EMQs: Is a two-state solution still possible?

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1:57Ed Balls: Hello and welcome to EMQ's Ex-Ministers Questions. And this is the last time that you and I are going to be doing a live EMQ for a couple of weeks. We are on holiday in August, but we've got some brilliant EMQs all ready to go.

2:10George Osborne: Yeah, that's right, haven't we? We do try and answer all the good questions that we get sent, and we don't always manage to do them in the week, and sometimes we tend to choose the more kind of contemporary questions, but some are timeless and then we bring them out for our summer episodes and i hope you can enjoy that and also uh you'll hear we've got some special guests coming on for our main podcast as well uh indeed we're having us one of the special guests is also asking us a question today so you'll hear about that uh later on but um you're looking forward to the summer

2:42Ed Balls: i am looking forward to the summer although i've got another week of good morning britain to go all next week and then um i'm up to edinburgh my um daughter is in a play in edinburgh which she's acting and has written and you know the amazing thing this is at the fringe the edinburgh fringe and the play she's written is called down to chance is about the um the story of the 1964 massive earthquake in alaska and the play is about a local radio station which carries on broadcasting through the earthquake and the rescue effort. And it's called Down to Chance because it was a young woman journalist called Jeannie Chance, who became a international star because she was the only person broadcasting in this kind of unfolding disaster in Anchorage and in Alaska.

3:28Ed Balls: And the first day of her play on Wednesday was the morning in which we had one of the largest earthquakes of the last hundred years in Russia, in Eastern Russia, which then led to tsunami warnings all across the West Coast of America, including Alaska down through California to Hawaii. So, you know, history repeating itself. If you want to hear the story, the story of that 1964 earthquake and potential tsunami to follow, that's a key part of the play. Then down to chances at the Edinburgh Festival, the Pleasance Theatre, every Tuesday at 10 past two. Bit of a plug for my daughter.

4:07George Osborne: I wish her well. You know, I've been to the Edinburgh Festival twice in my life and both were so memorable. The first time I went when I was 18 and I just loved it. And I took part in a, there was a 24 hour poathon. They were basically reading poems all over Edinburgh over a 24 hour period, mainly from stars, but some of the kind of night shifts required people like me to read a poem. But it was brilliant. It was such fun as a kind of young student. And then I went when I was chancellor with my son, who was a teenager at the time. And the amazing thing was, even though I was like the chancellor checker I had been for several years, not all of my policies were massively popular in Scotland at the time.

4:47George Osborne: I went with him and we snuck in at the back of all of these comedy shows and no one knew we were there. We were just going to come in at the back and they were quite often like jokes about the government. But it was brilliant. I remember the sun was shining. I probably say, I think the Edinburgh, if you've never done the Edinburgh Festival, We did do the formal, we did the fringe, but we also did the, you know, the thing in the castle with the tattoo and the military bands because there's so much going on. If you've not been to Edinburgh at some point in your life in the month of August to do all this, then you are definitely, definitely missing out.

5:21Ed Balls: Excellent. Let's get on with our EMQs today. Our first question is from Darren and his question is voiced by one of our producers. Hi, Ed and George. You keep going on about a two-state solution. How do you propose to go down that route? Are you sure the Israeli electorate would support a government entering into negotiation with Palestinians? Or are you making an assumption that died along with 1 ,200 Israelis on October 7th?

5:45George Osborne: No, I think, look, Darren asks, of course, this unbelievably pertinent question about how realistic is it that there is going to be a two-state solution to the Israel-Palestine conflict? And there is a kind of irony, isn't it, that the very moment that the French president and the Canadian prime minister and quite probably the British prime minister are recognizing the state of Palestine, the prospects of that state actually ever existing in any kind of form that you or I would recognize as a functioning state are probably as remote as they've ever been in our life. and people have been talking about a two-state solution for decades and decades and in calmer times when we haven't had these you know situations with Israelis held hostage in Gaza and the you know Israeli army you know fighting in Gaza and the you know starvation you're seeing in Gaza so it's you know it is a unbelievably difficult time to imagine that this two-state solution is going to emerge.

6:51George Osborne: And you also have an Israeli prime minister who doesn't make much secret of the fact he doesn't actually believe in it. I mean, his argument is it's not realistic because you can't ever really guarantee Israel's security if you have a fully functioning Palestinian state on its borders, given the infiltration of Palestinian politics by terrorist groups like Hamas. I mean, that would be, I think, his argument. um so to kind of we could spend obviously the whole show talking about the middle east i mean i think to the very specific point that darren makes is you know israel is a democracy uh it may be you know a democracy where people complain that some people can't vote whatever but you know the people citizens of israel and they're not all jewish do get to vote in this democracy and And so the kind of, you know, the nature of any democracy is a government has to be able to command a majority in its parliament or its political system.

