Has the race to succeed Starmer kicked off?

0:00Ed Balls: The Bleacher Report app is your destination for sports. Right now, the NBA is heating up, March Madness is here, and MLB is almost back. Every day there's a new headline, a new highlight, a new moment you've got to see for yourself. That's why I stay locked in with the Bleacher Report app. For me, it's about staying connected to my sports. I can follow the teams I care about, get real-time scores, breaking news, and highlights all in one place. Download the Bleacher Report app today so you never miss a moment.

0:46This is Political Codency with Ed Balls and George Osborne.

1:00Ed Balls: So welcome to our podcast. George Osborne is in Britain, I think actually the British Museum, but having been to California and back in 24 hours, basically.

1:12George Osborne: Yeah, you know, I was reflecting on the paths that our lives are taking at the moment, because I think last night you were at the state banquet for the president of Nigeria. So you can't get anything in Britain, more traditional, more full of pomp and circumstance, It's more flunkies around the king, lots of people dressed up. And I was in a hotel room in California for one night, and I ordered a room service, and a robot came to the door. Literally, a robot, a sort of self-driving robot thing, came down the corridor. The food and the drink and whatever was in this sort of container that opened automatically.

1:50George Osborne: And then I took it out, and then the robot zoomed off back down the corridor. So, two different worlds.

1:57Ed Balls: A driverless car one week, a driverless room service trolley the next week. It's the tech revolution. I had last weekend another fabulous political currency listener moment. I'd gone down to Smith Square with my daughter to a Handel concert, part of the Handel Festival, the Gabrielli Orchestra playing Asis and Galatea. And we're having a cup of coffee underneath the venue. By the way, the same venue in which we won Political Podcast of the Year just a few weeks ago.

2:29George Osborne: And the same square where I started working for the Conservative Party back in the early 1990s.

2:35Ed Balls: So this guy comes over and says that, you know, he's a great listener of our podcast. He's been listening to it on the way in, really loves it. Also listens to electoral dysfunction. He said they're the two that he listens to. And I thought that's really nice. I said to him, send us in a question. Then the concert starts. Up on the stage, the soloists, the five soloists are there with the orchestra. Halfway through, the guy who listens to our podcast turned out to be one of the soloists. He was a tenor called Jonathan Hanley, who was playing Damon. So he sang a solo in this concert and his preparation for this big moment as a soloist on the way into work that day, listening to our podcast.

3:14George Osborne: Gets him in the zone. How about that? What is Damon's role?

3:17Ed Balls: well he sang i mean let's be honest athus and galatea the music's fabulous but the story is all a bit complicated he does one great aria but you know it was really all the soloists in particular the guy called lawrence killsby who plays asus utterly brilliant do you think

3:35George Osborne: our listeners the same reaction to our podcast i don't know what they were talking about but

3:39Ed Balls: the whole thing was quite nice to listen to look i went for aesthetic pleasure just to hear the beauty of the sound not needing to be too focused on the content whether Jonathan has the same approach to our podcast I have no idea I mean is it the aesthetic beauty of the Osborne timbre I have no idea I think we should get on with it yeah we've got a lot to talk about first of all of course we have to talk again about Iran at the end of the third week of the conflict there

4:06George Osborne: and you know as we speak gas prices have rocketed because of attacks by the Israelis in Iran and the retaliation against gas facilities in Qatar. So we're going to look at, you know, where we are now with the conflict, this particularly interesting divergence emerging between what the US is doing and what the Israelis are doing, and then take a quick look at what's going on in the United States around the MAGA movement, attitudes towards Israel.

4:35Ed Balls: Definitely. Then we're going to talk about Rachel Reeves' second May's lecture, where she set out policies for growth that she's intending to pursue. We'll talk about whether the speech landed and whether the policies are worth pursuing.

4:50George Osborne: And then finally, what is Angela Rayner up to? She has burst back onto the Westminster scene this week with a speech and a speech that the leader of the opposition quoted at the Prime Minister in PMQs this week. But I think people must have thought when she was fired from the cabinet and fired from the job of deputy leader of the Labour Party for not fully paying her taxes, that that was the end of her. Well, she has other ideas and we're going to have a look at what she's up to.

5:20Ed Balls: But we're going to start with Iran and the war, but also the energy crisis intensifying overnight. I mean, in the last couple of weeks in the podcast, we've debated whether this could be short lift in its military engagement, but also the impact upon the global economy, that is looking, I would say, increasingly unlikely now, even if the war was to end tomorrow. And there's no sign that Donald Trump has the ability to stop what is going on anymore, especially with Israel, as you said, behaving as it is. But the damage which is now being done to capacity in the Gulf and the knock-on impact upon oil and gas flows in the coming weeks becoming very serious indeed.

6:07Ed Balls: And those price rises we've seen today, huge rise in the gas price, for the first time, it feels as though we may be on a path to the kind of disruption we saw in the early 2000s or even in the 1970s. The price rises are still short of that, but big impact upon the global economy. And I think the very striking thing, this was from a Donald Trump truth social post. He said that this was Israel lashing out violently against a major facility known as the South Pars gas field in Iran, an attack the Americans knew nothing about. And the reason why the Israelis were doing that was because they had been provoked by the Iranians.

6:52Ed Balls: The Iranians then, he says unjustifiably and unfairly attack a portion of Qatar's LNG gas facility and then announces no more attacks will be made by Israel. Whether he could deliver that, who knows. But tit for tat, a few days ago, Donald Trump saying the war was over, Iran's capacity had been destroyed. Well, it seems not. And this will do medium term damage now to the global economy. And I think, you know, whether you're talking about petrol prices, heating prices, but actually also worries about the flow of pharmaceuticals dependent upon those petrochemicals, in particular fertilisers, and what that could mean for global food prices.

