Is the clock ticking for Keir Starmer?

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2:15this is political currency with ed balls and George Osborne.

2:27Ed Balls: So we are remote this week although I think we're both in London but George you know has got a busy day. There's also some refit happening in our studios which is exciting we'll see how that goes in the next couple of weeks. How's your week been George? Well it's It's been a big week at home because our little boy, our youngest, Pax, aged just two, has gone to nursery. So that's always an exciting moment. He seems to be enjoying it. So that's great. At the other end of the spectrum, I took our youngest daughter for her last term at university. She's doing her finals this summer. So, you know, we're rather at different ends of the childcare spectrum.

3:09Ed Balls: Yes. Quite emotional, actually. I mean, emotional for you, the beginning. Emotional for me, you know, the end of formal education. Although it's not the end of parenting, as we know. No, that is true. And what else has been going on? Are you at home? Are you in the British Museum? I'm in the British Museum. We had a spectacular event here a couple of days ago when the king and queen came to view the, essentially the maquettes, I think that's the right word, or the models of the new Queen Elizabeth II Memorial. that is going to be built in St. James's Park. Of course, it's a strange event because there was this enormous kind of gathering of the great and the good, not just the royal family, but the prime minister was here, Keir Starmer, the cabinet secretary, all sorts of panjandrums.

3:56And, you know, the heart of it is a memorial to someone's mother and father, because there's also a statue of Prince Philip. And I was sort of looking at the king thinking, gosh, what a strange existence he has, sort of being both the head of state and in this case a son looking at the memorial of his parents and Norman Foster our great you know probably the greatest living architect you know was standing there age 90 something doing his thing and just you know very impressive unveiling it all so it was a great occasion although you couldn't help but think like what everyone's really whispering about in the kind of breaks between the different events was like what's going on with Peter Mandelson and what's going on with Keir Starmer.

4:36And, you know, the prime minister was there, you know, and you could think, we actually, I had a debate with someone that was like, if you were a prime minister, would you want to be at this event in the week he's having? Which obviously we're going to come on and talk about. But one view was, oh my God, you imagine it's in your diary. It's the last thing you want to do, go to the British Museum to do something with the royal family. On the other hand, if you're trying to project yourself as a prime minister, it's exactly what you do want.

5:00Ed Balls: Of course, the king will be spending his weekend packing his suitcase because he's off to Washington for his visit to the White House to see Donald Trump. And it wouldn't surprise me if in the margins of the dinner and the tea party, there's also quite a lot of chat about the former ambassador to Washington, Peter Manilson as well. Yes, I suspect there's the palace is telling Downing Street. Can we have a period of quiet, please. I'm not sure that's going to be possible to deliver, is it? We should get on with the show, shouldn't we? We're obviously going to talk about the ongoing Mandelson crisis, the crisis around his appointment.

5:40Many months after he was fired, it has put the Prime Minister back in a hole, and it dropped just after our podcast a week ago. So we're going to discuss not just the events since then, but projecting forward, what does it mean for this government? What does it mean for this Prime Minister.

5:56Ed Balls: And then as the royal family prepare to fly out to America, we're going to look across the Atlantic as well and check in with Donald Trump's kind of latest views on ceasefire, what's happening in those negotiations with Iran, how it's impacting on world markets, but also how the politics is coming back here into the UK. And of course, all of this is having an impact on those key decisions that central banks need to make about whether to put up interest rates or to cut interest rates. And the most important central bank is the Federal Reserve. Kevin Walsh, a friend of both of ours, had his confirmation hearing before the Senate Banking Committee this week, before he takes up the post, assuming he is confirmed.

6:38We're going to have a look at that confirmation hearing and what it says about the kind of Fed chair he is going to be. But let's start with an extraordinary week. We finished recording our podcast, didn't we, exactly a week ago. And then this story broke that the Foreign Office, or rather the independent vetting agency that the Foreign Office works with inside the heart of the British state, had in fact not cleared Peter Mandelson, had not given him vetting. But this had been overruled by the permanent undersecretary at the Foreign Office, Sir Ollie Robbins, known to us both. It turns out the Prime Minister didn't know anything about this either at the time or indeed subsequently.

7:18It was only then very recently leaked to The Guardian and Keir Starmer responded by firing Ollie Robbins. And that's when the firework was set off and has exploded again in the middle of Downing Street. But should we just start with, we've discussed this many times on the podcast, but how do you handle a crisis? I guess the question is, if you're in Downing Street this week, have they handled it as well as they could? or have they been continuing to make mistakes?

7:52Ed Balls: As you said, we've talked about crisis management before, and we've been saying in the case of Peter Mandelson and the whole issue of how he was appointed and how the decision was taken and the humble address, the requirement from Parliament to publish all the information, that Keir Starmer just needs to get all of that out and they still haven't managed to do that. But then, as you said, last Thursday, You have a story breaks in The Guardian Thursday afternoon saying that the vetting agency had not cleared Peter Mandelson. It had been a borderline recommendation, but we now know a negative one.

8:33Ed Balls: And Ollie Robbins chose to use his discretion to clear Peter Mandelson, but seemingly didn't tell Number 10 or the Cabinet Office or anybody, not just in January of last year, but in the many months which followed. That broke on Thursday afternoon. And in that moment, you have a choice. Keir Starmer had known about this for 36 hours. The Cabinet Office, we now know, had known about this for a few weeks. In that moment, you have a choice. And all the lessons of government, and we've talked about this in the past, Mandelson resignations, the David Blunkett passports crisis. I had direct experience of this.

9:12Ed Balls: we've talked about before when the baby pea crisis broke. The hard thing to do is not to jump to an immediate conclusion and public statement. The hard thing to do is to say, I'm going to take some time, some days to establish what went on, get all the facts, absorb the political media pressure during that period in order you can then get on top of ahead of the story and potentially draw a line. And Keir Starmer didn't do that. That was not the approach number 10 took. Instead, that Thursday afternoon, they first of all made it clear they hadn't known about this. And then that evening, Olly Robbins spoke to the prime minister, was removed from his job.

