Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
We cannot tax and spend our way to growth, with Jon Moynihan
2.6k Plays20 days ago
The UK economy is structurally buggered (to use a technical term). Decades of economic mismanagement has caused growth to grind to a halt. To discuss if, and how, it can be turned around, Will chats to Jon Moynihan.
Jon has had an esteemed career in business and venture capital, including as CEO and Executive Chairman of PA Consulting Group, efforts which earned him a seat in the House of Lords. He has recently released a powerful two-volume manifesto for economic change, titled ‘Return to Growth: How to Fix the Economy'.
Follow Will Kingston and Fire at Will on social media here.
Read The Spectator Australia here.
Buy 'Return to Growth' here.
Recommended
Transcript
Introduction to 'Fire at Will' Podcast
00:00:21
Speaker
G'day and welcome to Fire at Will, a safe space for dangerous conversations. I'm Will Kingston. As an Australian living in London, there are ah moments when I feel like I've boarded the Titanic after it's hit the iceberg.
00:00:35
Speaker
There is a deep malaise in the country, a feeling of despair shared by people across the political spectrum.
The UK's Political and Economic Struggles
00:00:41
Speaker
The challenge the incumbent Labour government faces, in addition to its own limitations, is that a series of long-term systemic problems seem to be coming to a head at the same time.
00:00:53
Speaker
the cultural impacts of an uncontrolled mass migration policy, the absence of a clear post-Brexit plan, the reticence to defend British culture and history in the face of the illiberal progressivism of recent times. But the most immediate threat is that the economy is, well, structurally buggered, to use a technical term.
00:01:17
Speaker
Decades of economic mismanagement have left the country on the brink.
John Moynihan's Economic Insights
00:01:21
Speaker
To discuss if and how it can be turned around, I am delighted to be joined by John Moynihan. John has had an esteemed career in business and venture capital, including as CEO and Executive Chairman of PA Consulting Group, efforts which earned him a seat in the House of Lords.
00:01:39
Speaker
He has recently released a powerful two-volume manifesto for economic change titled Return to Growth, How to Fix the Economy. John, welcome to Fire at Will. Thank you very much, Will. Very delighted to be here. yeah It's great to have you on. A rule that we have on this podcast for anyone who has written a book, the first question, and this is indeed two books, ah the first question is, what's the book about?
00:02:03
Speaker
i I spent about 18 months researching the issue of why do some economies grow and others don't. and And you see it all over the world that there are plenty of economies who are just making their citizens richer and richer and being paid more for essentially the same work because they can afford to being able to give services to their citizens and so forth. And then there are plenty of economies around the world that at one point were growing very fast like we were.
00:02:33
Speaker
like the rest of the European Union was, and have suddenly
Policy Comparisons: Poland vs UK
00:02:37
Speaker
stopped. And there's this phenomenon that for the last 20 years, what you might call the social democracies, that is to say, economies, countries where they're spending large amounts of money as a government and they're taxing large amounts of money off of their citizens, they they have stopped growing.
00:02:57
Speaker
Almost all of the social social democracies in europe have have stopped growing although the ones in the east who are still smaller size government less taxes are growing very fast so that for example poland is predicted to have a higher gdp per capita.
00:03:14
Speaker
than we here in the UK by the end of this decade, which which is quite the success on their part and and good on them, but it's pretty disastrous for us. So so I started to say, and and nobody seemed to be saying, well, you know what do the studies say? what what What do the people in the universities say? And so I just went through all the studies.
00:03:37
Speaker
and came back with the story that it's really quite simple. If you've got a small government, low level of taxes, and light regulation, then you grow. That's volume one. Volume two is if you if you allow free markets, that is to say competition among the players, in the economic players in your country, if you allow free trade, that is to say,
00:03:59
Speaker
buying goods from other countries without tariffs and and conditions and selling goods without housing conditions to them, then then you grow faster. And you've got to have sound money. You've got to ensure that you don't spend a lot more than you tax. And that's volume two. So the volume one is the main one. and And it's just incontrovertible. Study after study after study. And then having figured out what what creates economic growth in a country. I set out a program as to how we could achieve that in the UK, how we could lower some of the more ridiculous government spends, how we could lower tax rates as we lower spend, and how we could get rid of some of the more ludicrous regulations that we suffer from in this country. And it's really not that hard as I show that if we could only revert to the early days of Tony Blair at the turn of the century, where
00:04:56
Speaker
The UK had an economy whose government spending was about a third of the economy, taxes were about a third of the economy, and regulation was quite light. If we could go back to then, then we would start growing fast
The UK's Economic Decline
00:05:10
Speaker
again. But meantime, we've had 20 years of very low growth.
00:05:16
Speaker
Particularly in GDP per capita, and obviously it's GDP per capita that determines how much an individual gets, how much you as a government can afford to spend per citizen, GDP per capita has actually declined relative to like 2007, I think.
00:05:32
Speaker
and and and will continue to decline even if the economy grows at half a percent a year, which people like the um IMF are forecasting, but but I don't think even that's going to happen. But even if it did, because our population, which you alluded to, is growing at three-quarters of a percent a year, our GDP per capita is going to go down. so But if we could just get back to Tony Blair land, and that's You know, that if we could go a lot further than that, and I show all the things that we could do to get there, then we would be growing again. In the meantime, America, which has its own problems, but has small government and relatively low taxes and very low regulation, particularly thanks to what Donald Trump did in his first ah presidency. ah America has grown so much during those years we haven't grown.
