How far will Trump go on Iran and what could it mean for Britain?

0:00George Osborne: Hello politics fans, I'm Matt Ford, the host of the Political Party podcast, and I have some very exciting news. The Crossed Wires Podcast Festival is coming to Sheffield from the 4th to the 6th of July, and they're bringing some of the biggest names in political podcasting to the stage, including me.

0:16Ed Balls: I'll be recording a special episode of the Political Party with King of the North Andy Burnham on Sunday the 6th of July. But there's even more. Pod Save the UK will be there as well. Nish Kumar and Coco Khan will be joined by former city trader Gary Stevenson

0:32George Osborne: the BBC's political editor Chris Mason will be taken to the stage with Adam Fleming for a live edition of Newscast and John Harris will also be at the festival with the Guardian's Politics Weekly

0:42Ed Balls: it's essentially the Glastonbury of political podcasts without the mud but maybe with the comedowns there's loads more including Greg James, Frank Skinner and Sir Michael Palin after parties, book signings and an entirely free fringe

0:56George Osborne: Head to crossedwires.live for tickets and more information.

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3:23This is Political Co-NC with Ed Balls and George Osborne.

3:36Ed Balls: So we are recording remotely today, even though actually we're both in the UK because I spent a couple of days you know on a boat in the solent sailing around kind of yarmouth and the isle of white and portsmouth but george you've just come in on the red eye from washington dc dashed in to london in order to record this uh podcast i've got to say i think you're looking okay

4:04George Osborne: given given you know the overnight flight i tell you it was a very english channel weather in washington it was terrible it was like pissing with rain it was foggy it was uh it then got it was quite cold it's pretty because it's been sunny and lovely i know and then it got very very humid it was that got that kind of swampy feeling to it and of course washington is the swamp that the trump team want to drain i caught up with various friends but i missed the british ambassador peter mandelson who i did reach out to because he is in london and he's been unveiling a statue of George Washington in Trafalgar Square.

4:41George Osborne: That's been there and now it's been kind of renovated. And I, as I said to some people in Washington, it's extraordinarily generous of us, isn't it, that we have that traitor's statue in Trafalgar Square. I mean, he was a colonel in the British Army who led an insurrection. And now we've gone and put a big monument to him in the centre of our capital. Just shows what good, what nice people we are, the Brits. As Peter

5:07Ed Balls: Anderson said it was a celebration of the 250th anniversary of the US Army and the UK played a rather formative role in the establishing of that said army 250 years ago so there we are. So it's been a really important, worrying, fast-moving few days. Fascinating to get your perspective from Washington on events but also I think we're going to come back later on to some UK issues as well. But we're going to start by talking about Israel's attack on Iran, Iran's retaliation, overshadowing of the G7 summit, and will he, won't he, all the speculation about what is happening in the White House, what is the Donald Trump game plan.

5:52George Osborne: And then we are going to turn to British politics and the announcement this week by the Prime Minister that there will now be a national inquiry into the so-called grooming gangs scandal, which is widely presented as a U-turn and has got an American element to it, because people might remember, we certainly discussed on this show, that Elon Musk was agitating for this some months ago. So why has there been this change of heart? And what does it say about the political instincts of the government?

6:24Ed Balls: And then we're going to return to U-Turns, a story in the Financial Times this week by Harriet Agnew, George Parker, unleashing a great deal of broad-based speculation. The story, Rachel Reeves considering changes to non-DOM inheritance tax amid UK exodus. Chancellors being lobbied by the city following a spate of departures by wealthy people. The door being opened, it seems, to further shifts on those non-DOM tax changes. And as I said, you'll give us a very interesting view from across the pond about how American financiers and investors and potentially current or ex-nondomers are seeing what's going on here in the UK.

7:06Ed Balls: But we're going to start with Israel and Iran and a moment which has been, I guess, much discussed strategically for very many years. When you were in government, when I was in government, what would happen if Israel and Iran went to war? And for the first time, for a very long time, we are living through that moment.

7:30George Osborne: Yeah, it caught everyone by surprise, not least, of course, the Iranians, and was brutal. The Israeli attack, which started a week ago and began with the assassination of a large number of leading Iranian military and Iranian Revolutionary Guard officials, and had sort of echoes of that decapitation strategy that Israel executed against Hezbollah with the exploding pages a few months ago. And I think has restored a kind of sense of Israeli competence, ruthlessness, and sort of internal tactical sort of, you know, espionage and special operations sense, sort of brilliance, which they had lost after the horrific Hamas attack and hostage taking back in October a couple years ago.

8:20George Osborne: So it's, as you say, long been discussed. This has been one of the most discussed issues. What will the world do? if Israel attacks Iran. And I would just start with an interesting observation. You know, Israel's, and particularly when I say Israel, particularly the Netanyahu government, its behavior in Gaza is, of course, unbelievably divisive. And there are people in this country, there are people in the United States, and above all, it's worth noting, there are lots of people in Israel who are very, very uncomfortable, downright angry with what the Netanyahu government and the Israeli army are doing now in Gaza and the reports of people being shot as they queue for aid and so on.

9:02George Osborne: What I found striking, and it was certainly the impression I got from Washington in reading the commentary, and I don't know whether you felt the same here, was there's not nearly the same opposition to what Israel is doing in Iran. There's actually pretty widespread support and understanding that Iran cannot be allowed to develop a nuclear weapon, that other channels have not really succeeded. And that the Israeli action happened just two days after a big international body, the IAEA, you know, set up after the cold during doing the wrong thing. And just to kind of just sort of make that first observation that there's a striking difference in attitudes towards Gaza and Iran in terms of Israeli action.

9:45Ed Balls: That's right. And I think you see the same thing in Israel, too. I was struck by an article by former Prime Minister Ered Barak, you know, from the other side of the political spectrum from Netanyahu, very critical of the current government's Gaza policy, writing in support of that preemptive strike against Iran. And the politics in Israel is a very unpopular government, worried about whether or not it could survive, and under great pressure, with a lot of criticism and concern about what's happening in Gaza, in a moment, unites politics, unites public opinion, a very, for now, strengthening moment for the Netanyahu government.

