How bad could the by-election be for Labour?

0:14This is Political Coancy with Ed Balls and George Osborne.

0:27so welcome to our weekly episode we're recording a day early and it's a bit challenging i'll come to that in a moment but before i do talking of challenge i'm going to start with an apology from george and i and this was a comment on spotify from somebody called jay didn't give their full name. It was referring to our discussion of Keir Starmer's speech last week, his fight back speech. He used the word fight, I think, 26 times. And we came up with this great idea, I'm not sure who it was, that we should have a bell ringing every time Keir Starmer said fight. And if you heard last week's podcast, you'll know what I'm talking about.

1:07Jay messages us, good episode, but bell incredibly annoying. I use this podcast to help me sleep, brackets, not a criticism, and that bloody thing woke me up. Now, I've got to say to Jay, I don't know what you think, George. What are you doing trying to go to sleep to our podcast? You should be staying awake. That's what the bell was for, to keep you focused on our insights. No, I'm very happy to be a substitute for white noise or, you know, a sleeping pill. Because we've discussed before, you get that rather odd thing of people come up to you and say, oh, I go to bed with you every night. And what they mean, of course, is they're listening to us as we send them off to sleep.

1:44And don't you say, you sorry you've got me mixed up i'm not boris johnson yeah sorry mate that was the other guy we perform many public services and one of them is a sleeping aid and i can imagine the bell's quite annoying just as you've dropped off to have this ping ping ping in your ear it's one in the morning you've got headphones on you've just gone to sleep anyway talking of annoying we are recording a day early because george osborne has gone to the ai summit in india now i've been sitting here for about 45 minutes because guess what you know the AI summit they've got banquets and they've got delegations and they've got cars probably motorbike outriders but the wi-fi the broadband connection at the AI summit is so bad it's taken us 45 minutes to get this connection up and we've had to resort to old technology.

2:34George what's going on with this AI summit I thought you were in charge of AI these days. I'm not in charge of this summit although I think to be fair to the indians here in new delhi they are a victim of their own success there are 70 000 people attending this conference can you believe that all recording podcasts as we speak probably it's quite late tonight but uh there's a lot of excitement here and i'm in one of the conference hotels and just walking through the lobby coming up to my hotel room it was all the buzz it would remind you of a kind of labor party conference it was everyone's you know talking about the future and their important role in it over a glass or two of wine although wouldn't it be like the Labour Party or Conservative Party conference going to the Arthur Anderson is tech going to solve the problems of the world and to be surrounded by all these sort of tech geeks who aren't really the kind of people you spend time with at party conferences or is that pejoratively anti-tech well I think it's a bit anti um party conference because they call a lot of geeks at the conferences i used to go to to be honest in fact some of those geeks political geeks are listening to us right now well look where are we going to start though with this podcast today because we're going to come back to the ai summit in a moment yeah well we're going to start with a forward look to the gorton and denton by-election that's in greater manchester you remember that's the by-election where there's already been a big row because uh andy burnham was not allowed to be the Labour candidate.

3:59And it's turned into a three-horse race with Labour as the incumbent, but not just reform in the running, as people expected, but also the Green Party. So we're going to talk about that and use that to talk a bit about the current travails of the government this week, and also that reform reshuffle and the announcement of Nigel Farage's putative cabinet. Then last week, George was recording in Munich, this week, India. Last week, we were looking forward to the Munich Security Conference and wondering what the atmosphere was going to be like. Actually, were you in Munich? No, I wasn't. I was about to pick you up on that.

4:36No, you weren't in Munich. Oh my goodness. I just assumed wherever the beating throb of global geopolitics is, George must be there. So you weren't there, but you'd been before. So I apologise. How could I have said that? I must have been thinking of Davos. Anyway, we're going to talk about what actually happened at Munich. And in particular, the row which has broken out in the last couple of days about defence spending here in the UK, following the Prime Minister's speech last Saturday at this global security summit. And then finally, we are going to talk about this summit, about the kind of politics of AI.

5:09You know, I was on the aeroplane coming here, and sitting next to me was one Rishi Sunak in the seat, literally on the other side of the aisle. And I would say it's one of Rishi Sunak's real legacies that he set up this global summit. It first took place in Pletchley Park in Britain. We're now on the fourth of these summits. And so we're going to discuss the kind of global temperature on AI. And is this attempt to achieve some rules-based order, something that everyone says is being dismantled, on AI working? But we're going to start with, as you said, George, Gorton and Denton. this is the by-election where Andy Burnham, Mayor of Manchester, sought to be the candidate and was rebuffed by Keir Starmer and the Labour NEC.

5:54This is a seat which Andy Burnham was clear he was going to win, which Labour won comfortably at the last election. The kind of seat which I think would be challenging mid-term for any incumbent government, but in particular challenging in this parliament, because, you know, on the one hand, it has a couple of awards from the old seat of Denton and Redditch, which I remember doing a fundraiser there back in the day for the then incumbent Andrew Gwynn, who's now stood down from Parliament. It was a very traditional Labour seat, the kind of seat where people wonder these days, will some of those Labour voters be going to reform, working class seat, large majority white constituency.

6:36But after the boundary changes, it's gone in with a whole group of wards from more central Manchester. One, I think, from the old seat of Manchester Withington, three or four from the Gorton seat, which was the old Gerald Kaufman seat. Seats which have been historically Labour for the last hundred years, but much more complex politically. A lot more graduates. I think those wards, 40 % Muslim. And so the kind of wards and seats which in the last general election, Labour was under pressure from the Greens to the left, but also from independent candidates, as we saw in Leicester in Birmingham, some in East London as well.

