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- [00:01]
A
We can't go back and change history.
- [00:03]
B
The underdeveloped part of the EU single market is in services. It is also, by a wide margin, the biggest share of both the EU's economy and our economy. And if you are wanting to get the growth rate up in the uk, all of that, if you really want to achieve that, is another argument for trying to get back inside the eu. Right. But there is a massive pot of gold at the end of that particular rainbow. If you could get back inside and start playing a leading influential role in shaping the future of Europe's single market. Hello, and welcome to the Rest Is Money, with me, Robert Peston.
- [00:52]
A
And with me, Steph McGovern. And today we. We referenced this in the last podcast that Rachel Reeves was doing her Mays lecture. So this was at City University, wasn't it, where she was basically telling us about what her plans are with growth. You and I, Robert, have talked a lot about the fact that we haven't really had a growth plan. We have. There's been nothing to suggest they have any ideas when it comes to how they're going to grow the economy. So that is what we're going to talk about in this episode. There were three big areas she hit on, which was AI, our relationship with Europe and devolution. So we want to talk through them. Also coming up today, we're going to be taking a close a look at some of history's greatest economic shifts. This is in partnership with our sponsor, Hargreaves Lansdowne. But, Robert, first of all, give us your take on it from the top.
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B
Well, just two big things to start with and we're going to drill down. One is quite a lot of what she announced today is perfectly sensible, but, you know, frankly, all of it could have been announced a year and a half ago and started a year and a half ago. It's another manifestation of how much time they've wasted. And the second thing you know, I spent as, you know, spending a very unhealthy proportion of my life talking to people who work in tech, people who invest in tech, and they keep talking to me about how they are now taking. Have you come across this expression, the red pill? Do you know about the red pill?
- [02:16]
A
Yes, I do. The Manosphere. God.
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B
So. So. Well, so well, the red pill is, you know, from the Matrix, it's the pill which allows you to see the world as it is. The blue pill, you know, is the sort of comforting world of that's been manufactured by other people and. But the red pill is the truth. Right. And I keep being talked to people who say they've been red pilled by Claude's co worker launch plus the latest version of AI. And they all say, my God, on the basis of this, millions of jobs are being lost fast. And you know, this is a speech given by our chancellor talking about the potential of AI, where she doesn't even refer to any of the really big stuff that is happening in that world right now. And so one of the things that just makes me sort of uneasy about this speech and I felt uneasy about this, you know, you know, with a whole succession of governments. But this is certainly a manifesto. Government is so behind the curve in a. In a world that is moving so fast. And this is yet another speech. We'll get on to the detail of this towards the end of the podcast. But it is just how the government always pays. Catch up with the big trends that are reshaping our world. Not leading, but following and too far behind. But I wanted to start because one of your big passions, how we have not addressed the income and wealth inequalities between North Midlands and the very rich, London and South. This is a speech where she says one of her absolutely biggest growth planks of the three growth planks is to raise up living standards, increase investment in the north, devolve tax spending powers. So give us your take on whether what she's announced, do you think, makes you more confident that where you live and work in the Northeast, you know, things are going to really move forward in terms of growth and living standards.
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A
Yeah, so. So just to explain this, this is a plan which she says is going to be announced in this year's budget which will give regional leaders control of a share of some national taxes. Now, she hasn't said how that will be worked out, because one of my concerns would be if it's about the taxes raised nationally but from a particular area, like if we were going to use a proportion of income tax but the proportion is based on the income tax in that area, then that could be problematic given there's such a big difference between what, you know, people are paying an income tax in the north versus the south because they earn more money in the South, So that would be a concern for me.
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B
Spell out what you mean by that. What you're saying is if in Middlesbrough you only get the share of income taxes paid in Middlesbrough, whereas in, you know, Manchester or Birmingham, you get your share. Basically people's incomes in Manchester and Birmingham are higher and therefore it just reinforces inequalities if you. All you get is the tax that your local people pay. Is that. Is that what you're saying?