10:32Ed Balls: So within Israel and internationally. But of course, the question is, where's it going? What is the goal? You know, is it simply the destruction of a nuclear capability? Is it about regime change and kind of taking out the current leadership in Iran? And if so, what would come after? Or will we end up in a war of attrition? And who has the greatest strength to sustain that? I was very struck by listening to Netanyahu being interviewed on Fox talking about this? Because, of course, the big question which has arisen in the last few days is what's America going to do? Because if the aim is taking out the nuclear capacity, it seems very hard for Israel to do that without active American support.

11:17Ed Balls: This was the Israeli Prime Minister talking about President Trump.

11:21George Osborne: Look, we're fully coordinated, but understand that America, under President Trump, will make the decisions that are best for America. and that's the way it is.

11:31Ed Balls: He understands that I, as the Prime Minister of Israel, the one and only Jewish state, must make the decisions that are important for the survival of my country and he will do what is best for America. That is a relationship of mutual respect and mutual confidence. But of course, as Barak says in his article, very hard for Israel's goals to be achieved without active support of the United States and the reality of the last few days is a great deal of uncertainty about what Donald Trump knew. What is his attitude to what's going on? What will the Americans do? What does he see his goal is? This is Donald Trump keeping everybody guessing.

12:12George Osborne: Will you strike the Iranian nuclear component? And what time exactly, sir? Sir, would you strike it? Would you please inform us so we can be there and watch? I mean, you don't know that I'm going to even do it. You don't know. I may do it. I may not do it. I mean, nobody knows what I'm going to do. I can tell you this, that Iran's got a lot of trouble and they want to negotiate. And I said, why didn't you negotiate with me before all this death and destruction? Why didn't you negotiate? I said to the people, why didn't you negotiate with me two weeks ago? You could have done fine.

12:46Ed Balls: So I guess this is the question I'm going to put to you because you've been out there in Washington, D.C. There is a natural kind of tendency of observers of politics to assume that there's a plan, that there's a strategy, there is a goal. And what's going on here is an unfolding of that strategy publicly. But that may not be the case at all. I mean, it may be when Donald Trump says, I might, I might not. That is genuinely in his mind, because there's a number of different things which have been going on in the last few days, all of which push him in different directions. First of all, did he actually know that this strike was going to happen in this way?

13:28Ed Balls: The Americans were involved in kind of quite detailed and acute negotiations with the Iranians. So there is a sense that, which he will hate, that he was a bit taken by surprise. Donald Trump who fought the election as the peacemaker, as the man who was going to solve conflicts, the man who was going to be the guy who brought peace quickly to not just to Ukraine, Russia, but more widely. He doesn't want to be seen in his mind. He's a peacemaker, not a war monger. You've then got, though, splits opening up in his own coalition with some people, Some of his big supporters, Steve Bannon, Tucker Carlson, saying, do not launch a war in the Middle East.

14:12Ed Balls: Don't get America involved. Leave it to the Israelis. But then, of course, others saying, this is the moment. You've got to be strong. And then there's a question, the Kissinger question. Well, if he starts, where does it end? What is his actual goal? And then I think the fifth thing, when I look at this, Trump 2.0. there is a wildness there is a an uncertainty think of the people around him in the room compared to in his first his administration i mean if tulsi gobbard is there or pete hegseth i mean what are they saying to him so i mean who knows how these forces are going to play out does donald trump even know himself this week what his plan is well i think it's a very good question um

14:55George Osborne: so let's sort of unpack it in terms of planning i think you're right in this respect there are There has been a ton of planning about what to do if Israel strikes Iran. So there's a lot of British planning, which is currently unfolding. And there's been many years in the making of deploying, forward deploying jets to Cyprus and so on. There's been a ton of American planning. And obviously, there's been a ton of Israeli planning about how they might carry out the attack. And in terms of consistency, I first met Benjamin Netanyahu in 1998. And the thing he was talking about in the meeting I was in, I was just the note taker at the back.

15:30George Osborne: But the thing he was talking about was trying to warn the West about Iranian nuclear weapons. So that's all been consistent and planned. But the big unanswered question, there were two big unanswered questions. The first was, could Israel single-handedly take out Iran's nuclear capability? And all the advice I saw when I was in government was no. that in the end, for all the ruthlessness of the Israeli military and intelligence and all their capability, they don't have the weapons required to completely eradicate the Iranian nuclear facilities, particularly this underground facility in Fordor.

16:10George Osborne: And the only country in the world that does have that capability is the United States. So that was the advice over 10 years ago. And it seems to be still the pressing question today that the Israelis cannot by themselves for all the damage they're doing to these facilities and of course the people who ran them most of whom are now dead as far as I can see um they can't they need the Americans for that and then the second question was would the Americans do it and Barack Obama openly discussed that with us and uh you know we didn't know whether he would say yes so the assumption was probably no because he didn't want to get drawn into it but that was for very different reasons to the as you say the sort of donald trump uh decision making because it's you know a very important part of the trump coalition is people on the right who think america first means america doesn't get involved anymore in these what they call never-ending wars in the middle east that bush and obama and so on have been involved in so so i think you're right those

17:10Ed Balls: bush obama things were slightly the aberration i mean if you take a 50 year view or 100 year view That was the American view. And you could have imagined, you know, two state solution, keep that alive, reduce the nuclear threat of Iran, but stop us getting engaged. I mean, in fact, the American engagement under Bush and to some extent Obama-Biden was unusual.

17:32George Osborne: Yes. No, I found out someone was saying to me yesterday, who, you know, was giving me the kind of where this all sits in American history, that, of course, there has been a strong isolationist and America first approach to foreign policy for a long time, and that you should be looking at the late 19th century when America was not wanting to get engaged in the world or in the 1920s, 30s. When it comes to, I mean, I think it's worth pausing on the kind of Trump coalition, because people who are anti-Trump or hate Trump, there'll be loads of listeners to this podcast who just think the guy is a complete lunatic, you know, will miss this point, which is that he has been, that you make, that he has been a consistent opponent of America getting involved in wars.