7:50George Osborne: And so the kind of politics of the coalition, the Netanyahu coalition or any other coalition are very important. And it's no good wishing on Israel that it undertakes certain things if the people of Israel are not prepared to vote for that or support a government that would advocate it. And so for anyone who is putting forward a two-state solution at the moment, you know, what they have to address is, I think, perfectly legitimate Israeli concerns. And we talked on the main podcast about some of the things Israel is getting wrong or the Netanyahu government is getting wrong. But the legitimate Israeli concerns about their own security and the survival of their state when they're surrounded by people who say they want to destroy them and kill them and establish a Palestinian state from the river to the sea, which basically means eliminating the state of Israel and presumably the people in it.

8:41George Osborne: And for people who've been through all, of course, they're not prepared to go through another one. So, you know, providing some assurances that that second state would not be an immediate imminent threat to Israel's life and security is at the heart of trying to provide a solution. And I'm trying to find a realistic answer to who is supposed to be the government of this Palestinian state in Gaza and on the West Bank. because if it's going to be you know death wishing jihadists in hamas then obviously israeli citizens are going to say no thank you and they're never going to support a government that proposes a two-state solution so i do think you know the the the democratic element of this in israel is an often neglected part of the equation that's definitely right um in the end

9:34Ed Balls: though it's a choice of um of of routes isn't it um what is the alternative route um the two-state solution route has been on the table for a very long time um i think you are right there is no prospect of a two-state solution while hamas is controlling gaza they cannot be a negotiator towards any two-state solution um at the moment it feels after the um the tragedy um and the terrible killings on October the 7th, that any time soon Israel reaching an agreement on a two-state solution is going to be very hard indeed. And it may be that very many people politically, democratically in Israel feel that's just something that they can't support and condone.

10:23Ed Balls: But what is the alternative? If the alternative is for Israel to turn away from a two-state solution, I think that also is hugely risky and costly. I think it increasingly would leave Israel isolated in the international community. I think it leaves Israel very dependent upon the United States and very vulnerable in the Middle East, as they have been, of course, for many years anyway. So however distant the prospect, however hard it is to see the route to it, the alternative route of the Israeli democratic elected government turning its face against any settlement which involves a Palestinian state on Palestinian lands, whatever the borders are, I think that is also hugely costly and risky.

11:17Ed Balls: And that is why I think very many people who are realistic about how hard it is feel kind of very worried about the approach that Netanyahu and his cabinet are taking at the moment, because that's also, Darren, a very difficult and dangerous route for Israel to take. Our next question is from Helen. Hi, Ed and George. This is Helen from near Newbury. I feel my mother died because of the junior doctor strike. She was, her urgent referral on her first stay in hospital some weeks earlier was never sent, we discovered, after she died as a direct result of that first wave of doctor strikes during the winter of 2023-24.

12:02And I just feel with the impending doctor strike happening now, there's going to be more deaths like that, which aren't pinned on the strike, but are clearly caused by it. and I think that's a deeply sad situation and this Labour government has found itself in that situation so I guess my question is what on earth can West Streeting do to get the BMA to realise that perhaps public opinion is not on their side and doctors do need to come back to work? Thank you.

12:33Ed Balls: I do think Helen that look without talking about the details of your kind of very very difficult case and huge sympathy from both of us um on the death of your mother and um you know the kind of complexities which happened there around the junior doctor's strike i've no doubt that um that this is an extent an existential moment for the national health service at the moment two years ago the um the the strikes um were publicly supported because people felt there was a legitimate complaint about the junior doctors about the huge amount to which their pay had fallen behind i think that has shifted now big pay rises for the junior doctors last year even if they don't claw up all the gap an important step in that direction a labor government not a conservative government seeking to get waiting times down and increase investment in the national health service and if the junior doctors set their fakes against working with west streeting and the Labour government to improve the National Health Service and you instead see huge disruption.

13:36Ed Balls: And as you say, deaths and missed operations, I think that is very dangerous for the future of the National Health Service. And there may be people who, within the doctor's profession, who don't mind running that risk for their own political reasons. and there will be people in the BMA who don't want to see a Labour government succeed. But I would say the majority of doctors want a Conservative or Labour government in power to deliver a better national health service and that requires cooperation and collaboration rather than confrontation. And I don't know at what point the doctors will reach that conclusion as a profession and I don't know what the government will have to do to offer olive branches to that point.