- [05:20]
A
That is what I'm saying. But let's assume. Because she hasn't said that, but let's assume it will be divided more equally than that. So it's not going to be about what is raised from an area, it's simply about dividing it where it's needed. Now, the interesting thing about this for me is I do think this is potentially a good idea because there is a serious problem with big projects being they happen a lot in the South. You and I have talked about the Oxford, Cambridge corridor and. Yes, or Kit will have national benefit in terms of supply chain. It's still very much money that is going to one particular area and I think it's hard to see how that will extend out other than in supply chain businesses. And still that will be weighted to the ones closest to the area. So, you know, and I'm already seeing on a daily basis, for example, where I am, I often take the view of where I live in the Northeast, where our mayor is. Our Northeast mayor is Kim McGuinness and she's been out several times in the last few months just talking about the money coming into the area. Even today, she's just announced another 120 million pounds is being being allocated from the treasury to speed up stalled city regeneration plans. I don't know what any of this means yet, but she's saying it's going to mean better housing and better infrastructure and all of these things, and that is going to be really tangible to people. So if we see in our local area money raised nationally, but being put into projects that have a really tangible, you know, outcome, then I think that will make a difference to how people feel about where they live and feel about what is, what is there, and hopefully help with job opportunities and everything else.
- [07:08]
B
And we were telling me earlier what you were telling me what this fund is called. Tell me what it's remind.
- [07:12]
A
Yeah.
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B
Or tell our viewers what it's got, because it's got the. It's got the most bizarre name.
- [07:15]
A
This is called the Treasury City Densification Fund, which is such a weird name, isn't it? Densification.
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B
You know, as I said, when you said densification to me, I just thought, why would you be paying money to make people thicker and denser? But that can't be what the money's for.
- [07:31]
A
No, I think it's about regenerating city areas so that they will become more dense. 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?
- [07:57]
B
Yeah, look, early on, the most important thing is to start building a customer base. Until you've got customers, you have no idea whether the products and services you're offering are going to be the ones that people want. So a lot of people spend far too much time building out pages and pages of business plans, thinking too hard about what they're going to do rather than just doing it.
- [08:17]
A
What surprised you most when you were launching Kraken?
- [08:20]
B
You know, the great fun of launching Kraken was it was the engine that powered Octopus to grow. You know, 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 competitive competitors will work with you if it's in their interests.
- [08:40]
A
Cheers, Greg. Right, well, you'll be hearing more from Greg throughout the year. But now let's get on with this episode.
- [08:49]
B
This podcast is brought to you by Carvana. Selling your car shouldn't feel like a second job. It should feel easy. With Carvana it is. Just visit Carvana.com, enter your license plate or VIN, answer a few quick questions and get an offer in minutes. Like what you see. We'll pick it up right from your door and hand you your check. No haggling, no hassle, no problem. Car selling made easy on Carvana. Pick up fees may apply. This episode is brought to you by White Claw Surge. Great podcast pick, friend. No surprises there. After all, you're all about finding the tastiest flavors out there, just like White Claw Surge. And with big, bold flavors to enjoy, like blood orange, BlackBerry, cranberry and more. It's time to go all in on taste. Unleash the flavor. Unleash White Claw Surge. Please drink responsibly. Hard Seltzer with flavors, 8% alcohol by volume. White Claw Seltzer works Chicago, Illinois. So on my wall is just because it's, you know, it's on my wall because this is where all my family came from. There's a map of the extraordinary density of Jewish immigrants in the East End of London at the turn of the century. And it's absolutely terrifying how many Jews lived in A tiny space.
- [10:05]
A
Yeah.
- [10:05]
B
And so. And that's all the densification makes me think about. It's grabbing too many people into a small area. But that can't be what they're talking about.
- [10:12]
A
It is about. It is about building in those areas. So, again, I know I always talk about the Northeast, but it's the easiest place for me to give examples of. But that there have been quite a few delays to City Center House building. So there's the stalled development of something called the new Newcastle Helix site, which is one where I was planning to open the fitness business, but haven't been able to because it's so far behind on everything. And then there's other parts of Newcastle again, where they've got plans for regeneration, but they've just been massively stalled. So what the mayor, Kim McGinnis, is saying is that's what it's going to go into, is just getting those moving. And. And if you look at how the treasury have described it, they said they want to bulldoze through the roadblocks or, you know, when they came into power, they talked about planning, didn't they? And. And reducing the planning restrictions and hopefully getting more movement. And. And this is an example of that, I think, in terms of what they want to happen. So, for me, I think that what Rachel Reeves has said about devolution, I think is really important. But like you said right at the start, it feels very, very slow. You could have announced this two years, well, you know, a year and a half ago, whenever they came in.