18:16George Osborne: and his own coalition however is a mix of people who think when they say america first they mean assertion of america power american supremacy abroad a kind of version of neoconservatism that we saw at the time of the iraq war with these people who are absolutely against conflict and you've had i think a couple of examples we should we should play them shouldn't we i mean the first is Tulsi Gubbard, who is the director of national intelligence. Lots of people question whether she was, you know, suited to do the job, seen as a very close ally. And then, you know, when Trump's returning from the G7 summit on Air Force One, someone says to, but hold on, Tulsi Gubbard says Iran isn't developing a nuclear bomb.

19:03George Osborne: And this is how he responded. You've always said that you don't believe Iran should be able to have a nuclear weapon. But how close do you personally think that they were to getting one? Because Tulsi Gabbard testified in March that the intelligence community said Iran wasn't building a nuclear weapon. I don't care what she said. I think they were very close to having one.

19:22Ed Balls: I don't care what she said. This is his national security advisor and he doesn't care what she said.

19:30George Osborne: Yeah. OK. Director of National Intelligence. Same thing. I mean, of course, and that is a reminder that all politics has elements of a court. There's a court around 10 Downing Street and there's a court around the Elysee and so on. But there is a really big court around Donald Trump. And you don't know what the king is going to do with his trusted advisors, whether he's going to chop their heads off or not, metaphorically.

19:53Ed Balls: She had done a really weird video last week warning about the dangers of nuclear proliferation and saying this was like an establishment plot and it was incredibly dangerous. She went to Nagasaki and to Hiroshima and talked about the terrible damage done, by the way, by an American president. And it must never happen again. And it was, I think people were a bit confused by it in Washington. And then the fact that Israel then launches his attack a few days later.

20:19George Osborne: I mean, goodness knows what she's up to. So then you have the for sort of Trump baiters, the sort of popcorn moment of the interview between Tucker Carlson, who, of course, was this sort of very prominent Fox interviewer who left Fox, has his own media outlets. And he was interviewing Republican Senator Ted Cruz, who has been a more sort of latter convert to Trumpian politics. and Carlson was interviewing Cruz this week and this was the encounter.

20:55Ed Balls: How many people living around, by the way? I don't know the population. At all? No, I don't know the population. You don't know the population of the country you seek to topple? How many people living around? 92 million. Okay. Yeah. How could you not know that? I don't sit around memorizing population tables. Well, it's kind of relevant

21:16George Osborne: because you're calling for the overthrow of the government.

21:18Ed Balls: Why is it relevant whether it's 90 million or 80 million or 100 million?

21:22George Osborne: Why is that relevant? Because if you don't know anything about the country... I didn't say I don't know anything about them. Okay, what's the ethnic mix of Iran?

21:28Ed Balls: They are Persians and predominantly Shia. Okay, no, you don't know anything about Iran. Okay, I am not the Tucker Carlson expert on Iran who says... You're a senator who's calling for the overthrow of the government and you don't know anything about the country. No, you don't know anything about the country. You're the one who claims they're not trying to murder Donald Trump. No, I'm not saying that. You're the one who can't figure out if it was a good idea to kill General Soleimani and you said it was bad. You don't believe they're trying to murder Trump. Yes, I do. Because you're not calling for military strikes against them in retaliation.

21:58Ed Balls: And if you really believe that. We're carrying out military strikes today. You said Israel was. Right. With our help. I've said we. Israel is leading them, but we're supporting them. Well, you're breaking news here because the U.S. government last night denied, the National Security Council spokesman Alex Pfeiffer denied on behalf of Trump that we were acting on Israel's behalf in any offensive capacity at all. We're not bombing them. Israel's bombing them. You just said we were.

22:24Ed Balls: Well, things are not kind of stable in Trump land. They really aren't. And Steve Bannon, I think, taking the same line as Tucker Carlson. And I'm not sure what JD's up to. I mean, you would know.

22:37George Osborne: Yeah, I think he's keeping a low profile on this issue. although you know I mean his instincts I think would be probably not to get too drawn in and there's definitely an option of if you can get away with it which is always you know to sort of the kind of Kissinger point once you get involved what's your exit plan but you know there may well be a kind of halfway house where the Americans use this one capability they have which is destroying deep underground facilities but of course if you do that you open yourself up to Iranian retaliation. I mean, it's worth noting in all of this, what has been exposed is the utter weakness of the Iranian autocracy.

23:15George Osborne: You know, they have no air defenses over their country. Their proxy groups like Hezbollah have been completely, you know, emasculated. And they are essentially sitting targets. And although they are retaliating in as far as they can against Israel, the damage being done in Iran is vastly greater than damage being done in Israel. I think there's a kind of interesting question, you know, if you're, so that's, you know, if you're trying to pick your way through all this as another western leader trying to interpret like who's you know what's trump going to do where is the kind of trump coalition heading um you know what will americans do next i mean the one thing is you definitely haven't been told in advance and you're having to put a brave face on it if you're the british prime minister or the french president you know you can't you can't just say i don't know anything but you know it's absolutely clear that most Western governments didn't have a clue or were not in any way consulted in advance.

24:10George Osborne: And then you had the G7 meeting happening while this is all taking place. And I think in a kind of traditional worldview, you might think, oh, that's really convenient. You know, here's a moment for the Western alliance to get together in, you know, they always happen in kind of slightly incongruous locations, this one in kind of log cabins in northern Canada, Mark Carney's first G7 as Canadian prime minister. but that was not the case at all because it became very evident that the american president thought it was a total waste of his time being there interesting the um g7 i think i'm right

24:42Ed Balls: saying mark carney is the first person ever at the g7 to have represented two different countries at the g7 i don't think it's ever happened before and a lower level you know and in every format of

24:54George Osborne: the g7 exactly because he's he's he's been there you know the g7 meets at the leader level which is what you know what he was hosting uh it also meets uh the finance ministers and central bank governors and he's done that as both canadian central bank governor and governor of bank of england and like you uh he was a sherpa a g7 sherpa as an official wasn't he so he's he's done every every kind of possible combination of the of the g7 i think the only other person i could