14:28Ed Balls: And I don't know whether those parts of the BMA leadership who don't want that kind of accommodation are going to prevail or be routed. But if you lose the consultants and you lose public opinion and you lose the support of mainstream politics, then I'm afraid you're in a very, very dangerous place. And that, I fear, is the route that some in the BMA leadership want to go down.

14:52George Osborne: See, I'm going to say to you, Ed, that you sound like I know you're not anymore a politician and you're an independent broadcaster, but you sound like those sort of Labour politicians who just can't ever believe that the unions aren't enormously grateful there's a Labour government and why on earth they're going on strike? And, you know, you saw that in the 1970s when essentially the Callaghan government was brought down by the trade unions. And now you've got, you know, a Labour government that says, you know, in language that you would use, hold on, we've got a Labour government. We really care about the health service, unlike the Tories.

15:27George Osborne: And we've given you a big pay rise, unlike the Tories. So how on earth can you be going on strike? You know, this is going to be massively self-defeating and you're only going to help the Tories. And, you know, why don't you come to your senses? Whereas I think if you were a conservative, you would say, first of all, well, of course they've gone on strike because they went on strike last time. And although the Tory health ministers and Tory chancellors tried to resist their demand for a 30 % pay rise, the strikes paid off because the moment there was a change of government, they got a 30 % pay rise.

15:59George Osborne: So why not go on strike again and get another 30 % or 20 % pay rise? in other words you know the the government created an incentive for people to go on strike and get huge pay rises which are not equivalent to the pay rises that people in the private sector or the other bits of the public sector or indeed other bits of the health service are getting um so if you're the resident doctors why not so that's the first thing and second um yeah look tori health secretaries and tori chancellors were um also trying to get uh waiting lists down and whatever It's not there's not a sort of just a, you know, sort of virtue because it's a Labour government.

16:37George Osborne: And, you know, finally, this was something I would think that actually Labour politicians should know more than Tories about, which is if you look at the people who actually lead the BMA, the Residence Doctors, the new name for the Junior Doctors, the Resident Doctors Committee of the BMA. These people, as far as I can see, are outright kind of Marxists and kind of hard left organisers. They're not just kind of good, you know, junior doctors just trying to do their best, resident doctors just doing their best. You know, they are very politically motivated young people or younger people. And they are on the hard left on the kind of what we would, I think, recently have called the Corbynista left.

17:17George Osborne: And they're pretty unreasonable and difficult people to deal with. And so I do actually think Wes Streeting, I do admire that he is not kind of, you know, he's calling it out a bit now. He's saying, look, your leadership is out of touch. You know, I'm sure the reason I know about the political background of the leaders of this committee is because some work's been done behind the scenes to bring that to the attention of the public. but you know unfortunately if you do give people who've been on strike a big pay rise shouldn't be surprised that they go on strike again to get another big pay rise i think that's

17:56Ed Balls: just um more venal a view of human nature than i'm than i'm going to sign up to um and um but i totally accept what you say about um aspects of the bma leadership and the fact that they are on the hard left and don't want to work with a with a labor government um i think that uh that it's possible for there to be a sense of common purpose in society. I think it's possible to use a phrase that we can all be in it together. And I think that is what West Streeting was trying to achieve with the junior doctors. And I think with the pay rise he delivered, he thought he had got that. And what happened was when he met with the leadership of the BMA in his office, he thought he'd got that agreement.

18:35Ed Balls: There were things he was going to do around support for doctors and their loans and their training places. He thought he'd got a deal with the leadership and then when the leadership went back to the meeting of the wider committee the wider committee rejected what their own leadership wanted because they wanted a confrontation and the question I'm asking is in the end does that wider committee reflect the view of doctors across the country or is it as you said hard left and out of touch with the members and that's complicated in a profession like the the doctors because I guess doctors on a daily basis stand together and support each other but if it is the case that a doctor's leadership broadly defined the wider committee want a confrontation at the expense of waiting times coming down and whether any government labor or conservative can make the health service work are all the doctors are going to go along with that or are they going to turn around at a certain point and say to that union leadership what on earth are you up to yeah but hold on it would be

19:36George Osborne: a perfectly rational course for a doctor's union to say, look, we absolutely know this Labour government has to get waiting lists down, right? They will be politically dead if they don't, right? They've made a huge commitment to the health service and a promise to improve it. And if we continue to go on strike and, you know, the story, let's get back to the story from Helen, which was about a strike that happened under the Tory government. You know, there are heart rendering stories, but the doctors didn't blink. They kept going on strike. There were endless attempts by endless Tory health secretaries to reach a deal and breach some sort of compromise.

