Could the Mandelson Scandal bring Starmer down?

0:13This is Political Coancy with Ed Balls and George Osborne.

0:27So we are remote today, not because George Osborne is travelling around the world in one of his jobs, but because he is in charge of childcare and is having to do the nursery drop off and then take over again shortly mid-morning. So we're going to squeeze our podcast in around his wider responsibilities. I think though, George, we can continue to celebrate a week on the political podcast of the year, 2026. And also Ellie, producer of the year. Do you have your award there? I've still got, because we're at home, I've still got the award. I know. I haven't been able to take it into the studio. I know you're beginning to suspect that you're never going to get your hands on it.

1:01No. Although it's a joint award, you know, possession is nine tenths of the law. That is true. By the way, congratulations. Lovely haircut you've got. Thank you. You know when you have a partner and you don't notice their haircut and they take offence? Yes. I know you're only my podcast partner, but what a nice haircut you've got. I think you are remembering the fact that I failed to notice Yvette's haircut. And yes, that didn't go down well, not least the discussion on the podcast where I admitted it. However, politics since we won UK Political Podcast of the Year has been completely wild. It has been one of the most turbulent few days I can remember.

1:36People saying the biggest political, potentially legal scandal since the Profumo affair of 1963, Keir Starmer's worst week. That is all the consequence of more revelations and emails released in America by the Department of Justice, shining the spotlight on former UK ambassador to the US, Peter Mandelson's relationship to Jeffrey Epstein. And we're going to talk about that first, because this is turning into a full blown crisis for Keir Starmer. Yeah, there's so much to unpack on that. But we're also going to look at how the Epstein scandal is sending shockwaves beyond number 10, starting with Buckingham Palace, Charles's brother Andrew, but also the wider impact on figures in American politics, the crown princess of Norway, and what it all means for the president of the United States.

2:26And then we're going to end by talking about something else happening in America, probably hasn't really got outside the business financial pages, but that is the hoitment of Kevin Walsh to be the next chair of the US Federal Reserve, subject to confirmation. And after all the controversy, the rows between Donald Trump and Jerome Powell, the current incumbent, how is that going to turn out for economic policy in the United States? We'll talk about that third. Let's start with these emails. They've been coming out drip, drip, over the last five or six days. We're going to talk about the political fallout in a moment, And we're going to talk also about what they tell us about governing at the end of the Labour administration 2008 to 2010 and what Peter Mandelson was in fact doing in his relationship with Jeffrey Epstein, which is really shocking.

3:18But let's just start with this. I actually think the most shocking thing in the last few days has been what it's told us about Peter Mandelson and the relationship that he had, in fact, with Jeffrey Epstein. and more widely the world of Jeffrey Epstein. It's actually been rather sickening and horrifying to read these emails. There's a very powerful piece by Helen Rumbelow in The Times. She went and looked back over all of these emails, immersed herself in them and writes a very emotional piece, a moving piece, but a powerful piece about the misogyny which kind of underpins all of these communications.

3:58The thing which jumped out at me in her piece was her saying that Jane Austen never wrote about men talking to men. It was always men talking to women because Jane Austen didn't feel as though she could understand the men-to-men communication. And these emails are all men-to-men. And they are all about, you know, girls and pussy and using the C word and an attitude to women, which is like really, really shocking. And I saw somebody say a couple of days ago. The world divides into those men who would never say that in front of women, but do to other men, and those men who would never say it even men to men.

4:36It turns out that Peter Mandelson, for all of his protestations, you know, he wasn't really a friend of Epstein. He was gay, and therefore he didn't understand what was going on with the girls and the women. In fact, Peter is in the emails, absolutely in the heart of all of this, celebrating when Epstein is released from jail alluding to boys and prostitutes and well hung and parties i mean it's actually you know to me was completely sickening but also quite shocking it wasn't what i thought um peter manderson was well it's a very good observation but by the way there's a heroic effort by journalists around the world to go through all these documents and bring these stories together in coherent ways first i actually agree with you i didn't know you're going to bring this up i I always sort of thought it's a bit weird, you know, suddenly my experience among my friendship group, men don't talk to each other, you know, about women in this way.

5:30And then you see all these emails and you go, well, maybe, you know, there are a bunch of men who do. And you would never really thought, or certainly I wouldn't have thought Peter Mandelson would be one of them. I think I started the week or maybe it was at the weekend when it all started to come out. I think Peter Manilson was one of my bitterest political opponents. And the closest I came to having my political career obliterated in 2008. And Peter Manilson was absolutely central to that. And I guess I was sort of endlessly intrigued by why he was such a good political operator, why he was such a strong political opponent of mine.

6:04And that's why I built up a relationship with him and started talking to him as the years went by. and I think you still have to say you know he was a big figure in British politics who did a lot to change the Labour Party and indeed you can argue was actually doing a pretty good job as ambassador to the United States and there's also a bit of me that doesn't like the kind of blood sport element of kind of when someone's down everyone piles in all the kind of hounds are chasing the fox and you know I say this is someone who's edited a newspaper and been part of that chase. So those are my kind of initial reactions.

6:40But I have to say all the kind of emails coming out, I think I have a similar reaction to you. And indeed, listening as I was listening on the radio this morning to the women, you know, who are the victims of all of this, telling their stories, you know, it's just utterly appalling and unforgivable, really. And the truth is that what these emails say about Peter's relationship with Epstein, are just very, very different from what he was saying, not just in public, but also in private about his relationship with Epstein. He hasn't spoken yet, but nevertheless, it is pretty disgusting and pretty shocking.