- [11:27]
B
And all she's done now is a statement of intent rather than giving us the detail. But I want to ask you, given that, you know, she has said, yes, more money to mayors. Right. But she hasn't actually specified what they'll be able to spend that money on. If you were advising her about what additional powers to give to mayors so that they can spend this money in a way that has the optimal impact on. On growth in the region, on incomes in the region. What would you recommend that she allows? Andy Burnham In Manchester, Kim McGinnis, where you live, and the various other mayors. What should they be able to spend money on that they can't now?
- [12:15]
A
On what they want to spend it on and what they've worked out is the need in the area. Yes, because I don't. I can't answer for Manchester. I mean, I used to live there for quite a while, but I can't tell you now what the issues are there. I can talk about what's going on here and I think, but that, you know, the whole point of having a mayor is that constantly talking to people in the across all organizations to find out where the need is, what is our local economy needs, what are our jobs needs, what are our, where are our pressure points in terms of social services and things like that? I can't answer that question because I'm not talking to these. I mean, I have an overview from work I do with a food bank and having a business here and stuff like that. But that's why I think, you know, it's good to let those. As long as they're held to account. You've got to hold people like Kim McGinnis to cut to account. Well, I know, and actually she'd be well up for being held to account. She wants to make a difference to this area. And so I think, you know, Andy Burnham knows that area, the Northwest, better than most. So I think they should be, with a proper advice, be able to decide themselves what they do with that money, and then we all hold them to account to make sure they do it well enough.
- [13:24]
B
So you would be in favor of what you might call variable geometry. So you would say what in one area, you know, if Andy Burnham wants to have way more money for skills, he should have that. And if Kim McGuinness thinks it's more about infrastructure, social housing, then she should
- [13:42]
A
have that, but with a view to growth. So I think growth has got to be the aim. So it can't be just, you know, we've talked about this before, haven't we, with Marianne Matsukuto about how it's really important, what the aim is. And the aim of this is, for me, it's about economic prosperity and growth, and that has to be the target. So if to get that social housing is one of the biggest things you need to solve, then. Then you do that. But it can't be just solving it for solving its sake. It's got to be with a target of driving economic growth, because then everything else will follow from that. It's a bit like when we talk about diversity in business. Often social mobility gets, you know, discussed as a last thing. It's normally about ethnic and gender and sexual orientation or whatever else, but actually, if you focus on social mobility, you get a lot of that diversity anywhere by by proxy, because often you'll find those minorities are the ones who are least socially mobile. So for me, it's about what the. The aim should be economic prosperity for the area for growth and then work it out based on that.
- [14:57]
B
I completely agree with you, one of my long running critiques, as you know of this government has been it took the talk of growth and then did so many, took so many actions that were anti growth. And so I completely agree with you that this is a moment where anything that is going to add grit in the wheel is going to slow growth down, has to be avoided and everything should be concentrated on or resources should be deployed almost exclusively on. Those initiatives that are going to get the growth rate up, are going to create really decent paying jobs. Because growth for growth's sake isn't the be all and end all. It's actually got to be about raising people's living standards. And so it has to be the kind of growth that is diffused throughout the maximum number of people getting decent, well paid employment. And so one of the things that you know, Mariana would always say is, you know, actually do refine what it is by your mission in a way that is a practical goal. I mean many people would say, you know, you need growth to do almost anything. So let's, let's, let's, you know, obviously we've got to get the growth rate up, but then let's say what are the outcomes that we need that growth can deliver. To get back to your point though, it is quite interesting to me. So housing definitely improved housing is definitely an engine of growth, no question about it. Because apart from anything else, it will mean that in an area which is losing highly skilled and talented people because they can't get anywhere decent to live, they're more likely to stay in, in an area skills plainly very correlated with improved growth. I mean, the interesting thing for me is should you devolve more control over health budgets? Because there will be parts of the country where there are way too many people who've signed off work for all sorts of reasons to do with both mental and physical ill health. Again, you could argue, even though there is some within the extraordinarily huge National Health Service with its massive employment, some devolution of decision making, you could argue there's nowhere near enough devolution of decision making when it comes to health provision, health resources. There is a big question about how radical you want to go when it, when it comes to devolving powers to these locally elected mayors.