25:21Ed Balls: think of you might have done two different countries although at a much lower level would be guz mcloof who used to be head of our revenue and then was the head of the australian revenue and is now central bank governor in ireland and so there may have been like g20 imf working groups where he's represented two different countries doesn't count if you like a tree shake because you've been a international european union or an imf bureaucrat but two different countries

25:43George Osborne: but um i think i mean i mean just tell me you've organized you've attended these g7s i i hosted one when I was chancellor in in Britain I mean the the amount of preparation that goes into them everything from like organizing the event what the meal's going to be and what the gifts are and who's going to sleep in which room and to the topics to the all the diplomatic work the Sherpas who we've talked before you know those are the people who prepare the summits hence they're called Sherpas and they um you know all the work can you imagine you're chairing and you've been organizing a g7 and the president united states says on the day he's arrived uh actually i'm

26:21Ed Balls: leaving i'm gone i know and i don't think they had any warning that he was going to do that as well he had an enormous delegation and they fly in and they fly out i don't think it is as bad as it first looks because actually um he was there for the monday meeting and for the monday dinner. The following day, which he left for, was a day when they were doing sort of outreach with wider brick powers, the Indians, I think the, I'm not sure the Brazilians were going. The Mexican president was going. Zelensky was coming. And actually, missing those things was probably less important. They did manage to get an agreed statement out on Iran-Israel.

27:04Ed Balls: But of course, they didn't have a communique it ended up with chairman's remarks for Mark Carney but actually the problem with the communique at this G7 it would have been a nightmare what would they have said in the communique about tariffs and trade and global growth so it might be that they slightly dodged a bullet in terms of of of what was actually going on on on those things but you know optimistic

27:29George Osborne: spin I think so I'm afraid I think Trump has sort of blown up the G7 at least for the Trump presidency i mean i don't think anyone can claim this is the inner sanctum where the west coordinates its actions and you know in fact there was a very public uh sort of dressing down by trump of emmanuel macron so emmanuel macron had said when asked because of course all these leaders like kia stama are doing domestic television when they're out there and domestic radio and manuel macron has said to the french press when asked when they all go like well it's a bit of a disaster isn't it that trump's leaving he goes no no no he's off to negotiate a ceasefire and trump tweets that or posts that that's absolutely not the case and then he says this on air force one as he's flying home when i'm looking for a ceasefire i didn't say i was looking for a ceasefire that was emmanuel nice guy but he doesn't get it right too often but uh when i'm looking we're looking for better than a ceasefire.

28:27Ed Balls: I mean, look, in Trump's defence, what had Macron done on the way to the G7 in Canada? He popped in to visit Greenland on the way to show his solidarity with the people of Greenland and their independence from America. So he had slightly poked the bear. By the way, there were actual bears on the golf courses around this G7 summit in Alberta. So I think Donald Trump was playing golf. I bet you're scared of bears.

28:55George Osborne: I heard a very interesting theory in Washington, which I had not heard before. So there's been a general narrative that the G20 is finished, or this sort of performative is pointless, because Vladimir Putin's a member, because President Xi's a member, it doesn't really operate anymore. And the way that it did, you know, when Gordon Brown was chairing it back in 2009, America is hosting the G20 next year. It's come round. They hosted the very first one, actually. It was George Bush who hosted the very first G20 at a leader's level, not at a finance minister's level in 2009. And here we are all these years later and America's hosting it again.

29:35George Osborne: And what I was hearing in Washington from people was that Trump has no time for the G7, but he actually is going to re-engage with the G20. He loves the G20. He loves the fact he's going to be hosting this big meeting and that he doesn't want to sit down with Keir Starmer and Emmanuel Macron and Friedrich Merz. He wants to sit down with President Xi and, you know, the crown prince of Saudi Arabia, who also attends and, you know, the president of China and the president of Russia. And, you know, that that's his he regards those as his kind of equals. And so you might get a kind of demise of the G7, at least temporarily, and a revival of the G20.

30:15Ed Balls: The interesting thing was, if you go back to the late 1990s, the original impetus for what became the G20 came from the Americans. It was originally called the Willard Group, which was a meeting in a hotel, which was alongside the G7 and the IMF meetings, because the Americans thought the G7, the G10 had too many Europeans, didn't give enough voice to Latin America, to Asia. and so if Trump is returning to the G20 that is actually where the impetus for the G20 started in the in the first place on the other hand you know if there are big problems in the economy this year I mean I think the unreported agenda of the G7 the things that I've been talking about in the margins is if things deteriorate in the Middle East and the oil price spikes if there is not a American an EU deal on trade before the beginning of July, what is the impact of that on the global economy?

31:15Ed Balls: And by the way, Britain very exposed to that as well. I would say if you want to sort out problems and apply pressure, then actually the G7 is still the place where that is most likely to happen. And it may not be what Trump wants, but there may be some difficult issues which need to be discussed in the G7 in the second half of this year about the economy, which he's going to have no choice but to engage in and if he doesn't everybody else will be talking about what on earth they're going to do about isolationist America but you know I don't think the G7 is dead and I think Carney will probably think he didn't have a bad meeting of course coming out of it that Israel-Iran statement I mean it doesn't say very much I mean it was a statement but it's what Keir Starmer, Chancellor Mertz, Carney, the EU, Macron, it's what they say in the coming days as the uncertainty about American engagement in Israel lifts.

32:11Ed Balls: I mean this is when it's going to get very acute and that won't be a G7 statement.

32:14George Osborne: Yeah but no European leader including the British Prime Minister wants to parade their powerlessness and yet everyone knows they have zero influence. there is however one very British have got a choice right there's a choice I was about to turn to that so there's you're quite right there's there is this sort of one sort of fly in the ointment and it's a really hard decision for the British Prime Minister and David Cameron spent a lot of time thinking about it and we were in coalition with the Liberal Democrats and we were always worried that this decision would cause real problems for the the coalition back then and in some senses you know Keir Starmer leads a different kind of coalition across the Labour movement of different voices and this is the british prime minister has to consent to the use of the diego garcia us uk airbase on the chagos islands now the chagos islands have been in the news because kirstama has essentially returned them to mauritius or handed them to mauritius but there's still this airbase and it's going to be there for 100 years and if the americans do these strikes on the iranian nuclear facilities they are likely to want to use this airbase and And so Keir Starmer has to say yes and could say no.