7:36Ed Balls: I mean, the potential for this to be a big hit to growth, but also to the living standards of citizens around the world, including here in Britain, and what that does to our politics. I mean, for the first time, this does start to feel like an unfolding global economic crisis as well as a security crisis.

7:53George Osborne: Yeah. I mean, we were talking about this a week ago, weren't we? And we were discussing, you know, could Trump kind of declare victory? And at the time, there was the start of these Iranian attacks on the oil and gas facilities of its Gulf neighbours. And we discussed that, well, you know, if in a week's time they're continuing, that is going to be a mounting problem. It's actually been a week in other respects in which the U.S. would feel, you know, we've made some progress. The, you know, continued degradation of the Iranian military continues. And the Israelis have, you know, managed to assassinate one of the absolute key figures in the Iranian regime.

8:30George Osborne: We might come back and talk about this. But, you know, essentially the security chief, remember the person who is seen as responsible for the execution and brutal suppression of the protesters a few weeks ago, Ali Larajani. you know, he has been assassinated. But there's no doubt, you know, this, as you say, it's starting to have an impact on, even if the war were to end today, some of these refinery facilities and gas storage facilities are going to take months, it seems, to repair. And it's notable that, you know, just before we started recording the podcast, the Bank of England has held interest rates at 3.75 % today, but it's also warned us that there will be an inflation shock from the Iran war.

9:14George Osborne: So there's a kind of real world kind of consequence to all of this. I guess let's just explore a couple of things. First of all, it's pretty striking, isn't it? I mean, here's this joint operation between the US and Israel. I mean, you would assume, and that must be the case, that the US military are kind of de-conflicting with Israeli jets in the air to make sure they're not shooting each other's down and so on. So it's incredibly odd for the President of the United States to sort of publicly say what might well be the truth, but for him to go public and say, I didn't know that the Israelis were going to bomb these gas facilities in Iran is pretty stunning.

9:53George Osborne: And then to say it ain't going to happen again, you know, that is the first very, very sort of public identification of a fissure between what the Israelis or Benjamin Netanyahu's government is trying to achieve and what, you know, the Americans say they're trying to achieve. And it certainly adds fuel to this claim that you're getting in America that, you know, we only got into this war because of the Israelis and the Netanyahu government has totally different kind of war aims than the US. And that's starting to spill over, isn't it, into domestic US politics.

10:27Ed Balls: It is. Let's come to that in a second. Just first of all, on what's happening in the Middle East. You're right, Donald Trump saying that Israel did not consult America about the attack on the Iranian gas field. That's significant. It's not, though, the first side we've had. Go back a couple of weeks ago, you had the US Secretary of State Marco Rubio saying that the reason why the Americans joined in the initial attack was because the Israelis made a decision to go in and the Americans followed. And then the debate we've seen in recent days about whether or not the talks with Iran in Geneva about nuclear decommissioning were succeeding or not.

11:11Ed Balls: And alongside that, reports in the British media that British officials were involved in those Geneva talks and thought progress was being made before the Israelis led those strikes. But I think the other thing which has been in the press, in particular, the sort of diplomatic commentary is, as you said, about the Iranian National Security Council Secretary Ali Laranjani, who, on the one hand, last weekend was saying quite provocative things. He did a speech last weekend in which he was calling on Muslims across the region to rise up against the American aggressor. On the other hand, in fact, he was the most reliable interlocutor.

11:56Ed Balls: He was the person that the Americans and the British and the international community thought could be the best negotiator between them and the Iranians. Iranians, and the fact that Israel has chosen to kill him, I mean, that has been interpreted as Israel again signalling that they don't want to see the kind of de-escalation or the talks, which maybe others want to see, that from Netanyahu's point of view, with an election to fight this year, that actually the war and the ongoing conflict and the escalation serves his domestic political purposes. And so you are seeing, I think, a divergence between what the Israelis think is the right path and maybe some parts of the American administration, certainly others around the world.

12:49Ed Balls: Then if you look at what's happening in Lebanon, I mean, in no way does the Israeli assault on Lebanon and the humanitarian crisis following that, I mean, that doesn't fit in any of the versions of the Donald Trump war aims we saw a few weeks ago, whether that was about the Iranian nuclear threat or the threat to the United States or to global energy supplies. So, as you say, it does feel as though part of what's happening here is Trump is losing control over what Netanyahu and the Israeli leadership are seeking to prosecute in this war.

13:22George Osborne: Well, I think there was a very good piece by a good friend of mine, I'll declare my interest, but I think it really is a very good piece by Matthew Gould, who used to be our acting ambassador in Iran and then was our ambassador in Israel. He wrote a piece a few days ago on Netanyahu. And actually, it's also backed up by something that William Hagel has also written about. A very consistent part of Netanyahu's political makeup has been his over 30 years. And I actually remember being in the back of the room taking notes when I first met him back in the 1990s, making this point that Iran was a mortal threat, an existential threat to the state of Israel.

13:59George Osborne: And that has been a consistent argument of his. And this is his chance to prosecute the war against Iran that he has spent the last 30 years thinking about, warning about saying that would have to happen. And he obviously does not want it to end until, you know, he would say mission accomplished, which is Iran poses no threat ever again to Israel. That is different from Donald Trump's objective, as far as one can ascribe it, which was at best to degrade further the nuclear program, so it didn't reemerge on his watch, and he could leave that as a legacy and decapitate the Iranian leadership. And at worst, you could say his, his like objective was just to not to be kind of outflanked by Israel, hence the kind of Marco Rubio quote you alluded to.