- [17:52]
A
Yeah, there is. And you know, it's interesting the point you make about healthcare because I was thinking in my head there, what do I think on this? It should that be devolved. But you're seeing really interesting things going on with healthcare in some particular trusts, like for example I'm good friends with the author Ann Cleaves, and she's been heavily involved in this reading for wellness. So people being prescribed reading where people will read to them and there'll be community groups where people will be prescribed to go and have books read to them. Which sounds totally hippie. I totally get that people, our health service shouldn't be doing that, but what we're. You're seeing results where people who are suffering from anxiety, you know, issues around loneliness and just, you know, which is impacting their physical health issues. It's helping on things like that. And so I wonder if, again, if there's some element of. Of regional devolution to health stuff you can do more of that and trial stuff, you know, like where we are, we've got an amazing coastline, so maybe think that could be used more. Whereas you're not going to get that in the center of London, but you've got lots of other resources in the center of London that would be great in other ways to help with healthcare. I don't know, because it all sounds a bit wacky, doesn't it, when you start talking about wellness prescriptions. And I know it's been in the news a bit this week as well about all that, but I don't think.
- [19:16]
B
I don't think it sounds. I don't think it sounds wacky. I mean, it's. It. I mean, you know, there's an enormous amount of science behind, you know, what kind of therapies work. So. But, but. And I think the point that we're making is simply if you want to really regenerate and get optimism and hope going in an area, you need the big decisions by people who are not sitting in Westminster, but who live and work locally and know their communities best and can respond to the, you know, the, the revealed needs of the community.
- [19:52]
A
Yeah. Because I often say I would love the kind of politicians in Westminster that are there all the time to just sit on a bus in Newcastle and see what life is really like for lots of people. And that's what obviously regional mayors and, and devolution is all about, is they know what life's like on a bus in a remote part of Northumberland, through the city center, what the challenges are for the people who are sitting on it. That's where I learn the most about what's going on in society. Sitting on the metro Newcastle and you see some of the biggest, as you pass through the different areas which are some more deprived than others, you get a real sense of what the issues are for people. And that, I guess that's what comes from, hopefully, devolution, is people understanding more about those areas needs.
- [20:37]
B
So what's interesting to me is that in the second big area, which she is counting on to generate growth, she's actually going. I mean, she's giving away potentially powers again from Westminster, but rather than devolving it down to a smaller area, you know, like Greater Manchester or the Northeast, she's actually now saying we should allow more decision making again by Brussels. Because her second big area, which she's talking about in terms of generating growth, is to improve access for British exporters to Europe's single market. And probably the most politically controversial thing that her May's lecture says is that she wants us to go back to this is one of those horrible phrases, to dynamic rules alignment with the European Union's single market. And what that means is that if you are an exporter. And the example that she has historically used in recent. Well, the example she's used in recent weeks is the chemicals industry, Right? Because the chemicals industry has made it clear that they have no problem with their safety rules. The regulations they have to follow being set by the European Union rather than the British government. And the reason for that is because that would, they hope, allow them to buy and sell from the EU with far less friction, less paperwork, less bureaucracy, be faster. And the advantage for them would be the equivalent of a big tax cut. Right. Cause the burden on them, the administrative burden, would be significantly less. In general, she now thinks that for the prosperity of the uk, she is now prepared to allow dynamic rules alignment between Britain and the EU in pretty much every sector you can think of, other than those where she gets representations from people in that industry that it would be damaging for them. But if, you know, whether it's pharmaceuticals or chemicals or steel or whatever it turns out to be, they say to her, collectively, it would be much better for us if we follow Brussels rules. Her instincts will be henceforth to say, okay, we in Westminster will simply endorse what Brussels wants to do. We will no longer be a rule maker, to use that, you know, resonant phrase, Britain will be a rule taker. So that, that. And that is a big two fingers up, frankly, at those who promoted the Brexit case. Right. Because a lot of the Brexit case was Parliament has to be sovereign. We have to make our own rules affecting all industries. And so this really is a big two fingers up to Nigel Farage and to Kemi Badenoch. But the issue for me is twofold really, one