Speaker 1So the big thing we are all waiting for is these massive decisions when it comes to spending about shifting away from spending billions on welfare towards spending billions on defence. And he did not address that. Instead, he kicked the can down to next year. If the situation is as bad as the government keeps telling us, then why is it taking decisions which amount to sitting on the deck of the Titanic with a cocktail and hoping that you can just drift through this storm? A raid on the middle class, a budget by a chancellor who, as Kemi said, ought to resign. Why? Well, because he resigned over the government failing to spend 3% on defence when he was Secretary of State for Defence. And now he's chancellor. He's also failing to spend 3% on defence. Well, to break down this attack upon wealth and success, we are joined by Georgie Frost, who is a business journalist, and by Jacob Rees-Mogg. But first, here's my reaction. Kemi has described it as a budget for getting by, not for getting on. John Healy said, we know who we are and we know where we are going, which made me think of the road to nowhere by talking heads. But it was also a budget which was full of sailing metaphors, you must have noticed. He talked about steering Britain through and when the storms pass, what matters is where Britain is heading. But as you said in our chat, Jacob, the problem is, is that steady as it goes doesn't work when you're in the middle of a storm. And I was really struck by what was absent in it. Remember, remember, remember, always the politics, never mind the economics, because I don't understand it. John Healy resigned as Defence Secretary over defence spending. That is what brought down Keir Starmer. That is why Andy Burnham is now Prime Minister. So the big thing we are all waiting for is these massive decisions when it comes to spending, about shifting away from spending billions on welfare towards spending billions on defence. And this was a budget that was full of reviews, full of task forces. Meanwhile, what is happening on the financial front? You have a tax raid on landlords. You have a tax raid on banks. Now, whatever you think about those two groups of people, they're people who keep the free market going. They're people who get, who keep things growing, in fact. And instead, what is the money being taken from them to give to other people? Well, they are things which are very difficult to argue against, such as 100 quid off your bills at winter, although I have to say mine, that is just a drop in the ocean compared to what I spend on heating. But these little handouts are being, you know, they're being, you know, being financed by what is essentially a raid on the asset-owning middle classes, while the government dodges the long-term issue of how much it's spending on the things that really matter and avoids the kind of massive tax reform needed in order to spur the free market so that we'll have greater income and be able to spend on the things we really want to spend on. So he referred there to Iran, and it's true, following the Israeli election. Who knows? The Middle East, it could kick off again. The storms have not died away. But I just find it astonishing that if the situation is as bad as the government keeps telling us, then why is it taking decisions which amount to sitting on the deck of the Titanic with a cocktail and hoping that you can just drift through this storm?
Speaker 2Jacob? It's very hard to disagree with your analysis. Let's first of all think of the sensible things that he's done, just to try and be fair to him. He has decided to use the buffer. Very good idea. If you've got a buffer, it's there when you need it. Right. I thought that was a good choice. He has- To explain, that's
Speaker 1the headroom between- That's the headroom. That's the spending headroom so that every government has a certain amount that doesn't go below that it's got coming in, so it's not down to-
Speaker 2It's essentially mythical because the sums are so large, you're talking about into the trillions, and then you talk about a few billion of headroom. It's one of those things that chancellors and bond markets get obsessed by. But if you've got it, you might as well use it rather than raising taxes further, which would have been the choice. So he's done one sensible thing. He's done the cliff edge for carers. That's important and needed to be done. So little bits and cutting the tax on Gherkins is sensible. Another Brexit benefit, but- This is done by reducing import duties. Yes. If we rejoined the single market, we'd have to put them all back on again, or the customs union. So nonetheless, these things aren't that important. But your analysis strikes me as being absolutely right. Not just the UK, but the whole Western world is facing a serious financial crisis. And I think that's a very important thing. And I think that's a very important that spending is too high. The US deficit is 40. The debt is $40 trillion. It's getting to an unsustainable point. France's debt to GDP is 120%, and its deficit is running at over 5%. We are not alone in facing this problem. But you need at that point to be taking decisions that lead to economic growth. And that's the supply side reforms, which need to come in a big way. So we've had one of the oil fields, but we need Rose Bank too. We've had Jackdaw. We need Rose Bank, and we should be getting on with that. We need to lower the cost of energy, not by shifting things around. Again, it's the same criticism that I made earlier about the tax on the banks to help the man in the street. It doesn't, because the man in the street pays for the banks. But that money isn't new money. It's simply being taken from people in a way that's a different way. And the same is true with his attempts to take levies off energy, that if you take a levy off electricity or on gas, and you put it onto taxation, it's paid for by exactly the same group of people. Individuals may be different, but the group is the same. The British people pay one way or another. What you've got to do is not change who pays for the levies. You've got to abolish the risk. And that's the thing. You've got to abolish the reason for the levies. And that means moving away from the net zero scheme. So he's doing a lot of tinkering. It's a very brown Osborne style budget. You tinker around a lot. You make things more complicated. You don't simplify the tax code. You don't have any major supply side reforms. And you hope really nobody notices and you get away with it for a year. And so I think it's a missed opportunity and in many ways a failure when this country is facing so many serious problems.