14:45George Osborne: But you do have now quite a divergence of war. I still think it's within Donald Trump's power to say, right, you know, we're stopping. The problem is that if the, you know, Israelis don't stop, then obviously the conflict continues. And if the Iranian kind of attacks around the, you know, on the neighbors continue, even if they're a bit asymmetric and it's the old drone rather than anything more serious than that, you can't really say the conflict's ending and it certainly will remain a real problem. Things like, you know, how you get ships through the Straits to the Homoose. It's a classic thing in politics, isn't it?

15:22George Osborne: Or, you know, this guy Ali Larijani, I mean, it's quite interesting to read his biography. He actually started off life as a philosopher writing theses about Immanuel Kant. But he did end up being the de facto leader of Iran. And, you know, he is the person seen as responsible for the appalling suppression and murder of students and other protesters of just a few weeks ago. And yet, as you say, he was like the person we could do business with. He was the behind the scenes back channel. It's an absolute classic kind of case of realpolitik, which is, you know, in any kind of, if there was any justice in the world, you know, he would be in the International Criminal Court and, you know, will be dead.

16:02George Osborne: And yet you need him, don't you? And it sounds like, you know, the British in particular, but maybe others think the Israelis deliberately got rid of him because he was someone who might be able to do a deal.

16:15Ed Balls: The interesting thing is former Obama officials talking publicly about this in the American media in recent days, talking about the fact that in the past, when they considered whether or not a strike against Iran would be a good thing to do, maybe if the nuclear deal hadn't gone well. The thing which always stopped them was the worry about what would happen if Iran was able to retaliate and in particular close the Strait of Hormuz and the impact that would have on global energy prices. And, you know, the idea that this seems to be a bit of a surprise to Donald Trump that this is happening, when I don't think it is actually a surprise to the American security and military establishment.

16:54George Osborne: It shouldn't also be a surprise to NATO and the West because we've been planning and training for the closure of the Straits War moves for decades. I remember when I was chancellor, that was one of the main reasons made for keeping our mine sweepers in operation. You know, I can totally understand everyone else in the world going, well, it's not our conflict. And, you know, we didn't start this war. But it is, you know, the international community is going to find itself drawn into the solution. And the rest of the world is actually much more dependent on Middle Eastern oil and gas than the United States is.

17:23Ed Balls: Absolutely. Let's just turn at the end to what's happening in American domestic politics. We had the resignation earlier in the week of Joe Kent, the director of the National Counterterrorism Centre, and he resigned because he was unpersuaded that Donald Trump was right to have identified an imminent threat from Iran. And you think to yourself, is this a sort of centrist, bureaucratic security guy? In fact, he is a strongly MAGA, of the right, activist politician in that job. In fact, the reason why he resigned is because, as he's perceived it, this is Israel taking charge and forcing America into an Israeli war.

18:12Ed Balls: Tucker Carlson said similar things in American politics in recent days. This is Tucker Carlson and Joe Kent discussing this on Tucker Carlson's podcast last night. So the imminent threat that the Secretary of State is describing is not from Iran, it's from Israel.

18:27George Osborne: Exactly. And I think this speaks to the broader issue. Who is in charge of our policy in the Middle East? Who is in charge of when we decide to go to war or not? In this case, with what the secretary described and later on the president, later on the Speaker of the House and the way the events played out, the Israelis drove the decision to take this action, which we knew would set off a series of events, meaning the Iranians would retaliate.

18:52Ed Balls: That is Joe Kent explaining why he resigned to Tucker Carlson, who said this is Israel's war. You've had Marjorie Taylor Greene say Trump is sacrificing troops for Israel. You've had Megyn Kelly, the podcaster, saying the war is being sold to Americans by Israel firsters. And you always know in politics, when things become engaged in satire, you are in real trouble. And this is how it was discussed on Saturday Night Live, the US comedy show back when the war was just beginning a few weeks ago. The trackers on CNN are saying that Trump had no authorization for this war, but he actually did. Netanyahu said it was OK.

19:33Ed Balls: I mean, America for all of my life has been Israel's number one ally. and for the first time you have people like Tucker Carlson trying to become president, Joe Kent resigning because they say Israel first is dominating America's interest. This is not only happening on the right, you also had a row earlier in the week between two Democrat presidential candidates, Gavin Newsom saying that what's been happening in Gaza is a genocide, the Pennsylvania Governor Shapiro, who might also be a candidate, saying this is a terrible way to use language. On the left and on the right, splits happening between candidates saying we must not allow Israel to dominate American politics and American interests.

20:24Ed Balls: You could end up with an American president, Democrat or Republican in the next few years who is not an Israel supporter. That is a huge change.

20:33George Osborne: Yeah, and it's obviously, you know, it's a very worrying time for a lot of people in the Middle East and for a lot of communities, but it's also a worrying time for Jewish communities who feel under pressure. I mean, it's something we perhaps should come back to, particularly in the kind of British context. But, you know, I've always thought it's incredibly important for the Jewish community not to become sort of allied with one particular strand of politics, one particular you know the right or the left or one particular form of right-wing politics you know it's incredibly important to kind of make this would be true of any of any community to maintain support across the peace and in the united states i think you know there's just been a kind of confusion of the kind of broader interests of the jewish community the you know objectives of benjamin netanyahu and his government which obviously doesn't speak for all jewish people or indeed all Israeli citizens.

21:26George Osborne: And there's lots of controversy in Israel about them and the American administration. And you just don't want to be in this position, I would think. And you want to make clear that the interests of the Jewish people are much broader and they have an interest across the political spectrum of the people on the left and the right who support their continued prosperity.

21:48Ed Balls: You're totally right. It is incredibly dangerous and very frightening for the Jewish community here in the UK and around the world. The fact that you have American presidential candidates positioning themselves on whether they are more or less pro-Israel, very dangerous. This could be a fight for the nomination between Rubio pro the action with Israel, J.D. Vance sceptical about the action in support of Israel, Tucker Carlson totally against the action with Israel. But you'd have to say, you know, who are the most influential protagonists in this whole situation? Donald Trump and Benjamin Netanyahu are either of them acting to try to bring this back together.