7:16And it speaks to, doesn't it, it's not just abuse of women, it's also abuse of power and abuse of trust in government and abuse of trust in your colleagues. And so not good at all. The other thing is that, you know, I always saw Peter as the kind of person who was a bit of a Svengali, who kind of gathered acolytes around him, who kind of hung on his words. Actually, his relationship with Epstein is like Peter is the one who has been kind of lured into this weird, dependent relationship. I mean, there were moments in these emails where you think, what are you doing? He's asking Epstein for permission to talk to people.

7:54And Peter could have made his own decisions. What was it about this psychopath which allowed him to have those kind of relationships? And then, you know, Peter, you're right, hasn't said anything. Although there was a quote on Newsnight last night. The BBC understands Lord Mandelson maintains he's not acted criminally, did not act for personal gain, and argues that confronting the late noughties, the biggest financial crisis since the 1930s, sought Epstein's expertise in the national interest. Now, the police are now investigating this formally as to whether or not it was an abuse of public office.

8:27When we saw at the weekend and on Monday what he'd actually done, that he was within minutes forwarding on to Epstein when he was a member of the cabinet, internal notes written for the prime minister by Downing Street staff, which he was copied into, which have, in the one from Nick Butler, they look forward to asset sales the government may make in order to get the national debt down. And they're passed on to Epstein. Epstein, a financier, who, by the way, Peter is also in conversations with about lobbying the chancellor, Alastair Darling, in cahoots with JP Morgan to change the bank bonus tax.

9:12Peter says to JP Morgan, to Jamie Darwin that he should mildly threaten Alistair Darling this is while he is actually in the cabinet it's revealing secrecy and market sensitivity but how do you feel about you were actually sitting at that cabinet table too and obviously I know you've had a long and kind of complicated relationship with Peter Mandelson politically but how do you feel because obviously Gordon Brown has come out of you know the woodwork to say his utter disgust and horror and says he's sent information to the police and all this kind of thing I mean how do you feel because you were you were sitting around that table and you obviously had no idea what this was happening.

9:47Look, it was no surprise to me that Peter didn't agree with every aspect of Alistair Darling's economic policy. I mean, nor did I. And that's what it is to be in the cabinet. You have robust debates within the cabinet. If you are the agricultural secretary and you're a bit worried about what the Treasury is doing on farming tax, you may say to the president of the NFU when you see them at a meeting, the thing you ought to do is tell the Treasury they're getting this wrong. It's a bit more complicated when it is a global investment banker from the United States. And you tell them to be threatening.

10:20This is not the best language. But when you are passing on internal notes about the financial crisis, but also what the government is intending to do, which were clearly secret and market sensitive. When I first arrived from the Treasury in 1997, so this is as an advisor back in 97 a long time ago really before electronic communication had properly taken hold I had in my room a huge safe which went you know two meters high with a combination lock and at the end of every day I picked up everything from my desk and put it into the safe and locked it because that was the culture and I remember one time leaving some papers on the floor of a hotel and then realising I'd done this and rushing back to grab them.

11:07Everything that we were taught, and you would have been the same, if you're in the Treasury, you are seeing every day market-sensitive information, which has to remain secret, which you discuss within government. But if it was to be revealed, that would be not only a massive breach of trust and actually a breaking of the law, but also it would give people an unfair advantage. And so the thing I felt, and I think talking to people who were in that cabinet at the time, those acts are just beyond anything that I imagined a cabinet minister doing. Totally shocking and actually slightly bewildering, because I don't think I'd ever seen that before.

11:45And if you spend years in the Treasury, you would never do that because it is so counter to everything which is inculcated to you from the first day you arrive. I think you have to unpack a bit, as you've just done, things that a kind of normal behavior in inverted commas so it's perfectly normal for cabinet ministers senior advisors in government to have conversations with people in finance for example bankers and the like of course it's also as you say it might not speak to how functional you'd like government to be but the truth is quite often a cabinet minister who's not you know the chancellor or the prime minister might say well don't ask me i've got no influence over this thing you know you need to have a go at the chancellor to get the policy changed so that because that's one of the revelations as you were saying in the email there's an odd there's one odd thing which is where he kind of confirms there's going to be a european bailout and that is market sensitive but there was a lot of speculation about it and it's a very weird day it happens it actually happens in between the 2010 general election and the formation of the coalition government it's in the kind of five days when Peter presumably knew he was about to be out of office.

12:53And I think we need further work on, you know, the police are doing their job on whether that was deeply market sensitive a lot. But what is inexplicable, where I go like, there is no excuse for that at all, is, as you say, the forwarding of internal Downing Street emails almost immediately to an external party. And it turns out a person that you have a financial arrangement with or your family as a your partner has a financial arrangement with i mean that is absolutely that you know sometimes in these political scandals i always think like oh there but for the grace of god goes any politician this one you just go there is no way i would ever do that and i don't know anyone who would do that and so i thought that that's quite striking this although it's interesting one of those you know i think there's a kind of little bit of a mystery because one of them which is the shritty vadira note to gordon brown about getting the banks to lend is forwarded by someone who's not Peter Mandelson and their name has been redacted.

13:49I'd merely note that there's a little bit of a mystery like where one of them comes from. One thing you just said there is that Peter received money from Epstein and he had, according to the emails, Peter says he doesn't remember receiving it, received tens of thousands of dollars but that was five or six years before. There was a payment to Ronaldo, the partner, for an osteopathy course. By the way, the irony that is osteopathy when in the Profumo affair, the guy who linked up the cabinet minister who resigned with Christine Keeler and then with the Russian naval attache, which is where the kind of question of official secrets and treason happens, was Stephen Ward, who was an osteopath.

