that these submarine drones would be able to detect some of them and destroy them. But, you know, one of the reasons everybody is so frightened about, one of the reasons why, you know, those who own tankers are not sending them through at the moment, is there is just fear that, you know, Iran at some point will release one of these drones and it'll blow up a tanker with absolutely catastrophic consequences. And actually, if you send a destroyer to, to guide a tanker through the straits, again, there are significant risks from these mines to warships. Not that we've got many Britain's operational warships, but obviously, if you put together the resources of all the countries I've just talked about, we are talking about a formidable potential fleet. But the position of The British government is. We don't want to take the risk of doing that effectively until Iran has surrendered. But Trump is not saying that. Trump is saying, I want you there now. And the reality is, if we were to go there now, the risk then of being massively sucked into the war. I mean, if you just imagine a British ship or a tanker being destroyed on our watch, as it were, at that point, very difficult for the UK not to retaliate in an offensive way. Trump is also talking about wanting our highly trained various people, like the SAS or the Special Boat Service to be deployed there to, in a sense, go along the shoreline and knock out, in a kind of guerrilla warfare, those members of the Iranian Republican Guard who are causing trouble on the shore there. Again, but that is not something that Keir Starmer, I think, can contemplate, because, again, that would be drawing us into, you know, an offensive part of the war. So the fact that he's made this formal request feels to me like a massive moment.

[Steph McGovern]

As things stand, Starmer is refusing to send warships to help reopen the Strait of Hormuz. But they are. Am I right in saying, as you've said, ministers are considering sending these, like, mine hunting drones?

[Robert Peston]

Not immediately, but, yes, they are.

[Steph McGovern]

But if. If they do that, is that not us getting involved anyway? Like, how do you. Are the Iranians gonna go, oh, right, they didn't send warships. Oh, they sent a couple of jobs. That's all right. Like, doesn't it feel like we would become part of it anyway, and then that becomes a bigger problem for us.

[Robert Peston]

Well, that's why, for example, the Liberal Democrats said over the weekend, under no circumstances should we agree to the request from President Trump because of precisely that risk, that it's a slippery slope to being fully engaged in what currently looks to be a very, very messy war. Now, it is possible that the Iranian government will, at some point capitulate. Doesn't seem to be showing any signs of that at the moment. But the other problem, even if the Iranian government itself capitulated, one of the things that the intelligence sources say to me has happened is, broadly, the irgc, which is the sort of military body that basically controls the country, has now got this most devolved structure. And there is a view that the attacks that are happening now throughout the Middle east are not really controlled from the center, are essentially local units of the IRGC are just doing whatever they want to do. So you could certainly conceive of a scenario where even if Trump got his surrender, and that doesn't look anything doesn't look likely at the moment, but have got his surrender from the new Ayatollah Khamenei's son. The Straits could still be in jeopardy because the local branch, as it were, of the IRGC could still be releasing mines or could be releasing mines lines and firing drones at traffic going through the Strait of Hormuz. So it is really messy and really complicated. And added onto all of this is the stuff that Trump told the Financial Times overnight, that if China and Britain and France and the rest don't agree to his demand to help him, he says he's saying again that his support for NATO will come into question again. You know, he constantly says, I didn't have to help you in Ukraine. Some would say he's not helped nearly enough in Ukraine. You know, Ukraine, a, you know, country miles away from America. It's not really in America's strategic interest to be helping Ukraine, is what he's saying. And he is, he is, you know, it's not a million miles from blackmail. He's basically saying, help, help, help me in the Straits of Hormuz, or we will scale back even more our support for Ukraine. So, as I say, it's a very big and rather scary moment.

[Steph McGovern]

Loads more still to talk about on this program, but let's have a quick break. This episode is brought to you by Hargreaves Lansdowne. Now, if the last four decades have shown us anything, it's that change keeps coming. There have been so many huge economic events that have shaped our thinking today. Back in the 80s, we had Margaret Thatcher's deregulation of the stock market. Then there was the dot com bubble of the 90s, followed by the credit crunch of the noughties and the pandemic in the decade after that. Plus lots of other significant developments, too. For over 40 years, though, Hargreaves Lansdowne has helped Britain invest through it all confidently. Whatever is going on in the world, join over 2 million Brits using the UK's number one investment and savings platform. Learn more at hl.co.uk. investment returns vary. For claim verification, visit hl.co.uk platform