7:16according to the betting markets if you look at the normal seat projections that you would see from the normal pollsters they would say this is the kind of seat which on the base of current opinion polls Labour should either be just winning or just losing to reform. I think the More in Common poll had Labour 28, Reform 30, Green 23. According to the betting markets the Greens are going to storm this. According to the betting markets 64 % probability of the Greens winning, 23 % reform just 14 % labour on the basis of the latest betting market today and for Keir Starmer to lose this seat would be a huge blow to him now but to lose it to the Greens there's so much kind of pressure and worry to the left for labour in lots of these urban constituencies would be doubly complicated.

8:10Yeah I think doesn't it speak to the way you describe the constituency the kind of tension in the modern Labour coalition. Who are the supporters of the Labour Party or who were the supporters? There's the traditional working class, what you might call the traditional white working class of some decades ago, the industrial working class here in... It's not the city centre seat in Manchester. It would have had industry in it and certainly big council house estates and so on. So there's that part of the longstanding part of the Labour coalition. Although it comes under the city council, isn't it?

8:44It's the actual Manchester City Council, one of the 10 components of Greater Manchester. Yes. So it's got the urban, it's got the kind of millennials, the university millennials who've been, you know, also a very important part of the Labour coalition. And one of the reasons why Labour has remained very strong in kind of city centres around the country. And then third has been this component, which also has been there for quite a period of time now, which is a strong vote from the Muslim community. Put those three things together. And you know, you could argue that the sort of attempt to pivot to deal with reform and to hold down the traditional working class vote that was lost around Brexit.

9:21And Boris Johnson did a good job of, we talked about him earlier, of sort of cleaning up on the red wall. You know, the attempt to kind of deal with that and face off against reform, then risks that that's a kind of rightward pivot on things like immigration, then puts you at risk with your urban millennials and your Muslim vote, as does your stance on things like attitudes towards Donald Trump and the war in Gaza and so on. You know, your attempt to sort of take a more sort of, I guess, sort of moderate place on the world stage. So all of this is at play in a by-election. I mean, what I would sort of challenge you is like, of course, if Keir Starmer loses this by-election, it's another blow to his premiership.

10:02But governments do lose by-elections. And, you know, this government's already lost one by-election in Roncorn. And sometimes governments have lost, you know, by-elections in seemingly impregnable seats and then bounce back a couple of years later to win a general election. I always think the key with by-elections is not really what it tells you about the kind of current temperature of politics, more how the governing party reacts to a loss. And I think with the departure of Morgan McSweeney, which we talked about last week, the kind of what I understand to be the kind of leading advocate in the Labour high command for a we've got to face off against reform has gone.

10:40and then if this by-election is lost to the Greens, there'll be huge pressure on Keir Starmer to pivot left, which you and I have talked about before on this podcast. I mean, it seems to me that it's going to be the reaction inside Labour rather than what it tells you about the future of the Greens that's going to be the thing to watch, if that's the result. I think that is right. But look, with the local elections coming up in May, I think that's actually going to be the more significant test for Keir Starmer. We put this medley together. This is the Labour deputy leader, herself a Manchester MP, Lucy Powell, and then the reform candidate, Matt Goodwin, and then the Green leader, Zach Polanski, all talking about the by-election.

11:23It is a by-election that's really testing these contested worldviews. And we're going to have to fight really hard to win it. And the stakes are really high. You know, I'm a proud Mancunian. And my city gave birth to the trade union movement, gave home to the suffragettes, grew the cooperative movement and has always been a city built on equality, opportunity and community spirit. And I am not going to let a reform MP come into my city. Labour politician after Labour politician are fighting to save themselves, are fighting to replace Keir Starmer, Wes Streeting, Angela Rayner among others. They're more interested in the Labour Party than Gorton and Denton.

12:06And the Greens, by the way, are more interested in Gaza than Gorton and Denton. We're the only campaign who will put the people of Gorton and Denton where they belong, which is first. Labour have taken people's votes for granted for decades. And now people are saying they want something different. And so the only choice, really, in Gorton and Denton is between hate and hope. And we want to reject the politics of reform. We want to reject their divisive politics. And the Green Party and Hannah Spencer want to work to lower people's bills, defend the National Health Service and rebuild our public services.

12:39And that's a vote for the Green Party. The interesting thing I hear from Labour people is that nobody really quite knows what is going on. I mean, I think people are taken aback by the idea the betting markets should think it's going to be surging for the Greens. That's not what people hear on the doorstep. And I think there's quite a lot of people who've been up there wondering, well, actually, could Labour still hold on to this? This is different from the Carefilly by-election we talked about in the autumn, where there was a question, would reform beat Labour? But then, do people really want reform?

13:13And Plaid Cymru became the galvanising place to vote if you were a bit disgruntled, but didn't want to vote for reform. Not clear that the Greens yet quite have that standing in British politics, a bit like the Liberal Democrats, where you could vote for them as a protest without quite knowing what they stand for. And the feedback I get is that people in the areas where there's canvassing say it's holding up quite well for Labour. Of course, there's also quite large chunks of the constituency where I would think the canvassing returns are less reliable. And more importantly, there's probably not a lot of canvassing going on because in those wards, the more urban wards, maybe the Muslim wards, the best thing for Labour would be for the turnout to be low rather than high.

14:00I think genuinely people don't know how this is going to go. I think I kind of disagree with you. I think if you think about the Uxbridge by-election after Boris Johnson stood down, if Rishi Sunak had lost that by-election that would have been a big blow for him but he didn't. But he was still under pressure in the run-up to the election. Keir Starmer will certainly be under great pressure now because of having denied Andy Burnham the chance to stand. But, you know, there's so many other things going on in politics, which in different ways are keeping the pressure on him and the government as well.

14:32Yeah. Although, come on, if you're Keir Starmer and you wake up in that flat in number 10 Downing Street the morning after the by-election and you listen to the radio, or indeed listen to, of course, Good Morning Britain, and they go, the result is the Greens have won in Gorton. you go, oh, OK, right. But if it had been, you know, Labour's one in Gorton and Andy Burnham is the new MP, you would definitely in Downing Street regard that as the worst of the two outcomes. Because then you go like, I've got a whole heap of problems coming my way with this new MP. So, you know, as we discussed a couple of weeks ago, I think he chose, you know, the lesser of two evils.