14:31I mean, the irony is just so fabulous. But that was$10 ,000. That isn't the issue. The issue is this, Peter knew that Labour was going to lose the general election, likely, even though he was running the election campaign. He was clearly already writing his book during the election campaign or before, but he was also thinking about what job was to come. And a few months later, there were emails between Peter and Jeffrey Epstein about Peter getting a job at Lazard's, but needing Epstein's help in order to try and strengthen the JP Morgan relationship, because that would be useful. I think it wasn't about receiving payments in this period.

15:08It was basically a relationship and job consultancy that Epstein was offering. What he was doing was essentially sorting out Peter's next stage in his career, which would be financially lucrative to Peter and useful to Epstein. And what Peter was doing, in thrall as he seems to be, was trading information in order to show his usefulness and willingness to do so at a later stage in the next stage of his career. We were thinking we were fighting an election. We were trying to beat you. We were trying to kind of deal with the aftermath of this global financial crisis. Peter was overtly planning the next stage of his career.

15:49And if that meant undermining number 10, Gordon Brown, the talks with Nick Clegg, Alistair Darling, he did it because he thought it was in his interests and Epstein's interests too. I mean, astonishing. finishing so talking about prime ministers who might be out of office let's jump to the immediate and current political scandal in britain because there'll be a police investigation of peter manderson he may end up in court and so on let's reveal a bit of the wiring of this show because we talk earlier in the week don't we but and we talk about like the topics we're going to discuss and we thought we would just sort of talk about peter manderson and i don't think when we were talking a couple of days ago we thought you know this would so quickly escalate or suddenly i into a full-blown crisis for Starmer.

16:32There are different kind of features of political crises. Some are like all-encompassing things that kind of threaten the standing of the government. Others are things that are very focused on a single cabinet minister, and it's really a question of whether the prime minister gets rid of them or not. What is unusual about this, it's not unique, but it's unusual, is that it's the prime minister in the crosshairs. And usually a prime minister is protected because they can fire someone in the cabinet or they can fire someone in Downing Street and we'll come on to that to sort of protect themselves.

17:04So, you know, if you take the Windrush scandal, you know, Theresa May was the Home Secretary who introduced all that, but it's Amber Rudd who has to resign. But this feels like the kind of floor is opening up a bit. Suddenly they're staring into the precipice in number 10 because they're very vulnerable now to anything that's been said internally on emails and, you know, WhatsApp messages and so on. about Peter Manilson's appointment as US ambassador. And what's clear, isn't it, from the last 24 hours is that they've completely lost control of the parliamentary Labour Party and the handling of this.

17:37We should, by the way, note, Kimmy Baden-Ock and the Tories have done a pretty good job of being in opposition this week and tabling the right motion and finding the kind of pressure point on the PLP. But the politics has been all around the PLP. Angela Rayner emerging as the kind of leader of the opposition inside the Labour Party. You know, they've got no control now over the release of all this internal communication. It's a sort of basic question. It's like, just how much trouble is Keir Starmer in? I think Keir Starmer and Number 10 are now in big trouble. Look, they've been in trouble for some months.

18:11And we were saying at the beginning of the year, the test for Keir Starmer and his administration is every week from now to what look like difficult May local elections. Are you advancing the argument? Are you getting back on track? Are you taking people with you? Are you improving things that you can't really afford a week where you have a huge setback? And this week is a massive setback. But I think what it does is it reveals like a deep structural distrust. And that's what happened yesterday. I think it happened in PMQs. And it's quite surprising because I think most journalists, most political observers would think Keir Starmer clearly knew that Peter Manderson had had and continued to have a relationship with Jeffrey Epstein after Epstein had been convicted.

19:00This wasn't a great revelation. But there was a moment yesterday in Pramice's questions in which Kemi Badenot put that particular point to Keir Starmer. And he gave a very stark answer. And that has sent things into a spiral. We should just hear that answer. I am asking the Prime Minister something very specific, not about the generalities of the full extent. Can the Prime Minister tell us, did the official security vetting he received mention Mandelson's ongoing relationship with the paedophile Jeffrey Epstein? Prime Minister. Yes, it did. As a result, various questions were put to him. I intend to disclose to this House the national security prejudice to international relations on one side.

19:52I want to make sure this House sees the full documentation so it will see for itself the extent to which time and time again Mandelson completely misrepresented the extent of his relationship with Epstein and lied throughout the process, including in response to the due diligence. So just to explain exactly what was happening yesterday, the Conservatives had put a motion to the House for their backbench Opposition Day, which is called a humble address, which is Parliament asking for information. Keir Starmer had decided to amend that motion to say they would do so, subject to national security considerations.

20:38and um angela rayner then stood up can i just ask you on that point before you get to the do you think that was like civil servants and kind of number 10 officials who don't really get politics going oh prime minister you must exclude the national security thing i remember that kind of thing going on with david cameron and you know they're a bit kind of poe-faced about national security and and you need the kind of political judgment to go yeah but it's not going a hold in the House of Government, so point taken, but we're not going to exclude things to do with international relations and national security.