00:06:23
Speaker
that the average worker in America doing the same job as here is, on average, you know making about 50% more then than a Britain doing the same job, but sometimes 100% more or more double for doing the same job because the economy has grown and they become more productive and so forth. so they and and They continue to add jobs. We don't really continue to add jobs. in fact The job count went down dramatically in the past month or so, and that's all because they got economic growth. I also, by the way, spend quite a lot of time talking about why economic growth is morally imperative. There is this weird fringe group who talk about a no-growth world, and I show how cataclysmic that would be for the human race.
00:07:12
Speaker
Yeah, that was going to be my my next question because in recent times, and this is ah aligned in some ways with the environmental movement as well, there's this almost anti-industrial revolution, this movement that says that, well, we shouldn't be targeting growth.
00:07:27
Speaker
You do at the start, and I think this is probably a really good starting point for this discussion is why does growth matter? Why is it important? Why should we still be targeting growth? It's something which for some people will be instinctive, but for many others who have been brought up in the age of net zero, they will go they may not have that grounding.
00:07:45
Speaker
but I think what happens is that is people are presented with group growth as an abstract idea that doesn't particularly have much to them. It's just an abstract idea in terms of, oh, growth will consume all these resources and growth will destroy the world and things like that. They never think of it as relates to themselves as an individual.
The Importance of Economic Growth
00:08:07
Speaker
Now, everybody in in the world,
00:08:11
Speaker
Embarks on a journey born a baby and die whenever they die and during that journey. People have ambition and want to better themselves they get married they have children they want to buy a larger house or they want to buy any kind of house.
00:08:29
Speaker
They want to give their kids a Christmas present, whatever. Bit by bit, very few people, they're one or two admirable people, but I think they're a little bit nutty. People don't want to go around living in sack cloth, living in mud huts. They want to fulfill themselves. They want to aspire. They want to achieve. Only economic growth does that.
00:08:54
Speaker
Now, in addition, I think people tend to think, well, you know, I'll be all right. I'll get on. I will thrive. I will prosper. but But on average, there shouldn't be growth. So if you think that, then if you're a prospering mate, then somebody else is equal and opposite, doing worse each year that you do better.
00:09:16
Speaker
Because there if there's no growth, there's only one pie to hand out. And this is often the view of ah the left wing, is that there's only a given pie. It's not a bigger pie.
00:09:28
Speaker
And left-wing people will demand that the state does more and more for its citizenry. It has a better and better health service. you know as but as as As we get more and more complicated medicines, you have to spend more and more money, more and more procedures and so forth. But but they demand more, but but they also say we shouldn't grow. So ah is it's nonsensical. But all of that is in the shade compared with the three quarters of the world where people live in abject poverty compared to how we live. Same people, same intelligence, often the same education, same desires and aspirations have to live with shortened life spans, much greater disease, very little education, no infrastructure, no proper transportation, all of those things. And they're only going to get it if they can grow their economies dramatically.
00:10:26
Speaker
And some countries have figured out how to do that. So like Singapore, it was famously called a ah mosquito and malaria infested swamp in the late 1950s and now is one of the richest nations in the world. So some countries have figured out how to do it. Others haven't.
00:10:46
Speaker
and basically because they go for the socialist, big government, and obviously highly corrupt form of economy. But we have a moral imperative to help those three quarters of the world's citizens who are living in poverty to to live the lives that we live. And to do that, there will have to be an enormous amount of economic growth in this in this world. Well,
Political Trends and Economic Stagnation
00:11:11
Speaker
there's a third category there, isn't there? There are countries that have figured out how to grow, there are countries that haven't figured out how to grow, and there are countries that figured out how to grow and then have forgotten. And the UK is in that third category now, unfortunately.
00:11:23
Speaker
so Something has happened over the last 20 years to go back to your three rules for growth. Something has happened whereby the state, the government's got bigger, taxation has risen, and regulation has gotten more prohibitive or oppressive. Why? That's the question. what What are the forces that have led to those three things happening? Well, arguably, there's a sort of natural rhythm in politics, which is that left-wing governments come along and and in in your phrase, bugger up the economy. So the UK in 1945, most of Europe recovering from the Second World War went in for some fairly aggressive free market economics nineteen forty seven the so-called vitche funder in in Germany, where where private enterprise was allowed to let rip. Here in the UK,
00:12:17
Speaker
We had an extreme left-wing government. that nationalized huge swathes of the economy, it kept rationing going till 1954. So you had to you had to bring a coupon to the shop to get your food or your clothing, and you were only allowed so much of it. Now, that that's not free market economics, and of course, so the economy did terribly, but then the populace get fed up with with the left-wing government being yeah screwing up the economy, and so they elect a right-wing government.
00:12:49
Speaker
and so they they elected when some churches actually is five minutes but then you know i need and mcmillan came along and mcmillan said you've never had it so good cuz economy got much better. And then and then in so so the second phase is that,
00:13:06
Speaker
The right-wing governments come in, sorted things out to a degree, things are a lot better, so then people start demanding more benefits. And the left-wing government promising those benefits comes back in and screws up the economy again. Now, that that's a little bit unfair because the UK had a philosophy that people called buttskillism, which was Butler, the conservative politician, and Gateskill, the labor politician, both really agreed on a fairly intensive injection of government into the economy. And and so that that modulated the curves, and and and the conservatives didn't really have a free enterprise, shall we say, Thatcherian view of the world.
00:13:51
Speaker
ah and and and actually in book two i show how to a degree it was the conservatives who buggered up the economy but they buggered it up just as labor took control so that poor harold wilson and others got the blame
00:14:09
Speaker
Add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add add now that that's all in in in book two where you show that it was and excessive attempt to keep sterling high the the the The value of the pound sterling being a sort of totemic thing, they made desperate attempts to keep it high and that's I show a mistake. You have to let it naturally become high as a result of good economic policies, not not just try and push it high or push it low.