22:32Ed Balls: I would say for Netanyahu, his own electoral prospects this year are coming before the interests of Israel and the Jewish community around the world. I mean, in the most irresponsible way. It's so dangerous.

22:47George Osborne: Well, he's one of those politicians, he's not unique in thinking that his own electoral prospects are inherently tied up with the interests of the nation. But he has been consistent, as we said, on Iran being, you know, the number one issue for him. So as you say, of course, all this having a big impact on the British economy. And then this was the week when the Chancellor's Exchequer became, I think, one of the very few chancellors, maybe be only the second ever to give two mace lectures these are these uh i think she is the first ever i don't think it's ever been done before right i think she gave the first lecture didn't she when she was shadow chancellor but anyway it's a it's a unique honor and we're going to discuss next how she made use of the platform

23:39Ed Balls: The Bleacher Report app is your destination for sports. Right now, the NBA is heating up, March Madness is here, and MLB is almost back. Every day there's a new headline, a new highlight, a new moment you've got to see for yourself. That's why I stay locked in with the Bleacher Report app. For me, it's about staying connected to my sports. I can follow the teams I care about, get real-time scores, breaking news and highlights all in one place. Download the Bleacher Report app today so you never miss a moment.

24:14George Osborne: So welcome back. Rachel Reeves delivered her second MACE lecture this week. She gave the first, as I was saying, when she was Shadow Chancellor. And this is a lecture that basically I think all chancellors have given. I gave it, but I actually gave it when I was like her first time around, shadow chancellor. The most famous Mace lecture was from Nigel Lawson, I think, in the 1980s.

24:36Ed Balls: 1984.

24:37George Osborne: Yeah. And he drew a distinction between monetary and fiscal policy and said monetary policy should be dealing with demand and fiscal policy should be dealing with the supply side. And that was quite a change from the way things had been run to that date.

24:50Ed Balls: And it was then followed by the Lawson boom, which was fuelled by both monetary and fiscal policy. So unfortunately, he didn't read his own speech carefully enough.

24:57George Osborne: Didn't read his own lecture. But it was quite an intellectual lecture. And it certainly set the tone for future MACE lectures, although I don't think any, including my own, got quite the attention that that one did. So it's a big deal and it's held at a business school in London. So Rachel Reeves, she gets the chance to deliver the second lecture. And here's just a quick medley of some of the things she said.

25:20Ed Balls: I did not plan to deliver this speech in this context, but it affirms rather than challenges the philosophy that I outlined in opposition and which has guided me in government. In a more volatile world, there are always excuses to put off the hard work of reform, but we must focus on the causes as well as the symptoms of our vulnerabilities. I have asked my officials to work with mayors and businesses to develop a roadmap for future fiscal devolution to be published at this year's budget. This will set out plans to give regional leaders control of a share of some national taxes. Through our advance commitment, we have pledged to procure up to£1 billion of quantum computers from the first UK companies to successfully make them at commercial scale, firing the starting gun on a global race and making sure that the UK is at the front of the pack.

26:14Ed Balls: Now, there are areas in which regulatory autonomy may be necessary for sectors with unique characteristics or strategic importance for the UK. But that should be the exception, not the norm. To get this right, we must work more closely with businesses, both here and across Europe. But when the economic gains exceed the costs, the trade-off is worth making. So it was a very meaty speech in terms of policy. We heard her there talking about more regional devolution, but wanting to devolve taxes, about wanting to pre-commit to spending money on AI and quantum computing procurement to become an AI capital, but also saying she wants to get closer to the European Union.

26:58Ed Balls: Having regulatory difference between Britain and Europe should be the exception rather than the norm. But I have to say, the policy section would have been better if it had actually been done in the spring statement and you'd have had the kind of backing document from the Treasury and the OBR analysis. But there we are. We should come to the meatiness of the policy in a second. First of all, what do you think of it as a speech?

27:22George Osborne: I'm rather coloured by the fact that I agree with quite a lot of the policy. So in many senses, that's the most important thing in the speech. I thought the speech itself, you know, she sometimes kind of shades into being too partisan when you don't need to be. I mean, you know, people would often say at the time and subsequently, I was an exceptionally partisan chancellor. And Gordon Brown was very partisan as well, in the sense of always prosecuting your argument, always trying to put your opponents into a difficult position and framing choices and so on. But a Mace lecture, rather like a budget, we discussed the spring statement speech and the budget speeches of hers before, is the moment when you don't actually have to sort of show you're working.

28:05George Osborne: You can just do it. The fact that if you go on the government website and quite a lot of the Mace lecture is redacted for political reasons, because the government websites can't put up political content, you know, I think speaks to the fact that the speech was too partisan and lacked actually some intellectualism. I think it's an argument you've been making for a couple of years now, which is what's your sort of economic theory behind what became the kind of tagline of the speech, which is that we want an active and a strategic state. That's what she would want as the kind of thing you took away from it.

28:37George Osborne: But because I do agree with the content or the kind of general policy direction of the content, it would have been nice to have a more intellectual, less partisan speech with more of an argument and a kind of strong underlying economic argument to it. But I'll take the policy.

28:53Ed Balls: Look, I agree with you on the policy. And I also share your frustration because we've been saying for the last couple of years, what they really need to do is set out a proper diagnosis of why the British economy, like other economies, has grown so poorly for the last 20 years. And what the theory of growth is that she's going to pursue and how the policy will then drive that theory. and the truth is it didn't have that kind of intellectual content there wasn't really a thesis there wasn't an argument there wasn't any data there wasn't an attempt to intellectually explain and it may be that in modern politics people say we don't want any of that intellectualism because it's actually about what the voters hear I just don't agree with that I think you have to win the intellectual argument with the commentators and the experts if you're gonna get them to then persuade the wider country.