Speaker 3Georgie. Well, what did I want from the budget? Exactly what Jacob said there. I wanted a more simplified tax system. I wanted a clear path to be opened out for me. At the end of his speech, the Chancellor said that it is burnt into every line of this budget. We can see where Britain wants to be. I must have, I mean, we were talking through most of that budget. So, you know, maybe I did miss some things, but I'm not entirely sure it's burnt in my head. Exactly where we want to go. We did have noises about defence, about welfare, about energy, as you rightly say, all things that will cost an enormous amount of money. And it was kicked down, the can was kicked down the road. We do have reviews into NEETs, non-employment education training for young people, into PIP, so welfare spending, which are coming out next month. And so therefore they've said, oh, we'll wait until we see the results of those. And with energy, yes, we do need to do a lot. And you're looking at £40 billion investment, if you really, really want to think about energy security and bringing down bills for people. We didn't get any indication of where that money might come from or where they'll spend it, because what we got was exactly what I believe Kemi said was a budget for getting by, not for getting on. It was a sticking plaster over issues. So for energy, for example, we got help for those in council bands A to D, which was £100. That's £20 million. Now, if they'd have gone down the route of increasing the warm home discount, that probably would have been about 6 million people and probably more targeted because it's those on welfare. However, as I've said before, it's not necessarily those people who are struggling the most because you are not just paying an amount. When we hear about the energy price cap going up in January, we're expecting it to go up. That is not what you'll pay. That's not your bill. If you have an old leaky house with five kids running around, you will pay a lot more. And some of these, help will not touch the surface, as you said, for yourself. We will have other things. So standing charge is another one. But as Jacob absolutely pointed out, so standing charge is essentially a part of the bill that you pay for your gas or electricity, which you can't do anything about. No matter how much you cut your energy usage, you can't do it. It pays for things like levies, of course, but also for maintenance, for admin, for the energy companies. So if you take it off that part, where are you going to put it? You're going to put it on unit pricing. So people are going to have to pay for it. More overall. We've got things like import duty cuts for certain products. Carer's allowance, as Jacob pointed out, absolutely right. But just put them all together. I feel like rather than simplifying it, going back to the tax point, we've got the change to the cash ISA, which I pointed out, I think is a good thing to bring it back to its £20,000 limit. Cash ISA is, by the way, a very good product still. That was something that Rachel Rees was threatening, wasn't it? Absolutely. It was going to come in.
Speaker 1He began his speech by praising Rachel Rees. One thing that I noticed, because I have an ISA, is him reversing Rachel Rees' policy. And has reversed that decision.
Speaker 3But then he said, we're going to introduce a new starter ISA to try and get people investing. We're going to introduce a first time buyer ISA. For example, another sort of complication is pensioners who are only on the state pension will not pay tax, even though they will go above the personal allowance next year. Another complication being added. So I don't feel like we're being simplified and I don't personally feel like we've got a direction that I'm very clear that we're heading
Speaker 2in. Jacob? No, I think that's true. I think it's worth talking briefly about standing charges. They are a perfectly logical way of paying for gas because gas has two components. One is that you've got pipes to your door, which have a cost, whether you use gas or not. And then the flow of gas that comes through, which has a separate and identifiable cost and a fluctuating price. There is a fixed cost on the asset. There's a fluctuating cost on the fuel. And to say that it should all be wrapped in. Into the fuel price means that 40% of customers will lose out. And not all of those are going to be the wealthy and great rolling in splendor and state. They're going to be people who live in old houses, poorly insulated houses, disabled people who need to keep their house warm, can't go out, old people who, again, aren't going out so much. So I think we will be surprised by how many losers there are and how much anger that creates. Because the general rule of politics, the losers are much noisier than the winners. The winners bank it, say, thank you very much. And the losers complain. So I'm not sure that policy is as clever as it seems. And it is the fundamental point that they're carrying on as if it's business as usual when we are in the midst of global crises. And they're not dealing with that, not even really thinking about that.