20:15George Osborne: You know, you might think if you're leading the doctors, Labour will blink. They'll have to blink. They'll have to give us a pay rise because in the end, someone is going to tell the Prime Minister, look, whatever Wes Streeting is saying, this is absolutely hugely damaging for us politically. and we've got to find the money somehow so phone up the chancellor and call and enter the doctor strike you know and get it done with and uh so you know i mean you could see why having created you know having created the precedent that you do give in they think we'll have another go and by the way we've got a lot of leverage because we know how important this is for the labor government well

20:56Ed Balls: um it slightly depends whether um whether whether as you said the people who are leading the doctors union are looking for that agreement or not and i think you might look at the pay rise the doctors have had over the last year and think that that had already been delivered and maybe the fight and the confrontation has become more important than than the outcomes and i think that's very dangerous for the national health service i don't think um we're streaking and and rachel reeves and kirstama can afford to to blink because actually they need the money to be going into reducing waiting times rather than simply more pay on a very rapid timetable for junior doctors.

21:30Ed Balls: So that's why I think that the future of the NHS is in the balance.

21:33George Osborne: So we should say, shouldn't we, at this point, that Wes Streeting is one of our guests on the podcast over the summer, over the next few weeks. And I had a really interesting conversation with him. We've just recorded it. Not just, you know, we haven't made it just about contemporary issues, because of course, things move on. But I had a good conversation about what it was like making the transition from opposition to government, what surprised him about being a government minister, what was as he expected, what his hopes and his ambitions are for the future, what he thinks is going right or wrong.

22:06George Osborne: Really, really good conversation. And we have also recorded another conversation with another Labour MP, and that is the person who is going to ask us the next question on EMQs, and that's coming up after this break.

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24:04Ed Balls: So welcome back. Our next question is from the chair of the Foreign Affairs Select Committee, former member of Keir Starmer's Shadow Cabinet, MP for Islington South, and about to have a conversation with George Osborne broadcast on political currency in August, Emily Thornberry. And this is her question. Hi, George and Ed. So I wondered, during your time as ministers, which select committee chairs do you think were most effective? And why were they most effective. What's your advice? Speaking on behalf of a friend.

24:46George Osborne: Speaking on behalf of a friend. I like that, Emily. You will love the conversation that I've recorded with Emily. You know, she speaks her mind. It's really refreshing. And she's very honest about her disappointment when she was not put in Keir Starmer's government, but how she's picked herself up and she's making the most of being chair of the Foreign Affairs Select Committee. And you and I, of course, we could ask anyone to do the podcast, but I thought that Emily and Wes would be two really interesting people. And I feel they've certainly delivered. You will, as a listener, make your own judgment in due course.

25:23George Osborne: But Emily's question is about effective select committee chairs. So when I was chancellor, the chair of the Treasury Select Committee was Andrew Tyree. and um andrew for those who you don't know about him he's no longer in parliament um i think he's now in the house of lords isn't he but he was the mp for uh chichester on the south coast and um he was very thoughtful he'd been i think nigel lawson's special advisor or certainly worked for the lawson treasury he certainly knew all about the treasury i think it would be fair to say i mean he would not necessarily you know want to say this publicly that i think in a parallel political career.

26:04George Osborne: I think he would have wished to have been in government and maybe even be chancellor himself, because he was deeply interested in treasury issues. But that's not how the kind of dice fell for him on his political career. But I did think he made the most of being the select committee chair. I mean, sometimes much to my annoyance, and used to kind of drive me around the corner a bit. But he used the platform not just to kind of grab headlines, which is often what a select committee chair or members of a select committee are. They're looking for their moment when the camera's on and they're going to say something that will get them in the news.

26:40George Osborne: And that's, you know, politicians, you know, want to get their point across and need to raise their profile all the time to get reelected. But I thought Andrew, you know, he wanted to achieve substantive things. He wanted his reports to have an impact on government policy. and he would often work behind the scenes with a bit of sort of coordination, not so much with me, but sometimes with the Treasury in general as an institution, certainly with the Bank of England. And he was pretty influential in creating some aspects of the regime that was put in place after the financial crash to create a safer financial system.