15:11He's chosen, of course, which means they're more likely to lose this by-election, although I agree. I think these betting markets in politics, you need to be a little bit careful of because they can be very thin. They can be very small amounts of money. I mean, how many people out there are betting? It's not like the Cheltenham races. I mean, the number of people betting on the Denton and Gorton by-election is probably quite small. And I think he's chosen the lesser of two people. You might be right about that. But on the other hand, that's a rather defensive approach to take. There are lots and lots of Labour MPs who will be really worried about the Greens and the Greens either winning or taking votes from them, all that pressure, which we reflected a bit in our podcast last week, you know, does Keir Starmer need to move left in order to secure his position and play to the sort of Lucy Powells and Ed Milibands and Andy Burnhams?

16:02I mean, a big Green win undoubtedly increases that pressure. As I said, though, look, isn't the bigger deal in this period that the government's just been forced to do a U-turn on holding local elections in lots of districts where they were hoping to postpone it for a year. Even before that, these May elections were going to be a big test for Keir Starmer, a much bigger test now, a much bigger kind of playing field in which the elections are happening. And a year ago, when there were fewer seats, Keir Starmer could say, you know, there'll be a change of direction, U-turn on the winter allowance, did a reshuffle, changed his policy directions.

16:43Harder to do that now. So I kind of think if I was Keir Starmer, I might shrug off a by-election defeat, although I think it'd be a problem. I think the May elections are a bigger deal. I think the attempt to delay the local elections in 30 councils, which was overturned by the court, is just a bit embarrassing. If the government had been in a strong position in this court judgment to come along, you know, potential court judgment, they obviously blinked before getting the judgment you know i think a kind of tony blair government would have just sort of brushed it off and it would have been a one-day wonder and by the way the whinging from the councils that they can't produce ballot papers or book school halls i mean what if there's a general election you get three and a half weeks notice and you've got to print ballot papers and book i mean they've got they've got months of it but anyway and also this is quite complicated because she's suddenly gonna have to fight norfolk suffolk east and west Sussex, all of which are Conservative-controlled, she could lose all four of them.

17:40So, you know, until now, she's been a bystander. In this Gordon-Denton by-election, she can be a bystander. She can say, you know, this Green reform Labour fight. I think in the local elections, there'll be more focus on her than there would otherwise have been. Yes, quite right. Maybe that was why it wasn't the Tories who were bringing the court case, but reform. Can we also just say, because I'm going to go on repeating this until someone listened. The elections are going to be bad for Labour. So you try and use that as the firebreak and get the Mandelson files out before the local elections.

18:14So you don't have the double blow of the local elections, which are going to be bad anyway, and then massive, you know, media interest, no doubt whiff of scandal, when all the internal communications of Downing Street are published. They should have followed West Streeting's example and do it overnight. Instead, they're waiting and waiting and waiting. Obviously, some people have jumped before these messages have been published anyway, and we discussed that in terms of the internal changes in Downing Street. So if you know these local elections are going to be bad, you want to dump everything you can so you can attempt a relaunch or a fight back after the May elections.

18:51We've also got, look, as well as the Mandelson files, there's still no cabinet secretary. The job has been split three ways. And as we said last week, we both felt Antonio Romeo was being hung out to dry. But as I said last week, with all of the speculation, the stories in the newspapers, with Downing Street and the Cabinet Office not taking a firm line, unless there's now a proper independent process, this isn't going to get solved. So I don't know what you think. It just feels to me, again, sort of messy and not hugely competent. Well, I think any situation where you've got three cabinet secretaries and two chiefs of staff in Downing Street feels like a single prime minister who's not really at the moment making decisions.

19:32You also, we should note, we've got this case of whether the kind of internal pressure group in Labour that was a big backer of Keir Starmer has been intimidating journalists. That's another kind of irritant story for the government, isn't it? Look, Keir Starmer, I mean, once again has said, I didn't know anything about it. Not the first time he's said that about something which has gone wrong. But he has said there's been an investigation. Gabriel Pogrand, Harry York, Sunday Times journalists. I mean, they were clearly targeted. It's a classic example of not finding out exactly what's gone on and putting it all out there quickly.

20:10Because this has been around for some weeks. And the Labour Together leadership or former leadership tried to brush it away. say there's nothing to see here it looks to me more and more this is going to be murky and there are going to be people taken down for this i would guess and so there's a lot of water to flow under the bridge yet and i i'm not sure whether um uniting the whole of the lobby in defense of lobby colleagues who have been it seems allegedly smeared in this way i'm not sure how wise that is well as someone who's been both um member of parliament and editor of the newspaper i can say that the only group of people who are even more self-important than members of Parliament are the great British press corps.

20:51And long may that remain so. So yes, they will take the story incredibly seriously. Awards will be won. Let's look at reform because we're in a recess week. And once again, Nigel Farage has done what the other parties fail to do when Parliament's not sitting. And he's grabbed the headlines by announcing his shadow cabinet. And that's what he's called it. even though it's only got five individuals in it. And he's put Rob Jenrick in there as shadow chancellor. He's got Richard Tice, Zia Yusuf, and Sweller Braverman. And he's got a lot of attention for this announcement. I mean, I don't think when Tory opposition leaders reshuffle their shadow cabinets, they get anything like this amount of attention.