Speaker 1But they would say, okay, they would say if they were here, what we're doing is we're shielding poorer members of society from the shocks of those global crises. By helping them to save a little bit of money, be it freezing fuel duty, for instance. And they have, by and large, chosen to say that they have large. So for instance, in the eternal battle between landlords and tenants, they've taken the side of the tenant.
Speaker 2No, they haven't. No, no, they really haven't. They're bashing tenants because landlords will put their prices up and they will leave the market and you will reduce supply and prices of rental property will go up. The yields that people will expect to get on rental properties will go up. And tenants will find they simply can't find properties and the properties they find cost them more. Once they're in, they will be more secure, but they will find it harder to get in and it's particularly bad for young people. A flexible, open rental market is best of all for tenants. Landlords are then competitive. It forces prices down. You're falling in for me. I think if I may say so, Tim, into the classic socialist trap that you think by doing nice sounding things, you help the people trying to help. No, you don't. What you want to do is help the least well off in this society. It's helping them get jobs. How do you help them get jobs? You have the supply side reforms that make the economy more efficient. You stop taxing businesses as heavily. You don't bash the banks because the banks are the lifeblood. They are taking
Speaker 170,000 businesses out of the rates. So they are taking some action to help.
Speaker 270,000 big businesses. It's completely trivial. Right. I've also seen employer national
Speaker 3insurance go up, the minimum wage is going up, and we'll already have paid huge amounts of energy bills are going up. So there's a little bit of support there, but I agree with Jacob to a degree. I think, you know, certainly the, I think the landlord is a very good example of if you think by increasing, you know, how much landlords have to pay in tax, that's going to bash the landlords and it's great. How could it possibly be good for tenants? We need to reform the rental system. So it's, it's an option. It's a good option for people. You don't have to buy a property, but at the moment it's so expensive to rent and it's going to get more expensive and more difficult. And think about all the benefits. If you're talking about trying to get Britain, you know, to be outside of London, to really promote, you know, the other cities, well, what's the best way to make it really easy to move around? I spent my entire career, because I'm a big renter, moving around the entire country working. And it's been marvellous and I've enjoyed it immensely. But, you know, but I'm old, so it was probably cheaper back then. But, you know, I do think that it's such a wasted opportunity to try and get Britain literally moving. Yes.
Speaker 1Let's talk about, let's talk about welfare, because the spending bill is now predicted to hit £431 billion by 2031 to 32. He missed this opportunity, didn't he?
Speaker 2Well, he has no parliamentary majority to do anything about it. Right. That's the problem. That was the problem that Starmer ran into. And Healy probably recognises, because he's not a fool, that welfare needs to be reformed. But he doesn't have the support of backbenchers to do it. And a lot of Labour MPs think they're dependent for their majority on people on benefits. So they don't want to bite the hand that feeds them.
Speaker 1Yes. Okay. Georgie, one reader asks, is it worth having a cash ISA anymore?
Speaker 3Goodness me. Who is asking that?
Speaker 1Yes. Because it's tax free money. Who doesn't want tax free money?
Speaker 3Absolutely. ISAs are a fantastic product. And actually, I spend a lot of time in Canada. It's very rare to have something quite so generous to be able to put £20,000 into, you know, an ISA product every year that's shielded from tax, essentially. So capital gains tax, you know, income tax. So absolutely, yes. And the fact that they've changed it, I think, acknowledges that. So I think it was a very smart decision to have changed the cash ISA thing. I would have actually liked it a few months ago if they knew it was a really rubbish decision and it wasn't going to encourage people to invest. I think it was a very short-sighted, but also building societies were saying, we use a lot of that money.
Speaker 2Yes. That's such an important point. This seemed to me to be the big giveaway of how Rachel Reeves didn't actually know anything about economics.
Speaker 1The money just sat in the account and didn't go anywhere. That's right. That's right.
Speaker 2She thought it was like having it under your mattress. Bank deposits are the lifeblood of any financial system that they provide mortgages, they provide loans to companies. They are just a different form of financing of companies from equity financing. Both are enormously valuable. And if you look at the financial crisis in 2008, one of the reasons it was such a problem was the loans deposit ratio of the major banks in this country was well over 100%. They were dependent on overnight money. Whereas cash ISAs are long-term money for the banks. They are a stable basis for them to make loans and do their business, particularly building societies doing primarily mortgage loans. And I thought it just showed the deep ignorance of Rachel Reeves.
Speaker 1I'm going to pick up some questions from the live stream here. Georgie, how can they talk about cheaper energy than talk about continuing with net zero? That was a key moment in the budget, by the way, when John Healy did that and lots of people laughed and pointed at privately opposed continuing with the Jack Dorr drilling.