33:25George Osborne: And he's getting advice from his attorney general, his kind of human rights lawyer buddy, Herrmer, Lord Herrmer. And I think this is a classic kind of clash between what you come into office wanting to be, which is a government that's based on the rule of law, international human rights. You're going to embed that. You've been campaigning for it in your various legal practices over the years, you and Herrmer. And then suddenly the British Prime Minister, you've been trying to build up relations with Donald Trump. You've handled them pretty well. You even picked up his papers when he flew them all over the floor at the G7.

34:00George Osborne: And now suddenly, can you say no to Trump if Trump wants to use the airbase? I mean, I don't think you can, but there'll be a lot of Labour MPs saying, hold on, we are participating in a Trump strike not authorised by the UN.

34:12Ed Balls: I think we have to give credit for this revelation that Richard Hermer may be advising Keir Starmer that this would not be legal. This might not be legal if it's not simply supporting Israel defending itself, but instead Israel on the attack. Because this was revealed by our friend, our friend who we actually first announced his job move, Tim Shipman, leaving the Sunday Times to the Spectator. This week's Spectator, Starmer's war zone, the Prime Minister in his perilous position, Tim's first piece in The Spectator, which has splashed the Telegraph and been all across the newspapers. And by the way, I thought actually the thing which jumped out at me was the US Defence Secretary telling his British counterpart, John Healy, about Donald Trump, what he writes on Truth Social.

35:00Ed Balls: That is the best indication of present thinking. I mean, the US Defense Secretary follows Donald Trump on Truth Social to find out what's in his mind.

35:11George Osborne: But you know what you really need to do, Ed? You need to check takeaway pizza deliveries around the Pentagon. Let's end on this. The way that people knew, if they're really paying attention, that Israel was about to strike Iran, was apparently there was a surge in pizza deliveries to the Pentagon because they were all suddenly working late on these plans. And there's a place called District Pizza Palace, a takeaway two miles from the Pentagon. And there's someone online who follows pizza orders and they posted, we'll put it in the show notes, this big spike in pizza delivery orders. So you see, that's the way to spot what's really going on in the world.

35:52Ed Balls: Look, Tim Shipman reports Lord Hermer saying the Attorney General has concerns about the UK playing any role in this except for defending our allies. Would using Diego Garcia, the base, as a launching point for those kind of 60 metre deep bombs to penetrate the far dough deep in the mountain Iranian kind of nuclear facility, would that count as defensive or offensive? And the politics of this, as you said, could be quite complicated because whatever is happening in Israel, Iran, in the parliamentary Labour Party and more widely in Parliament, in American politics as well, concern about what's happening in Gaza is still kind of, you know, at least equally uppermost in people's minds.

36:39Ed Balls: And so I think you are right that for Keir Starmer to do a Wilson and refuse as a Labour prime minister to support an American president in this kind of international offensive operation. This is you're referring to Harold Wilson saying no to sending British soldiers to Vietnam. That's right. That would be like a really big deal. But the politics of saying yes are going to be pretty tough. and so yeah but I would think in the end this will not be the fight Keir Starmer would pick with Donald Trump don't you think?

37:12George Osborne: I do think that and he's got enough fights at home we should turn to that next we're going to look at the decision to hold a national inquiry on grooming gangs which has a lot of domestic politics attached to it even though of course at the heart of it is an absolute tragedy and we'll do that after the break.

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39:47George Osborne: welcome back on monday the government announced through the home secretary yvette cooper much loved by this podcast particularly one half foot that there was going to be a national inquiry into to the scandal of these grooming gangs in towns across England, and that the authorities, national and local, did nothing about it for far too long. And in fact, the whole thing was exposed by somebody who sadly has died, a Times journalist called Andrew Norfolk. So let's hear Yvette in the House of Commons making the announcement.

40:18Ed Balls: To the victims and survivors of sexual exploitation and grooming gangs, on behalf of this and past governments and the many public authorities who let you down, I want to reiterate an unequivocal apology for the unimaginable pain and suffering that you have suffered and the failure of our country's institutions through decades to prevent that harm and keep you safe. But words are not enough. Victims and survivors need action. But most disturbing of all, as Baroness Casey makes clear, is the fact that too many of these findings are not new. As Baroness Casey's audit sets out, there have been 15 years of reports, reviews, inquiries and investigations into these appalling rapes, exploitation and violent crimes against children, detailed over 17 pages in her report, but too little has changed.

41:19Ed Balls: We have lost more than a decade. That must end now.

41:25George Osborne: So I thought Yvette was very strong in the House of Commons, but there's no doubt, let's set aside, for the purposes of this podcast, we are not equipped to investigate and scrutinise all the things that went wrong, and we will await the inquiry. But let's look at the politics of this, Because I think when this first surfaced again, and of course, this story has been going on for over a decade. But when it sort of surfaced again towards the end of last year, it was seen as a very sort of political issue, wasn't it? It was seen as two things. It was seen as, first of all, an attack on Keir Starmer's record as director of public prosecutions.

42:07George Osborne: It was a kind of opportunity to attack Starmer by his political critics and opponents. and then second there was extraordinary american intervention by elon musk this was when musk was sort of just getting going as a kind of big public figure in politics certainly in our politics and he you know he um he posted these extraordinary statements about gordon brown um and jess phillips who was the junior minister here and keir starmer all being kind of essentially complicit in the mass rape of britain that he uses that kind of language but he had a very specific thing why are you not having an inquiry and the whole thing had been triggered this politics had been triggered by the labor government essentially rejecting a request by oldham council labor run oldham council to have a broader national inquiry into what had gone on in oldham and elsewhere and i guess the you know the the question i got for you first was just on the politics this it does seem to me kind of you know you can you can make the case for Keir Starmer that he you know the guy is not very political and that's a good thing and he commissioned Baroness Casey to say you know what should we do and she says we should have a national inquiry so he's having a national inquiry but the problem is it looks very naive and looks like a big U-turn because he had sort of stood against having a national inquiry and said that people were jumping on a right-wing bandwagon who were calling for it and I think if you were looking at it just as a sort of from the sort of narrow politics, it's been quite ineptly handled that he's ended up having the National Inquiry that he was against having just a few months ago.