21:32Do you think, I guess the kind of interesting question here is, if reform is the kind of insurgent, you know, out with the old politics, the old politics has failed you, a does it make sense to have sort of for some very prominent conservative faces there and then b i think in some ways i think a more interesting question is why do you want to sort of present yourself as the shadow cabinet you know that's quite old school isn't it i mean that's quite you're sort of playing the traditional westminster game you're setting yourself up as a sort of westminster operation rather than being a kind of force out there in the country that's coming for Westminster that's you know wanting to take back control to use the famous Brexit slogan that thinks Westminster's failed you I thought it was good sort of quite a trad announcement sort of thing that you know the Liberal Democrats used to do you know we've got our own shadow team and whatever it's not just the Dories or Labour whatever you know I thought it was quite square I think though it's Nigel Farage realising that the game for him is changing being the one-man-band insurgency from the outside is hard to reconcile with the opinion polls and being ahead in by-elections and people saying, are you going to be the next government?

22:51And the reality is he is going to have increasing scrutiny over the next two or three years until the general election about the people around him and the policies that he's putting in place and also the finances of his party. And so he's attempting to codify and regularise all of that. But it's incredibly risky. I mean, I don't know if you saw, actually, Robert Jenrick did a speech this morning. He's come out and said, Bank of England independence will stay. The Office of Budget Responsibility will stay. And also, the two-child limit will now be restored by a reformed government with Robert Jenrick as the Chancellor of the Exchequer.

23:31I have to say, Bank of England OBR, two-child policy, I thought George Osborne's been on the phone to Mr Jenrick. I mean, he's obviously been listening to you. And then if you look around the Farage team, I mean, Farage just a few months ago was saying he supported Labour getting rid of the two-child policy. So Ella Braverman has said she supports getting rid of the two-child cap. You have Richard Tice, now in charge of business, will be hugely frustrated that Robert Jenrick is the Shadow Chancellor, not least because Richard Tice has been saying very critical things about the Bank of England and the OBR, as has Zia Yusuf, who's also not going to be the Shadow Chancellor.

24:10And then there is poor old Lee Anderson, who's not involved at all. So this is going to be complex for Nigel Farage to manage. But on the other hand, this is the reality of if you want to win an election, you have to look and walk and have policies and finances which look like a potential party of government and i think he's trying to answer these questions well i haven't been talking to rob jenrick but i promise you ed that literally while you were saying that i just received a message from robert jenrick a whatsapp message um and i don't think he'll mind normally i'm you know wouldn't want to publish my whatsapp messages i'm not not like downing street but i don't think he'd mind he said george trust Joel, here's a copy of the speech I gave today on the economy.

24:56It commits to the OBR and fiscal responsibility, which I hope you will approve of. And I say, yes, I do. I'm not sure I approve of much else in the reform programme, but I absolutely do commit to that. As people say, vote reform, get the Tories. Get fiscal responsibility and the OBR and an independent bank of England. He's buying both our votes, Ed. And rising child poverty. No, the two child... Which Suella and Nigel say is stunting the birth rate. the two child limit remains very popular as Labour to find out having abolished it no I look but that shows interesting I mean I promise you that just happened he did just message me and that shows you know he's on it and he wants people to notice what he's saying and I guess you know the bigger point here is reform realized that the flank they've left open to the conservatives is the economy.

25:49And Mel Stride, and to some degree, Kemi Badenock have come in behind that by saying, you know, we're for fiscal responsibility first, we support the OBR, we're not listening to the Tories who want to get rid of it. And we're not meddling around with the independence of the Bank of England. And, you know, what Robert is trying to do, and what Nigel Farage was trying to do before he defected is just sort of shut down that flank. And it's interesting, because it's definitely an economy that for all the other issues out there that the country faces which we're going to come on and talk about a couple of them technology disruption and defense it's still the economy the economy and the economy isn't it and i think it's interesting you look at the economic statistics this week you know the government pointed to a fall in inflation kia starmer actually said that it meant prices were falling that's not true prices are not going up as much as they were, they're now going up at 3%, still above the target, but nevertheless a fall.

26:45But it's unemployment that's come back as an issue. Youth unemployment now, quite a high in our country. I thought the really striking figure, if you say, well, yeah, but this is all the kind of general malaise that Western Europe is facing, youth unemployment is now higher than the EU average. And that is the first time that has happened. Remember those periods when, yes, Britain had quite high unemployment in the 90s and early 2000s, although it was falling. But France and Germany, other countries, had very high youth unemployment. And a lot of people think and a lot of businesses would say this is entirely self-inflicted.

27:22This is driven by the national insurance rise for employers. This is driven by an above average income growth increase in the minimum wage and by Angela Rayner's employment law, all of which combining probably with the arrival of new technology like AI, which is displacing work, to make it harder and harder or more expensive for businesses to employ people and anyway, businesses have other options with this technology. So it's one of those things where you just need, The cost of living has been the issue underlying British politics for the last five or six years. And now maybe unemployment is coming back.

28:04And, you know, you and I will both remember times in our lives when unemployment has been the dominant issue. That's right. I mean, I think we were saying just a few months ago when the government announced they were going to get rid of the lower minimum wage for young people. That is a risky thing to do. At a time when the labour market is more difficult anyway, making it harder relatively for young people to get jobs, equalising the minimum wage. We made a very clear decision to have a lower youth minimum wage when we introduced the minimum wage because we didn't want the minimum wage to be blamed for rising youth unemployment.

28:40And when COVID spike aside, youth unemployment is now at an 11-year high and that higher youth minimum wage is still to come in. This is going to be a challenge. I think the bigger problem is likely to be whether people feel better off. Classic lesson for media operations in Downing Street. Keir Starmer's tweet, The choices this Labour government has made means inflation has fallen today to its lowest rate in a year. Lower food and petrol prices are helping ease the pressure on household budgets. No, they're not, Keir. These inflation figures show food prices and fuel prices all rising, not falling.