21:10Or do you think it was a deliberate thing like, Christ, we can't release all this stuff? Well, I think it was a sensible piece of government to say we can't release everything. I mean, this motion is everything. Every communication Peter Mannerson gave or received, as the American ambassador he would have been copied onto pretty much everything and so what we're talking about is voluminous and so they would have thought we need to have a kind of sifting and a check the problem is and this is the point that line where he confirms he knew sent i think parliamentary labour party mps into a spasm of oh my god they knew and they still appointed him what a failure of judgment even though that may have been obvious in the autumn and then the second thing was they decided they did not trust this number 10 to make the decision about what should or shouldn't be released and Angela Rayner's intervention was to say that should be handed over from the civil service from number 10 from the cabinet secretary to the the MP chaired and independent security Committee, which is the sort of parliamentary oversight of secret national security information.

22:23And what happened over the hours afterwards, as you had MP after MP saying, I'm going to vote against the government with the Tories, Labour MP saying they're going to vote with the Tories, people saying he's got to go, saying Morgan McSweeney's got to go, they decided they had to basically give in, give in to Angela Rayner's proposal. They amended their own amendment. They've now handed over control of the release of this information. A couple of things which I think are important to say. First of all, big parallel here with the Sue Gray inquiry. Sue Gray was doing that inquiry into Boris Johnson's misbehaviour.

23:01But the problem was there was a police investigation and the police kept saying to Sue Gray, hold on, you can't publish information which would compromise our investigation. The police are saying the same thing now to Number 10. You can't release information which will compromise our investigation. Quite complicated that because the investigation is into 2008, 9, 10. This is about information in 2025, but I guess it goes to Peter Mandelson's integrity and whether he was a serial liar. The result is this is not going to be over quickly. This is going to be drawn out. They can't get this information out fast like Sue Gray couldn't.

23:38And then I think the second thing is, if you go back to the conversation we had about this in September, when Peter Mandelson was sacked by Keir Starmer, we said the question is going to be, what did Number 10 know when they made the appointment? Did they ask the difficult questions? Did Morgan McSweeney and Keir Starmer give him a free ride? Or did they listen to the concerns which are clearly being raised within the system? at the time we thought the conservatives would go for that and in fact what happened was it all sort of slightly got forgotten they moved on to a new row do you remember the china spies row i remember on this podcast rather mischievously saying i wonder whether morgan mcsweeney has decided that having a row about china spies might be easier to deal with than the row about peter manderson's appointment but actually the conservatives went along with it so although the Conservatives have been fleek to foot in the last 24 hours, they sort of missed their opportunity last autumn.

24:35Ironically, it would have been easier for Keir Starmer and Morgan McSweeney to get all the information out last autumn when I think people were inclined to believe that Peter Manderson had been duped by Epstein, but maybe there'd been a misjudgment and then we then saw that it was worse than we thought. Now in the context of the emails released this week, it looks like a massive failure of judgment by number 10 and the scrutiny now in retrospect is going to be much much harsher and so you have this combination of a doubt about the promises judgment and a distrust about whether they're willing to be straight with parliament and the labour party mps i mean it's very very toxic and talking to people last night it was one of those moments where because people were so upset and angry and emotional, it's sort of politics or political leadership just lost control.

25:33It's a pretty toxic combination from Number 10's point of view of three things. I mean, first of all, there's a lot of emotion in the parliamentary Labour Party amongst Labour MPs. You know, there are exploited victims of sex trafficking at the heart of this story. And we're hearing their stories on the TV and the radio, and that's disgusting. So there's a kind of emotional and moral revulsion. Second, there's potentially criminal charges here and the police are involved and so on. When the law gets involved and the police gets involved, it can really kind of freeze politics and cause all sorts of huge ramifications.

26:12And then third, you know, Keir Starmer is just in an exceptionally weak position at the start of all of this, going into this week. and if you think of like the you know the ingredients here that are preying on him it's like lack of control of the parliamentary labor body there was evidence of that all through last year on things like the welfare votes there's um disgruntled and you know sacked people the deputy leader of the labor body was sacked from the cabinet angela rayner sacked from the cabinet the previous deputy leader and indeed sue gray i think is out there saying things to people in private about the number 10 operation and the appointment of the ambassador and then you got the actual appointment process itself i mean it's a bit odd for me to talk about it because i you know was the other candidate for the job but you know there were clearly people around the labor cabinet table at the time and maybe at number 10 or maybe not i don't know the story because i only have you know what i saw at the time who uh like saying do not appoint peter mandelson what i would do if i was kirstama right now you need to get all of this stuff out now you've got to stop this drip drip it's actually you know learn from the epstein files which is it drips drips drips it keeps going you keep under pressure published that's why we're in that's why we're having this conversation in the first place yes okay the scuritats will say that you can't do this the police will say you can't publish anything because they're investigating that's what they say in all cases but this is about the survival of your premiership and the government and you need to get everything that you can possibly publish out as quickly as possible.

27:47I would try and do it in the next couple of days. That is the fire break you've got. And until you've done that, the fire is going to be raging through the forest. The problem is, it's going to be hard for a former director of public prosecutions to tell the police that for political reasons, he's going to release information that they don't want released. But I'm sure that politically, he needs to do that. There is a common individual which goes through the treatment of Angela Rayner or Louise Haig or the nature of the reshuffle, the mistakes which have been made, which is Morgan Bitsweeney. And I think probably he is the person who is immediately in the firing line in these days.

28:23I started this conversation talking about the Helen Rumbleau piece in The Times, but the Alva Ray piece in The New Statesman, where she goes through in a very forensic, detailed way the story of the last year and a half. What comes through in that is quite how much Peter Mandelson was involved in the operation of this government, including the detail of the reshuffle and policy decisions through his relationship with Morgan McSweeney, which goes back a long way. So it goes far beyond, you're saying it goes far beyond relations with Trump and being the American ambassador. It's like he's being consulted on personnel decisions in reshuffles and stuff like that.