29:44Ed Balls: I mean, she says the Tories were the problem. Well, you know, but the Tories weren't in power in Germany, France and America, which had slow growth in the last 15 years. And she said, we need more investment. That is right. We have had insufficient investment, but there's also a question of what drives productivity. And, you know, there was a little nod to this about dynamism. I've been making the argument that our problem is we've had insufficient change and churn and competition and dynamism. That's what you've got to go after. And I don't think she's quite decided whether she agrees with that or disagrees with that.

30:17Ed Balls: And therefore, she's kind of slightly on the fence on that argument. But I would like the 40-page document which explains what the speech is about. And they haven't written it yet.

30:28George Osborne: Well, it's quite a long speech. They could have explained it in the speech. And also, the attack on the Conservatives. Look, if I was a Labour Chancellor, I'd absolutely be taking it to the conservatives. But it's a very kind of trite and not very convincing attack on the conservatives. It says they had a laissez-faire approach to the economy. It's the kind of thing Labour politicians were saying in the 1990s about Margaret Thatcher. But things like quantum computing, well, I announced some quantum computing fund a decade ago, regional mayors and regional powers, we were talking about that. EU, for sure, you can take the argument to the brexiteers and conservative party adopting the brexiteer argument after the result but you know i just thought that you can you can have a kind of cleverer argument and if i said to you

31:11Ed Balls: what is secure nomics which is her slogan she tells us in the speech it's not protectionism and it's um not globalization not simply thinking borrowing more is a good thing so i understand a

31:26George Osborne: of things it's not but what is it well maybe the evidence of it it comes today where the uk has put a 50 tariff rate on steel imports i mean that is a real break but she says it's not about

31:39Ed Balls: protectionism and it's not about stopping the labor market working in a flexible way so that

31:44George Osborne: move today is you know that's a real thing and that is one of the most protectionist things that britain has done in decades and decades let's just turn to the sort of so the three bits of the speech you pulled out. Let's just take each briefly in turn, because, you know, there's a lot of ambition here. But the question is, what actually needs to happen to deliver? Because I think most people would say, all this is fine. But, you know, the history of the last couple of years is a lot of things promised, nothing delivered, lots of U-turns, etc. On the three things. So the first one is, essentially, you know, the big news, but no detail, and no clear sign of where the direction is going to go is that mayors may have access to national taxes like income tax receipts.

32:28George Osborne: So at the moment, there are various schemes that have been developed over the last 15 years, for example, to allow regions and mayors to keep more business rates if they are pro-growth or more of council tax receipts if they're pro-house building. But she's saying there, these elected mayors may now have access to a slice of national taxes, which I guess is a form of the devolution that's already happened in Scotland. Whether they can set their own rates, we have no idea what the detail of this is, but she says she's going to come back in the budget with a big, bold move on national taxation and its regional distribution.

33:07Ed Balls: This could turn out to be very significant. As you say, it all depends what it actually means. It's a big change from a year ago when the Treasury was setting their face against this kind of tax devolution. But let's be clear, in Scotland, they have the power to raise taxes, to raise income tax. She says in the speech there'll be no increase in taxes. This is not about having the power to raise more money. This is simply about the existing money which is being spent. So what it must mean is that you say to the mayor in Greater Manchester, you will take responsibility for funding all of local transport or all of housing or all of social care and we will assign to you from the national tax pot the money for that and you then have to be accountable for delivering those outcomes.

34:02Ed Balls: Now whether they are allowed to say, well, actually, you know, in that case, I don't really care about local transport, or I'm not going to build more houses, or I think social care could be less generously provided, or whether the centre mandates what you have to do in those policy areas, that is to be decided. But if it means saying you're giving power over local transport or local skills, it's a good thing. But what it's not doing is allowing any more resource, unless you're saying what we're going to allow then the mayors to do is borrow from the financial markets on the basis of those taxes assigned to you and therefore the treasury at the centre would have to borrow less.

34:41Ed Balls: Well, that would be a big change, but I'm not sure that's where they are going. And then of course, raises lots of fairness issues because if you are the North East and the economy does less well, and therefore on your assigned chunk of income tax, less money comes in, does that then mean that the North East gets to spend less money on education or health or whatever? Because historically, in our country, if London was doing better and getting more tax revenue in, they would be paying more into the big pot to help the North East. Do you have less of that kind of fairness redistribution? Lots of questions, but it is potentially a big move.

35:20George Osborne: Yeah, I mean, what you point to is, of course, always the central challenge and the reason why Britain's remained a very centralized state, which is, it's all very well if you say more money for areas that allow for growth and development. But, you know, what happens to areas that do things that put off growth and development? Do they get less money? And then they're in a kind of spiral of poverty. And ultimately, the kind of national government stands behind them. I guess you could, you know, I could imagine a scheme where, you know, if you encourage employment in Manchester, let's say, and attract businesses, and as a result, there are more income tax receipts coming from Manchester, more national insurance receipts, maybe more VAT receipts actually, coming from Manchester than would otherwise be the case if you hadn't done this and compared to other areas, that you get more of the money, you share more of the upside of doing the right things.

36:05George Osborne: And you could move to, there's no reason why you couldn't have a kind of local surcharge or ability to cut. Remember, as a conservative, you might say, well, why don't we cut income tax in this or cut national insurance in this area. So you could have some regional element to some of these national taxes. But as you look, very complicated. Anyway, significant announcement, but no detail. I'm going to have to wait and see on the budget.