29:18No lower prices. The rate at which they are rising is lower, but they're still rising. And the guy you were sitting next to on the plane, Rishi Sunak, did a piece in the Sunday Times just a few weeks ago saying that, you know, stop the boats. His commitment on the tackling the cost of living crisis. I mean, all it does is it puts the focus on those issues. Unless you're sure that you can turn these things around. Is Keir Starmer sure that people will feel better off this year? Has he got the policies to make people feel better off this year? Is the Resolution Foundation and the OBR and the IFS all wrong when they say living standards are going to be stagnant this year and falling for working people?

30:01In those circumstances, saying at every moment, it's the cost of living crisis right now, which is my number one priority. That may make sense. But, you know, that is not an easy argument or I think a winning argument for Keir Starmer in this period. I think it's incredibly risky. It's a classic example of letting the focus groups drive your messaging, because I'm sure it's the case that people are saying the cost of living crisis is a big concern for people. But what is Keir Starmer's lever? If interest rates come down next month, it's because the economy is weaker, not stronger. If inflation is falling now, it's because the economy is weaker, not stronger.

30:36And all of that means that living standards are going to stay flat. The economic messaging, I still don't fully understand, but there we are. You don't think this is a Kevin Walsh, you know, technology is driving deflation and higher growth because of a productivity improvement. And a consequence of that is going to be fewer people employed. Well, we're going to hear from the AI Summit from you later in the podcast. But Joe Biden and Rishi Sunak talked about the cost of living without having something they could point to which was making a difference or that people felt it was making a difference.

31:15and both cases, they lost. I really hope the economy strengthens this year and next year and I hope that there's a big productivity boost but I'm not sure I would want to bet the house on it if I was the number 10. There we are. We should take a break and then we're going to come back and talk about Munich and security and defence spending which of course is very dependent upon what happens to growth in the economy as well. We'll do that after the break.

31:49welcome back so the munich security conference last weekend uh this time not your mate jd vance but um secretary of state marco rubio speaking for the trump administration keir starmer amongst many others speaking as well we previewed it last week in our podcast and um i think things turn out as expected yeah i would say up to a point i think marco rubio's speech was much better received, I think, than people expected it would be. Because, you know, the Secretary of State gave a definitely more conciliatory speech, well, we'll come on to the content, but certainly in tone, than J.D. Vance had given a year ago, the Vice President, you know, he, and he got a standing ovation.

32:32And, and indeed, there were kind of rounds of applause while he was speaking. And Ursula von der Leyen, the President of the European Commission, went out of her way to So it was much more warmly received. And that's because he talked about the common history of Europe and the United States. He talked about his own European heritage. He talked about the conflicts that America and Europe had fought together, like the Second World War. And so it was much less jarring than J.D.'s speech a year ago. But if you actually look at the content, it's very, very similar. You know, not the tone, not the kind of embellishment, but the actual content was, you know, very similar, which is, you know, a few mentions of the Russians and the Chinese as being, you know, the big external threat.

33:27Definitely a warning to Europe about, you know, you didn't put it like this, but the Trump Security Doctrine does sort of civilizational decline, the huge mistake of mass immigration. And I don't know if you noticed, if you read his speech, just a lot of references to Christianity, which, you know, of how the Europeans have brought Christianity to America, not a speech a European politician, including a Christian European politician, would give. And I thought some of the kind of structural issues which are driving the United States and Europe apart, some of which were present pre-Trump, a focus on industrial policy and tariffs rather than free trade, an expectation that Europeans do much more of the heavy lifting on their own defense, an opposition to lax border security.

34:20I mean, all of these things are absolutely present in the speech. So, yeah, I think he deserved a round of applause. This was a good speech, rhetorically, but a standing ovation from Europe's leaders, I wonder if they were really paying attention. The interesting thing for me is when you read that speech and think about the sort of the past lineage of American leaders, I mean, Europe may be kind of slow in responding. But the reality is what America is doing is pushing Europe in defence terms to try and think more independently as an economy, to think in a more separate, potentially protectionist way, if they respond with protectionism to Trump's protectionism, to look for new alliances around the world.

35:08You see Mark Carney encouraging that, but you see other European leaders looking elsewhere in the world. And you think to yourself, why is this in America's interests? I mean, America was always stronger by having a Europe which sort of jumped to its tune. And this was brought home to me. We've just had the passing of the Reverend Jesse Jackson. And I heard him speak live at the Kendi School when I was a student there back in 1988-89. And he was like the bridge between Martin Luther King and that generation and the modern era. And a great charisma, very important to the election of Democrats. But I was looking back on things he said, and in the 1980s, Jesse Jackson railing against Europe.

35:51Why are these Europeans not pulling their weight? Why don't they do their own defence? Why does America have to spend all this money defending Europe when, in Jesse Jackson's terms, that money could be better spent in the United States dealing with, from a left to centre perspective, America's domestic challenges? Now, kind of different politics, different motive, but a critique, which is not so different from the Donald Trump critique about Europe not pulling its weight. Ronald Reagan took the opposite approach. Ronald Reagan said, no, that actually it's not only in the world's interest, but in America's interests to have this continuing economic and military relationship with the European Union.

36:41And you think to yourself, Ronald Reagan thought that was the right place to be and predecessors of his in the White House. I mean, if Donald Trump and Marco Rubio, are they making a kind of classic foreign policy error that in the end, in a world in which America, China, Russia, they go their own way, that in the end, they put Europe in a position where it has to do the same? Well, as we discussed before in this podcast, there's always been a strain of American unilateralism where it's only consulted its allies after the fact. Like we were discussing the invasion of Grenada and telling Margaret Thatcher the next day and her railing against it.

37:21I mean, I think what's embarrassing for Europeans at the moment is that we're just not included in these big conversations that are going on. I thought there are kind of several indicators of that. I mean, the Iran talks, you know, 15 years ago when I was in government, you know, there were Iran talks. There was a process that involved, you know, the British Foreign Secretary, the French Foreign Secretary, the German Foreign Secretary, the European Union. Now there's, you know, two carrier groups now sitting in Iran. And the conversations with Iran are being conducted by Donald Trump's son-in-law and his friend from New York, Steve Whitcroft.