29:03Everybody believes. That's what Alva Ray says in her piece. Alva Ray, by the way, was a student journalist who wrote to me when I was editor of the Evening Standard saying, please can I have a job on the Evening Standard? And one of the better decisions by any shit was to give her a job. So I'm absolutely thrilled that she's doing so well. Her piece was being passed all around Parliament yesterday. Much wider influence of Peter Mandelson than you might have thought. The piece starts by saying the two candidates which Sue Gray wanted were either Karen Pierce, the existing ambassador to carry on, or David Miliband.

29:38it was decided there should be a more political figure. Interestingly, they didn't think of David Miliband as a political figure. Therefore, you and Peter were the names in the frame. That Keir Starmer, according to Alva, originally wanted you. And that Morgan McSweeney said, no, Peter Manderson's the guy. He's my guy and he's the guy we should have in there. I don't know whether that accords with your understanding of what happened. I always thought it was the other way around, to be honest, but I have no evidence of this. I mean, I had conversations with Morgan McSweeney about the ambassadorship.

30:08which I've kept private. And I never spoke to Keir Starmer about it. And I always sort of thought, you know, when it actually gets to Keir Starmer, who I would say is quite a tribal Labour figure, I think that's one of his weaknesses as a politician. You know, I would have thought, is he going to appoint like me, former Tory Chancellor? I mean, you know, I could see why Morgan McSweeney might think that's, you know, a smart move. So I had always thought it was the other way around. But if it turns out, you know, the Prime Minister was a fan of mine, And well, I want him to survive now. George, can I say that it's such a staggeringly revealing comment that I think I'm going to have to pass over.

30:48We need to end this section, but let's end this section here. All the pressure in Parliament today and on the media today is about Morgan McSweeney and whether Keir Starmer needs to remove him as, you know, the Peter Mandelson whisperer, the guy who was culpable in the decision, which they now are all appalled by. and clearly patience is wearing very thin in this parliamentary party but we know I'm going to put you on the spot Ed is he going to go or not? I think Keir Starmer is under huge pressure and what do we know about Keir Starmer in the past he's been willing to be ruthless and if everybody is saying that's what you've got to do his past reveal preference will be to act but what we know is when in the end as a prime minister as a politician when it comes back to your judgment and your leadership how often do people get strengthened by removing the proxy and how often does it actually turn out to be a very weakening thing so here star will be sitting there thinking if i do that which may it be the thing i'm under pressure to do and the convenient thing how exposed does that leave me next monday because let's be honest this is going to go on for weeks and months now it's going to overshadow the may uh elections going to overshadow the by-election at the end of this month this is not going to be whatever we may think should happen we'll still be waiting for the detail and there is so much detail which can come out and every time you see these epstein files you think surely there can't be more and there is more we haven't even begun the mandelson files if it is the case that keir starmer thought oh george olsen would be quite good as a bastard can i just give him one piece of advice i would override in the national interest this pro forma of police advice you get, which is you can't release anything because it might prejudice some future prosecution, I would override the securitats in number 10 and I would get everything out.

32:43I think you would claim it's in the public interest, but it's absolutely in the personal interest of the Prime Minister right now. And that is exactly what I would do. And in retrospect, that's what they should have done last September. So I'm afraid the dead cat was the wrong strategy, if that's what it was. We've been talking about Peter Mandelson and the crisis of Keir Starmer, But of course, these Epstein files are also causing massive constellation much more widely, not least in the Royal Lodge and in Buckingham Palace. And we're going to turn to the wider collateral damage being done by these Epstein files next.

33:27Welcome back. So we've been talking about the impact of the Epstein revelations on the British government, Peter Mandelson. But of course, there have been much wider ramifications. And these have affected the royal family. Obviously, the former prince, Prince Andrew. Now, Mr. Andrew, Mountbatten-Windsor, is in the frame because of the revelations. Not just actually of the pictures of him sitting over the girl, which people have seen. But I'll tell you, as someone who edited a newspaper at the time, that famous picture of the then Prince Andrew with Virginia Giuffre, you know, with his hand around her waist, you know, he always said was fake.

34:07And I remember every time we had a discussion about whether to put it in the newspaper, we'd have to discuss with sort of legal counsel about whether it was fake or not and all that kind of thing. And the fact that that among the revelations, that just is confirmed to be absolutely true is itself pretty startling, actually, if you've been following this whole thing. for years. I guess the question is, is it enough that King Charles has essentially stripped his brother of his titles, taken him out of the grand residence in Windsor Great Park, put him into a farm on the private Sandringham estate?

34:40Has Charles and Buckingham Palace done enough to kind of draw a line? Or are they still being dragged down by this? We'll come on to some of the other people affected by it, like potentially the Clintons, the crown princess of Norway, and Donald Trump, who lots of people in America on the Democrat side think is the prime target in all of this. But just to start with the royal family, and this is, I was interested in this, you were interviewing on GMB, weren't you? Andrew's royal biographer, who's also called Andrew, Andrew Loney, and this is the exchange. Andrews denies all the allegations. The Metropolitan Police in 2024 didn't investigate.

35:22Surely on the basis of this new evidence, how could they not investigate? Well, I think this is the suspicion that there's one law for the royals and one law for everyone else. That's a terrible suspicion. And that's so damaging to the Crown. The King cannot allow that suspicion to take hold. Well, I think the pressure needs to be put on the Met to investigate. And I think that the pressure is there. The victims' lawyers are talking. I don't think Andrew is going to go and talk to the Senate. He spent 15 years avoiding talking to anyone. He ran away to Balmoral to avoid the summons. He's been financed by the king, and he depends upon that money.