9:54Ed Balls: The Prime Minister then says, I'm making a statement on Monday to the House of Commons before they put any of the papers, the documentation into the public domain. They're clearly with the intention of drawing a line under the story. But because Ollie Robbins is now kind of out of his job, he gets summoned to the select committee by Emily Thornberry, the Foreign Affairs Select Committee chair. the morning after, Ollie Robbins then gives kind of explosive, very careful, but explosive testimony in which he says, you know, the decision was already made before the vetting began. I was under daily pressure, the Foreign Office was under daily pressure to agree this, throws in this bombshell, a grenade into politics that, oh, and by the way, Number 10 demanded the former comms chief Matthew Doyle also be given an ambassador job.

10:50Ed Balls: But when the Foreign Office was asked to see if they could line up that appointment, they were not to tell David Lammy, the Foreign Secretary, about their intentions. And you end up in PMQs with the Prime Minister again, under pressure to substantiate whether what he said on Monday was really the end of the story. You now have the Foreign Affairs Committee calling Morgan McSweeney, Cat Little, the Cabinet Office Permanent Secretary, giving evidence while we're doing this podcast. More to come. I mean, did they succeed in drawing a line under this story? No, they didn't. It's actually shooting off in all sorts of other directions as well.

11:30Ed Balls: And I just think the lesson is you have to resist the temptation to go out until you really, really are on top of things and that you've had the internal conversations. Okay, but that lesson, which we have spoken about on this podcast many times, you know, don't go out until you're on top of things. How it is possible that Downing Street did not find out all this information months ago. There's an issue of whether Ollie Robbins should have told someone, the prime minister, the national security advisor, the chief staff, you know, the cabinet secretary about the fact that he was essentially, you know, overruling the recommendation of the vetting agency in the case of Peter Mandelson.

12:14And, you know, to be fair to Ollie Robbins, his argument is, I was following procedure. You know, it's a confidential process. I have the power to do this. I don't need to tell anyone. I think it's surprised everyone that he didn't tell anyone, but that's his defense. And the irony is he's fired for following procedure. and Starmer's defense of why he's not resigning is that he was also following procedure. So there's a mess there. But what I find absolutely staggering, I think everyone I've spoken to, including lots of people who've been in and out of the Foreign Office and been in and out of Number 10, what we don't understand is once the whole thing blows up and Mandelson's fired, how do you not find out this information?

12:50And ultimately, this information was discoverable because ultimately the Cabinet Office did in the last few weeks discover it. But this could have been discovered months ago therefore and that sort of falls you know that's to your lesson which is get all the facts and the fact that number 10 is still discovering new things about this nine months later is you know just utterly incompetent you are right and um emily thornbury

13:17Ed Balls: in the committee in a very careful kind of forensic way did put ollie robbins under pressure because if you are a civil servant and you are doing things as you believe in a proper way, following the correct process, but you're being asked difficult questions, the thing that you do is you write minutes, you take records, you have an audit trail, which is all there for you to be able to produce. And if you are a minister or an advisor and you know that the permanent secretary is pushing back and that they are kind of warning and they're kind of writing this down, you know that this is going to cause difficulties down the line.

13:59Ed Balls: And I think the thing which is really hard to understand in the case of Ollie Robbins was that he didn't look at the vetting report. He chose to take a different judgment. There doesn't seem to be a kind of documentation about his thought process, how he made that decision, why he made that decision. It's all based upon his recall. And Emily was pretty tough on him about the decision in January, but then also later in the autumn as to why he didn't either reveal that information or document at the time why he was not doing so. Because he must have known when he's asked by number 10, the prime minister's got to answer questions in parliament about the vetting process.

14:38Ed Balls: He knows how exposed the prime minister potentially is if the truth comes out. I think the reality, George, is that he always assumed this would stay below the surface. What then happens is the humble address suddenly makes it clear it's all going to come out. Even then, it took the Cabinet Office weeks to finally establish that they could see this vetting report. And when they saw it, when Cat Little saw it, I don't think at that point Ollie Robbins had even actually ever looked at it. But do you think the Prime Minister is justified? Right. We'll come on to the prime minister's position, whether he should remain or not.

15:14But is he justified in saying, because you didn't tell me this, Ollie Robbins' justification, you know, I know Ollie Robbins well, and I have huge respect for him, is that I was following procedure. But to your point, well, fine, but, you know, this is so explosive. And once it's anyway led to Mandelson's resignation or sacking, surely at this point you tell prime minister is the prime minister justified sacking ollie robbins because there was an alternative path which was to get ollie robbins to make a profuse apology which essentially is what keir starmer has done himself and say i made an error of judgment and the prime minister accepts that error of judgment and that apology and everything's kind of contained in a box where there's you know firing ollie robbins we're going to come on and discuss the relationship with the wider civil service as a result and the relationship with the rest of the cabinet and so on, just looks utterly unfair and utter double standards because he's being fired for the same offence, essentially, that Keir Starmer is saying, I don't need to resign.

16:20Well, as you say, in Parliament on Monday, Keir Starmer starts off by essentially apologising

16:27Ed Balls: to Parliament for an error of judgment, which is the appointing of Peter Manderson, which he now says he regrets. And Ollie Robbins also made an error of judgment in Keir Starmer's view, which was not to reveal the information at the time or subsequently. It's pretty clear from what Emily Thornberry thinks as the chair of the committee. And she's not a great fan of Keir Starmer. She was the person who Keir Starmer didn't give a job to in the cabinet on the first day of the government back in 2024. I think she agrees that Ollie Robbins made an error. She had a good consolation prize. She came on our podcast.

17:00That's true.

17:00Ed Balls: But she agrees Olly Robbins made an error of judgment. But as you say, and you know, on Good Morning Britain this week from our viewers, particularly from Susanna Reid, the anger that... It's just not fair play. Olly Robbins loses his job for what is now seen to be an error of judgment, although he probably disagrees it was an error of judgment. But Keir Starmer, he made the decision on the basis of a report in front of him in December 2024, which had all the information, all the red flags, which were subsequently in the vetting and barring report. And Keir Starmer still decided to appoint Peter Manlesson.