37:57So, you know, and the Europeans are nowhere on that conversation. There's actually quite a lot of chaos in Cuba at the moment, okay, in America's backyard, caused by American sanctions on Cuba, sort of follow up to what's going on in Venezuela. Again, Europeans are not involved at all. The French sent an envoy to Moscow to try and barge in on the talks around Ukraine and got sent home empty handed. And Macron actually, you know, was pretty strong against Russia. So in lots of these spaces, you know, the French traditionally had a sort of softer line on Russia, were much more vocal. So, you know, it is quite sort of striking at the moment.

38:36And while we're recording this podcast, the Board of Peace is meeting Donald Trump saying, and Europe having completely boycotted the thing because they didn't like the way it was set up and Donald Trump's sort of personal involvement and all, you know, have now had to send a European commissioner because they realized that to be completely absent from this event is a mistake. And so, you know, all of this, I mean, I actually agree. Although the UK is absent. Good point. And I bet there must have been a discussion about that. Because I thought it was a very interesting speech. Who would have expected the human rights lawyer, the man who's built his entire adult career on, you know, the rule of law, international courts, the soft power, giving this speech at the Munich Security Conference.

39:26This is our Prime Minister, Keir Starmer, talking about what he called the hard currency of the world, as you'll hear. Now, to break the convention of a thousand speeches, we are not at a crossroads today. The road ahead is straight and it is clear. We must build our hard power because that is the currency of the age. We must be able to deter aggression. And yes, if necessary, we must be ready to fight, to do whatever it takes to protect our people, our values and our way of life. And as Europe, we must stand on our own two feet. So talking of hard currency, and just to reinforce your point, I was just reading the last couple of hours, but it being reported that a further 50 jets have been moved into the Gulf from Europe.

40:25These are 50 more US fighter jets and US fuel supply aircraft moving en masse from North America and Europe. So goodness knows what the plan is in Donald Trump's mind. But while you've been away in India, the politics has been been hotting up here following Keir Starmer's speech. As he said, to meet the wider threat, it's clear we're going to have to spend more faster. James Landale, the BBC's diplomatic correspondent, reports the Prime Minister's considering making a significant increase in defence spending, the BBC has learned. BBC's been told the Prime Minister's aides are now looking at proposals to meet the 3 % ambition by the end of the current parliament by 2029.

41:05As you know, the government has said they'll get to 2.5 % of defence spending by April 2027, but with a broader aim to get to 3 % at some point in the next 10 years. No date on that. And then in the Telegraph this morning, Reeves blocking spending boosts for defence, Chancellor refusing to increase MOD budget further, despite pleas for military leaders, saying they have a big funding shortfall, but talks over the defence budget have hit a roadblock with the Treasury. So Chancellor's spring statement in a few weeks' time, Treasury wanting to downplay this and just saying that this is an update on the economy without a fiscal report.

41:49But if Keir Starmer wants to put his money where his mouth is on defence spending and 3 % by 2029. I mean, this is billions of pounds, you know, 15, 17 billion pound a year extra over the allocations currently in the spending review. Where is the money going to come from? And who's going to make the announcement? And if it's not being made in the spring statement, then when's it going to be made? But I think it also begs two questions, which I guess will lead to the summit I'm at here in Delhi, which is, you know, first of all, we clearly have to spend more on defense, but I've yet to see a convincing plan of how this money is going to be spent.

42:33Is it going to be spent on the big cost overruns on very expensive frigates and armored vehicles and, you know, next generation of manned fighter jets, when many people think that the money should be spent more on a technology-enabled new kind of conflict of the kind, brutal kind, you're seeing being played out in Ukraine. This is so funny. You can take George Osborne out of the Treasury, but you can't take the Treasury out of George Osborne. In that Telegraph piece this morning, government sources told the Telegraph the Treasury were worried about wasteful spending by the MOD with refusing to increase its budget beyond the settlement of£73.5 billion by 2028-29, concerned that giving more money this is the treasury to defense will force them into spending cuts elsewhere that's their other concern but they start with this defense department they're just going to waste it all well there's a row going on in germany at the moment pretty interesting row because germany has taken this historic decision for for sort of post cold war germany to increase dramatically its defense budget and now people are saying but all the money is being spent on buying german-made tanks and at the moment you can't move a tank on the ukrainian battlefield without it being destroyed almost instantly by a swarm of drones and so you know rachel reeves when she announced the big increase in defense spending last year promised that a lot of this money would go into new innovation the new battlefield the new weaponry of the future and i don't see a huge amount of evidence of that happening and i was speaking recently to a group of people connected with the military and they were saying they're not really seeing it too i mean there's there is some you know core technology which the british military have developed over recent decades which is strong but the new innovation not so much there and then the second point i make which is true throughout history is that you're only as strong as your economy yeah it's how you introduce this item ed and here i am at this big conference with these huge tech companies you know of course i declare an interest as i work with one now and you know where are the european companies here you know the the american companies are here there are chinese companies here and this you know huge technological revolution that's happening which is driving we talk about the economic figures in the uk striking figures in the us where the us economy is really picking up now.

45:06This innovation, this technology, the strength of the economies that are pioneering it, that is not being seen across Europe, including in the UK. I mean, you can increase your defence budget on a flat economy, but only by either increasing taxes or cannibalising other public services. And I don't think many of those Labour MPs were put into office to, you know, turn the plowshares into spears, as the old saying goes. You need your economy to be growing to really defend yourself, to protect yourself. That's what Europe needs to do, and that's what the UK needs to do. But Putin is fighting a war in Ukraine on the back of a flat economy, and if there is an existential threat to Europe from external forces, you have to be ready.