00:14:37
Speaker
But over and over again, you know then we had the Labour Party coming in, and then things got really bad in the 70s, and so Margaret Thatcher came in, and things got really good under Thatcher. And Labour nearly came back in 1992, but John Major snatched a victory, so he had five more years of conservatives, where they consolidated the Thatcherian Revolution. And then Tony Blair,
00:15:07
Speaker
afraid of not being elected, said, I'm going to keep the conservative plans for three years. I'm going to do what the conservatives say they're going to do in so terms of spending money on what and so forth. And he did. And at the turn of the millennium, year 2000 or so, he we'd had three years of Blair doing what the conservatives do. And by complete accord, Britain had the best economy in Europe.
00:15:33
Speaker
growing faster, better employment, much better employment, and so forth. And we were actually running a surplus. And nowadays the talk is only of how big the deficit is going to be. But we were spending less than we were bringing in and taxes and other revenues. And so bit by bit, the UK's debt was being paid down at that point. Brilliant.
00:15:57
Speaker
And had that carried on, you know, who knows what the UK would have looked like right now. Had it gone on in the way that went on in America, everybody would be far richer now. People would be earning much more. People would have more in the bank. All the problems that we talk about, most of them would have gone. The government would be able to spend much more money on meeting the needs of the population. Personally, I find usually that the government spending the money to meet the needs rather than the citizen having the money in their pocket and being able to meet the needs themselves is usually not the best way for the government to be doing it. But nonetheless, all the money would be there, but it isn't. Why? Because what happened, at that point, they abandoned the conservative spending principles, which was to keep spending relatively low. Although I i used to have arguments with John Major where he said he used to say, why shouldn't
00:16:52
Speaker
And this is back in the 90s when I used to give advice. I was in a group that gave advice to the Prime Minister. He used to say, why shouldn't the government go up to 40% of the economy? i i Being ignorant, just a businessman, I was just giving you advice as a businessman. And I'd say, it doesn't feel right. ah if if You can keep government low and and let business get on with things. And so I was i was all for like 33% of the economy. And he was saying, well, why shouldn't it be 40%? But nonetheless, it was more where I was.
00:17:22
Speaker
But then, later on, when John Major being kicked out, Tony Blair comes in, Gordon Brown gets an increasing grip on the economy. He says, right, let it rip. And he starts spending money like it's going out of style. And and pretty quickly we're up in the high 30s. Then the great financial crisis comes along.
00:17:45
Speaker
We don't have any money because we've been spending it all on this nonsense, and and we have a big crash, and we have the city of London, large part of our economy, bigger crash, and and and we're on our knees. In come the Conservatives. In theory, now we'd be back on the way of the Conservatives sorting it out. Unfortunately, no. George Osborne made a little bit of an attempt to do it, but not really.
00:18:13
Speaker
And then we get the disasters of Theresa May, Boris Johnson, Rishi Sunak, all of whom behave like Gordon Brown until we have an economy now that's much worse than Gordon Brown had. So we haven't really had that correcting conservative right-wing government in place since John Major in in the 1990s, and that's what went wrong. We've just got bigger and bigger government, higher and higher taxes, more and more regulation, and then you throw in woke, and woke is a form of regulation, which which which is completely mucking up, is getting rid of large sways of the economy.
Government Spending and Taxation Challenges
00:18:55
Speaker
And we will get to that. yeah But what comes to mind here for me is that this is a global trend. So you said that, you know, late Blair and then Brown, that period was let it rip when it comes to spending a lack of discipline. And I can think of the same thing happening in Australia at around the same time. yeah Clinton was very close to balancing the budget in the US before then the deficit absolutely blew out. And again, this is all happening around the same time in Australia, in the US, in Europe, where you have governments where suddenly fiscal discipline completely goes out the door. yes My question is, what are the political forces that are obviously pushing these politicians to give up on that sort of fiscal discipline? I don't think it's in the least... It may to a degree be accepted intellectually by many, although not by all.
00:19:46
Speaker
But it's not accepted in the sense of determining what people should do. What I'm proposing is so hard and politicians in this era are so unwilling to anything that is in the least hard.
00:20:05
Speaker
that they they feel that the only way to get elected is to promise more and more expenditure. That means that they have to raise taxes more and more. Although I show in my book that that is a doomed attempt in many cases. They're trying to raise the tax take in the uk by raising the tax rate, but you can raise tax rates and the tax take doesn't go up i predicted just narrow the base of where you're actually taking money from.
00:20:40
Speaker
Well, yes, I mean, what what what happens is that people have a say in how much tax they pay. Governments think of themselves as hapless victims who you just increase the tax rate and they'll have to pay more, but they don't. They find all sorts of ways of not paying that tax the more you raise it.
00:20:57
Speaker
And the main way that people in the UK are finding not to pay the tax is by leaving the country. And it's even, even Rachel Reeves has had to pull back on one of her signature policies, which is to remove the non dom regime because non doms.
00:21:16
Speaker
Which, by the way, even George Osborne didn't even seem to understand what a non-dom was, because he said a non-dom pays less tax than my cleaner. In fact, non-dom's paid a huge amount of tax in this country. And non-dom is somebody who comes from abroad, lives here, and pays tax on what they earn here, but doesn't pay tax on anything that they've got outside the country. So it's a way of saying, well, you've got stuff outside the country that you're paying low taxes on right now.
00:21:44
Speaker
come to us and we won't charge you tax on those, we'll just charge you tax on what you do here. This might be a ah Frenchman who rents out his flat in Paris, makes money from it, pays whatever tax he's paying to France, comes over here, works in the city of London, earns a few hundred thousand a year, and pays tax on it. And my my reckoning was at one point, non-doms might have been paying up to 10% or more of all income tax in this country.