43:46Ed Balls: There's no doubt that he was very defensive about what he saw was his leadership. When he was Director of Public Prosecutions, 10 years slightly more than that ago, he was one of the first people who really went after these gangs. And at a time when it hadn't properly broken through, it was only really with the Norfolk reporting the Times. I I don't know about you as Chancellor, part of the government in that period. Certainly, I was Secretary of State for Children's Schools and Families. We had responsibility for tackling child sex abuse. We would go after any time when institutions were failing.

44:21Ed Balls: I mean, post-Climbier, BBP and all of the problems about poor communication. But at that time, this wasn't coming across the desks of cabinet ministers. I mean, I don't know whether you ever had any dealings with it.

44:36George Osborne: I didn't. I didn't directly. I mean, there was definitely, you know, there was the emerging prosecutions in places like Rotherham. And I guess there was a sense in conservative circles that, you know, this was embarrassing for Labour because these areas were run by Labour councils, that the Labour councils often had drew a lot of support from the local Pakistani origin community, that they didn't want to kind of call it out. There was definitely, but we never thought that was something that you could sort of politically exploit, frankly. Really?

45:08Ed Balls: I mean, I would have thought if you thought this was something which was embarrassing for Labour, you would have. I think when Keir Starmer was going about this in that period, it wasn't really on the political radar. I think what you're talking about happened a little bit later on. But there is no doubt he then uses this language about a far-right bangwagon at the beginning of the year in the face of Farage and Baden-Ock and Musk. and that was you know poor language to use and a political mistake which then sets him up for a U-turn on the other hand as he said at the weekend when he asked Louise Casey when Home Secretary he asked Louise Casey to do this report I don't think Louise Casey thought that the right thing to do was to have another national inquiry I mean the view was there'd been the J-enquiry over very many years.

45:55Ed Balls: Its report had not been implemented at all. Another national inquiry might kick things into the long grass. What we needed was more local inquiries. Why hadn't there been proper inquiries in Bradford or in Oldham? By the way, London, Manchester, Birmingham, have there been proper inquiries in those places? Why haven't you seen more prosecutions? And I think what you see then happen in the Casey report and then on Monday is the realisation that it's only a national umbrella with the national powers in order to compel witnesses that you can really make these local inquiries work and and bite so so Louise Casey I mean I think we can hear her explain it she changes her mind about whether this national inquiry was the right thing but she can change her mind Yvette can change her mind or at least kind of join the support for the national inquiry without having to eat their words in the way that Keir Starmer had to do this is Louise Casey explaining why she changed her position so it wasn't a political thing for me it's just like I don't really see the necessity of this Alexis J did a really really good inquiry into sort of institutional failings the thing is the more I got into it and the more I looked at the data and you For example, sad to say, but when they said, we'll put some money into five areas coming forward that will do their own local reviews, only Oldham said, yep, we'll do that.

47:22Ed Balls: There wasn't exactly a battering down of the door to do it. Then you look at some of the serious case reviews, they rarely talk about the perpetrators. They certainly don't talk about the ethnicity of the perpetrators. Yeah, on that note... I felt more and more frustrated, and I thought, we'll sod this frankly sorry to use that language sorry i'm not going to apologize for it that's fair these are victims these are victims and we need to do right for them and if that takes a statutory inquiry i'm going to go and get one for these girls louise casey they're speaking very

47:54George Osborne: powerfully and bluntly and that's why you know she's been used by lots of different governments to tackle lots of different sort of social problems i mean i would just make this point that one of the arts of politics is being able to see around corners particularly for the prime minister you've got to be able to anticipate where the politics might go and where your problems might go and if you set your stall against having a national inquiry into child grooming gangs and you've got like an enormous amount of attention when you do that you then you can't then commission someone who's gonna potentially come up with the answer oh yes we do need a national inquiry and i don't i don't think gordon brown would have commissioned an inquiry we didn't know what the outcome was going to be you know that is good smart politics it may not be how people want their politics operated and i think if you were giust army that would be your defense well i'm doing politics a different way but you know that of course it takes it takes its place amongst lots of other u-turns that the government's doing on winter fuel payments possibly you know not actually on disability payments but there's a you know there was a suggestion they might we're going to come on to non-doms you know you've got to look like you you're in charge of things and i don't I think, you know, this week, it looked like he hadn't really anticipated where he might end up on this issue.

49:07George Osborne: I mean, let's turn quickly to the Conservative response, Kimi Bader-Koch. So she is piled in. She's piled in to say it's, you know, a great scandal. I do remember sensing there might have been a political opportunity 10 years ago, but we did back off and we thought, you know, we don't want to go there. That's not what Kimi's done. She has gone there and this is what she said. Mr Speaker, the Prime Minister's handling of this scandal is an extraordinary failure of leadership. His judgment has once again been found wanting. Since he became Prime Minister, he and the Home Secretary dismissed calls for an inquiry because they did not want to cause a stir.

49:44George Osborne: They accused those of us demanding justice for the victims of this scandal as, and I quote, jumping on a far-right bandwagon. A claim the Prime Minister's official spokesman restated this weekend. Shameful. It has been left to Conservatives time and time again to force this issue. Three times, Mr Speaker. Three times. They can mutter now. They all mutter now. Three times, Mr Speaker, these Labour MPs voted against the National Enquirer. Unfortunately, Kemi Badeknot was a member of the government for a long period while the scandal was unfolding or the kind of aftermath of the scandal. And she was actually the Minister for Women and Equality.

50:31George Osborne: And she obviously hadn't cleared her lines with Louise Casey herself, who said this in response.