is, yes, there's an argument for it, but it is a conditional argument because it will only work if the EU plays ball. If the EU says, right, on the basis that you are following rules for chemicals, we will now allow seamless single market access for chemicals, well, it's by no means certain that the EU will allow that. And secondly, the other point about it is this, what she really wants is the kind of a market we have, the kind of access British companies had when we were members of the single market. But all members of the single market have, for example, to pay money into the EU's budget. Right. There is nobody who gets this access for free. One of the things, again, that is absent from her speech today is would she be prepared to spend British taxpayers money on getting access? Now, truthfully, the cost benefit analysis of providing that kind of money to the EU may well make it a sensible thing to do. But again, just think back to that Brexit referendum. It was massively contentious. All that money that we pay over to Brussels, and now we would be paying money to Brussels for access to the European single market market, but no voice in the decision making process. In the old days when we were member of the eu, you paid money into the budget and you could help shape the rules. Now we're just saying we will take the rules and we're gonna have to pay money to take the rules. I mean, she cites the analysis that shows that as a result of Brexit being out of a single market, the country is 8% poorer than it would otherwise have been. Right, that's true. We are poorer for leaving the eu, but I'm not sure actually how the argument politically with the British people will play if we sort of, you know, essentially become supplicants to the EU on a permanent basis, pay money to them, but don't have a voice. You know, in a way, the logic of her position is we got to rejoin the eu, do right, we've got to get a voice back. But that's not what she's arguing. She's actually arguing for something that I think many, many people, even those who would, would want us to join the eu. I think many people would feel quite uncomfortable with. But. But what, what's your take on it?
- [26:48]
A
Yeah, so. So she's insistent, isn't she? We're not rejoining the single market, the customs union or the, the free, free movement of people. But is, is this better than nothing, though? I know you're saying we will, you know, it might not happen. Yeah, well, there's that because they might
- [27:04]
B
not agree, you might not let us.
- [27:06]
A
Yes. So, so let's, for argument's sake, say the EU do let us and we do have to contribute, but we don't have a voice, is that still better than where we are now? Yes. It's not as good as before Brexit as when we were part of the EU fully and we had a voice. But is this better than being totally left out because we can't go back and change history, but we may as well try and make the best of it we can now. And is that our only option?
- [27:33]
B
If an industry like chemicals says, actually this is collectively in our interest to do this, then I think there is an argument for British government trying to negotiate it on their behalf. And if there are other industries, you know, again, that are saying we've been really badly damaged by being outside of the single market, you know, if there's an absolutely overwhelming desire from that industry, then yeah, I do think it's, think it's a perfectly reasonable thing for the government to start negotiate, trying to negotiate better access on that rule taking basis, I suppose. My other concern, however, is this, and this is much more complicated. This is going to be much more complicated for the medium term. The underdeveloped part of the EU single market is in services. It is also, by a wide margin, the biggest share of both the EU's economy and our economy. Right. And if you are wanting to get the growth rate up in the uk, the thing you most want is way better access for our service industries to the eu. And you also want to want the EU single market to be completed. All of that, if you really want to achieve that is another argument for trying to get back inside.
- [28:57]
A
Yeah, yeah.
- [28:58]
B
Right. Because it's, you know, trying to get access for our service companies to a market in services which isn't even fully completed yet. Right. Is, is, is quite a tall order, but there is a massive pot of gold at the end of that particular rainbow. If you could get back inside and start playing a leading influential role in shaping the future of Europe's single market. And so if this is the start of a journey where essentially you get a government that becomes progressively more confident about making the case not only for being closer to Europe, but actually being part of the European project again, then actually at that point you do, in my view, get into what could be a very virtuous circle of investors being more confident in the UK's future interest rates coming down as a result of that increased confidence, because the price of Assets, including government bonds, would rise. You get it. Cost of borrowing for investment, cost of raising capital for investment would fall for businesses. So you get into that virtuous circle. But it requires, again, this, this being the beginning of a journey and a bit more confidence by her and the Prime Minister when it comes to making the case for Europe.