00:22:11
Speaker
So so but but but they were they were convenient. ah Scapegoat you know to say all these horrible non doms these foreigners coming here paying no tax. And so when you do that they also okay and they leave no non dom had which we had to pull back on that.
00:22:28
Speaker
I should note for for listeners, and this is extraordinary, that the UK had the second highest net outflows of millionaires leaving the country of anywhere in the world. I think second only to China, and that's not on a per capita basis, that is on a real basis.
00:22:45
Speaker
you know and and you know You think about the amount of money that that takes out of the the Treasury coffers. it is It's terrifying. but the The important thing is, i mean you can go up from millionaires to billionaires. I personally know three billionaires who left the country. They were paying enormous amounts of tax before. But but it's not but then go down for millionaires. It's not just millionaires. It's all the young high achievers who are earning maybe 100,000 or 200,000 in the city,
00:23:12
Speaker
and They go off to Dubai or to New York where they pay less tax and there's less regulation and and they were going to be the people who would be the future millionaires. and It's not even them go further down. It's hairdressers. It's beauticians who can't stand the regulation.
00:23:29
Speaker
and the general malays in the economy, their clients have gone to Dubai. So they go to Dubai, and they earn two or three times as much, pay far less tax, and live a much nicer life. And they don't have stabbings in the street, by the way. So it's people at all levels of society, but it's the strivers. And like it or not, an economy grows because of the 10% of the population or so who are entrepreneurs.
00:23:59
Speaker
That's where an economy grows, is from entrepreneurial folk who get into new forms of business and start up their own business. And and they're all leaving this country. It's it's really desperate at the moment.
00:24:14
Speaker
Someone who picks up the papers every day and and would see the word growth a lot, Keir Starmer has said that growth is the top priority, go for growth is the mantra. The Conservatives said much the same, and yet we haven't seen growth. And know and to that end, I want to put what I thought was a really provocative and interesting quote from Janan Ganesh in the Financial Times recently on this topic.
00:24:39
Speaker
He said that Britain's problem is that almost everyone names growth as their priority, and almost no one means it. There's always another consideration that takes precedence, whether geopolitical, ecological, cultural or e egalitarian.
00:24:53
Speaker
The result is the worst of all worlds. No serious drive for economic success, but also no tacit national agreement that we should bed down for a life of low drama stagnation. In other words, and you're an ex-consultant, you'd understand this, there's no strategic focus around this. How do you feel about that that argument?
00:25:11
Speaker
Well, Janan has been writing some very good columns recently, and I fully agree with that, and I've said much the same myself. He he wrote another column a few weeks back where he posited that what he wrote it when Jimmy Carter, the former president of the United States died, he said that what Britain needs is a Carter moment. And what he meant by that was that things got so awful in the US in 1979.
00:25:41
Speaker
that it in the re-election ah when when Carter stood for reelection, they kicked him out, which it doesn't happen all that often. you know Most presidents tend to get two terms. and Ronald Reagan was put in to sort things out, and he's saying, we need that Carter moment.
00:26:00
Speaker
and and people have to get fairly desperate. I posit that we're under the rule of something called Wagner's law. Wagner was a was a German professor in the mid-19th century who said that in a democracy, the size of government grows and grows, and the concept being that that in a democracy, people want more and more from the government, and you only get elected if you promise to deliver more and more.
00:26:30
Speaker
and in delivering more and more of the side the government grows. Now, there's a recent paper come out saying, well, there's a limit to Wagner's growth. You can't just go to Wagner's law. You can't just grow the economy since it's till the government's 100% of the economy, because they tried that in Russia and places and it didn't exactly work. But if we're all suffering from Wagner's law, where the easy way out, and this is very much in line with the quote that you've just made the easy way out is not to do the hard things that are required for growth then you eventually get to a stage of such fury with the economy doing so badly and people's aspirations being so
00:27:13
Speaker
thwarted that you re-elect a Donald Trump, as they have re-elected him. You elect a Javier Millay. and they just i mean i mean they The two of them have have exhibited a willingness to go tanto with the economy in a way that nobody ever imagined would be the case, and both of them in the early days are looking like is going to be very successful. And that's because the electorate has said, yeah, well, you know, we've seen enough of this other nonsense where we're willing to go broke on a completely new approach. And and by the way,
00:28:00
Speaker
Trump had very aggressive deregulators in America in his first in his first term. They were tearing up regulations every day of the week. and And Biden wasn't able to restore many of those, particularly because it was a fairly nonproductive administration. And now he's going even more. And as you can see, he's signing 100 proclamations in his first couple of days. Javier Millay just getting rid of regulation after regulation.
00:28:28
Speaker
and A classic example would be, he got rid of rent control. Now, here we have rent control. In America, they have rent control. Javier Millay just got rid of it, and the stock of housing available to renters went up by 40% straight away, which which which is what happens when you get rid of regulations. and and and There are many, many, many opportunities like that.
00:28:51
Speaker
but but But this woke thing has also had a catastrophic effect. Don't forget, it's closed down North Sea oil. It's closing down the automobile industry. It's closed down the petrochemicals industry. It's closing down the steel industry. Just just cutting out swathes of our economy and then making government far less efficient by having all these DEI people rushing around doing nonsensical things.
Cultural and Policy Impacts on Economy
00:29:25
Speaker
so well you know I think people like me, probably like you, thought it was all a bit of a joke and embarrassing and and that the polite thing to do was just let the people who were deluded by this stuff to have their way, you know fair deal, you you can do what you like.