35:52And that is a choice for the crown, not simply for Andrew. Well, I agree. I think the monarchy has an opportunity here to deal with this problem and actually to save itself. I think if it leads to greater accountability and transparency, it will have made itself fit for purpose. The police are now reconsidering whether they need to do a formal investigation. The allegations from the Epstein emails is essentially that young women were trafficked to the UK in order to have sex with Andrew at the Royal Lodge, allegations that he denies. The problem in the past was when these allegations were denied, Andrew was able, with the help of his mother, to pay millions of pounds to Virginia Dufresne to get the allegations away.

36:39She's now obviously passed away. But it's not possible for Andrew personally, or I don't think for the king, to pay off victims in this context. But can he really say he's not going to talk about this publicly, give evidence to Congress? What happens if there is police investigation? I do think that it is putting now the Crown in a very difficult place. And you can see the way in which they're responding. The palace sources were saying a day or two ago, this is now for Andrew's conscience. Although the question is, is that really enough? His younger brother, Prince Edward, was out in, I think, Dubai a couple of days ago doing an event.

37:22And this is what he said when he was asked about his older brother. No, I think it's really important always to remember the victims. And who are the victims in all this? I mean, who are the victims? Always remember the victims. I don't think that the palace stonewalling or Andrew Stonewalling, while he lives in relatively comfortable surroundings in East Anglia, is comfortable. We know the Prince of Wales and his younger brother take a much harder line on this. Neither the king or Queen Camilla will be at all comfortable. They'll be deeply upset by what these allegations are revealing. But I'm not sure that the crown can just hope this goes away because I don't think it's going to.

38:10But what could they actually do? I mean, they could compel Andrew to go and give evidence to the Senate, although on the evidence of his disastrous interview with Emily Maitlis, who did an exceptionally good job in that interview, of course. I don't think him giving testimony is going to draw a line onto it. He'll only kind of probably dig him in further. But what can they actually do? I mean, haven't they, like, they've stripped him of all his titles, they've taken away any single pound of public money that finds its way towards him. What can they actually do? He is still formally eighth in the line of succession.

38:42He is living, financed by the crown. I mean, it will be King Charles's personal money, but, you know. Yeah, it's the Windsor family's money. Yes, but I mean, I'm not sure whether people in the public really make that distinction. You're talking to a former treasurer of the royal household. I am. that's one of the jobs of chancellor things check he's living on the royal estate um earlier in the week he was out riding horses in windsor great park for the media of course there are things they can do we talked in the past about whether or not it wouldn't be better for andrew to live abroad that is absolutely in the king's gift do they make a full and final financial settlement and then say over to him do you think they should get edward back from dubai and send andrew to Dubai.

39:28Every time with these Epstein emails, people have thought, well, at least we've got to the end of it. More has come out. Although the Department of Justice are now saying it's all out there, Congress say there's still 50 % of the emails still to be released. This latest batch, as you said, the Clintons who had been refusing to give evidence to Congress have now decided, given the scale of the evidence and the public horror they are now going to give testimony is causing a huge crisis in the royal family and the governing class in Norway. We should just say, shouldn't we, the crown princess of Norway, who's not having a great week because her son's on trial for rape, she's got these unbelievably embarrassing email exchanges with Epstein, all about good-looking women and going to Paris for adultery and Scandi women are better, and then inexplicably calls Epstein a sweetheart.

40:26So that's a kind of crisis for the Norwegian monarchy. Bill Clinton, that's the kind of Democratic Party's aristocracy, isn't it? Bill Clinton has spoken at every single Democrat convention since he was president and is part of the kind of ruling elite of the Democrat Party. but you know to be fair to him and hillary they've now volunteered maybe they had a few options but they volunteered to give evidence unlike andrew and dp jim anderson what about trump in all of this i mean it's sort of extraordinary i mean he's the biggest player on the chessboard you know he's the president united states and yet you know he's actually going around at the moment saying i've been utterly cleared it's all the conspiracy against me he's been picking on reporters who dare raised questions about it.

41:15Quite extraordinary. And it's just not clear, is it, whether they've just not published any of the emails that detail things about him because he's entirely absent from this release of the papers. Although we know his name is mentioned very many thousands of times and there were photos of him in these files. Look, I mean, this started when Pam Bondi said they weren't going to release any of these papers because they were not pursuing any criminal charges and there was nothing to release. And, you know, I mean, in retrospect, that was just clearly untrue. The Trump new strategy is to say, look, you know, this is boring.

41:52Move on. It was the most astonishing exchange between him and CNN's Caitlin Collins this week in the White House. Just listen to the way Trump talks to this journalist. Maybe get onto something else. But what would you say to people who feel like they haven't gotten justice, Mr. President? Something that people care about. Yeah, what did you say? What would you say to the survivors who feel they haven't gotten justice? You are the worst reporter. CNN has no ratings because of people like you. You know, she's a young woman. I don't think I've ever seen you smile. I've known you for 10 years. I don't think I've ever seen a smile on my face.

42:25Well, I'm asking you about survivors of Jeffrey Epstein, Mr. President. Because you know you're not telling the truth. And you're a very dishonest organisation. And they should be ashamed of you. telling women they don't smile is a classic misogynist trait assuming that the public are bored of things and want to move on that has not been the way things have turned out with these epstein files in the last few months interestingly it's elon musk who was mentioned in some of these files who has been out there saying look there should be a full investigation i mean if you think about the grooming gangs, we're talking here about mass, what, you know, allegedly, Mola Epstein was convicted, but lots of other people involved in underage sex or trafficking.