45:51And saying, look, can you postpone the conflict for a few years because we've got to sort our economy out first isn't the way in which things work. I find it really hard to see how this Chancellor, this Prime Minister, are going to find room for manoeuvre within the fiscal arithmetic to borrow more for defence? Very hard to do. I think it was possible a year ago. Very difficult now. Are they going to be cutting spending on the NHS or schools or housing or local government capital spending for the economy to make way? Are they going to be reconsidering the two-child cap or disability benefits or the triple lock?

46:26In the end, do you come back to some kind of Boris Johnson style social care type ask you know a defence levy you know a tax to equip us for the future but that would be a tax which would have to be paid for by business and pensioners and working people and I mean I understand the are we at the races in tech and the economy's got to grow and are they wasting the money but if Keir Starmer says we're gonna have to spend more and he wants to spend it in this parliament i mean how okay so what would you do you know you're the labor chancellor do you in this situation well you haven't got a growing economy and that ain't going to materialize soon do you try and persuade the public that there's a kind of precept on their taxes a defense charge on their taxes as you just mentioned do you try and persuade the market that there should be as you suggested a year ago a sort of addition to the fiscal rules, a bit like the Germans did, to fund a defence ramp up?

47:26Or do you try and persuade the parliamentary Labour Party that it's got to swallow now welfare cuts or cuts in other public services because the nation's security is at risk? So which of those, if you're this Labour government, what's the least bad choice? Look, the last time our defence spending was at 3.5 % of GDP in the late 1980s. Our spending on the health service was 4 % of GDP. And our spending on the health service is now twice that and expected to rise further. And despite that, there's still huge pressure on the NHS and social care. And our capital spending in our economy has been weak.

48:07And people want the borders and the streets to be safer. and there's no way that Keir Strahm is going to be going after disability benefits for savings anytime soon and he's not going to touch the pensioners triple lock. So I don't think the markets will wear a fiscal fiddle as it would now be seen. I think there was a way to do it. I think that may have gone. I think spending is very hard. The only way you could do it now would be for the immediate threat to be so dangerous you have to ask people to make a contribution. But the contribution. If you want to get to three and a half percent of GDP, that is£500 a year per taxpayer.

48:44And this is a large amount of money. So I think if I was the Treasury, I would think, why is the Prime Minister coming back from the Munich summit and briefing James Landale, causing us a massive problem where it's not clear that any of us can see the path? Defence spending is rising, but accelerating it further in this Parliament, I think it's going to be very difficult unless the threat is so clear and present and i guess we're not quite at that point yet so um if i were the treasury i'd be pushing them back you don't think we're going to see the dividends of the green energy revolution that ed milliband is taking international this week because he you will have seen that he's done that's all going on lower bills he's he's uh he's striking deals with california did you see that he's um you should people who are not watching this on video should I see Ed's face at that moment.

49:38It speaks a thousand words. I'm just looking at our poor producer, Ellie, a producer of the year, 2026, sending us messages saying you've got to move on. And we've got to talk about this AI summit. So let's do that after the break.

50:04Welcome back. As you can see, I dodged energy policy. I think we should come back and discuss energy policy in the next few weeks. But you're in India. You're at this summit. You said it was massive. The tech is challenging. You are chairing a panel tomorrow and you'll be doing your day job. What is the mood like at this AI summit? Well, it's a hell of an achievement to put on one of these summits. As I was saying earlier, 70 ,000 people, I'm told here. Certainly feels like it if you try and move around New Delhi at the moment. And this is a proper British achievement. You know, this was Rishi Sunak's summit at Bletchley Park, which has now been followed by summits in South Korea, Paris, and now here in New Delhi.

50:47And the theme of the summit, the sort of stated theme by the Indian Prime Minister, who formally opens the leader-level element of the summit tomorrow, although it's been going on already for a couple of days, is all about Indian leadership of the global south and needs to make sure that this technology doesn't just make richer countries richer, but it needs to be used to lift the living standards of the poor and it needs to be felt everywhere in the world. And I think that's something we can all applaud and that's a good focus for the summit. It's interesting, as you noted earlier on, originally this was called the AI Safety Summit and the British incarnation of this the first summit focused a lot on kind of you know big risks from ai including the kind of existential you know are the robots going to take over the world you don't hear that at all here but what i do see is a kind of curious paradox which is really interesting and is part of my role at open ai which is i think for a lot of countries there's a combination of of a fomo and at the same time a concern about sovereignty so the FOMO is you know my country my you know we're not the United States we're not China all the other countries are thinking this revolution this AI revolution is it passing us by and how can we make sure it happens in our country and how can we make sure our kids are properly educated and our businesses succeed because otherwise we're going to fall really far behind so we're just discussing on the economy and alongside that FOMO there's a kind of sovereignty control which is this technology is so pervasive how do we have some control over it because it's really unrealistic for most countries with the possible exception of China to say we're going to be entirely independent we're going to build our own chips we're going to develop our own frontier models of AI we're going to build our own data centers to host those models you know that's not an option available even for you know the richer countries of the world other than the US so it's that kind of tension playing out the excitement about the revolution plus the concern about sovereignty and of course there are all sorts of other issues not least you know issues around job displacement and the like as well that featured a summit like this I guess my question to you is I mean a a parochial question and then a kind of big question the parochial question I was reading a um substack by Verity Harding, a friend of our podcast, she wrote the book AI Needs You.

53:16And I talked to her about AI a couple of years ago around the SUNAC summit. And in her substack, she says that, you know, both France and India have really used their hosting of the summits to drive that big question, that big national question, is AI working for our country? Are we going to get the benefits here? is regulation and our business capacity, but also our citizens, are they kind of at the centre of this? And that is not an approach the UK has taken over the last two or three years. It wasn't how Rishi Sunak did the first summit, but the British government more recently hasn't. It's sort of, you know, they are more wanting to follow the American lead.