00:29:43
Speaker
but but But I don't think we realize how pervasive and disastrous it would get to be. I think when you say the work stuff, it sounds like you're referring to A, energy policy and net zero and B, DEI and activities which take away from the core objective of a business to produce goods and services efficiently and effectively.
00:30:06
Speaker
On the first piece around energy policy, because you go into this in the book and you say that the production of cheaper, more efficient energy has been the driving force behind step changes in economic growth over the recent centuries. We seem to have have forgotten that. Yes. A leading question, I suppose. Is the pursuit of net zero incompatible with the go for growth mantra that the government is also trying to simultaneously pursue? Oh, completely. But it won't happen.
00:30:36
Speaker
Net zero won't happen, and and they'll have to abandon it at some point. The question is how disastrous it has to get before they do. ah I'm sure you know the writer Matt Ridley, who's written you know dozens of extraordinarily interesting and valuable books. he's got He's got a very good sequence of thoughts where he talks about those step changes that you've that you've mentioned, and so the the original source of energy was mankind.
00:31:02
Speaker
you'd pick up a rock and move it from A to B, a human being. that then Then you harness the power of animals. So you once you'd invented the wheel, you'd get you get oxen to pull your cart along. and and that And that was a step change in productivity. And then and then we learned to harness water. So you get water mills powering things like threshing and so forth. And that was another step change.
00:31:30
Speaker
and Then we turn from water to steam, and that's getting pretty exciting. And and and the the big industrial revolution takes place through the use of first water, Arkwright's water frame, and then steam, you know spinning genny and all of that. ah and and And suddenly in the 19th century, our wealth expands enormously and we end up actually as as the the the richest economy in the world for a while before America overtakes us. But then we discover the electron and we and and and electricity becomes our source of power and you've got another enormous step change and and you move out of the darkness of the 19th century into the bright electric light of the 20th century and everything really takes off.
00:32:27
Speaker
And then, during the Second World War, and unfortunately mixed up with nuclear bombs, you go beyond the electron into the nucleus, nuclear power. and And again, you've got the opportunity for a huge step change. And what do you do? You surround that potential of nuclear, and I talk about this in the second book, with such enormous regulation because of the ah ghastliness and and awfulness of the effects of the nuclear bomb on the people of Japan who are the only ones to have ever suffered from it, you surround it with such enormous regulation that bit by bit, you actually move away
00:33:14
Speaker
from, oh, i I missed out actually, I missed out between ah between steam and and the electron. I missed out hydrocarbons, which we'll have to get back to them, because because they they they are what power you know most of our electricity now, not wind, by the way. so So we veer off the track of having another enormous step change, which we could have done had we carried on with nuclear.
00:33:44
Speaker
into just a flat sort of hydrocarbon world. And and then we get really weird off the path by saying hydrocarbons are evil and Gaia is offended and and the world is going, we're going to have a boiling ocean and ah and a fiery world and so forth if we carry on this way. So let's go back to wind and and solar, so-called renewables, and and and let's talk a load of unscientific nonsense about how these are going to provide our needs going forward in the future. Now, there is a potential way out called hydrogen, but so far the likelihood of that being a step change opportunity is vanishingly small.
Energy Policy and Economic Growth
00:34:35
Speaker
What we need to do is get back to nuclear, and there are plenty of nuclear such as molten salt and that I'm very interested in, have an investment in to declare my interest. Molten salt nuclear doesn't have the dangers of conventional fission, and there's also, of course, fusion, which promises in the long term to be the solution.
00:34:59
Speaker
That's what we should be focusing on, but in the meantime, we've we've adopted a cul-de-sac on net zero, which ain't going to happen because they're going to be blackouts and brownouts and and arguments between countries over transmission lines and so forth. so so that so There'll be a general retreat from net zero, but when that will happen, whether it's in the 2020s or the 2030s,
00:35:25
Speaker
ah isn't clear, and the longer it takes that retreat takes to happen, the worse our economy is going to get. Well, I even heard Rachel Reeves saying last week at Davos when she was asked about what would be the chosen priority if net zero and growth come into conflict. She said, well, it would obviously be growth. Now, I don't think Ed Miliband would agree with her, and I think we will see that tension in the Labour Party blow up in the next next little while because I think there is even a realization in this pretty dim government that that you cannot pursue those things simultaneously. There's also a yeah huge amount of vested interest in in net zero. when When I say the sort of thing that I've just said to you in the House of Lords,
00:36:08
Speaker
I get absolutely, I won't say yelled at, but but stridently, demonstrated with by people who have interests in in this whole renewable thing. and And the problem is the whole net zero thing is so interlocked with vet vested interests right now. And you and you see it, you you know who I'm talking about. That is quite difficult to pull back from it at the moment, but we will have to in the end.
00:36:35
Speaker
I want to hone in on your three rules for growth. The Wagner's law that you mentioned is a nice segue um because the first rule is the larger the government, the smaller the economic growth. Now, most classically liberal economic thinkers would think about growth as, or the path to growth is through deregulation, lowering taxes, allowing the private sector to do its thing. yes It feels like this current government, the way that they think about growth,
00:37:03
Speaker
is more spending or using perhaps the the euphemism of investment and and pushing pushing growth through the government and then through public infrastructure projects, through ah the government placing bets on particular industries, meddling in
Critique of Government Economic Strategies
00:37:20
Speaker
AI. We had a new AI policy the other day that they can drive growth. yes Why and I assume you don't think that will work. Why shouldn't the state be driving growth in the way that it looks like Starmer and Reeves want to to go?