Speaker 3Well, it goes back to what we've both been, we've all been saying is that if you want to really reduce energy bills, you are going to have to focus on some very expensive things. Infrastructure, for example, talking about the national grid, it's very leaky. We must do things to promote our infrastructure and that is expensive. So, you know, Jacob, I think you have very strong views about what to do with the
Speaker 2net zero policies. Really, the net zero policies, start fracking and dig out some coal. And then you don't have to spend billions, possibly hundreds of billions on the grid because the grid is designed for a hub and spoke mechanism. And with wind farms and solar panels, you're moving it to a spoke to spoke mechanism. And that is a much, much more complicated balancing act than big hubs producing most electricity in a small number of places, distributing it to millions of places. You've now got thousands of supply points coming in, which is just so much more complicated and leads. So the billions of expenditure, which, of course, puts bills up. So I just want to go back to a fossil fuel based economy. We've got lots of it. It's very cheap and it's pretty
Speaker 1clean nowadays. And someone else asks how they're doing on their building, their target of building 1.5 million new homes. And I can answer that. They're not hitting it. They're really nowhere close. And instead of doing that, they're talking about helping people to get on the housing ladder, which, of course, is something that doesn't increase supply. Now, as regards to the politics of this, I will just note, someone funnier than me pointed out that John Healy does look like a butcher. There's something about the man is the way particularly he leans forward. It was just like he's leaning over a butcher's counter in Tesco or something. And he should have one of those little white hats on or a stripy apron. If once seen, it can never be unseen. But Kemi Badenoch said he ought to resign over this budget because there isn't the commitment to three percent in it. And as some people on the live stream have pointed out, this feels like an election budget, not in the sense that it's a giveaway, but in that it's trying to keep everything as calm as possible and suggests that vote labor and the goodies will keep on coming. If you had to guess, does this feel like a budget which is about saying you should really vote for us in a few weeks time?
Speaker 3I don't think there was enough in it to say that. But certainly if you are thinking about going, getting us to the polls, then I think it probably hasn't done a terrible job. I'm trying to think what could be the headlines, you know, Healy the butcher. And I don't think that would really work because I don't think he's done enough in it to really have that sort of a picture on the front covers. But, yeah, no, if you are going to do it, and this is from a financial journalist perspective with no history of political journalism at all, but I would suggest probably now is the time to do it. You know, you're riding high. It could only get worse. I was just going to say, although my dad says there's no situations so bad, it can't get worse. So, you know, it could get even worse, you know. The OBR, which,
Speaker 1of course, is independent,
Speaker 2has published its. Not really independent. It's run by a bunch of lefties who all come from lefty think tanks. I was thinking, by the way, when I heard about. Maybe I was no more independent than I am.
Speaker 1When I heard about this innovative defence task force, I just thought, being a bureaucratic thing, that's going to end up with more people working on it than there are in the British Army, isn't it?
Speaker 2Well, there are 60,000 civil servants in the MOD and 73,000 soldiers, so we're getting pretty close.
Speaker 1There you go. We're nearly there. But the OBR gives a pretty gloomy view of the future. It says, quote, we expect no growth in real earnings in 2027 and 2028 and a slight fall in real households. Disposable income per person in the near term. And something I always find confusing about budgets, as I say, he always talks very quickly when running through the tax rises and then very slowly when talking through the amount of money he's going to spend. At the beginning, when he's giving that picture of the state of the economy and where it's going to be, that's all prediction. And we can dispute the figures about it because we noticed when he was saying it that they were not figures that matched your figures, Georgie, of the state of debt, GDP, ratio. But this is all prediction. And if he puts forward a budget which doesn't do what we want, which is to spur the markets and create growth, then everything he said is for the birds, right?
Speaker 2Oh, yes. That bit of it is always spin and propaganda. It's hardly worth listening to. The forecasts are only forecasts. The OBR is always wrong. It's more wrong even than the Treasury, which is quite spectacularly bad. So we don't need to worry about the forecast. We need to worry about economics, economic principles. And do you think in economic principle terms what this budget has done will help the economy grow? I think the answer to that is no. It is an approach to the fiscal side that wants to have the country too highly taxed and isn't dealing with the complications of the tax code, is going to be hitting the self-employed who are now going to have to pay their tax more often. So it's going to affect. That was a big one.
Speaker 1He hinted that we may have to. All of us will eventually have to do tax made digital. Which is where you have to submit it four times a year.
Speaker 2Well, you only have to submit it at the moment, but he was saying you're going to have to pay the tax as well. Oh, right. Not everyone. The threshold's going to
Speaker 1decrease as we go on.
Speaker 2Right, OK. But so he's hitting the self-employed from 2029.