27:18So yes, sometimes unbelievably annoying for me,

27:22George Osborne: But I would say, Emily, you do want, in your case, the Foreign Secretary to sometimes be unbelievably annoyed with the Orcs. You're not really doing a job as chair of the Select Committee, but also constructive and ultimately wanting his government as a conservative to succeed. And for him and his committee led in, you know, as a united team, because it had, in fact, had Wes Streetingham and Rachel Reeves on it as members. they were new benches at the time um you know having a as a sort of bipartisan effort making a positive contribution to government policy making i agree with you very much about

27:58Ed Balls: andrew tyree and um the work he did around the banking reform was important and he was fair-minded and uh objective in the chair and wanted um both the conservative and the labor members of that committee to have their say and i think that to be a good chair of a select committee in our modern parliament you cannot be seen to be a partisan figure um and also i think one of the important reforms which has happened in select committees is the fact that backbenchers elect the um chairs of the select committee now they're not chosen as used to be the case by um the whips and the the Prime Minister, they don't tend to be stooges.

28:40Ed Balls: They tend to be independent-minded and substantial figures. And I think that is greatly to the benefit of Parliament. And, you know, if you look at the way in the Corbyn years, a number of senior Labour former Cabinet ministers became chairs of select committees. You think about anyone in particular? Well, I mean, as it happens, I'm married to one of them. Yvette was chair of the Home Affairs select committee but i think she did it in a non-partisan way and the same thing was true with hillary ben and uh rachel reeves as chair of a select committee as well um the two i was going to single out from the previous era though um were in different ways people would have heard me a few weeks ago talking about um the huge kind of challenge i faced from gwyneth dunwoody when i spoke as a cabinet minister for the first time in in parliament and she called me out for what turn out to be my stammer but she was somebody as chair of the transport select committee who had a formidable reputation because she was tough and very knowledgeable and didn't take any prisoners and she was willing to ask the toughest questions of any government minister i was on that committee

29:52George Osborne: oh were you i was a member of goodness dunwoodie's transport committee and am i right she was brilliant I mean, she could be quite annoying. She was a Cheshire MP. She was, as I was, and she was sort of dean of all the Cheshire MPs. I mean, I was a junior, I was like literally the most junior member of the select committee. I'd just become an MP. And, you know, I was an opposition MP conservative. I'll tell you what, we had a very, very funny trip to America because these select committees go on these foreign trips, which sometimes the British press is not very sympathetic about. And we went to Memphis.

30:26George Osborne: and the reason we were in Memphis was we were going to go and look at the FedEx headquarters their FedEx hub which is absolutely amazing operation like overnight this this airport in Memphis all these parcels come in from all over the world and all over America they get sorted in an amazing factory at about two or three in the morning which we had to see and then they all get sent out on the planes at four or five in the morning to be you know there the next day when people wake up is one that I still have such strong memories of it. But we then also went out as a select committee to Beale Street, which is the street in Memphis, where the kind of blues clubs are.

31:04George Osborne: And I found myself in this slightly surreal situation with Gwyneth Dunwoody and Graham Stringer, another Labour MP, and various other kind of Labour veterans, all, you know, stamping our feet and going along with the blues in Beale Street in Memphis and it was you know but it was actually that's part of being a new MP and working out how it all works and getting on with the other side and so yeah sorry I interrupted but I was a member of that

31:33Ed Balls: committee. No I think Gwyneth Dunwoody is one and then the other one I was going to mention was chair of the treasury select committee actually when I was a junior treasury minister John McFall and he also was in a different way very effective i think he was quite collegiate and cross-party but he was a campaigner and he used his select committee if you remember the availability and charging for using atms cash machines in in poor areas he had a great campaign on that and then around financial exclusion and whether or not banks were providing affordable banking for people on low incomes and then also more generally around banking reform calling in the bank bosses this was before the financial crisis john mcfault was a very effective campaigning chair of the select committee he's now um the um the speaker in the house of lords um i think an important part of the reason why he ended up speaking speaker in the house of lords because of the standing he had in a cross-party way in parliament because of his leadership of the select committee And I'm sure that Emily Thornberry is in her own way absolutely following in the footstep of those great previous chairs, independent, fair, nonpartisan, knowledgeable, but also kind of tough and willing to campaign for outcomes that she and her committee think are important to pursue.

32:54Ed Balls: So I'm looking forward to your conversation with Emily in a few weeks time. Our next question is from Johnny. Hi, Ed and George. It's Johnny Russell here. I much enjoy listening to your podcasts and EMQs. Having read Fraser Nelson's excellent article in The Times recently, I wonder how you respond to the charge that successive governments have left us overexposed to increases in debt service costs. We could have paid a small premium to lock in the interest rate on our borrowings and also limit the amount of index-linked debt, but we chose the alternative and more risky path. I would be most interested to have your views on this.