00:37:34
Speaker
Well, there's a famous quote attributed to Peter Mandelson, one one of the brains behind new labor in the early 21st century. he He did speak it, but he was actually, I think, quoting somebody else about industrial policy. He said, we thought we were picking winners. In fact, the losers were picking us. And and and and that that that is what industrial policy is. It's so-called crony capitalism or rent seekers.
00:38:04
Speaker
who find a way to persuade the government that they're the thing to be, as you say, invested in, i.e. money poured down the drain in many cases on. And you know that there there's a classic example from the Johnson administration that Dominic Cummings, who is not the economic brain some people seem to think he is, there was ah there was a company called OneWeb that made satellites.
00:38:30
Speaker
And Cummings apparently decided that we needed to prop this company, which wasn't doing all that well, up. And they put 500 million pounds into it. Well,
00:38:40
Speaker
you know didn't do any good because you've got Elon Musk coming along with Starlink that you know was way superior in its technology and its rollout and didn't rely on government subsidy. OneWeb continued to get worse, has been sold off to a French company, which has subsumed it and it's now some tiny little thing, the $500 million that the government put into it has gone.
00:39:06
Speaker
and that And that is under the Boris Johnson administration. Now, imagine, and I mean, I suppose one can assume that they are no better or worse than the current labor lot, but the but but the current labor lot will be just as bad.
00:39:21
Speaker
yeah I have, in in my time back in the day when I was in consulting, come across these government bodies that decide who to invest in. and it's a bunch i'm I'm sorry to be rude, i'm I know I'll bump into one of them this afternoon after they've seen this and they'll demonstrate it with me. It's a bunch of second-rate academics, who you know those who Who do do those who can't do teach those who can't teach get on a government board to choose industrial policy and and that that they just indulge their own. You know prejudices or beliefs about what technology is going to work in the future but these but these are not entrepreneurs so an entrepreneur has to put in their own money so they got to be damn sure that that is a good bet because if they lose their own money then they get to be poor.
00:40:18
Speaker
ah Whereas if if a government panel chooses the wrong company, then they just move on to choosing the next company and continue to get paid. yeah The whole idea of private enterprise and entrepreneurialism being the engine of growth is completely lost. and and i I can tell you the the people on these panels are extremely second rate, to say the least. and and What is more, they're being pushed by people like Ed Miliband, who have a doctrinaire belief as to what has to be done for the future. so It's you know wind farms and and solar farms that are getting huge amounts of subsidy right now.
00:41:05
Speaker
and and and and That subsidy is going up and up and up in order to attract people into wind farms. It turns out that wind isn't getting cheaper, it's getting more and more expensive as they discover you know how difficult it is.
00:41:18
Speaker
Dr. Nair is a very good word, and I think it is something which depresses me so much about the political leadership that we see at the moment in that there is this dogmatic instinct towards so many things. You know, the way that say a Miliband or in Australia, the way an Albanese approaches environmental policy is zealous. It is dogmatic. there It doesn't appear that there is any room for doubt.
00:41:40
Speaker
I want to go to ah your sir your third rule for growth around the greater the amount of regulation, the smaller the economic growth. There is this regulatory urge, and again, I think this is in the yeah UK, but it also is shared across Europe, Australia, Canada, the anglo The question that comes to mind for me, and you know as we see more and more parts of our lives regulated, I've heard you talk about the looming football regulator in the UK, perhaps the one success story in business, which absolutely doesn't need a regulator, but we're going to get a football regulator.
00:42:11
Speaker
Are we to blame? so There is increasingly this instinct in society amongst people that we need to be protected, that we need government to protect us. We saw this very clearly in COVID, where we were very happy with authoritarian protectionist policies. so I understand why a politician would want to meddle in people's lives. It gives them more power. That's obvious.
00:42:34
Speaker
but On the part of the people, are we perhaps to blame for the fact that there is more government overreach into our lives? Do we secretly want that?
Education and Workforce Development
00:42:45
Speaker
I think there's a strong element of truth in what you've just said. I think education has become quite difficult. I don't want to push this idea too strongly, but particularly in primary schools, there are considerably less men teachers.
00:43:04
Speaker
An awful lot of men got out of primary school teaching during the pedophilia scare that rocked the country for a couple of decades because they felt that just by being a teacher in a primary school, the chances of being accused you know you You couldn't touch a child. you couldn't yeah yeah They just felt, no, I'm not going to do this. And so I think you're fine. I don't want to go too aggressive on this, that primary school teaching became more and more and more dominated, it always had been, but even more, by women teachers.
00:43:38
Speaker
And women teachers tend to be, are not always, a bit softer, a bit more protective, a bit more instilling fear into into children than instilling hardiness and a sense of adventure and and so forth. And because of moral panics about real events, about about children being kidnapped and tortured and raped and and the most horrendous things,
00:44:04
Speaker
Parents who exposed to these stories got more and more protection of their children. wouldn't yeah When I was six years old, I used to walk to school by myself across London. That that hardly ever happens now because it was a much safer environment in the 1950s when I was doing that.
00:44:22
Speaker
So children much more protected, much more coddled, and constantly told you know by people like Greta Thunberg that that the world is being destroyed and it's all the fault of their parents and and so forth. So young people growing up to be much more timorous, less adventurous, more reliant on the state. Now there's talk that The new generation of children are looking with incredulity at their parents and saying, what on earth are you talking about? And talking about you know this whole thing about people can be born in the wrong body and you know the world's going to go up in flames any minute and so forth. And so that there will be this natural
00:45:06
Speaker
the reaction now it may not happen in my lifetime, but I will it happens in your lifetime. that That all of this gets rejected and people become more adventurous cuz jeans are jeans you know if you got adventurous jeans which the brits have then they'll they'll end up being more adventurous again.