17:40Ed Balls: And then when it comes to two failures of judgment, it's Ollie Robbins who pays the price with his job. So that doesn't feel fair as you... Both of their defence, it's an error of judgment. Well, as you say, Ollie Robbins has not said that, but others would say it's an error of judgment, but we were following procedure. That's Keir Starmer's defence. I find it an utterly bizarre decision to fire Ollie Robbins because it sets a whole, you know, sets in train all sorts of other things and creates a kind of essentially from number 10's point of view, a rogue agent. So Ollie Robbins, hugely respected, but we should say by way of background, you know, key civil service lieutenant of Gordon Brown when he was chancellor and prime minister, the Brexit negotiator for Theresa May.

18:27I mean, no one doubts that this is a highly regarded civil servant who is not partisan because he served all causes.

18:35Ed Balls: But it then takes you into both that question of fairness, but also, you know, because they didn't establish all the facts fully last week, the risk of unravelling. So first of all, you have this exchange between Emily Thornberry and Ollie Robbins at the committee, where Ollie Robbins is explaining about the pressure, the daily pressure, his predecessor, Philip Barton, who is going to appear before the committee in the coming weeks, and Ollie Robbins were getting from number 10 and the Cabinet Office. The appointment is already announced. They're waiting for the formality, the tick, that the vetting barring report is complete.

19:14Ed Balls: Emily Thornberry asked Ollie Robbins whether he'll name the civil servants who put him under pressure. And he says, I'm not going to scapegoat individual civil servants. This is Ollie Robbins, who clearly feels as though he is being made the scapegoat for Keir Starmer's decision. First of all, just listen to this exchange between Emily Thornberry and Ollie Robbins. I think throughout January, honestly, my office, the Foreign Secretary's office, were under constant pressure. There was an atmosphere of constant chasing. Daily phone calls? I couldn't say for certain daily, but I mean certainly very frequent from private office to private office.

20:01Ed Balls: has this been delivered yet? Never any interest, as far as I recall, in whether, but only an interest in when. So when you say private office to private office, are you saying private office of number 10? Yes, I am. And who are we talking about there then? Are we talking about Elsa Tarry? I'm not going to say, Chair. I may no longer be a civil servant, but I didn't come here today to scapegoat other civil servants. I came here to make sure the committee understood the circumstances. But then on Wednesday at Prime Minister's Questions, you know, the second showdown of the week for Keir Starmer under pressure from across Parliament.

20:43Ed Balls: When Keir Starmer is asked whether there was pressure from number 10 in the Cabinet Office, this is what he says. So Ollie Robbins could not have been clearer in his evidence yesterday. He said this. I didn't feel under pressure personally in terms of my judgment. His words. Mr Speaker, he went on to say, I have complete confidence that recommendations to me and the discussions we had and the decision we made were rigorously independent of any pressure. Mr Speaker, on top of that, he was asked if any conversations led him to believe that Mandelson needed to take up the role regardless of vetting outcome.

21:29He said, I can say with certainty it was never put to me in that way. No pressure existed whatsoever in relation to this case. What is unacceptable is that the recommendation of UKSV was not given to me before Mandelson took up his post.

21:48Ed Balls: For Keir Starmer to say in the House Commons on Wednesday, no pressure was put on the Foreign Office and Ollie Robbins by the Cabinet Office is in direct contradiction to what Ollie Robbins had said to the Select Committee two days before. It's that last bit, isn't it? It's fine quoting Robbins in your defence, you know, in an attempt to get yourself out of jail. But it's the very last thing Starmer says where he's not quoting Robbins. and he goes no pressure existed in this case and that is contradictory to the evidence that Robbins was giving because because although in other bits of the testimony Robbins is making it clear that you know the foreign office and the whole system was under pressure to get this appointment cleared and and underway but it may be that Kat Little this morning is saying there's no pressure I would be surprised if she can be confident about that from civil servants and political appointments in Downing Street.

22:44Ed Balls: Keir Starmer is either going to have to now be able to substantiate that and show Ollie Robbins is wrong, or he'll have to withdraw it. This is my point. For the Prime Minister to be in a public dispute with somebody who many people think has been unfairly treated and removed from his job, about who is actually really speaking the truth in a sort of rolling day-by-day way, and we've got many more of these select committee hearings to come. They ought to have established all the facts before they made a decision about Ollie Robbins and before they went public in explanation of what happened. And the rush to get ahead of the news cycle, I mean, it's just a terrible call.

23:28Well, talk about the news cycle. We've got weeks and weeks of this because we've got lots of hearings coming up now. So the whole thing has kind of exploded again. Let's just touch for a moment on PMQs. So Kimmy Bednarik has, you know, made the running and the opposition, the Tory opposition has made the running on the Mandelson case ever since, you know, she first asked the question of whether Keir Starmer had confidence in Peter Mandelson. He said yes, and then had to fire him 24 hours later. How do you think she did at PMQs? If you're a PMQ watcher, what would you say?

24:00Ed Balls: Well, the judgment, I think, of most commentators was it didn't work for her on Wednesday. And that was a bit surprising because it was a big showdown moment. And after she had done really well on Monday, her six questions, her forensic approach. approach. And if you think back to Keir Starmer, when he was taking Boris Johnson on over Partygate, Emily Thornberry did a bit of this in the committee. What you do is you ask a series of questions, which you demand answers to in a forensic way, and then you reach your conclusion at the end. And that was what Kemi was doing on Monday. On Wednesday, she was kind of firing all over the place.

24:41Ed Balls: She hadn't really worked out what her fundamental point was. She You know what I felt had happened? This is just my guesswork. I think it was one of those cases, you'll recognise this, George, where it's seen as a massive moment. People have helped you on the Monday. You end up in PMQs with too many people in the room, too many opinions, too many strategies. As a consequence, it all becomes jumbled and overcomplex. And what she probably needed to do on Wednesday morning was having established what her main point was, thrown all the experts out of the room, stuck with her core team who've been doing really well on PMQs in recent months and just say, okay, how do I pin Keir Starmer down hard and forensic on this?

25:26Ed Balls: And she didn't quite pull that off. And I think she'll probably learn from that. She slightly missed it on Wednesday, but because this has got so many weeks more to go, there's not going to be a PMQs next week. They're going to prorogue parliament to avoid it, but there are going to be more PMQs where she'll have another go on this. But it wasn't her best day Wednesday. No, I mean, I did PMQ prep for maybe 20 years for, you know, I started doing it for John Major when he was Prime Minister and ended up doing it for David Cameron as Prime Minister and had long periods in opposition, helping Tory opposition leaders.