43:11In any other context, you would have an investigation. So far, the only person who is still in prison is a woman, Ghislaine Maxwell. I mean, there've been no men so far. It is utterly shocking and I don't know that Donald Trump can continue to get away with this. Of course when Musk spectacularly fell out with Trump last year he tweeted didn't he Epstein files about Trump but I will just draw for the third week in a row everyone's attention to the US carrier group that is sitting off the coast of Iran. If you're a kind of conspiracy theorist or you're a deeply cynical about politics, you would say that sometimes US presidents take international action to divert attention from problems at home.

44:00So we will see. We will see. The other thing which we're just going to end by talking about is a decision Donald Trump has made, appointing a new chair of the Federal Reserve. As I said, the beginning of the podcast, probably not got outside the business pages, but decision of great significance. And also an old friend of yours, I met him at your birthday dinner. a few months ago. So after the break, we're going to talk about Kevin Walsh.

44:36Welcome back. So Jerome Powell, standing down as chair of the Federal Reserve, the most important individual, probably in global economic policy, chairing the committee which sets interest rates for the United States, but that impacts all around the world. As we've talked about in recent weeks, Donald Trump has been picking a huge fight with Jerome Powell because he thinks Powell should have cut interest rates much more than the Fed has been willing to do and ended up with a rather surprising, I would say spurious, investigation into whether Jerome Powell has broken the law and been corrupt in the Fed's refurbishment, big multi-billion dollar process which is going on.

45:27And there's been a lot of speculation in financial markets that would Donald Trump appoint a narc, somebody to do his bidding, somebody who would not be for low inflation and for stability. In fact, he has appointed Kevin Walsh, who has in the past worked at the Federal Reserve as a governor, somebody who is well known to global financial markets. But there is a question as to what Kevin Walsh has done in order to persuade Donald Trump to give him this job. And there was a really good column by Martin Wolf in the Financial Times this week called Reading the Runes on a Walsh Fed. And I'm just going to read the first paragraph because I think this sets up the question about Walsh, which we can then talk about.

46:15If confirmed as chair of the Federal Reserve, is Kevin Walsh going to be an inflation hawk or Donald Trump's poodle? His repeated statements on monetary policy and the broad obligations of the Fed suggest the former. But his more recent statements on the inflation outlook and the fact that Trump chose him very much suggest the latter. More broadly, is he a man of conviction and judgment or is he a weathervane blowing with the wind from the Republican side of politics and so in favour of loose monetary policy when Republicans are in power and of tight money when the Democrats are? Because, of course, famously, Walsh was the guy back in 2010 who attacked the Fed for cutting interest rates too much, which he said was a big inflationary risk, rather the opposite of Donald Trump's concerns at the moment.

47:03But you know Kevin Walsh really well. What is your view? Is he a political hack? Is he a hawk? Or is he seeing the world in new ways? Well, first of all, I think he's an excellent choice as chair of the Fed. And, you know, everyone who has a problem with the many other things that Donald Trump does, I think when it comes to this, the general reaction has been he's made a good choice in Kevin Walsh. But what is Kevin? I first met Kevin when I was in my 20s. He was exactly the same age as me. And I went as the kind of bag carrier to the White House, not to meet the president, but as part of a visit with the then Tory leadership to meet the economic advisor to the president.

47:48And the economic advisor had himself an advisor, and that was young Kevin Walsh. And we were the same age and we were doing the same job, sort of taking notes at the back of the room. And that's how we struck up a friendship. And we've been really good friends ever since. And he was both at my wedding and my birthday, like you. So, yeah, I know him really well. And I think in many ways he's a pretty sort of orthodox choice from Donald Trump. If you look at the other candidates that Donald Trump could have appointed. And I would say, you know, two things to people who say the kind of thing. I actually thought the Martha and Wolf column was very, very good.

48:21And it's worth reading if you're interested in these things. But there's always an element of people who write about these things, which I think is a bit unrealistic. I mean, Donald Trump is the person who makes the appointment. So it's no good being a Donald Trump critic. You ain't going to get the job. You're not going to get appointed by him. And that's true, by the way, of previous people appointed by previous presidents. And second, Kevin's a Republican. And there are lots of people who don't like Republicans and lots of people who are Democrats and they're never going to like a Republican.

48:47And when I first met Kevin, George W. Bush was the president, and that was why he was in the White House. So, you know, Kevin is a Republican, but he is extremely experienced. And he has been there at some of the toughest moments that the Federal Reserve has faced in his history, including, you know, he tells a very gripping story about being in the room on the day they decided to let Lehman Brothers go bust. probably the kind of pivotal moment of the entire financial crisis. And he was one of only two or three people in the room with Ben Bernanke at the time. So he has seen it all. And the fact that, as Martin alludes to in his column, the things he was saying in 2010 are very similar to the things he's been saying in 2025, 2026, I think also speaks to Kevin's consistency.

49:35And that is that the Federal Reserve, I think he would say this of other central banks, have overreached They've gone beyond their mandate. Their job was to control inflation. They took their eye off the ball. The printing of money has allowed large fiscal deficits to emerge and essentially let governments off the hook. Extending the interest of central banks into all sorts of things like climate change or equality in society, these are not what they're paid to do. And it inevitably draws them into the political arena when they need to stay out of it. But those are all utterly consistent arguments he's made and what he really believes.