36:30Ed Balls: But it shows they are getting into, the Treasury is starting to sign up to an important agenda here, which is about the regeneration of our cities and towns and devolution to make that possible. And so I think both of us should applaud that because that's what we've been calling for.

36:45George Osborne: Yeah, definitely. And the Treasury is the only department really that can drive that across Whitehall. Just quickly on the other two things. On AI, we should probably come back and have a longer conversation about this. They've set a really interesting ambition, which quite a lot of countries are not doing, which is saying we want to be the fastest AI adopting country. We want to get, you know, AI into our public services, into our industry, into our small and medium-sized businesses. We want to get our population upskilled, you know, and they can point to some successes. I mean, you know, my own company, I work for OpenAI, has just announced that London's going to be its European research hub, for example.

37:21George Osborne: So there's definitely all of that happening. But specifically, she talks about data centers. You know, I think it's significant she's talking about AI. She's not really addressed AI. Liz Kendall has as the digital secretary and Peter Kyle before her. It's the first time she's kind of leaning into this. and it's the first time the government's moved off kind of data centers as a sort of physical manifestation of your AI preparedness and I think that's because you know they can't get these copyright law changes through the House of Lords because various sort of high-profile British artists have come out against it and until they change the copyright laws Britain is almost unique among European jurisdictions as being the one place the AI companies are not going to put their training and model development because copyright laws won't allow it.

38:10George Osborne: So there's quite interesting, you know, more to come on AI, but I thought the right ambition for Britain. What did you think?

38:16Ed Balls: I thought it was good to see her, as you say, talking in a broader way, but there is a debate she has to take on. There was a really interesting blog from Archie Hall of The Economist just last week, looking at the issue of Britain and AI, in which he says two things. On the one hand, we have great strengths in services, in the law, in finance, the kind of places which actually may be areas ripe for productivity growth through replacing those kind of services with kind of AI generated work. So, you know, is Britain going to really benefit there? And he then also says that the economies which will succeed with AI will be the ones which have dynamic, changing, churning economies.

39:01Ed Balls: And at the moment, Britain looks like it's rather less dynamic than some other countries. And so are we really equipping ourselves to take advantage? And I would like to have seen the Treasury and her take on those arguments a bit more clearly, because it's all very well to say AI is a good thing. But are we really going to be in a position to benefit? And do we know how to take advantage? And I'm not sure the speech answered that.

39:22George Osborne: What about the European sector speech, which probably attracted the most attention? I mean, Conservative Party response which is oh no they're trying to undo Brexit I just think I mean Conservative Party has just not worked out which voters it's trying to attract to the next election because in loads of seats they lost there'd be quite a lot of people who'd like to be closer to Europe and more unhappy with the hard Brexit but I thought there was an interesting thing I think the debate has been if you look at the content of the speech the debate till now in the Labour Party has been, do we rejoin the customs union?

39:54George Osborne: And some people have gone out publicly and said we should. I mean, Wes Streeting said this, actually. The mayor of London, Sadiq Khan, has said it, and so on. You know, that's all about the tariffs you pay and the trade barriers, the tax barriers to trade, i.e. customs and duties. What she's saying in this speech is that we should aim for regulatory alignment with the EU, as we have done in the agriculture sector already, food and agriculture. and that should be the norm, and there may be the odd exception, she says in the speech, but the assumption is we should align on regulations. Now, there's a big kind of, the Brexiteers would say, hold on, what about sovereignty?

40:32George Osborne: We should decide our own laws. The whole point of leaving the EU was not to follow their laws and have no say in how those laws are devised, which we had when we were inside the EU. That's much more of a single market argument. The single market is more about the rules and regulations around food safety, chemical safety, energy supply. She's leaning more into the single market than the customs union. It's actually a much bigger move. If Britain's default is we're going to shadow EU rules, that is quite a big move from where we've been as a country and where the kind of bipartisan consensus or conspiracy of silence has been.

41:12George Osborne: I thought that was pretty significant.

41:14Ed Balls: I think you are right. And look, let's be honest, the government's explanation as to why joining the customs union wouldn't work, because we wouldn't get the benefits of trade deals with India or with America. Actually, in the speech, Rachel Reeves rains on that argument by saying that all is small beer compared to the gains from better trade with the European Union. But what's also the case is that the gains you might get from getting the customs union would be small compared to the gains you'd get from being an effective part of a big single market and getting rid of all of those wider regulatory barriers.

41:51Ed Balls: Now, yes, it is the case that if you have dynamic alignment across most sectors, that is us choosing to align with regulations we don't set. They're set by the European Union, but that is the reality of being outside the European Union. That is what the country voted for. But if that reduces burdens for business, it means we have more growth, that is a price you pay. Of course, the problem is that the Europeans are saying, well, if you want that, there's things you're going to have to do. Pay into the European budget, reduce tuition fees for EU citizens coming to the UK, increase the scale of the youth mobility scheme.

42:30Ed Balls: These are all things that are quite painful for the British government. But Rachel Reeves is saying maybe she wants to pay some of those prices to get those single market gains. I think the other thing politically is interesting about this, straight after her speech, Sadiq Khan, the London mayor, says, well, look, let's go the whole hog and rejoin the European Union. And I have to say, when you read Rachel Reeves' speech, it's not totally clear why she doesn't agree with Sadiq Khan. Now, I know that... Well, she does, doesn't it?

42:58George Osborne: I mean, of course, in private, most of the people running the country at the moment think it was a huge mistake to leave the EU and it'd be better off if we'd stayed in.

43:06Ed Balls: But I'm not sure that is a wise political argument for her and Keir Starmer to open up in the next two years. And I think Keir Starmer will run a mile, even absent Morgan McSweeney in number 10, from wanting that argument. But if you open it up in this ambiguous way, without being clear why you think we shouldn't rejoin, then you sort of give license to Sadiq Khan to say what he said. So this lean, I think it's all quite sensible economics, but I'm not exactly sure how the politics of this is going to unfold. Maybe Rachel Rees is deciding that that's not her problem, that's Keir Starmer's problem.