25:59And there are a couple of rules about PMQs. One is, quite often when it's an open goal, it's actually a hardest moment as an opposition leader, because the expectations are very high. And it's not that she missed the goal, because in fact, the Labour MPs didn't cheer and jeer when she sat down saying, oh, you've screwed up. I remember this devastating moment when Tony Blair, as Prime Minister, said to one of our opposition leaders, you know, you had an open goal and you missed it. Even as Prime Minister, he was saying there was an open goal. So, you know, those moments are quite hard. Second, you know, it's not a court of law.

26:32It's a debate. And it's a mistake to think of them as six questions. They're not. They're six debating points, which sometimes can be presented as forensic questions. But that's not the purpose. And I thought, you know, you actually should have gone big. Having done the forensic stuff on Monday, you should have done the thing that everyone is thinking, including all the Labour MPs, which is like, how many more people are going to lose their jobs, Prime Minister? How many more cabinet secretaries, foreign office permanent secretaries chiefs of staff comes directors labor msps in scotland senate members in wales labor councillors how many people are going to lose their job before you lose your job i mean that is what they're all thinking which is everyone's being thrown to the wolves because this guy's not on top of the job of prime minister and and you should have kind of gone big and i think you could also have made a point which we should maybe come now to discuss which is Keir Starmer was a permanent secretary.

27:31I think I'm right in saying that he is the first senior civil servant since Harold Wilson many, many decades ago to have become prime minister. And I think there was a huge expectation when he was elected that the kind of relationship between the civil service and the politicians, which had been very, very frayed, particularly during the Boris Johnson period, and Rishi Sunak had done a pretty good job of trying to restore things, but nevertheless, here was a guy, he was a decent public servant becoming prime minister, and he's ended up in a situation where he's been firing these, you know, very respected public servants, left, right, and center, including now Olly Robbins.

28:13And that's another point you can make in the House of Commons, which every MP is thinking, like, you can't behave like this towards our civil service. And of course, there'll be a load of people in the cabinet going, this is just outrageous. You know, I have a race ship with my civil servants, my permanent secretary, and our prime minister's trashing that relationship.

28:31Ed Balls: As Shabana Mahmood is reported in the papers today to have said in the cabinet meeting on Tuesday, if he was such a good public servant and Ollie Robbins had just had a glowing tribute in the cabinet, why did he lose his job? And I think there are very many other permanent secretaries who'll be asking the same question. Gus O'Donnell, the former cabinet secretary writing in The Times at the beginning of the week, made your point about Keir Starmer being a former permanent secretary and then described this as a crisis in government civil service relations. It's so chilling when people feel there are sort of double standards in this way.

29:08Ed Balls: And as I said, our viewers on GMB just saying to us all week, it's one rule for the civil servant and it's another rule for the politician. So it is a deepening crisis. Emily Thornberry came on GMB Wednesday and she said, you know, I thought Keir Starmer was getting out of the hole and he stepped right back into it. And there's an interesting point here, isn't there, that go back a couple of weeks ago, Keir Starmer's poll ratings were going up. He was prosecuting the war well. He was actually taking on Donald Trump in a way which was popular and successful. It looked like the pressure was going to ease even after the local elections, which are going to be difficult for Labour.

29:49Ed Balls: Keir Starmer kind of getting a grip on the job. And then the Peter Mandelson scandal has the ability to plunge him right back into crisis again, partly because they've not sorted it out in the last year and a half, mainly because they made the wrong decision in the first place, but also because of the way which they chose to handle this just a few days ago. There's no doubt that of course at the root of all of this is the decision to appoint Peter Mandelson. But at the time, it was, you know, an unorthodox appointment, it was seen as, you know, a way to get in with the Trump White House. Okay, they didn't anticipate that the Epstein files will be published in months later in Washington and so on.

30:31I don't think nine months later, you would still be on the hook for that appointment. If you and I don't think the Prime Minister would be in trouble, you know, going into local elections. If he had just done the apology, published the information and sort of moved on, it's been the handling of the kind of aftermath that continues to, you know, drag him back into mud. And doesn't it speak to, it's not that so much the, you know, the very specific issues of like the vetting report and whatever, it kind of reinforces a view, this guy is A, not very good at politics, B, not very nice or fair, and is not delivering for a Labour government.

31:21And all those people who put their hopes in a Labour, you know, lots of people who voted Labour, who were tired of the Conservatives, who were waiting for a fresh start, who are waiting not just for a kind of policy reset, but a kind of ethical reset, you know, are just utterly disappointed. I mean, it's not frustrated, I think, is too mild a term. And of course, looming in the wings, you know, which we won't discuss on this show today, but is, you know, very kind of populist alternatives as a result, kind of gaining strength in Britain. And that's what I don't think there must be a single member of the cabinet who is not thinking, including his most loyal people or people tied to his fate, like Rachel Reeves as chancellor, who aren't just sitting there thinking, how is it possible this man keeps putting us back in the hole?

32:07Ed Balls: Look, we on GMB interviewed Douglas Alexander, Ed Miliband, Pat McFadden across three days. You know, the pain... All very accomplished media performers who don't drop the ball, don't say things, you know, by mistake, done tons of interviews in their lives. They're the people you send out to defend the wicket when it's sticky, right? And also people who had done years worth of cabinet jobs and kind of know the dangers and risks in mishandling, as you say, not just original appointments, but also subsequent affairs. And, you know, in every one of them, I say to them, if you had seen the report which Keir Starmer received in December 2024 with all those red flags, I don't believe that you would have made that decision to which they say Keir Starmer has said he got it wrong.

33:00Ed Balls: but I mean they know they wouldn't and more than that the pain and anguish that you can see etched across their faces in the way this has gone in the last 10 days people in the parliamentary Labour Party now being very open to journalists about their dismay it just means that the local elections in a couple of weeks time take on a bigger and more dangerous significance for Keir a clip of various cabinet ministers over the last few days. And if you can't read the writing on the wall in number 10, maybe listening to this will help you. What went through your mind when you saw we'd been appointed as US ambassador?