- [30:24]
A
Yeah, I've become a bit obsessed with how well Ireland's doing things and obviously they are still in the eu. And if you look at what has been happening there in terms of their, like, growth and everything, you know, last year it was something like 8%, which was a lot to do with exports and stuff, and it's not going to be as much as that this year. But they've got employment at record highs, unemployment at, you know, a law, they've got inflation below 2%, they've got a budget surplus, mainly because of the corporation tax receipts. And they're obviously relying on, you know, several multinational companies being headquartered there or having their European headquarters there. But, you know, that it just shows the difference of what we could have been if we'd stayed in the eu and then maybe, you know, reduced corporation tax like Ireland did and became this attractive place to, to do business and really said, yes, we are business friendly, instead of the kind of the way things have gone. I find that fascinating because I don't think Ireland's that dissimilar for us in terms of what they have to offer in terms of skills and everything else. But the big difference is they are part of the EU and we are not.
- [31:33]
B
So tons more for us to talk about when it comes to the Chancellor's growth plans. We'll do that after the break.
- [31:42]
A
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.
- [32:41]
B
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- [33:11]
A
Rest Is Money, a quick look back at some of the biggest economic changes of our time, brought to you by Hargreaves Lansdowne. And now for something slightly different. We've got a special segment for you looking at the defining point points in modern investing history. It's called the Moment that Changed Everything. It's brought to you by Hargreaves Lansdowne. So we're going to be, I guess, pulling out the magnifying glass and analyzing eras of great economic shift, looking at what was actually happening and why it all felt so uncertain. And so, Robert, I wanted to kick things off, I think, with one that ties us together, but also was such a defining moment for the world economy, which is is the 2008 credit crunch. And just to set the scene, obviously, this was huge for you, Robert. You know, you were on the telly every night. I was behind the scenes with you. But also for me personally, I was in my early 20s. I just bought my first house on a tracker mortgage. I just started investing in stocks and shares, ISAs, and, you know, things like the housing market that I thought were a totally solid bet all kind of of, you know, went a bit shaky, didn't they, because of this subprime mortgage problem and, you know, this global financial disaster triggered by the collapse of a huge housing bubble in the US So that, I mean, that for me felt like really uncertain. And then also for the global economy, this was such a big moment, wasn't it, this credit crunch.
- [34:40]
B
It was a absolutely defining moment. Quite a lot of the stagnation of living standards that we've suffered in this country begins really then we saw a collapse in investment in this period. Actually, some of it was government response. George Osborne's austerity, which again, had a negative impact on productivity and therefore the growth of living standards. So absolutely a defining moment. But this was one of those recoveries, whether we're talking about markets recovery or economic recovery, that was relatively slow. I mean, for me, the incident that certainly in recent history is absolutely screaming at me in my head was Covid because when the global economy was being shut down, when businesses couldn't trade, at that point, stock market absolutely collapsed. And over a period of really just a tiny number of weeks, the stock market lost, I think it was more than a third of its value. Right. That was a massive, massive fall. But then we saw in particular central banks creating the most astonishing amount of new money through quantitative easing. And we also saw obviously, governments in Britain and America supporting people who couldn't work with all sorts of enormously expensive payments furlough scheme in the uk. And that bounce back in the stock market was absolutely off the charts. Extraordinary. So again, within literally just a few months, share prices were above where they had been before COVID Within that recovery, we saw differentiations in terms of which shares recovered and which. So you'll remember everybody was watching Netflix because they couldn't leave the house, so shares, you know, so companies like Netflix went through the roof. Actually, if you were an airline or if you were a retailer, it in some cases took years for their share prices to recover because we couldn't go to the shops and we couldn't fly. So it wasn't that every share price recovered, but just compare it with the 1929 Wall street shock, right? That took like 25 years for those losses to be recovered.