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[Steph McGovern]

we should probably talk about what that means for everything happening here in the UK in terms of the cost of living, because Starmer is going to be now looking at how to help people, particularly with energy bills. And one of the big problems that we both wanted to talk about today was how much the price of heat and oil's gone up. And you know why, why that's important because although heat and oil is, it only accounts for about 5% of households using it, we're still talking about about 1.7 million households. And it's crucial for those off grid rural areas, you know, not in Northern Ireland in particular. It's nearly two thirds of households use heating oil. And then you've got parts of Wales and Scottish Highlands, east of England, these rural areas, where it's absolutely vital for heating their homes, for running their farms and all sorts. And there's over 150,000 businesses who use it as well. And the price has doubled since this all started. And people are even seeing their orders cancelled as well. So people who've agreed prices on the heating oil and then that order's either been cancelled or they've been told, despite having agreed a price, that it's now double. And there's a big problem here because this is a market that doesn't fall under the off gem rules. It's not part of the energy price cap. It's essentially an unregulated market. And there is a real problem here that the Prime Minister, that Rachel Reeves, they're going to have to sort isn't there around heating oil because it is a worry for all those people who use it, how much it's gone up by.

[Robert Peston]

You know, it's important to point out that we haven't yet got all the detail about the price support scheme that the Prime Minister is about to announce to help people who are struggling to pay these bills. I mean, one of the things that he will inevitably talk about is this so called price gouging. He will say that when the suppliers massively put up prices in a way that's way beyond what's actually happened to the price they're paying for the oil, he will say that's unlawful and they'll take every measure they can to prevent that from happening. But even without unfair practices, prices, you know, has gone up very significantly. And as you say, you know, whether you're a farmer or whether you're somebody living in a rural area, you're really struggling with this. The part of it that I am most interested in is whether they will link the amount of help that the individual receives to their income. And all the signs are that they are going to sort of means test the support they give.

[Steph McGovern]

Oh, wow. Right.

[Robert Peston]

Which I think is. But I think that's really quite hard because you could be, for example, let's say you're, you know, let's just say you're a farmer. You know, technically on paper your income may look pretty good, but actually what's happening to the price of your fuel oil may wipe out, you know, any profit that you're making on your farm. So it's very, very difficult to actually, you know, make a calculation about who deserves the support and who doesn't. But the problem for them of not means testing is that creates a massive and very difficult precedent for them when it comes to the support that they almost certainly will have to give almost every household in the country in a few months if the oil and gas price doesn't fall back fairly rapidly. And I think, if I'm honest with you, given how messy this war is, I think it's highly unlikely that the oil and gas price is going to fall back rapidly. So I think it's highly likely that when the regulator sets the oil and gas price in three months time, that's going to go up very sharply. But if the government does what the previous government does, and I think you can remind us of what that support was, but if this government does what the previous government does and gives blanket support across the board for energy bills, frankly, in the current climate, that's totally unaffordable. You've been looking at the numbers again, haven't you? I mean, just tell us about the scale of what the last government did.

[Steph McGovern]

So this was when Truss and Jeremy Hunt, that came out with this energy price guarantee. So you're a member off the back of Russia invading Ukraine, energy costs absolutely rocketed. So in the autumn of 2022, there was this kind of massive intervention by our governments that capped the typical household energy bill. And it worked out at around two and a half grand annually. And it was originally meant to be for two years, although that changed as time went on. It got cut to six months and then it was. There was another extension and it got lifted to 3,000 annually. It's really important to point out it didn't mean that no one's bill went over three grand annually, it just meant that the typical bill was capped. It's similar to what we have with this energy price cap. Now, in the sense of it's not a cap of your bill, it's a limit on how much suppliers can charge

[Robert Peston]

people for a typical bill. Yes, but nobody is actually typical. Everybody either pays, buys more or less than that. But it's a framework for understanding the degree of support. And so what was the degree of support per household if they capped it at £3,000? What was the effective subsidy in all of that?

[Steph McGovern]

Yes, because the government committed to paying energy suppliers the difference between the actual cost of energy and the reduced capped price that consumers paid. So we're talking about this cap of a typical bill at around £2,500 annually. And if you were looking at actually what they should people should have been paying, it was about a thousand pounds more than that when this was first announced. So in the autumn of 2022, a few months after that into January again, it would have been even higher than that. So that's a subsidy being paid essentially by the government, and this is money that they would have to borrow. So, you know, we're talking something in the region of £78 billion in terms of. I mean, some people are putting the estimates even higher than that of how much it did actually cost, because you also had the energy bill support scheme. So this was this 400 pound discount given to all households with a domestic electricity connection. You'll remember we all got this paid in installments and it was a discount on your bill, and that ran from October 2022 to March 2023. So that was another thing that the government were paying for. All in all, this is really expensive. And Robert, what can our government now do? Because could they afford this?