33:45Ed Balls: Well, that it could blow up, that it could go wrong. Did you say that to anyone? I had a conversation with David Lammy about it before the appointment. And I said I was worried about it. I do want to say one thing, though, which is... What did David Lamming say then? Well, I think he was worried about it too. Look, look... The officials in Number 10 put pressure on the FCDO to find a job as ambassador for Matthew Doyle, a close friend of a convicted sex offender. I am, of course, extremely concerned at any suggestion that the permanent secretary or permanent undersecretary of the Foreign Office would be told not to inform the foreign secretary.

34:26I can also confirm that... I've asked you and you've not answered. Is it fair in your view that Olly Robbins has been sacked over this? Look, of course, as a cabinet member, I support the prime minister's decisions. He took the decision. He couldn't continue with Olly Robbins in post because he viewed the material that had been withheld from him, not shared with him. So that was Ed Miliband on Sky. That was Yvette in the House of Commons. and that was Pat McFadden on Times Radio. And what do I say to that? Tick-tock, tick-tock, tick-tock. We're going to be back next talking about Iran.

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37:49Ed Balls: so welcome back the ceasefire in iran has been extended peace deal still remains in the balance interesting phrase in financial times this week by gideon rackman who talked about um not just the fog of war but the fog of peace and how complicated it is to try to work out what is really going on. A week ago, George, you'd just come back from Washington. I think that you were thinking that there was clarity and a path in these negotiations. In particular, you had the revelation that the US were talking about payments to Iran, but also that the Speaker of the Parliament in Iran was the effective interlocutor for the Americans.

38:40Ed Balls: But it feels as though over the last week, things have got messier and become more complicated and hard to see how this is going to end. I think that's fair. But a bit like if you were listening to our EMQ's episode where we discussed what a curate's egg is. I think from the White House's point of view, and indeed, you know, if you're concerned about the world economy, what we see at the moment is good in parts. Come on, turn to the bits that aren't good in parts. Although the whole point about the curate's egg story is it's not good in parts it's actually bad you just say it's good in parts because you're trying to be friendly to the person you're trying to get on with in the curate's case the bishop it actually is bad well that's the origin of the curate's egg but it's not how the phrase is used these days we establish if you listen to the epic well i'm not totally sure whether you may not have used it in the appropriate and original way yeah this is definitely a diversion no i'd listen what i what i heard in washington i think still stands and i think if you kind of zoom out the war is over.

39:40I mean, you know, I don't want to break into the John Lennon song. But if you think about it, there's no fighting, right? I'll come on to the Straits of Formals in a moment. But, you know, the bombing campaign has been suspended. Israeli action in Lebanon has been suspended. And there is no prospect, frankly, of the war restarting, in my view. Now, I might be totally wrong about that. And in a week's time, you can come and say, hold on, George, you said the Americans wouldn't start bombing again. But I think there is zero appetite in the United States, in Washington, in the White House, to restart the campaign of the systematic bombing of the missile sites, of the, you know, key nodes of the Iranian government.

40:20And Donald Trump, I think, in the last few days has quite significantly moved from sort of setting deadlines. You know, a week ago, he said he's, you know, he only had a ceasefire for whatever it was, 10 days. Now they're saying there's no end to the ceasefire. There's no cutoff point to the ceasefire. It doesn't mean that they couldn't resume hostilities, but they haven't set a sort of deadline that they keep having to extend. I mean, this was, for example, the White House press secretary, Caroline Levitt, just in the last couple of days. What's the ultimate goal of this blockade? Is it indefinite?

40:53And is the ceasefire that's in place right now also indefinite? Look, again, I'm not going to set a timetable for the president. He has not done that, and I won't. I know there's been some anonymous sourced reporting that there was maybe a three to five day deadline. That is not true. The president has not set a deadline himself. Ultimately, he will dictate the timetable. And again, he is satisfied with the naval blockade, and he understands that Iran is in a very weak position, and the cards are in President Trump's hands right now. I mean, of course, Donald Trump has throughout this conflict, which is now six weeks old, repeatedly said it was going to be opening over in two weeks, three weeks, four weeks, six weeks, whatever.

41:35But on the ceasefire now, there is no deadline, which there was a week ago. So I think the ceasefire holds because it's in no one's interest to restart it, apart from potentially the Israelis. And we've discussed on this show before that the Israelis are a kind of independent third actor potentially here. So then you have the blockade, which is causing the problem. And it's a kind of double blockade, isn't it? It's the Americans are blockading the Iranian ports, and the Iranians are blockading the Straits of Hormuz, effectively blockading it by sending drones and attacking ships. And what both sides are trying to do is, it's a classic case of trying to put some more cards into your deck if you're in a negotiation, you know, pick up some leverage for these negotiations.

42:18That's also the case, but it's also true that neither the United States nor Iran want to see the Straits of Hormuz closed for any prolonged period of time. The US, because it's having a big impact on the world economy and more to their concern, the US economy and US gas prices. And the Iranians, because while the Straits are closed, that is throttling their economy, throttling the flow of cash and some very brave reporting from inside Iran. I should pay credit. I think it's to Lise Doucette on the BBC I've been listening to and she's reporting from Iran. It's clear that inside Iran, the regime is coming under pressure from its domestic population because of things like food prices and shortages.

43:00So both sides want this thing over. The terms of the peace, or the terms of the deal, are, I think, very similar to the ones that I described to you a week ago and were, put it this way, extremely well-sourced when I told you. It wasn't just my view, it was what I'd heard. It's around giving up the enrichment program around nuclear weapons without saying, you know, Iran has given up all ambitions, either on the sort of civil or indeed on the military nuclear front. It's sort of quite narrow around enrichment and returning or not returning is the wrong word, but giving up stockpiles of enriched uranium.

43:39So it doesn't include other things that have been kind of casus belli at various points for the United States over the last six weeks, the missiles that Iran has, the support for proxies like Hezbollah, or indeed regime change. It's now down to the kind of nuclear program. And it's this whole question of the future of the Straits of Formals, where everyone, not just the US, but Britain, France, the Gulf countries do not want to leave a situation where Iran is essentially operating a kind of toll gate on the Straits of Formals. But in return, as I said a week ago, Iran's going to get a load of money from the US.