00:45:27
Speaker
I think there's some really interesting science amongst young people that there is some sort of a reaction to the wokism of the recent times in that there is this reversion to Christianity. I'm not saying that it is at this stage widespread, but there are there is an uptick in Christianity amongst young people.
00:45:44
Speaker
There is you know obviously an uptick in the following of conservative politicians. Trump did surprisingly well with the Gen Z. Farage is doing very well on TikTok and reform is doing surprisingly well. So I think there is something happening there. The second volume is is a is is in in praise of the free market. What we saw you know under Reagan, Thatcher from the 80s to the the early 2000s was an embrace of free market economics.
00:46:12
Speaker
Now, what that led to was basically economic growth in and in America, in the UK, in Australia. Principle of comparative advantage meant that if things can be built or produced more cheaply in a country and then sold in, say, the US, you get a cheaper TV out of it. What some people have subsequently said is that that was in the end a raw deal in that whilst we may have got cheaper TVs, you cut out rust belt industries, the north of England was devastated. In the end, the demolition of local jobs wasn't worth the trade off that came with free market economics. And as a result, you've seen some of these populist forces like Trump, like increasingly reform in the yeah UK and and Brexit as well. How would you respond to that line of argument?
00:47:02
Speaker
but i think I think there were excesses in the globalization movement. So, allowing China to join the World Trade Organization had enormous benefits, both for China and for the world. But not carefully controlling what they did,
00:47:21
Speaker
and allowing them to flout a lot of the rules took things too far and allowed them to establish a base in many industries that on a level playing field they wouldn't have. Not to mention the fact that an awful lot of goods in China are made by slave labor in Xinjiang. And if you ask anybody, would you like to to use this cup?
00:47:45
Speaker
if you knew that it was made by a person who's been shoved into a prison camp and forced to make it. Now, that this is actually a nice piece of German porcelain, but but i I couldn't find anything that was ah immediately a site made in China. But anybody would say, no, no, no, i don't i don't I don't want to have something made by slave labor. Well-made, a lot of what you get is. And and and we allowed that.
00:48:09
Speaker
So, yes, China has massively exploited our letting it into the world trade organization. But here's the thing. First of all, the original devastation of the north of England was due to the closure of coal mines. That started under labor, and labor closed more coal mines than Margaret Thatcher did. And I don't think anybody is saying that we should have continued to use coal as our basis for generating electricity. I think it had a place, which by the way is being removed, but that shouldn't have been our basic. you know We had to move on. So those people were going to lose their jobs.
00:48:55
Speaker
whatever happened. And to turn it into some tale of class warfare by Margaret Thatcher is a massive ah sort of distortion of what actually happened. Second point, citizens expect, I mean, they they had this compact in the UK for nearly 200 years, that every year, the number of jobs in the country would increase.
00:49:21
Speaker
so that there'd always be a job for me, for my children, and for their children. and Not just that, but what you paid for the same job, for doing the same thing, that's how we would go up every year. so The bit by bit you could better yourself. and That was a social compact that worked up until about the turn of the century. so so you know and It started to stop after Gordon Brown started spending a lot of money because then we got no growth and you couldn't do it.
00:49:48
Speaker
If you expect that, and do you think that's a normal state of affairs, and if all those people around the world who are living lives in poverty expect that the economy is going to get better, there'll be more jobs of a higher wage available, then you've got to accept that what you can do in your economy will improve every year. Now, I give the example of Switzerland.
00:50:13
Speaker
which, as you say and in volume two, Switzerland, ah what I give is a paradigm for how you're going to achieve this growth, how you're going to achieve productivity.
00:50:24
Speaker
is through, as you say, comparative advantage. You find the things that you're best at, and you make sure that there's room in your economy for growing those. And you drop the things that other people are better than you at, and focus on the things that you're better at.
00:50:42
Speaker
and and actually even if There's something that you're a bit better than other people at. You drop that too in favor of the things that you're a lot better than other people. That's the whole comparative advantage point. And that does involve disruption. And it does require that.
00:51:02
Speaker
the The workforce, the working age citizens get better and better, are better educated, have more technical skills, are able to do those very high value added things. And that is what Switzerland has managed to do. And in doing so, Switzerland has tripled the value of the Swiss franc against the dollar.
00:51:26
Speaker
Think about what that means that means that when they buy something from america, it cost them one third of what it used to cost them and. Basically one third of of what it costs us to buy yeah the ipad whatever obviously i have to pay the swiss salesman.
00:51:43
Speaker
Swiss money, but but the rest of it, they're getting very cheap. How did they do that? Well, amazingly, Switzerland, the the the the Economist magazine revealed, Switzerland is the number one country in the world for innovations per capita. That is to say, the number of patents that they come up with. So they they have this huge innovation machine. They have very good Technical education and they have a system whereby they're constantly coming up with new things to keep them in the forefront. That make them more productive.
00:52:15
Speaker
And year by year, they drop some of the things they're not very good at, and they add things that they're better and better at. And and the things that they're better at, they make themselves even better by innovating. So, you know, it's a manufacturing process. They innovate. And that's how they do it. but But the Swiss are dedicated saying, okay, yes, our educational capabilities will increase. Our education system will increasingly educate our people.
00:52:41
Speaker
We won't, like the UK has, have one in five children leaving school, unable to read or write properly, unable to do basic mathematics sums. That means they can't fill in a form, they can't open a bank account.
00:52:59
Speaker
They're chaotic in terms of their personal personal finances. One in five new adults are like that in this country because we're failing them in our education system.