33:32Ed Balls: Thank you. So this is a really good question, Johnny. And Fraser Nelson's article in the Times was controversial. And he, I think, called out one important thing, which is the fact that we have a quarter of the government debt which has been issued by the British government is currently index linked, which means its investors are inflation protected, has meant that the cost of debt service has been higher for the government. during this period of high inflation, but I'm not sure if that substantiates the wider argument against index-linked gilts. I mean, just to a bit of history, this started with Geoffrey Howe in the early 1980s to issue some government debt where your interest rate was protected from inflation, index-linked gilts.

34:24Ed Balls: And that is something which successive chancellors, Gordon Brown, US Chancellor George, which advised by the debt management office, the independent debt management office, continued to issue these index link guilds. And the reason was because it was a way of the government saying, you know, we aren't going to benefit from higher inflation by inflating away debt. We'll protect investors. So it was a signal of anti-inflationary commitment. but also the pension funds during that period were very keen to buy these inflation protected bonds and if you actually look back over the the period both in the brown and then in the osborne chancellorships there was a long period where the real interest rate the inflation adjusted interest rate on government debt was actually negative i mean it wasn't the case that the government adjusted for inflation was paying people to lend them money, actually, these holders of bonds were in real terms paying for the privilege to hold government debt.

35:30Ed Balls: And it was also the case, and it's been consistently the case over the period, including more recently, that the real interest paid on those inflation adjusted bonds was lower than the interest rate paid on ordinary bonds. And so actually, over that period since Geoffrey Howe, the government has saved tens, hundreds of billions of pounds. Now, one of the price you pay is if you have a period of high inflation, then it costs you. But I think people who, with expertise in this matter, would look across the period and say, net, this has been and continues to be of substantial benefit to the British exchequer, to the British taxpayer.

36:09Ed Balls: That is why the practice has continued. The pension fund demand for those indexing gilts started to fall as a structure of defined benefit pension funds and their liabilities change. And there was a reduction, I think, starting with Philip Hammond in the overall number of those index-linked builds in overall gills, but they still haven't gone away. And British average debt issued is considerably longer, twice as long in maturity as the debts issued by America or Germany. So we've paid less of a price from high interest rates in the inflation period in the last few years than other comparable g7 countries so overall even though in a period of unusually high inflation you pay a cost over the period issuing index link gilts was not only recommended by the debt management office and demanded by investors but substantially to the

37:05George Osborne: benefit of the buddhist taxpayer yeah i mean i don't need to add a huge amount to that because i was very comprehensive um i guess you know the the answer is you can't just look at a sort of short period of time, which in the history of indexing guilds and in the history of the longevity of some of these guilds, the current period of high inflation is pretty short. And we don't know what's going to happen tomorrow. But in the past, there have also been, as you said, long periods when inflation was much lower than expected. It was almost deflationary. And I personally, you know who knows but if you believe even half of what i read and see about the coming revolution in artificial intelligence i think you may also be in we might be on the um on the cusp of another very deflationary period driven by productivity improvements and inflate and um technology improvements uh and uh you know you could be entering another period of deflation the previous sort of period of deflation was partly driven i'm not talking about the period immediately after the financial crash, it was slightly different when interest rates were on the floor.

38:11George Osborne: But the China effect, China kind of becoming part of the global economy, created a much sort of cheaper pool of labor. And obviously that gave rise to all sorts of other challenges and problems like the hollowing out of our industrial heartlands. And the reaction to that that you've seen in things like the Trump presidency. But fundamentally, it was a very deflationary force in our economy over 30 years and the Western economy for 30 years. And, you know, if you believe that AI is going to replace lots of jobs or drive productivity improvements, then that will also prove to be quite deflationary.

38:48George Osborne: And so you just don't know whether is, you know, if you take today and here and now, and there's all sorts of causes of high inflation, like COVID, like the Ukraine war, it's just a snapshot. And when you're trying to set long-term government debt policy, you're trying to look beyond that. And you are also trying to support your own financial services system. I think what you were saying there about the pension funds is really important. And by the way, if you get it wrong, if you look at the Liz Trust problems, actually they're first felt in the pension funds. That's when the first sign of a kind of crisis emerges.

39:27George Osborne: so yeah you're right overall I guess the demand for these index guilds will start to fall as those defined benefit schemes well they're already closed largely to as for unless you're in the public sector you're very unlikely to be on a defined benefit scheme if you are a new employee and and they will decline over time but I think the jury is still out on whether it has cost the country money or in fact saved the country a lot of money let's take a break and then we've got

39:54Ed Balls: Time for one more question.