54:00So question mark, is Britain falling behind in the race to take advantage of the AI opportunity? And then the big question is, Rishi Sunak back then, talking about the big existential threat. Could AI take over the world or could rogue states grab AI and turn it against us? Or what's going to happen to jobs with AI? Are we all going to see our economic models changed? or in a more consumer way, is AI and the internet and social media more widely undermining our children and our safety? And I just wonder, over the last three years, have any of those questions been properly addressed or answered?

54:44Does it feel as though in the rush to be part of the sugar rush, those big strategic regulatory questions are being ignored? Well, to take both questions, and I think they're related. First of all, Britain does have quite a high reputation at this summit and the institution that emerged from the bletchley park summit in britain which is britain's ai safety institute has is held as a model that other countries should try and replicate so britain has i think led by example to quote william pitt's famous speech a couple hundred years ago the second thing is you know as with all these kind of international gatherings and you you would have seen it with the g20 and uh the g8 and as it then was and the un you sort of say well is there a purpose to all this talking and you know these communicates do they mean anything is never just getting on and doing their own thing yeah but it's a good thing people are talking about it and it's a good thing that the governments of the world and many many heads of government and heads of state are here talking about it's better it's better that they're trying to talk about this technology and what they and try and find some common ground rather than just see it entirely as a kind of race to the bottom or not a race to the bottom there's the wrong way to put it you know a race to kind of absolute control you know so i i think we should applaud the efforts here even if they can be messy and kind of a bit woolly because i think they're well meant and i think it's true that kind of fear the kind of conversation about existential you know the the robots taking over has dimmed but i think what's definitely picked up is more of a sense that this is a truly transformative technology this is like the arrival of electricity or the arrival of steam power before it's going to it's it's not just a change in the way the internet operates as a and and i think a lot of countries are waking up to it and i would i think you know we don't you know we often point out where the government's got things wrong.

56:48But in fact, on their approach to AI, Liz Kendall, who's the technology secretary in the cabinet, she gave an interesting speech about AI just about a week ago, in which she said, look, Britain's not going to be the same as the United States or China. It's not going to necessarily have these giant companies that are British. But it can be the nation that adapts to and adopts AI more comprehensively than any other nation. We can be more nimble, more quick-footed. It's actually what happened with the digital revolution and the internet and e-commerce. The British government moved more quickly online than many other governments.

57:28British consumers moved more quickly to get the price benefits of e-commerce. And so I thought that was a really sensible ambition to set Britain, a realistic ambition, not grandstanding, not pretending to be something we can't be, but something a fairly centralised British state can deliver. Sure. I hate what you're saying. I mean, I think at this point you become slightly less Treasury Chancellor and more AI tech bod with a rucksack and a sweatshirt on the west coast of America. Because there is a divide at the moment between economists and the AI world, with economists in general saying, this is going to be a big technology and it will improve welfare.

58:09But actually, is it likely to have much impact on productivity in the next 10, 20, 30 years? Probably not. And the AI guy saying, you don't really understand it. It's going to be much more revolutionary than you realize. And, you know, time will tell. I guess my - I mean, your hero, sorry, your hero, Paul Krugman, famously predicted that the internet would have the same impact on the world economy as the fax machine, didn't he? So that's right. And so economists can. There are economists saying you are seeing now a productivity pickup in the US driven by AI, that you are beginning to see it in the numbers.

58:45Well, this is this is early and keep an eye. But last summer we had Donald Trump saying that anybody who discriminates against American tech will be hit with tariffs and retaliation. the UK-American kind of deal on that, put into abeyance because he didn't think we were doing enough. Last week in the UN, the UN General Assembly approved the appointment of a 40-member independent international scientific panel on artificial intelligence to look at the impacts and risks of AI. And of the 117 countries who supported the move, two voted against, two abstained. Paraguay voted against with Ukraine because there was a Russian representative on the group and the United States.

59:30And how much does it feel there that the US is participating in this global conversation? And how much does the US government think, you know, leave us alone? Well, the US tech companies are here in force and their presence is very much felt. And there are quite a few members of the White House, the sort of White House advisors, like the White House AI advisor, Srinam, who lived in London in recent years and will be known to a lot of people in the UK tech community. But you don't have, it's true that the president obviously hasn't come and the vice president isn't here. Although Deputy Prime Minister Lammy is leading the UK delegation.

1:00:12Yes, he is. And I would say, you know. Macron is there, right? I don't know. It was a good question. I thought he was coming in. My world did. A lot of them arriving overnight for the opening tomorrow. I think there are 40 heads of state. If they're listening to this podcast, beware the Wi-Fi. It's a challenge. Well, I think we can conclude, can't we? Because I can report back next week on any developments after this podcast. But I think we would have had an easier time, instead of trying to get the Wi-Fi to work here, if we had just got, you know, ChatGPT or whatever, to produce this podcast in the style of Ed Balls and George Osborne.

1:00:49And we could have played it and then, you know, asked our listeners a week later whether they'd noticed that it had been generated by, you know, our agents. That's the new word you've got to get used to, agents. That is a solution to how we have an Easter holiday. We'll just have an EMQs where AI can think up some good questions and then some good answers. Maybe we should try that out and see. Look, have a safe trip back from India. And next week we can get your ex-post reflections. And maybe at some point we'll dig into that. You know, the economists versus AI experts debate about the productivity impact.

1:01:24But that is it for this week's episode of Political Currency. Yes, we're going to be back with ex-Ministers questions on Monday. And if you need it sooner, you can get it early and ad-free by becoming a member of our Kitchen Cabinet or indeed a gold subscriber. I've met quite a few fans and subscribers here in New Delhi. And Kitchen Cabinet members also get ad-free versions of our main episodes, a bi-weekly newsletter. members only chat and our political currency mugs and um you know wherever you are in the world join our kitchen cabinet we have a global revolution to plan we'll see you on monday for emqs see you then thanks for listening to political currency this has been a persephonica production

1:02:16Thank you.