[Robert Peston]

So the reason I was saying that how they designed this support scheme for fuel oil will, in people's minds, at least politically, create a precedent. I mean, when I talk to very senior people at the Treasury. They are very clear that they can't afford. The Government Chancellor feels she can't afford to simply follow the scheme that was originally designed by Liz Truss with Kwasi Kwateng, her Chancellor, and then was taken over when Truss and Kwateng were forced out by Jeremy Hunt. That was a blanket. Everybody effectively got a thousand pound subsidy more or less from the Government. The scale of the subsidy over time was absolutely enormous and as you say, 78 billion, 80 billion quids worth of, of subsidy, which right now, if they went down that track would be 78, 80 billion quids worth of additional borrowing for a government that has pledged to get the public finances under control. Britain's debts partly as a result of COVID and indeed the Ukraine energy price shock rising very significantly. If there is one pledge most closely associated with Rachel Reeves, is to get the public finances under control. So the Government is looking at doing something that Jeremy Hunt felt he couldn't do. So Jeremy Hunt, basically, it was an economic and political crisis and technically means testing it. Restricting the help only to those on lower incomes was just felt to be too complicated. And so they went with the simpler route of simply giving help to absolutely everybody because they just thought it would take too long to. And, and of course could create quite a lot of unfairness if you decide that only certain people on lower incomes get the help. So as I understand it, an enormous amount of work is going on at the treasury at the moment, so that this time round the help is restricted to those on lower incomes. But it isn't that easy. I mean, let's just say, for example, that they found a way of restricting the help to those who got universal credit, or if you're a pensioner, a pension credit, which is one definition of people on low incomes, as we know and as we saw from the massive for all when they withdrew universal entitlement to the winter fuel payment. You know, when you do, when you restrict support in that way, quite a lot of people who are on low incomes miss out.

[Steph McGovern]

The working poor. It's more often than not it's the working poor. They're the people who I see at like our local food bank all the time. It's people who the that society that government says have got an okay income but they literally cannot afford to pay all their bills.

[Robert Peston]

There are real difficulties with designing a scheme that doesn't go to everybody. And you know, this is going to be a really big, you know, really big challenge because on the one hand, giving it to Everybody we could see if they did give it to everybody. Lenders to the UK reacting very negatively because this would be, in their view, another example of how vulnerable the public finances are and how we have a government, despite its majority, that isn't able to control the growth of debt. So you could get a negative reaction from the markets where the government ends up having to pay more interest if it gives the money to everybody. But if it doesn't give the money to everybody, there could be a political backlash because some very vulnerable people might end up not receiving it. Lots of Labor MPs might rebel against the scheme designed in that way. So, you know, this is really difficult

[Steph McGovern]

for the government and we've seen, haven't we, when backbenchers are unhappy, the government often u turns on the decision they've made. And so that is another problem here, that uncertainty could be really crippling. I think just from another point as well in all of this is my, from years spent on the road, on budget day and things, things like that, going out into businesses and talking to them. You know, I was always reporting on BBC Breakfast for some type of business. One of the things that one of the most tangible things to people when it comes to how they feel is how much they're paying for energy, but also how much they're paying for fuel at the pumps. And that's the other big problem here as well, is how much petrol and diesel has gone up by. That's what all my mates are talking about now. Everyone's talking about, you know, around the WhatsApp chat group, the parents chat group is get your cars filled, girls. You know, the prices are going up. Those types of tangible things are really, really impact people in terms of how they're thinking of politics as well. And so that's the other big problem here is, is it's not just energy, it's the cost of fuel for your car too. And the government are in real danger of facing the, the wrath of everyone going, the government did nothing for us in terms of how am I going to get to work. It's cost me this much more now to get to work. And obviously there's all this problem around whether there's price gouging going on in with retailers of petrol and diesel as well. And that's another big problem. So it isn't just about energy, it's about how people are feeling about moving about the country as well and paying for fuel to get to work.