43:41George Osborne: Well, of course, you know, saying nice things about Europe and how you'd be better off back in the European Union used to be a way you became leader of the Labour Party because Keir Starmer was very pro-European in his pitch to be leader of the Labour Party and he'd rejoined the single market and reintroduced free movement and so on. So maybe this is actually as much to do with positioning yourself for a putative Labour leadership contest than anything else. And we are going to turn to someone else who's on manoeuvres, Angela Rayner, after this break.

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44:57George Osborne: Welcome back. So there's lots of potential runners and riders in a Labour leadership contest should one happen and lots of focus on what might happen after the local elections in May. And usually these people say, well, you know, I'm not really running and, you know, people are interpreting things too much. But I mean, I think it's hard to say that of Angela Rayner because she's gone out of her way to go and give a speech to an organization called Labour Mainstream. It sounds like the name is sort of like one of your kind of, a bit like your sort of centrist dad uh pop group isn't it ed mainstream anyway the whole thing was in a westminster pub so not the same as uh rachel reed's big speech in the business school but certainly god probably got more noticed within the labor body than rachel reed's speech because i thought that was angela rena's sort of most direct kind of attack on the current government that i've seen since she left office in particular she picked this one policy which you know you have raised a few times, Ed, as something that's going to give the government real problems.

46:01George Osborne: And that is Shabana Mahmood's immigration reforms. And in particular, this, you know, extension of the period you have indefinitely to remain before you qualify for citizenship. And then there's another aspect of the potential immigration reforms, which is, you know, how permanent your asylum status is. So Angela Rainey, I mean, she's absolutely parking her tanks on Shabana Mahmood's lawn and Shabana Mahmood is another highly touted candidate were there to be a leadership contest.

46:30Ed Balls: You are right that Angela Rayner has chosen that very deliberately and I think she probably thinks she can get some more traction here as she has had on other policy issues over recent weeks and I think I was saying only last week that this was a challenge for Shabana Mahmood to persuade people on the Labour side that these reforms are fair. I mean, look, the reforms are absolutely essential. After the Boris bulge in migration, they had to find a way in which they tackled this issue. So I think Shabana Mahmood is right to go after reform. Although when you have Edward Lee, the father of the House, Conservative MP, standing up and saying that she's a great conservative Home Secretary, that doesn't go down so well on the Labour side.

47:20Ed Balls: And I think I was saying...

47:21George Osborne: Which is why Edward Lee was saying it, presumably.

47:24Ed Balls: Exactly. And I was saying last week that on the issue of, do you give more advantageous routes to indefinite leave to people who are higher earners, that that would cause fairness issues? Well, those are the issues which Angela Rayner is homing in on at a time when Shibana Mahmood is being pretty tough with her own side about that. I think the thing which was interesting to me was even yesterday afternoon, Downing Street refused to say that the Mahmood proposals were the proposals. Downing Street officials said they are looking at finessing the proposals in order to make things work. Finessing?

48:05Ed Balls: Finessing. That's a new word for a U-turn.

48:08George Osborne: You've got to give them credit for coming up with a new word for a U-turn.

48:10Ed Balls: The thing in number 10 is after welfare reform and after the last few months, they're not strong enough to have another big row with Labour backbenchers. And therefore, they're looking for a path which gets them to agreement. And if you were Shabana Mahmood, having seen the way in which Rachel Rees was turned over by number 10 on a series of policy areas in recent months, I think you'd be slightly concerned that number 10 is now talking about finessing things. And so therefore, this is definitely a rich theme for Angela Rayner. On the other hand, it's also risky for her because she was out there in quite a blatant, bold way, has a sort of slight feeling of Michael Heseltine, 1989, 1990 about it.

48:53Ed Balls: In recent weeks and months, we've had Andy Burden setting out his stall to be the leader. You've had West Streeting for a period doing the same. Angela Rayner on the back foot because of her tax affairs. And so this felt to me like her and her supporters putting her out there saying, I'm here. And they know these May elections are going to be very difficult in a few weeks time. So if you want to be a runner or a rider, you need to be in there and in the debate. But there was always a danger that also backfires on you. So, you know, I'm sure you're right. That's what she was doing. But it's not without risks.

49:28George Osborne: so normally in an internal leadership contest i.e you know contest when you're in government as opposed to when you're in opposition and you know the whole party is involved and so on normally the kind of person who wins is a very senior member of the government you know it's like the chancellor or the or the home secretary or you know those are the people who tend to win the contest because they're very high profile they've got sort of factions built around them partly because they are senior government ministers with lots of patronage.

50:00Ed Balls: In fact, if you take the transitions of a leader as prime minister in our recent history, Jim Callaghan becomes prime minister from foreign secretary in 1976. Gordon Brown becomes prime minister 2007 from chancellor.

50:20George Osborne: John Major, also chancellor.

50:21Ed Balls: John Major, also chancellor. Theresa May, home secretary. Yeah. Boris Johnson is the exception.

50:30George Osborne: Boris Johnson, he's chosen, he chooses to resign as Foreign Secretary. So he's not in Angela Rayner's position where she was.

50:38Ed Balls: But he had been Foreign Secretary. Liz Truss had been Foreign Secretary. Well, she was in the government. Exactly. And Rishi Sunak had been Chancellor. So all of them had one of the big officers of state. Now, I have to say, Angela Rayner.

50:51George Osborne: But she was Deputy Prime Minister. She was Deputy Prime Minister.