- [37:03]
A
Yeah. And I think one of the other interesting things from it was just that point you've made about, you know, people weren't able to travel and weren't able to go to the shops and things. So we've seen now that, you know, that gave some people who could afford it the chance to pay off debts, reduce, you know, how much they'd been borrowing. And if you look now at household debt as a percentage of GDP, it's at its lowest since 2002. And that's partly thanks to what went on in Corvid and people having slightly more, I guess, disposable income and trying to sh up their. Their personal debt levels and similarly with businesses as well. So I think the thing that I kind of have learned from all of this is you. You have to hold your water, don't you? And, and whether that's with investments or whatever, but also just, just how you're feeling about the world, like, don't panic because things tend to be all right in the end, don't they? We always find a way through it. Just sometimes it takes a bit longer than others. But whatever's happening in the world, Hargreaves Lansdowne has been helping Britain and fest through it all confidently for 45 years. With the advent of AI and other emerging technologies, more change is coming. And Hargreaves Lansdowne has the tools and information to see support your Future Investments. Visit hl.co.uk to learn more about the UK's number one investment and savings platform. Investment returns vary. For claim verification, visit hl.co.uk platform
- [38:35]
B
so the other bit of it that was eye catching was Rachel Reeves recognition. Good, good, good, good. For the Chancellor, the that artificial intelligence is an important industrial revolution. We've been talking about this on this podcast for almost three years. Yeah, you know, I wrote a book about it three years ago about how it was changing everything. Again, one of the incredible frustrations, I mean, look, is how, again, far behind the curve this government is on this. But we should just say, you know, what are the things that she has announced? So she is holding an AI adoption summit where she's convening CEOs and tech firms to accelerate the diffusion of AI across the economy. You know, she is, she's announced a sovereign AI unit which launches next month, where they're allocating half a billion to sort of core, strategically important AI within the uk. I mean, I think she has recognized that when it comes to data centers and hyper computers, we are so far behind the curve that we've somewhat lost that, that race. And they certainly aren't allocating any kind of money on the scale that would require us to catch up on any of that. But broadly, she has recognized whether it's in AI itself that we have. Amazing. And we talk about this a lot on the podcast. Amazing. Young growing businesses that could become world leaders with the right sort of financial infrastructure and regulatory infrastructure. They're setting up an AI Economics institute.
- [40:16]
A
I want to ask about this.
- [40:17]
B
This, which is an institute which is going to quotes, keep an eye on the jobs market. And if AI is doing worrying things, the jobs market, it will presumably alert the Chancellor and maybe at that point they'll take some action. And they're also, they've also announced an AI skills boost campaign where they have an ambition to upskill with AI the skills of 10 million workers. But as I said, infuriated actually was genuinely what I felt when I was reading this is honestly, if you talk to anybody in the industry about this. Do you remember when we interviewed very recently, you know, faculty AIs, Mark Warner just sold out to Accenture. You know, he was talking then about the rapid growth. I mean, I have to say he is not quite as alarmist as many of the people I'm talking to at the moment are about the way in which recent AI developments are creating the potential very soon for the elimination of really enormous numbers of jobs in services like the law, like accounting. I mean, you know, the number of people now that I know who are using Claude, AI's co worker to literally simply make redundant so much of either people who work for them or who they hire as consultants in different kinds of ways, it is transforming so many basic research, not just research jobs, but also the thing about coworker is you can give it instructions to do things that people do for you. As you know, my mum died a few weeks ago and I'm the executor of her will and the lawyers that you know, would do all the probate work are you know, basically potentially charging really quite a lot of money. And having now talked to a couple of people, it is quite clear that, you know, if I invest a little bit of time in essentially training up or creating my own agents as it were, using Claude's co worker, a huge amount of what I would pay the lawyers to do can simply be eliminated. Right. This is just one little example. I was talking to an investor who invests in companies and he gets just in the last few weeks he has, has created agents that do all the due diligence, right? They, you know, they, you know, they go into the data rooms, they scrape all the data for him, they then provide a complete list of all the questions he needs to ask the company. At the end of the call, it then summarizes everything that he's learned and actually at the end of it also makes an investment recommendation about whether he should go ahead or not. And this is all on the basis of essentially creating these agents using co worker in just the last three weeks.