44:13The irony being, the Islamic Republic of Iran, led by some of the people who were leading it just a few weeks ago. So I'm still fairly optimistic that the outline of the deal is there. The ceasefire no longer has a kind of end point to it, which creates pressure. And I think it's highly unlikely that the fighting resumes. There are things, lots of things can go wrong, of which I would note that the Israelis are at the moment not necessarily bought into all this. But still, you know, that's why I think markets are calming. The oil price is not as elevated as it was and has peaked. And the kind of general expectation is we're in the endgame.

45:00Look, I hope you are right. But I am more cautious about this. No, fair enough. Because, you know, things have been going wrong.

45:09Ed Balls: For three reasons. So reason one, we now know from the reporting we had from Pakistan and the talks, and the talks are currently suspended, is that while there was a hope that Mohammed Galibaf, the Speaker of the Parliament, former IRGC Brigadier General, that he was the main person. In fact, there were lots and lots of other people out there in Pakistan. I mean, to be honest, if you're Iranian and senior, probably being in Pakistan was much safer than being in Tehran last weekend. And lots of conflicting views about who really is in charge and what people really want. And if you go to our Libya inside the room, there was a debate.

45:52A bit like the UK, conflicting views about who's really in charge.

45:56Ed Balls: If you go to our Libya inside the room, there was one. This was our special episodes over Easter on the Libyan conflict in 2011. If you have not heard them, you should. You definitely should. I mean, there was one question, should there have been boots on the ground? And Donald Trump has flirted with boots on the ground, but he hasn't done so. There was a second question, did you guys in 2011 have a clear end game? I think arguably you did. It's just that it was hard to deliver. But the reason it was hard to deliver, as John Sawyers explained to us in our Inside the Room, is while you were talking to the politicians, it turned out there were all these militia groups who had different interests, were fighting each other, and they subverted and destroyed the political process and then led to chaos and anarchy afterwards.

46:43Ed Balls: And so question one, are the Americans really speaking to the people who are the right interlocutors, who are actually really in charge and can deliver the deal? So that's my first sort of question. But then you then go to the... Or indeed, is anyone in charge? I mean, I think that's a serious point. There's a vacuum because the Supreme Leader was killed. We haven't seen the new Supreme Leader. So that's a bit suspicious. And we know that the Iranians decentralized command, didn't they, as a response to the attack. So potentially a bit of a power struggle. And it's not clear who can deliver the whole Iranian kind of body politic in the negotiations.

47:21Ed Balls: That is right. But Donald Trump has said the ceasefire holds while the deal is done, but he needs there to be a deal which is done and can hold in order for him, he is still using bellicose language. What is the nature of this deal? I mean, the thing is, George, there was a deal. It had been negotiated by President Obama with Iran. It was all about dropping... And Britain and France and Germany and China and Russia. That is part of my point. That was a deal in which Iran committed to moving away from, other than for civil reasons, nuclear enrichment in return for the dropping of sanctions. I mean, to be quite honest, if you could get the Obama deal back on the table now, that would be brilliant.

48:06Ed Balls: And the only reason it's not on the table is because Donald Trump ditched it in his first term. he can't simply go back to that deal because it's the Obama deal. What does he have to do? Well, he has to ask for more. He has to ask for them to go further on enrichment. He has to ask them to do more in terms of stopping actions of allies. It's a bit harder to get his deal. But as you also said, it's now not a deal which is being where there are counterparties, France, Germany, the UK. it's simply a bilateral deal and it's pretty clear that the Iranians don't trust the Americans, not least because every time Donald Trump in the last couple of years has had negotiations, he's decided in parallel with his negotiations to then launch armed conflict.

48:52Ed Balls: And while that deal isn't done, as of today, the strait is still not open. So you still have airlines saying they're going to run out of airline fuel, fertilizers not getting out to developing countries. It is true that the oil price isn't spiking, but it is still the case that the economic squeeze is underway. And if the test, the hurdle for reopening the strait is you need to have a deal done, I mean, actually, how confident are you really that there is going to be a deal which is doable here? Maybe Donald Trump just has to say, you know, a bit like happened in Libya, we'll just pull away and let them get on with it.

49:30Ed Balls: But I mean, I think that's what he will do. But that's a defeat for him. Well, it depends what you mean by defeat, because it depends what you think he was trying to achieve at the beginning of all this. And there's no doubt there's been a massive degradation of the Iranian kind of military and leadership infrastructure. structure there's no doubt that anyone who now claims to rule iran will not be thinking if i really do restart this nuclear program they're probably going to strike me again and by the way they might kill me and like they just killed you know my former boss but it's true i think he's just going to say like now we walk away and uh you know other countries can handle the fallout it remains the case that you know although the gas prices in the united states have gone up and that's created political pressure at home the united states is an net exporter of oil and gas and it has really exposed regions of the world that are highly dependent still on oil and gas completely europe and the uk through because of gas southeast asia and china and i think he can say look that's now going to be your problem i just just on that point george i think you might be right that donald trump in the white house and his allies sit around thinking well you know this isn't really our problem.

50:46Ed Balls: I mean, maybe it's not their problem. And maybe the economic impact into US cost of living and politics which flows from that for the midterms eases somewhat. And maybe him looking like he's not delivered his war ends doesn't really matter. But, you know, for us, for Europe, for China, the rest of the world, I mean, things are materially worse than they were two months ago. And is that actually going to ease? And, you know, what kind of ally does that to you? Oh, yeah. Look, I'm not saying that this is, you know, how to conduct the multilateral global order that was envisaged after the Second World War.

51:30And there's so many things, you know, which we can explore in future weeks around, for example, the fragmentation of the Gulf states, you know, Saudi Arabia forming alliances in the world now that are separate from the UAE's alliances and so on.

51:43Ed Balls: We should also come back and talk about what's happening in British politics, Scottish politics, what's happening with Ed Miliband and North Sea exploration. Maybe that's something to do before we get to the local elections. We probably haven't got time today, but it's absolutely fascinating what's happening there. Drill baby drill. Or not, as the case may be. Who are you quoting there? Tony Blair, Gordon Brown or Rachel Reeves? Exactly. there's quite a lot of people in the Labour Party putting pressure on Ed Miliband I feel like Ed Miliband's got you know he's in quite a strong position at the moment he's got his own version of the Straits of the Moos which he's got a stranglehold on which is all to do with the leadership of the Labour Party which we were just discussing can I end by pointing because we started this year with me being a bit of a kind of maritime nerd and kept pointing to you and to our listeners that various US ships were moving towards Iran, various US carrier groups were moving towards Iran.