50:54Ed Balls: And she's a good communicator. and if you were to look at her record on regional growth which we were just discussing I mean I think she did a really good job in her first period around the whole reform of local government the mayor's devolution and she was leading that intellectual debate so I think but what she hasn't done is been chancellor or foreign secretary and it is an issue isn't it if you are um transiting in a quiet and calm time in politics that's one thing but we may be facing a global economic crisis this year, as well as a security crisis in the Middle East. And whoever you choose as leader has to become prime minister, dealing with those massive issues.

51:35Ed Balls: Also, you know, the future defence of our country, how you deal with a fiscal crisis. Is there a way to kind of make the defence sums that up? Like, it's a big question.

51:45George Osborne: But they're not going to be necessarily the questions that the Labour electorate is going to be asking in the contest.

51:51Ed Balls: But that goes to the question, George, of who is the Labour electorate? I would say if you are a candidate for the leadership, and look, there's no vacancy at the moment. So this is just us speculating. What you want to do is be acclaimed. What you want is a coronation. What you don't want is the mess at a time of global and international crisis going to some contest with the members. And I think that will be in the minds. I mean, the selectorate here is first the members of parliament. you're yes hold on you are making the classic uh argument that when you're in government you can't

52:25George Osborne: afford a contest but there was sometimes an argument that a contest benefits people that actually gordon brown would have benefited from a contest potentially rather than just a coronation but i don't think there will necessarily be a coronation what there might well be is you know a front runner who then puts enormous pressure on everyone else to drop out of the race But Andrew Reign is doing her best, I think, to try and reassure people on the flanks in which she might be vulnerable. So she also this week has been talking to, you know, the international investors and banks and so on, and something that she's being paid for.

52:57George Osborne: And one of these speeches she's being paid for, she was going out of her way to say how reassuring she would be to the bond markets and the economy. But she will answer the question, which I think will be set in the contest. The contest will be set by Keir Starmer's failure in the context of there wouldn't be a contest if he hadn't failed. And that will be like he didn't stand for anything. And, of course, what we haven't discussed on this podcast is the article that many people who listen to the podcast would have read over the weekend, last weekend in the Sunday Times by Patrick McGuire and Gabrielle Pogrand about life inside Downing Street and Keir Starmer's reading time.

53:31George Osborne: And he doesn't have any kind of intellectual curiosity and so on. You know, she will be coming at it with, I know what I stand for. I know what Labour values are. I know what a Labour government should be doing. She'll be answering that question, which I think will be a big question in the contest, whilst trying to address, as you say, the weakness, which will be, yeah, but hold on. Do we really want this person frightening the bond market? Or, you know, will she be able to stand up to Donald Trump and so on?

53:58Ed Balls: So I think you are right. And if you look at her speech on Tuesday, that is what it was all about. It was about the importance of being of labor values and taking on the establishment, not becoming the establishment. But the reality is that parties normally have those member driven philosophical debates from opposition. Think of David Cameron in 2005, which was a sort of an intellectual and political directional choice or Ed Miliband in 2010, a repudiation of New Labour. but Jeremy Corbyn, a repudiation of Ed Miliband as well as New Labour. When you're in government, it is different. And Jim Callaghan was not voted on by the members because there was no members vote at the time.

54:42Ed Balls: Gordon Brown was not voted on by the members because he was the only person who got the nominations. And if you look at the Conservative, more recent pattern, Theresa May, well, she became the leader without a vote of the members, but that didn't go great, nor did it with Boris Johnson. Liz Truss was a disaster, and Rishi Sunak lost the, election in 2024. So I think if you are a Labour MP, you would think the track record of changing leaders to prime ministers in government has been pretty checkered in recent years. And to the extent it's been done successfully, it's not been done successfully in recent decades based upon a big debate and choice of members in the country.

55:20Ed Balls: So I think there'll be a lot of nervousness about about allowing that kind of contest. Hence my point that if I was a leadership candidate at the moment or thought I would want to be the next prime minister, I would want to get there through coronated acclaim. And the question is, is that something which Angela Rayner can pull off?

55:41George Osborne: Yeah, it's like one of those political phrases, which is, you know, power is never given, it has to be taken. You have to pick the crown off the field of battle, having, you know, the king slain down on the ground. Anyway, we're definitely going to be coming back to the Labour leadership issues again in future episodes. But that is it for this week of Political Currency. We're going to be back on Monday with another episode of Ex-Minister's Questions. And we are about to do one of our special what-if episodes of Ex-Minister's Questions over Easter. And we've got a treat coming of Inside the Room, another Inside the Room.

56:15George Osborne: We're going to tell you a bit more about that in the future as well.

56:17Ed Balls: But it will be very relevant to current events. But if you want to ask us questions, please do get your voice notes in. If you've got some what ifs you would like us to answer over Easter, still time to get those in as well. Don't forget, you can get EMQs ad free, like our main episodes, but also early if you are a member of our Kitchen Cabinet or Gold subscriber.

56:40George Osborne: And you also, of course, get our biweekly newsletter if you're a member of our Kitchen Cabinet, where we update things that have happened over the days since we record the podcast. and our political currency mug and our members only chat.

56:53Ed Balls: Now, what I don't know is whether soloist tenor Jonathan Hanley, is he a gold member? Is he a Kitchen Cabinet member? Or is he just a great Handel soloist?

57:03George Osborne: Or is he still listening at this point or has he drifted off? Is it a bit like, you know, when you were listening to him, he didn't really know what he was saying, but it was just nice music.

57:11Ed Balls: Can I just say, George Osborne, if you can get through the whole of a Handel opera, and, you know, they do repeat quite a lot, you can definitely get through one of our episodes. Definitely. See you on Monday for MQs. See you then.

57:31George Osborne: Thanks for listening to Political Currency. This has been a Persephoneca production.

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