50:37Ed Balls: Dare I say it, that I felt the opposition could have just been a bit, you know, yes, we will all come together behind you. Maybe there's still time to do that. I think it's just so important that they do. It almost doesn't matter right now, does it? What political party people are part of that we've identified there's a problem. It's been a problem there a long time and it's about time we drew a line in the sand. It's quite a decision if you are the leader of the opposition to decide in the Commons to insert yourself in to respond to a statement from the Home Secretary. That's not what normally happens.

51:13Ed Balls: It would have normally been the Shadow Home Secretary. secretary she did it last week on the today program um displacing male stride but doing it in the commons is a bigger deal but it felt to me looking at this as though she fell into that classic trap that you know it wasn't totally clear why she would be the person responding but in that hour before when she had the statement and the casey report she was clearly reading the casey report i'm not sure if she'd read the statement because i mean grant shaps had done an apology in his short period as Home Secretary. Yvette then does... You're the only person who remembers who was Home Secretary, apart from Grant.

51:49Ed Balls: Yvette then does an apology on behalf of current and past governments. It's left to Roger Gale and other Tory backbenchers to associate themselves with that apology. And Kemi Badenoch, who had been Children's Minister, Local Government Minister and Women and Equalities Minister, but had never ever raised this issue in the Commons, chooses not to associate herself with the apology and just launches into a big attack and I think I mean surely if she'd known that that was going to be the mood in the commons that was the road she was going to take now she had this press conference lined up for the day after she thought she was going to turn this into a big political moment my sense is her response on Monday kind of showed like a big lack of political judgment that was the wrong way to respond in the

52:34George Osborne: commons but it's first of all you know she's under pressure she's under pressure on her leadership so she's she's trying to find opportunities to get out and lead from the front hence she displaces chris philip to uh do the statement the shadow home secretary and uh she's also under pressure from reform and nigel farage um with the help of these americans have been you know really making hay with this issue and you know it won't go away it'll feed a kind of underground narrative about the establishment you know not speaking the truth to people and covering things up and and so on and i think you know there's that classic judgment an opposition leader has to get right which is you know are you on attack are you just are you the opposition or are you the government in waiting or do you and do you look like a alternative prime minister and here she was definitely straying more into the let's just like attack rather than be because you can you can make the same points she's making in a much more states person like way you know you can be we all take responsibility we've all shared an apology but there are some very specific questions that you know kia starr must answer i mean there are there are ways of doing it which she did not do let's turn next to um another potential u-turn and that is on the removal of non-dom status and in particular the treatment of their inheritance tax liabilities lots of speculation about that and we will touch on that next.

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56:52Ed Balls: So non-domicile taxation is back in the news. That report in the FT this week that the government is considering doing a reversal of the decision to charge UK inheritance tax on the global assets of non-doms. That was one aspect of the new regime introduced in April, confirmed in the budget. Although the great irony, as we discussed on this podcast a couple of years ago, is that it was actually introduced by the Conservative Chancellor, Jeremy Hunt. We said at the time that if we were the Tory Chancellor, we would be shooting Labour's fox. They'd spent the money on the health service and on education from what they believed to be the proceeds of non-domicile taxation.

57:40Ed Balls: And in order to avoid that fox being entirely shot, Rachel Reeves decided to go a bit further on the reform in the budget, which has caused a lot of grief and upset. just in one sentence in the past in the non-domicile tax regime you could only pay tax if you were tax registered or tax domiciled in another part of the world you could choose to only pay tax on the income you earned in the UK there were then reforms I think you introduced reforms to say well you could only have that status if you paid a charge which allowed you to to avoid tax on your global assets and global income. But what Jeremy Hunt did was he abolished the non-dom status and said instead you have to have a new regime where you can only for a few years, I think four years, you can continue to be taxed in the old way and then you become a full UK taxpayer.

58:47Ed Balls: And this has caused a lot of angst and worry, a lot of reports I mean to be fair self-serving reports from wealth managers saying lots of non-doms are leaving the country but actually quite a lot of worry that this has gone further in its impact on non-dom behavior than people were expecting and therefore potentially undercutting the revenue which was expected to flow into the treasury.

59:17George Osborne: I mean, look, it's a very tricky issue, and there's not much public sympathy for rich people trying to reduce their tax bill. But in the real world, these very wealthy people do have choices. And the non-DOM regime is really complicated, because it's got to cover, you know, the American investment banker who's been posted to London for a couple of years, and wants to return to America. You've got to have some regime for that, or else Britain won't have a financial services centre. What about Filipino nurses who own properties in Manila? Are they going to be taxed when they come and work at the NHS on renting out that property in Manila?

59:49George Osborne: So it's a much more sort of complicated picture once you get into it. But fundamentally, you are making a choice with the very wealthy to say, base yourself in London. Like there's some of these big Indian billionaires, big European billionaires. And you will be part of an ecosystem of financial services, legal services, the auction houses and whatever. and you will pay some tax but not as much as if you were a UK citizen now that has all changed and it was a combination of Jeremy Hunt and Keir Starmer and Rachel Reeves who've done it and Rishi Sunak the four of them are responsible for this it was the Tories who got rid of the non-dom status and then Labour went further and what they did was they touched the kind of third rail which was inheritance tax because they said to these unbelievably wealthy families worth many billions of dollars, you're going to have to pay 40 % inheritance tax now on that.

1:00:43George Osborne: And that is causing the exodus of the very wealthy.

1:00:46Ed Balls: It's important to say that that only applies if you spent 10 of the last 20 years in the UK. So these are not people who are coming over for an American investment bank for one or two years. These are people who are very wealthy, but they've been here a long time, but they've always sustained that non-UK citizen, non-UK domiciled for tax status. But it It turns out there's rather a lot of them and they have loud voices and they can move with their feet.

1:01:16George Osborne: Yes. And of course, people listening to this show will be going, well, I have to pay these taxes. The truth is these people have more options. And I always used to think, look, it's impossible for Britain to compete and wouldn't want to compete with the Cayman Islands or Panama or Monaco or some Swiss canton where there's no tax. And there are huge advantages to being in a great metropolitan city like London and the schools and the education and the culture and the business that goes on there. But the truth is that other European countries leapt on Britain's decision to end this regime. And now you can go to Milan, which is where a lot of people are going in Italy, pretty big European city.