52:43So in the last week, the USS Boxer, which is the Marine Expeditionary Unit Deployment, in other words, this is the ship that is a bit like modern version of D-Day, sends the Marines onto the beach to seize control of the Iranian coastline or the oil terminal there, you know, that has been delayed and is now been stopped at the Straits of Malacca, which is some way away in Singapore. And the US carrier strike group, the USS Bush, because they're all named after ex-presidents, has been rerouted to go around the Cape of Good Hope, which is the kind of long way around to Iran. So in other words, the US is doing the opposite of what it was doing early in the year.

53:28It had ordered all of these forces to reinforce its military presence over recent weeks. And now they're all being sort of rerouted and told to stop and hold in position and so on. So I think that kind of reinforces the view that we're in the world of peace, not war. But of course, that doesn't mean that the impacts on the global economy don't continue to be felt and may continue to be felt for many months to come. And who is the person who's going to have to figure all of that out? It is Kevin Walsh, who is about to be, we assume, confirmed as governor of the Federal Reserve. And we're going to turn to that confirmation hearing, which has been taking place this week after this break.

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56:49Ed Balls: So welcome back. Kevin Walsh faced the Senate Banking Committee this week ahead of his approval, we hope, as Fed Chair. Those questions were put to him on Tuesday. I think he came out of it very well. He's a very serious, upstanding, experienced public servant. One of the easier decisions, I would say, for Congress giving clearance compared to some of the rather more complex cases with the Trump White House in recent months. I'm just going to refer to the issue of Laurie Chavez de Rema, who's just been ousted as the US Labour Secretary just a couple of days ago. She was under internal investigation for potential wrongdoing.

57:37Ed Balls: The wrongdoing in the Labor Department included allegations she was drinking alcohol during the workday, committing travel fraud. Her husband, who is a doctor, was banned from the department earlier in the year after female employees reported that he had touched them inappropriately. I mean, she is the Pat McFadden of American politics. And can you think of a politician less like Pat? I think Pat McFadden might sue you if you don't clarify. I mean, both of the, you know, the Labour secretary, the Work and Pension secretary. Can you think of anybody less like the upstanding, serious, sober Pat McFadden?

58:24Ed Balls: So compared, I mean, you know, she had congressional approval. so compared to that Kevin Walsh surely surely he's just going to be green-lighted you should also point out that the health secretary in America RFK Jr has been coming up with his own revelations recently so we now know that over the course of his life he has cut off a raccoon penis that's the most recent revelation he's still in post but we're talking about confirmations of people who have not yet got jobs in the broader American political system. Kevin goes before the Senate Banking Committee, which is the relevant body here, on Tuesday.

59:05And, you know, I'm sure a lot of people have seen these confirmation hearings either on television, you know, in news reports or, you know, there've been lots of sort of film versions of them. And obviously, most of the questions Kevin got were about inflation and, you know, how the Federal Reserve was going to react to things. But the Democrats on the committee, you know, obviously wanted to take a chunk or two out of Donald Trump's nominee, whatever they privately think of Kevin. And I think he's very highly respected in Democrat circles too. And the really fiery ranking minority member of the Senate Banking Committee, because the Democrats aren't in charge in the Senate, is Elizabeth Warren.

59:45And I'm sure listeners to our podcast know about Elizabeth Warren. She's the Massachusetts senator. She's a kind of scourge of the banks and has had presidential ambitions at various points in her career. This is her exchange with Kevin Walsh during his confirmation hearing.

1:00:02Ed Balls: One aspect of President Trump's economic agenda with which you disagree. Well, Senator, the Federal Reserve in recent years has wandered outside of its remit, wandered into other areas. That's not something I'm prepared to do. on. If I'm confirmed, the Federal Reserve should stay in its lane. Just one, just one little place where you disagree with Donald Trump. Well, I do have a disagreement, actually, Senator, with the president. I think even this morning, he said that he thought I was out of central casting. I think central casting, I'd look older, grayer, maybe show up here with a cigar of sorts.

1:00:42Ed Balls: look kevin walsh is a skilled political operator as well as an economist in his time on the fed as a governor and then subsequently clearly strongly pro-independence of the central bank not totally clear that donald trump um really agrees with that um absolutely um committed to delivering low inflation. In fact, his track record is being a bit more hawkish, although Donald Trump wants him to cut interest rates. And so that's partly what Elizabeth Warren is getting at there. Is he going to disagree with Donald Trump's desire to get interest rates coming down in the way that Jerome Powell has resisted that pressure?

1:01:24Ed Balls: But also for Ben Bernanke, he was a person who sort of managed the political congressional relations between the Fed and Congress. And he does that with great skill. And I thought that in that answer to Elizabeth Warren, you could see he's smart. He knows how to diffuse a situation. And so I can't believe they aren't going to confirm him. I think the question for you, George, is how is he going to do the job differently from Jerome Powell? What's it actually going to mean in practice in terms of how the Fed operates in the future? Because I think in his testimony, he did give some hints. Yeah, I mean, I did see Kevin before his confirmation hearing when I was in Washington.

1:02:08And he's, as I say, he's a friend of mine. He's godfather to my son, Beau. And, you know, I'm absolutely thrilled for him personally. And I think he's very much the right choice. What's a sort of a bit of a shame about...

1:02:18Ed Balls: Did you ask him some difficult questions and help him rehearse his answers? No, no, he doesn't. He doesn't need my help to get through a confirmation hearing. I think actually there's a kind of shame about the American political environment at the moment that he probably won't get any Democrat votes. in the confirmation. It doesn't matter ultimately because the Republicans have a majority. You know, he is someone who has genuine friendships across the aisle. You know, for example, he's a great friend of Tony Blinken, who was the former Biden Secretary of State. That's, you know, one example. But when it comes to, you know, I think it's a good question you've got, which is, okay, but how is he actually going to be any different or, you know, and is he going to be able to resist the pressure from Donald Trump?