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41:31Ed Balls: Welcome back. Now to our final question from Chris. Hi Ed and George, Chris from Surrey here. Long time listener and gold subscriber. Love the podcast. I'm cabin crew for British Airways, so I often get to look after politicians from both sides of the pond, as well as the odd celebrity. And it got me thinking about flights that made the headlines because of who was on board, like when Kwasi Kwarteng was flown back from an IMF meeting in Washington only to be sacked the moment he landed at Heathrow, or when Boris Johnson cut short his Caribbean holiday in 2022 and jumped on a flight home to see if he could run for Tory leader again after Liz Truss resigned.

42:08George, I remember you mentioned once that you were sat next to the late Alex Salmond on a BA flight to Edinburgh back in 2006 and that he predicted how the SNP would get the UK government to agree to a Scottish independence referendum. So I'd love to know, do either of you have any other memorable political anecdotes from flights that you've been on? Thanks and I hope to welcome you both on board one day.

42:31George Osborne: Well, I'll give you a couple of stories. So first of all, maybe we should do a whole kind of podcast segment on this and maybe next summer but we uh we should talk about what it's like flying on one of those prime ministerial trips or i don't know if you ever went in the kind of airplane with tony blair or yeah they are hilarious so this was all before uh britain bought a replacement or bought its equivalent of kind of air force one it's not much like air force one but um uh we used to when i was uh i commissioned that plane even though i've never flown on it it should be said um but uh when i was chancellor we used to basically if there was a big kind of prime ministerial trip to china or india we'd commission a big plane from like bridge airways or virgin and fill it with business leaders politicians local government leaders the heads of arts organizations and the press lobby and um basically on the way out everyone's quite sober the prime minister usually does a press huddle in the aisle with the journalists you may have seen pictures of that uh and um it's you know everyone's kind of busily reading their briefs if you're the minister the ministers tend to sit up in the kind of equivalent of first class or the business class, you know, and the press lobby are at the back.

43:55George Osborne: Not that they constantly remind you about that arrangement. But on the way back, so on the way out, everyone's pretty sober. On the way back, it's like a party. It's like basically everyone's, there's a sort of de-mob happy. The trip's been hopefully a success. You know, the politicians, I should stress, David Cameron was always very sober-minded and would have a couple of drinks and then go to sleep, as would I. But if you went to the back of the plane, I mean, people would stay up all night, all through the trip, and everyone would get off this plane, bleary-eyed, some, you know, half-cut. And it was, they were hilarious.

44:34George Osborne: The flights, the political flights were hilarious. And I suspect that continues. I went on two other, I should say, I'm probably the only British politician who's ever been on China one. I went with President Xi on a trip, on a short flight from London to Manchester as part of his state visit. And I was part of the official, I was welcoming him in Manchester. He gave me a lift on China One. And I don't think there are many Western politicians who've done that. And I also went on Nicholas Sarkozy's France One. So I have seen some other, I never went on Air Force One, sadly, although Keir Starmer's just been on Air Force One, hasn't he?

45:13George Osborne: I know he's a very sober man. There must have been one part of him that says, gosh, I'm actually on Air Force One. David Cameron went on Air Force One and actually slept in the bed of the president because he was a bit jet-lagged. And Obama said, well, why don't you take a nap in my bed? Which he did.

45:30Ed Balls: Did Obama move over?

45:32George Osborne: Obama stayed up. Oh, I see. I see. It wasn't like that awkward thing when you're sharing a double bed with your friend.

45:40Ed Balls: Taking the bromance a bit too far. like you i've got tons of plane stories and i think maybe you are right that we ought to have a special special episode where we kind of do some airplane travel stories i'll tell you one which is um which is a great story which is my last ever flight on concord i only went on concord two or three times um but uh every now and then what a deprived life you've had i know but every now and then there was a reason why you had to go on concord um because to get from say the labor Party conference or another government event out to America. And the last time we went...

46:16Ed Balls: I never went.

46:16George Osborne: I'm very jealous.

46:18Ed Balls: Right. I went with Gordon Brown. And I think Beth Russell was the speechwriter. There was the three of us traveling.

46:25George Osborne: We should say now, she's number two permanent secretary at the Treasury, isn't she?