00:53:11
Speaker
and And then if you look at what is the number one university course in this country, creative arts, well, lots of luck, lots of luck. If you want the economy to grow, yes, so some people, I mean, a ah small fraction of those people doing creative arts will go on to become creative artists. and but but a lot of But a lot of our most famous artists didn't bloody go to university.
00:53:39
Speaker
Because but but you know we we have the wrong attitude we haven't created an economy of structure. Whereby we can continually improve our capability and sense that that's the problem not not not that globalization wack these people who's gonna work these people. Whatever happened without a commitment.
00:54:00
Speaker
to creating an economy where there would be jobs for them and where they'd be capable of doing those jobs.
Potential Political Shifts in the UK
00:54:06
Speaker
That's a really clear summary. I want to use the remaining time we have John to look ahead, both at the political implications of what you are proposing and then policy suggestions.
00:54:16
Speaker
On the politics, you mentioned that you have these leaders like Trump, like Malay, who are in many ways reactions to the systemic problems that those countries have faced. And it's reached a tipping point where the people have said enough is enough. It feels like we are maybe over the next four years heading in that direction in the UK.
00:54:38
Speaker
The obvious parallel is reform and forage. How do you assess their chances and do you see them as being the equivalent populist movement in the UK with an equivalent chance of success?
00:54:49
Speaker
Yes, just to throw in a very quick point, and I've only just realized this, we've talked about two types of country. Countries have reached a tipping point, like the US and Argentina, but countries that have always done the right thing, like Singapore and Switzerland, who therefore don't need to reach a tipping point, and they have very stable societies. That's an interesting point. But as you say, we're clearly in the former category where things are going badly wrong. It does look like we're stuck for the next four years,
00:55:16
Speaker
four and a half years with with a labor government that will continue to double down on some of these stupidities. Although it's fascinating, they are trying to do things that the Sunak conservative government, the Johnson conservative government, the May conservative government didn't try to do. Well, maybe the May... Well, anyway, the conservatives didn't try to do, which is to reform the planning laws.
00:55:40
Speaker
and say, I don't care about your NIMBY thing. We've got to keep building. We've got to have a new runway, Heathrow and so forth. So it is very interesting that from the left and the position of strength they have, they can do some things that would be beneficial and they're pulling back from the non-doms. And I'm sure that they'll pull back from lots of other things as the ghastly reality of what's going on hits them. I don't think it's going to be enough unless they get rid of milli-band and and completely reverse course on net zero, which could happen, but maybe too late to save them. I do think things will get much worse. Whether they'll be so bad as to as to have a revolution at the end of this government is hard to tell. Now, one of four things can happen at the next election. One is that the conservatives have crushed reform
00:56:31
Speaker
by having such an attractive set of policies that that people somehow forgive them for what happened in the previous ah iterations and re-elect them with because if all the reform voters go to the Conservatives, then they'll get a majority. I don't think that is going to happen. The second thing is that reform crushes the Conservatives.
00:56:54
Speaker
well In the local elections in May, reform will do well. it The Conservatives will survive that. In the local election the following May, they'll also do well and they'll they'll probably do a lot better for various technical reasons. At that point, and and already reform are ahead in the opinion polls, ahead of every other party, Labour and Conservative.
00:57:19
Speaker
At that point, the conservatives might start to look marginalized the way the conservatives did in Canada, and and the Reform Party took over the conservatives, renamed itself the Conservative Party, and is looking like it's going to be the next party of of government.
00:57:35
Speaker
that That is quite likely. And Kemi Badenok, who's got the problem of a whole bunch of quite left-wing MPs to play Cage, and who could kick her out any time they like, she's in a ah real bind in terms of responding to both sides.
00:57:53
Speaker
Third is that there's a some kind of deal between reform and the Conservatives, and reform is allowed to compete against Labour up north uncontested, and Conservative is a allowed to compete against Lib Dems down south uncontested.
00:58:10
Speaker
which ends with a success and and ah and a ah coalition government between reform and and and conservatives. That is not looking likely to happen right now because reform are smelling the coffee and also are saying they're so angry with the way the conservatives treated them over the past 15 years that they're in no mood for a quarter. that's So that's sort of slightly less likely to happen. Final option is that none of the first three happen.
00:58:38
Speaker
In which case, reform and conservatives both get a lot of votes, and labor become the next administration. And that's a very strong possibility. So, I'm i'm not really a politician. I'm not smart enough to know which of those four is going to happen. But if the last of them happens, and it's ah is a strong possibility, then we'll have to wait another five years for our Carter moment.
Policy Recommendations for UK Growth
00:59:03
Speaker
I wish time things will be very bad. I would get it. Yeah. Yeah. That's not even worth thinking about. My final question, John, let's assume that we do get lucky and and you have options two or three a year. They have a reform government, you have a coalition government, or maybe the conservatives get their act together and win in their own right. And they go, well, look, Labour's continued this period of degrowth. What are your three biggest policy priorities in the next administration to kickstart growth in this country?
00:59:34
Speaker
Well, cut expenditure, cut taxes, cut swathes of regulation, and and and all of those three things are mentioned in the book. and And I would add a fourth, which is, decimate the civil service. Do what Trump has did, say that There will be no work policies. Anybody whose job is to pursue work work policies in the civil service yeah goes. the Above all, the defined benefit civil service pension goes, because that's adding hundreds of billions of pounds of obligations every year that it continues.
01:00:09
Speaker
and just have a civil service that's a third to one half the size of what it is now. and and All of that will be incredibly difficult to do, but has to be done if we are to return to growth. yeah john This is an incredibly thoughtful and timely and and also I would add very readable and entertaining contribution to the national debate. Thank you for putting it together and thank you for coming on the show. It was very enjoyable being with you Will, thank you very much.