1:02:58I mean, first of all, in the hearing, he's very clear he's clear about two things he doesn't he cannot say and he wouldn't say and he doesn't think this privately he disagrees with Donald Trump you know Donald Trump has chosen him to be his pick for the Federal Reserve and he was very careful throughout the hearing and you heard a version of it there you know when Elizabeth Warren was trying to go like well name one thing you disagree with the president on so you know he is in that sense loyal to the person who's put him into the post. But, but, but, but, he makes clear in the confirmation hearing, it's essential that the Federal Reserve has independence on monetary policy, not on other aspects of things that the Federal Reserve does, such as banking supervision and, you know, various interventions in the economy and financial services sector.

1:03:45But on monetary policy, it must be independent. He also makes it clear that the president has not applied pressure to him or asked him directly. and I don't think he would, you know, I know he's the kind of person who absolutely would not tell a lie to the banking committee, you know, the Senate. So, you know, I think he's staking out there that he's going to be independent. I think where, you know, one of the reasons I suspect that Trump picked him is not just that he looks the part. And it's interesting that in the economic jobs, we were talking about some of the wilder Trump appointments just now, but in the economic jobs you know he has chosen people that markets respect and businesses respect and the treasury secretary has emerged as a kind of key and important influence here um who's also a friend of kevin's so he's chosen someone who a yes he's out of central casting in the respect in the sense that he commands the respect markets but crucially kevin does have a theory you know which we will come back and debate and we've already debated on this podcast that there are technological forces at work, essentially the spread of AI and the development of AI technology, which are deflationary and productivity enhancing.

1:04:58And therefore, there is space for the Federal Reserve to cut rates, or indeed the world to cut interest rates. And that's his view. He is rooted in Silicon Valley. He went to Stanford University. This all predates the current circus about who was going to be chairman of the Federal Reserve. And, you know, that happens to align, as he points out, not just with the view of Donald Trump, but every person who's ever been president, which is, be nice if the Fed cut rates. But he's been careful not to say that has to happen immediately. And interestingly, even Scott Besson, the Treasury Secretary, I noticed this week saying, yeah, sure, you know, the president wants rates lower, and I want rates lower.

1:05:40But, you know, because of what's going on in Iran, it's quite sensible for the Federal Reserve to kind of take a pause and look at what's going on there. Because, you know, you can see that in two ways. You can either say it's going to be inflationary because of the impact on energy prices, or you can say it's going to be damaging for the global economy and therefore we need the stimulus of lower rates around the world. So I think, you know, the direction of travel is still going to be towards lower rates because that's what Kevin believes. And he wants the Fed to be data-driven, to have the most up-to-date information to understand what's going on in terms of technology.

1:06:11And he's very clear it needs to make his own independence decision. And he said that in the confirmation hearing.

1:06:15Ed Balls: See, I accept everything you say and still wonder whether this is going to end up with Donald Trump feeling like he's been sold a bit of a pup when we get to Kevin Walsh in post. I mean, there is still an outstanding issue. The Republican Senator Thomas Tillis is still saying he will only support the Walsh nomination, if the current US criminal inquiry into the Fed and into Jerome Powell is dropped. Now, I think it would be crazy for the Republicans to block Kevin Walsh. So let's hope that that works its way through. I'm pretty sure it will. From Kevin's point of view, it would be far better anyway to arrive at the Fed with all of the kind of noise and this criminal investigation into to his predecessor done and dusted and finished or shut down.

1:07:05Ed Balls: But if you look at what he said in the committee and his past pronouncements, you are right that he has an open mind. In fact, probably a hope and an expectation that that AI productivity boost will put downward pressure on prices. But he's also somebody who is very sceptical about the Federal Reserve issuing forward guidance, allowing the institution or individual members to start speculating too much about what they believe will happen in future and how they'll react. He's very data-driven. He wants there to be more real-time, immediate data. He worries when the data isn't good enough. But as I said, has a reputation for being a bit hawkish.

1:07:52Ed Balls: He'll want to see the evidence before he puts the inflation target at risk. So as you say, if things turn out that way, and it's in the data, he'll be cutting interest rates. But if Donald Trump thinks Kevin Walsh is going to come in and shift monetary policy absent the data to a looser stance, which is what Donald Trump demands almost weekly, he's going to be disappointed. And that's what I mean by Donald Trump being sold a pup. I think what's going to happen is that Kevin Walsh is not only going to be confirmed. But he's going to end up outliving Donald Trump politically. Kevin Walsh will be there when Donald Trump is gone.

1:08:34And maybe by that point, your hope that AI-driven

1:08:41Ed Balls: productivity is leading to low interest rates will have sort of crystallised. But is that going to crystallise this year into next year? Is Donald Trump going to get what he wants from his new appointee quickly no and that is why it's such a good thing that kevin walsh is a smart political operator because he's going to need all that savvy once he's in the job to deal with the donald because my prediction is uh it will be bumpy quicker rather than more slowly but you know if it is it's because kevin walsh will be doing his job well we wish him well and certainly i hope he gets confirmed and takes up his post soon to deal with what is a pretty complex international economic situation at the moment.

1:09:27That's all for this week's episode.

1:09:30Ed Balls: As always, you can expect EMQs on Monday, unless you're a gold subscriber or a kitchen cabinet member, because they get EMQs early as well as ad free, all our main episodes ad free. You can also get all of our Libya 2011 inside the room, the Libya crisis, and also some special episodes, a reflection by me and George, but also the full interviews with Cathy Ashton and Hugh Powell. So plenty there for our golden kitchen cabinet subscribers. Yeah. And of course, you not only get the much coveted political currency mug, you also get the members only chat, our newsletter, you know, things are always developing these days.

1:10:11So you get to hear between episodes what we think about things. and the next issue of the newsletter is coming up this Monday and indeed on Monday if you're not one of our Kitchen Cabinet members or Gold Scrubbers you will hear EMQs so we'll see you then

1:10:23Ed Balls: I will give you an update on Polar Star which I have almost finished the sequel to Gorky Park thank you George for your cultural recommendations we will see you soon

1:10:42Thanks for listening to Political Currency. This has been a Persephoneca production.

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