1:01:58George Osborne: You can go to Portugal. You can go to Spain. and other countries are looking at this regime and sort of hoovering up these people. And it's really hard for the government. I remember in the Treasury, the Treasury is not very good at really understanding this ecosystem that's based really around central London, you know, because it doesn't kind of, you know, that's not what the Treasury is really equipped to do. But even on the OBR estimates, and again, the OBR is not particularly equipped to do this, it estimated that 25 % of non-DOMs would leave if the government proceeded with its policy and it did and there is no doubt you hear it left right and center I heard it in America just now this week I hear it every time I travel abroad I've been in the room with government ministers and business audiences and this is coming up again and again and again and Britain has sent a message it's not only the responsibility of this government but they're in charge now and they went further that Britain is closed to international wealth.

1:02:55George Osborne: And that is a huge change from the way Britain has presented itself over the last hundred or so years. And I'm not surprised they're looking at a U-turn because I don't think they will get the message going internationally that Britain's owned for business, Britain's owned for enterprise, come and invest in Britain until they do this U-turn. And it'll be quite painful with elements of the left, but it's worth it. And it's one of those things where you just have to hold your nose, get it done and i think you then get quite a lot of potentially if you do it well do a proper we've often discussed if you're going to do a u-turn do a proper u-turn on this show do a proper u-turn and then the message will go out actually britain is a place i can stay but they've got to make decision very quickly because people are leaving right now as i said the irony is that the first

1:03:42Ed Balls: person who made a move tightening up this regime was you all the time the 13 years i was in government and eight of them nine of them at the treasury we never moved on non-doms we looked at it we talked to the treasury and the revenue I mean I remember the times when we had advice from treasury or HMRC to to not do something which looked like it was sensible because you'd lose money so we kept tobacco taxes high and we were being told you'll lose revenue you'll lose revenue And in the end, that turned out to be the case. But on this one, when we looked at it, we concluded that the danger was we would lose revenue rather than gain it.

1:04:22Ed Balls: In 2015, you know, I was asked by some local BBC reporter from Look North before the election, like a year before the election, what did I think of abolishing non-DOMs? And I said, well, the danger with that is it ends up costing you money rather than raising money. And this caused me a bit of embarrassment in the election campaign in 2015.

1:04:40George Osborne: When it became the official policy of the Labour Party.

1:04:42Ed Balls: But the official policy was not to abolish non-DOMs. It was tightening up the non-DOM regime. It wasn't getting rid of it. And that's what you did. But what's happened here is you've had this escalation from the Conservatives and then from Labour to do something that we didn't do, which was to get rid of the regime and put something else in its place. And, you know, I'm not sure it's fair to say that the Treasury and the Revenue weren't warning. Maybe those warnings were ignored by Jeremy Hunt and Rishi Sunak and then by Rachel Reeves.

1:05:09George Osborne: Well, Rishi Sunak was under pressure because his wife was a non-DOM.

1:05:12Ed Balls: Of course, that's right.

1:05:13George Osborne: And Keir Starmer and Rachel Reeves were under pressure because once the Tories did something about it, they needed to kind of protect the revenue for their plans. But what they have done, it's a bit like a kind of game of chicken with the internationally rich. Because you often had, I remember Treasury officials saying, oh, they're never going to leave. There's nowhere for them to go. I mean, of course, they can head off to, you know, the Bahamas. But that's not where most people want to be. And it's a bit like a game of chicken where suddenly, unfortunately, it's gone wrong and all the chickens have flown.

1:05:40Ed Balls: And as you say, the optics of a U-turn on this are now suddenly very messy. Government's under pressure. They've moved on the winter fuel allowance. But are they going to move on to child policy? Are they going to move on softening the welfare reform? Keir Starmer is saying anybody who rebels against the welfare reform bill will not ever then be appointed to his government for the whole life of his premiership. That's just if you abstain. If you vote against it, you lose the whip. That's the message being sent out. if you're simultaneously being really tough on welfare reform, which hits the bottom half of the income distribution, and you're saying we're going to do a U-turn on the very richest, wealthiest people.

1:06:21Ed Balls: I think the internal political optics of that is bad. But at the same time, the Treasury is not knocking this story down. They're going to have to move for the reasons you said, which is that if not, cutting off your nose to spite your faith, there's no point in a reform which loses you money.

1:06:36George Osborne: Fundamentally, the government's going to be judged by one thing above all. have they got the British economy growing? Is there a sense that Britain is moving forward? But I would say if you got the call today from Keir Starmer, he says, come on, please, come and be Chancellor Balls in the Treasury, or you would do this U-turn. You would understand how painful it is in the politics of it, and we shouldn't be where we are, but we are where we are, and it's got to be done. And you can't really build a strategy for selling Britain to the world unless you restore the sense that Britain is a place where wealthy, successful entrepreneurs, these big families, the center of international finance is located.

1:07:22Ed Balls: and the lesson of the last nine months is if you listen to the people who say don't do a u-turn you've got to be strong set your face against the pressure you've got to absolutely know that you can sustain that position with the support of the prime minister from now to the budget and then into the spring and um because you know another u-turn when you've had months beforehand saying we're not going to do it is not what the treasury wants and if they're

1:07:52George Osborne: going to do it they need to get on with it so you might find a labor prime minister in the next week or two authorizing the use of a an air base for american bombers to attack iran and um giving a tax break to some of the richest people in the world that's life at the top governing governing

1:08:11Ed Balls: it's um it's a tough business and yet um lots of people want to do it lots of people want to do it That is all for Political Currency this week.

1:08:21George Osborne: We'll be back on Monday with ex-Minister's questions. Or you can hear it earlier and ad-free if you become a member of our kitchen cabinet. And you can find the link to subscribe in our show notes. See you next week. See you then.

1:08:42George Osborne: Thanks for listening to Political Currency. This has been a Persephoneca production.

1:09:19Ed Balls: We'll be right back.

1:09:49George Osborne: We'll be right back. actual toast customer.

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