46:29Ed Balls: That's right. And we were going out to Washington. Gordon was making a speech about financial regulation um at the imf meetings and we had to kind of get out very quickly so we went to the airport and gone to concord and concord is a very narrow kind of it was a very kind of small plane inside kind of had nice seats but it was quite tight and um fly down the runway and go flying up into the air and um there's a thing up in front of you which tells you what mac you're at which is your speed and then the height and we were up to about 56 or 57 ,000 feet flying along I always get confused where the Mach 3 is the razor blade or the speed but anyway it was a Mach something flying along and then suddenly it was like the plane it was like the plane hit a wall honestly it was like we had hit a physical wall in the middle of the sky and the plane shuddered and people started to scream on the flight.

47:35Ed Balls: The lights had flickered and we started to go down and the counter went 55 ,000, 54 ,000, 53 ,000, 52 ,000 feet. We were going down and then the head flight attendant came on and said, ladies and gentlemen, if I could appeal for quiet to stop the screaming. He said, there has clearly been a major incident. He said, once the captain has identified the nature of this major incident i will report back to you which immediately meant everybody started screaming again because they thought the captain doesn't know what this major incident is and we were going down and we got to like 45 000 44 000 feet we're still going down and you know honestly honestly we thought we're going to die right and gordon turned to me and said i think this is the end and i said you know i think it is and um and then we had a conversation You were as calm as you've just said it.

48:27Ed Balls: Honestly, we were quite calm, actually. But about our families, because it wasn't like, by this time it was quite calm, but this counter was ticking down. Our families, you know, what we'd achieved in our lives, you know, me saying to him, you know, but Gordon, you were Chancellor of the Exchequer. It didn't matter whether you were Prime Minister. And, you know, he wasn't totally persuaded by that argument. And we had this kind of very... You should have persuaded him. He would have been... I remember Beth was slightly horrified by what was going on. But Gordon and I... But what I discovered was after that 15 minutes, you can only talk to Gordon Brown for so long about impending death before you suddenly run out of conversation.

49:04Ed Balls: And so we got to 20 ,000 feet and then went to 19 ,000 feet. And he turned to me and he said, Eddie said, do you think we should finish the speech? And I said to him, you know, he was obviously looking for a diversion. I said to him in rather more flowery language, I'm not going to effing spend the last 10 minutes of my life. finishing a speech on financial regulation with you which you're never going to give because we're about to die and as i said this the plane stabilized at 16 000 feet and um the flight attendant boss came back and said you know this there'd been a surge the engine had blown out it was too late to turn back we had to carry on and we limped across and landed in newfoundland and um and then got to New York.

49:47Ed Balls: And so that was my Concorde plane flight with Gordon Brown, where we almost died together.

49:54George Osborne: You know, perhaps I'll tell the story on another occasion in greater length. But I was on a small, a private jet coming into Austin, Texas, to meet George W. Bush, who was then the governor of Texas, with William Hague, who was leader of the opposition. And we brought two journalists with us to cover our trip to the person we thought might be the next president. And that was Michael Gove of the Times and Boris Johnson of the Daily Telegraph. And we were in this little plane. And Sebastian Coe was also there, by the way, as William Hague's chief of staff. And the plane hit this terrible turbulence.

50:30And, you know, for a while, I mean, this plane was like

50:33George Osborne: bouncing around, this tiny private plane was bouncing around. Michael Gove, who was already afraid of flying just was like sheet white and i had a sort of gallows humor about it all and i was saying you know what this plane crashes it'll be leader of the opposition dies olympic legend killed in crash and among the other dead were aids george osborne and journalists boris johnson and michael gove but um i do wonder whether the history of britain would have been quite different if that

51:02Ed Balls: plane had crashed well all i can say is gordon brown was a very nice person to almost die with I'm not sure.

51:09George Osborne: Well, William Hague would have been a very nice person to be buried with. That is it for this episode of EMQs. Yeah, or rather morbid note to end on. But anyway, yes, it is. And thank you so much for listening. We are going to have some summer EMQs coming up about all these sorts of things that ministers get up to. And we're going to talk about. We won't give away too much. but kind of some of the perennial things in politics and the challenges that face MPs and people in the government and the opposition. But we'll be back with the live EMQs, if you like, or almost live EMQs at the end of the month.

51:47George Osborne: Do keep sending us your voice notes, your questions, your emails at questions at politicalcurrency.co.uk. Review the show because the algorithms means that other people can find us as a result. and enjoy your summer and enjoy our summer EMQ episodes.

52:04Ed Balls: And we'll see you soon. See you then.

52:14George Osborne: Thanks for listening to Political Currency. This has been a Persephoneca production.

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