50:15I think the kind of economic judgment which he will come under most scrutiny on is he thinks, and I would say he absolutely believes this, and he's said this to me for many years, that we are undergoing in our world a massive technological revolution with things like artificial intelligence that is inherently deflationary. and highly productive. And therefore, you can have quite high levels of growth without a risk of inflation. And therefore, the Federal Reserve has been maintaining interest rates too high, because what the US economy is going through is a burst of productive growth. And therefore, you could actually have the interest rates lower.

51:04And Kevin, by the way, is not just, you know, he lives in New York, but he teaches at Stanford. He's very connected in Silicon Valley. I've often met with him out there. So he, you know, he's pretty close to that technological revolution. So that, I think, is the judgment that's going to come under most scrutiny. And some will say he says he wants to cut interest rates because he wanted Donald Trump to give him the job. And it's hard to imagine Donald Trump would have given the job to anyone who said they were going to put interest rates up. But at the same time, I would say that has been his consistent economic argument and there are lots of good economists who agree with them and there are lots of economists who disagree with them.

51:39And the truth is the markets as you said have not been destabilized by the Walsh appointment. They don't see this as a big threat to stability and the inflation target. The markets also expect the US Federal Reserve to cut interest rates twice over this year and Kevin Walsh will deliver that. He'll tell Donald Trump I'm delivering for you but the truth is that's what would have happened if Jerome Powell was still chairing the Fed and if Kevin Walsh tried to impose something bigger on that I mean you know he's one vote of a number so even if he wanted to he won't be able to I think I mean the interesting thing about Walsh I mean I think the point you highlight is the most important one but just to say first of all I mean his view in 2010 that the Fed was making an inflationary mistake was controversial I would say that isn't actually judged to have been a good call.

52:33But if anything, that was on the hawkish side of things. And if you want to be chair of the Federal Reserve, having been on the margin a bit hawkish probably doesn't do you any harm. The arguments he said over the last couple of years that the Federal Reserve's been too broad in its remit, use QE too much, being too focused on forward guidance where they're trying to predict the economy and unemployment and growth and give guidance to markets about their reaction function, always pretty risky. I agree with them on that. Broadening their remit to look at sort of kind of wider sustainability of the environment.

53:06I think you and I both gave evidence to the House of Lords Select Committee saying that we thought that for the Bank of England, that was kind of a risky thing to do. Paul Krugman had a sort of an attack on him, where he said that Kevin Walsh tended to want lower interest rates when the Republicans were in power and higher interest rates when the Democrats were in power. But the exception to that was the period after he didn't get the job from Donald Trump in the first term and it went to Jerome Powell. But, you know, I think you can make a pretty good economic argument that those were sensible judgments.

53:36It all comes down to your point. If there is an AI revolution, if there is stronger productivity growth and it is possible to have low inflationary growth, then good. and you know people point out that Greenspan certainly got into that kind of mindset when he was early in the job as head of the Federal Reserve about technology but it's got to be data driven if in the end Walsh looks like he's taking a punt which the data doesn't justify he'll lose the support of the Federal Reserve governors and he'll lose the support of markets whereas if in fact that is what the data reveals then that will be the right stance to take in monetary policy terms it will be possible to have stronger growth and keep inflation low and my sense is that he is a very small c conservative traditional central banker in his mindset so he won't want to take risks and punts which he doesn't think are justified by what's in the the data and if that's what he's going to do in the approach he's going to take my prediction is that he will be popular with financial markets he'll take the federal governors with him.

54:49He'll make the right calls, but he might really wind up Donald Trump. But you know, once you've got the job, doesn't matter, does it? And in the past, what's Trump's revealed preference? Powell, Walsh, Mnuchin, Besant. He's always chosen sensible rather than wild people to go into these economic policy jobs. And this is another example. I'll tell you an interesting thing if you want to kind of things to watch a bit in the friendship group he's also a really good friend of Mark Carney's and Mark when he was governor of the Bank of England actually got Kevin to do some work on reforms at the Bank of England they definitely have a different relationship with Donald Trump these days there's some you know watching the Mark and Kevin dynamic is certainly going to be So if you're part of this group, it's going to be quite interesting to watch.

55:44Would you advise Kevin Walsh to seek to be the bridge between Donald Trump and Mark Kiney? Well, if you're Kevin, no, I'd stay well out of that. Totally. And, you know, the thing about Kevin is he's a very, very loyal friend. I texted him to say congratulations when the news emerged last week. and much to my surprise even though we are good friends he immediately called me and said i you know i won't go into the conversation but he was clearly just so kind of chuffed to get this great job and i felt i felt you know i felt really proud of my boy and just just you know between you and me you know not for wider circulation what did he say he thought the terminal rate was for the fed did he think two rate cuts this year was enough or was looking for three um just you know a bit of inside information well if you remember we started the podcast uh with a conversation about how peter mannison passed on confidential information and it's facing a criminal investigation so uh i think uh we will i would advise kevin not to tell anyone what he wants to do uh except to the members of the federal open market committee Well, we will be back next week.

56:58And who knows what will have happened in British politics and global politics over the next seven days. But we'll be back. And of course, we'll be back on Monday with ex-minister's questions. Yeah. Or you can get it early and ad-free if you are a valued member of our Kitchen Cabinet or Gold subscriber. Kitchen Cabinet members also get our bi-weekly newsletter and our members only chat and our political currency mugs. And we will see you on Monday for EMQs. See you then.

57:30Thanks for listening to Political Currency. This has been a Persephoneca production.