[Robert Peston]

And actually we've been quite lucky so far that there hasn't been you know, the kind of panic that seen queues at petrol stations because. Because, because, you know, even when it's not. I mean, if. Do you remember at the beginning of COVID when supermarkets ran out of loo paper? I mean, there was no national shortage of blue paper, but people just. Somehow a rumor went round, if you didn't get your loo paper, you won't be able to get it during lockdown. Or anyway, people, you know, literally, if you remember, supermarkets had to ration it. And. And we have seen essentially panic buying of petrol on a number of occasions over the last 20 years or so. And that's another really big political risk for the government because people hate it when there's essentially a fear about not being able to buy your petrol and fuel. The other thing which I think is sort of relevant to all of this, we had this fascinating chat with Mohamed El Erian.

[Steph McGovern]

Yeah.

[Robert Peston]

You know, just the other last episode. And, you know, Mohammed was saying that in his view, if you look at the medium term here, the most important thing that the Chancellor can do to restore, you know, get at least economic confidence up for, particularly for businesses, but also for households, is to persuade people she does have a credible growth plan. Right.

[Steph McGovern]

Yeah.

[Robert Peston]

Looking effectively beyond this crisis. And one of the things that is striking to me is certainly the penny appears to have dropped for the Chancellor because she is giving something called the Mays Lecture tomorrow.

[Steph McGovern]

What's that remind us?

[Robert Peston]

So the Mays Lecture is quite. It's a lecture that's given in London, typically given by chancellors, but also other big economic players, which sort of sets out big economic plans. And, you know, pretty much, I think every Chancellor in modern times has given a Mays Lecture. Rachel Reeves, interestingly, this is an interesting fact, is she is the only Chancellor to be giving. This is her second one. No Chancellor has given more than one Mays lecture, but tomorrow she is giving a second one. Apparently the treasury had to have quite interesting conversations, conversations with the organizers. It's given at City University in London. And the reason she wanted it is because she sort of thought nobody would take any notice of her growth plans if she announced them in the spring, in the spring statement that we just had. So she needed a separate occasion. So we're getting that tomorrow.

[Steph McGovern]

But the big thing for me, Robert, in this is why do you need to do this to announce your growth plans in a lecture in a university? Like, it feels so, so out of date. Just get yourself on YouTube or tick tock and do it there. That's where everyone is. This these days, aren't there?

[Robert Peston]

Yeah, well, we could say that I think the media plans of this government are somewhat in, in transition. And, and you're right, it is quite interesting the way that they're, they're still wedded to particular traditional ways of making announcements. I mean, I think it is going to be a worthwhile lecture. And as I, as I understand it, there are going to be sort of three pillars of her growth strategy. One is more powers, something we've talked about for those who run our second cities. We've talked a lot in this program about how productivity and living standards are so much lower in our big cities outside of London. The income and wealth gap between London and, you know, Liverpool, Manchester, Birmingham, Newcastle, your favorite, Middlesbrough, still far too big. And so one driver she hopes of growth will be giving more economic decision making power to those who run those places. The second element of all of this is helping the rollout of artificial intelligence services throughout the private and public sectors. AI diffusion. This is something again that we have recommended many times on this podcast. And then finally she will put some flesh on stuff we've been hearing from the government. Some would say this is a very belated realisation, but she wants to cut the cost of trade with the European Union. Single market for British exporters. We know, for example, that she thinks that if she adopts what's known as dynamic alignment with EU rules for the chemical sector, that will allow our big chemicals industry to have better exports to the eu. Politically, this is a little bit controversial in the sense that dynamic alignment means that rules the chemical industry in this country would follow would be set in Brussels. It'd be interesting to see whether she gives us more detail about which other sectors she thinks. Well, she's relaxed about having rules imposed on them by Brussels. But the prize from all of that is it becomes way cheaper for those important export industries to trade with the eu. And that she hopes drives growth. I suppose the thing is, it's pointless at this particular moment to make a judgment about this framework because we haven't got the detail. And so both you and I will be tuning into what she says in her May's lecture and we'll try and assess that, you know, whether it makes sense in our next podcast.

[Steph McGovern]

I will be watching it afterwards on YouTube.

[Robert Peston]

Because you're a thoroughly modern, you know, consumer. That's the point we would, we would, we would make.

[Steph McGovern]

But you're right though, we will do a full analysis of all of this in our next episode. But until then, yeah, that's it. For us for now. Bye. Bye.

[Robert Peston]

See you soon.

[Steph McGovern]

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