- [43:25]
A
Yeah, I've got, I mean, can I give you some of my examples? Recently my 80 year old neighbor is now using Claude because she was, she's struggling. My husband's got dementia and you know, there's a lot of admin tasks that are quite overwhelming now, like dealing with all the different carers coming into the house and even things like dealing with the cat. And so me and a couple of the other neighbors got her onto using AI and she started with basic stuff like, you know, getting whatever perplexity to explain things to her. But now she shouted across the door when I saw her yesterday. I've got a Claude in my life, Steph. I've got it booking the cattery for me and it's just lifted all these things I was worried About. So it's not even like it's a generational thing either. I think, you know, people are. And she. That she might have been someone who would have employed an assistant or whatever or, you know, found off, had to get other people to do things for her in order to be able to do it all. But she's now using in, you know, agentic AI to help her and.
- [44:23]
B
Because you can use natural. Because when you're coding now, you use natural language. Right. And that is the big breakthrough.
- [44:29]
A
Yes. Because now, you know, everyone's been saying, oh, what should your kids do at school? They should do coding. Well, that's becoming redundant because of AI as well. Like, I've got a friend who's got a business which is connected to property, and their agent, Agent Ki, is. They call it Theodore. And one day they came into the office and Theodore had said, said, hey, guys, I've, you know, we don't need to use Whisper anymore to, to transcribe our meetings. I've created one overnight while you were all out. So here's a. A free version of. I've coded this. It's a free version of transcribing all of our meetings. And then that saved them the subscription of that they did have for Whisper. So there's this really, you know, as you say, it's. It's making jobs that even in the last two, two or three or four years ago, we were talking about as being crucial. It's making them redundant as well. And that's not what's being considered in what Rachel Reeves is saying, I don't think. And it's so far behind where we should be.
- [45:26]
B
Well, it's not in the speech at all. And that's the point. The point is, if you were doing what you might call a cutting edge political speech at this stage, you would say, yes, all of this stuff will massively improve the productivity of service companies. And actually, if you look at the developments in robotics, I don't know if you saw. Did you see the Chinese New Year? It was sort of everywhere. The Chinese New Year. Dancing robots. Did you see. You see that? I didn't actually.
- [45:52]
A
I must look these up. Sorry.
- [45:55]
B
I'll send you the link. Honestly, again, it's not just in the intangible world of, you know, essentially, you know, one computer basically accessing your bank statements and downloading all, you know, all your balances and then making some calculations for you, which is obviously. But it's also increasingly in the physical world.
- [46:13]
A
Yeah, right.
- [46:14]
B
So, you know, the, the advances here are Enormous. Obviously, if you are an owner of a business, the returns that you can make from deploying this are off the charts huge. But the other side of it is you will be able to make these returns with very few human beings. Right. And at that point, the challenge for any government is those human beings who are no longer being used in these businesses. What are they doing right? What are they going to do with their lives? How are their lives going to be fulfilling and how are we going to make sure that the super, we've talked about this before. You know, when you've got these businesses deploying AI with no people and making these unbelievably enormous profits, they got to pay tax back to the, they've got to be pay tax back to the government so the government can still provide all these public services and actually provide income to people who've lost their jobs so that they can retrain. Right. So there's a, you know, those are the challenges for any government out of AI at the moment. And again, not even a whisper of it in any speech that any minister makes at the moment and not a whisper in this supposedly, you know, path breaking speech that the Chancellor has just given. You know, it is, you know, it drives me slightly mad as you can tell.
- [47:29]
A
We should probably wrap things up. I think it's a, can we conclude by saying it's a mixed bag though? Because you know, we're, we're quick to, you know, I guess I'm not criticizing,
- [47:39]
B
it's sort of better late than never. But it is late.
- [47:41]
A
Yeah. Yeah, fair enough. So maybe, you know, I'm sure there's lots of this we'll talk about again. But also we should point ahead to an interview we've got coming up with a guy called Alex Stephanie who, who was doing, who was using AI to help improve productivity in public services. So his business is used by around two thirds of, of councils to. His tech is used to help document really important notes and things and, and for case workers on the front line and people dealing with housing, unemployment and stuff like that. And it's, it's interesting to hear the battle he's had with the government on getting them to adopt his tech. So that's in the, the next episode of the Rest is Money. But that's it from us for now.
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