Speaker 1It's the kind of thing that makes you think, why do I bother? I'd rather not earn the amount to have to hit that threshold than. That's what I'm thinking anyway. I won't do that appearance on TV. We'll do this for free. I know. I'm trying to keep it low so I don't have to fiddle about with the zero tax system.
Speaker 2I'm in the process of doing this last quarter's making tax digital. And I'm much better at remembering my expenses each quarter than I was remembering my expenses from a year, nearly two years ago. Right. So I'm actually. You like it. Well, I don't like it. It's a complete waste of time. It's invasive. But I don't think it's going to make the government that much money. Because we all remember what we spent six weeks ago. We don't remember what we spent 16 months ago. That's very true. You look through a bank statement and you see something and you think when you're doing it for January the 31st, or I don't know, I'm not going to claim that because I'm not sure. Or six weeks later, you know precisely what it was. Yes, that was a business expense. And so I think they're going to find a lot of people have correctly, without any impropriety, discovered that they can claim back more that is offsetable against tax. However, they want to go ahead with this to hit the self-employed because they don't like the self-employed. They like PAYE. I want to go back to the Healey question. Should Healey resign against his own budget? Does the Defence Secretary Healey resign against the Chancellor Healey? And I think the answer is yes. And what that reveals is that the resignation was not that of a highly principled man, but it was of a man climbing the greasy pole. He wanted to get rid of Starmer and he wanted to pave the way for Burnham and he got his reward as being Chancellor.
Speaker 1That's a very good point. If Healey were in the room right now, what I'd love to say to him is, imagine your Defence Secretary today. Would you, after hearing that budget, resign?
Speaker 2He's got no more for the defence than there was when he resigned. Yes. And yet he's staying in office and he's in charge of it. I think that's a pretty awkward position for him to be in.
Speaker 3I think he might argue that, given the fact that the can's been kicked down the road and he's been on settling and welfare, that maybe he'll find some savings there and once we have the reviews, that's what we could spend on defence. And once the picture is clearer and we've got the spending view, then we're going to have a much clearer picture.
Speaker 2But he was being offered a fudge by Rachel Reeves too. There's always fudge, plenty of fudge in government, probably made from Cornish clotted cream. But he's going to have an innovative defence finance task force. Not any money, but a task force. And the other thing you were raising, is it an election budget? I mean, I think your point's very good, that is there enough in it that makes people feel good? That this seems to me to be, has no firework in it, no sparkler, no one thing that you can say, oh my goodness. We got a hug afterwards from Andy Burnham.
Speaker 1Yes. I'm not
Speaker 2into male hugging. I think that's become very modern. Boris Johnson never hugged you after his speech. No, I wouldn't let anybody hug me. I'm not a hugger. Right, okay. Nolly Mae Tangra is my favourite quotation from the Bible. But I don't think there's enough in it. If he had taken tuppence of beer or something, something inexpensive but eye-catching. Do you remember Tony Blair once wanted eye-catching opportunities with which Tony can be associated? Yes. There were no eye-catching opportunities with which Andy can be associated. Do you agree with that?
Speaker 3I don't think the issue is about anything good in there. I think there wasn't anything ridiculously quotably bad potentially that could, you know, get.
Speaker 1Oh, I think we're going to be quoting the tax rise on landlords and the tax rise on banks, I think.
Speaker 3But for the general populace, rising taxes on gambling, raising taxes on banks, raising taxes, raising taxes on landlords. These are the three sins, the three great sins of modern society.
Speaker 1You said it. I think they're easy targets. I mean, what we always ask with every budget is how did I do? And we always have to wait because we need to see what the fine print actually says. But do you think the average telegraph reader, someone of some assets and some income, how do you think they come out of this?
Speaker 3Unscathed? No, I don't think anyone's going to come out of this really unscathed. I think where the big concerns were were things like you know, mansion tax, capital gains tax, all of those sort of wealth taxes, what we were perhaps expecting, you know, the amount you could take out of your pension tax-free, all of those things we didn't get. So I think there'll be a bit of a sigh of relief for that. But I think once the dust has settled and you see the bigger picture, then I think people will be a bit more concerned.
Speaker 2Every telegraph reader will be worse off because of fiscal drag, which he didn't even mention. And that's the freezing of tax thresholds, which will carry on in April, and every single telegraph reader will be worse off because of that, assuming we don't have a huge number of readers who are on benefits. They'll be protected.
Speaker 1Well, thank you both, Jacob and Georgie. Thank you for joining us. And thank you for watching and for all your excellent comments. Jacob and I will be back tomorrow to discuss more of the fallout of the Ottoman budget at 5 p.m. We'll be right back.
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