Is this Rachel Reeves’ last throw of the dice?

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

0:27so we're here in the studio in hoxton busy show today so much to talk about this week in terms of big politics but before we do i think we have a bit of a track record on this podcast of looking out for our friends promoting their careers tim chipman now doing very well at the spectator. We got him the job, basically, didn't we? I think we definitely helped him. I think he's sort of acknowledged that now. But I was looking at Downing Street Tuesday morning. Rachel Reeves doing this speech in Downing Street. In the back row is a friend of this podcast, Tom Baldwin, sitting with the Treasury team.

1:06And I noticed this and I thought, what is going on? I thought, is he writing a book about Rachel Reeves having written the Keir Starmer book? Is he helping out with speeches? Is he going to be the new treasury media Svengali because of course ben nunn um her treasury media political operator moving over into number 10 so you know is tom baldwin's career on the up well it's always on the up he's always high yeah i saw him actually earlier this week as well at nick bowles's 60th birthday party which rather curiously but very kind of bowles style was combined with a fundraising effort for the kiev school of economics which he is right behind in ukraine but you know and anyway I've known Tom since he was a journalist on The Times.

1:49I'll do some speculation here because there's quite a lot of talk that they might split out the chief of staff job in Downing Street, isn't there? And that Morgan McSweeney might go back to more of a campaigning role. Is that true? I mean, I've heard people say it might be a good idea. I didn't know that was actually being considered. Well, I think, you know, it probably is under active consideration. And in that case, I would think Tom might be one of the candidates because he's close to Keir Starmer, right? So there's Tom Baldwin. You could put in someone like Spencer Livermore, who used to work with you in the Brown team, now a government minister.

2:22In charge of the elections next spring. Right. OK. So if Morgan McSweeney takes on a more overtly campaigning political role, that creates a vacancy there. And then there's also Tim Allen as the new comms guy and very experienced. We could get Jonathan Powell to come back and do the old job he did for Tony Blair. I also heard speculation that Louise Casey might be a candidate for that, although she's going to have to do a review into social care. And also, by the looks of it, also take over the grooming guns review because nobody else seems to be willing to do it. So she'll have a lot on. I thought she was also going to be the cabinet secretary.

2:56Oh, and the cabinet secretary. Yeah, look. Anyway, we're on Team Tom here. So we wish him the best of luck. Maybe he just, you know, didn't have anything better to do on a Tuesday morning and thought, I'll go and see Rachel Reeves in Downing Street. That is right. Well, I was at work, though, at Good Morning Britain. I didn't have better things to do. My job was to listen to Rachel Reeves' speech. And the first thing we're going to talk about is this very unusual pre-budget pitch from the Chancellor in which she said, each of us must do our bit when it comes to getting the national debt down. And that was widely seen as preparing the ground, not just for tax rises to come, but maybe a breach of Labour's manifesto, something we've discussed a lot in recent weeks and months.

3:44So that's what we're going to talk about first. Yeah, we're all in this together. I seem to remember someone once saying. Then we're going to talk about Kemi Badenoch because it's her first year anniversary and she's done a year as Tory leader, which is great. But it also means that it's now under the rules of the Tory party she can be challenged. You can't be challenged as leader in the first year. And we'll do a little assessment of how she's done in these first 12 months. Always difficult for a new opposition leader. And what has Nigel Farage been up to as well? Because, of course, she's not just facing a threat from the Labour government, but also she has to deal with Farage on her right flank.

4:22And then finally, big politics in New York this week. 34-year-old democratic socialist Zoran Mandani has won the mayoral election race there after a high-profile campaign, but he's sort of come from nowhere to win this campaign. Also, big wins for the Democrats in Virginia and in New Jersey. But people have looked at New York and there are people in the UK, Labour MPs saying, you know, is this the template for a Labour victory, the way to beat Farage when it comes to the general election? And so we're going to be asking what does this political shift in America mean for both the Democrats, but also for British politics as well.

5:01But we're going to start with that Rachel Reeve speech. Now, it was seen as something highly unusual. I actually don't think it was unusual for a chancellor to go out three weeks before a budget and set the scene. Gordon Brown always used to do this. I agree with you, but I thought it was a lot of misreporting that this is an extraordinary thing to do. I mean, I seem to remember I would regularly try and find a way to roll the pitch a bit. I mean, copying us, may I say. Don't worry, I learned a lot from you. Thank you. That's why I ended up beating you. Although in the end, you got beaten by yourself.

5:40Yes, I did, yes. And ended up on a podcast with me. Yeah, I agree. You know, hubris before nemesis. But a classic Chancellor thing to do to shake expectations, get your message out there, set out your choices, dampen expectations maybe. The unusual thing to do was to do it live on breakfast television. And, you know, I was presenting with Susanna Reid, Andrew Pearce, Kevin Maguire. And, you know, this was a speech which was quite technocratic. At one point she said, as I said in my Mays lecture, and we slightly thought at 8.15, the breakfast television audience. The G &B audience were going like.

6:15They were opening the drawer in the kitchen to find their copy. I'm having my Weetabix. To find their marked up copy of Rachel Reeves' May's lecture and see whether they'd highlighted the particular phrase she was talking about. But it was quite technocratic. The other thing I think which was frustrating about it was that she didn't actually say, I'm going to raise taxes. But she can't say that. No, but... That's what everyone interpreted it as, right? Every broadcaster, every newspaper said, she is now going to raise taxes. And it's sort of, it's a frustrating thing, isn't it? If you're going to do something that high profile, not to say the thing that you are actually setting out to say, it's definitely frustrating for the public if they are watching it in that way and try to work out what's going on.

6:56But I think the question is, was it coherent? Was it actually an argument which people could understand and comprehend and come around? I don't just mean political journalists. I don't mean people like you and me. I'm talking about the public as well. Did it land? And I think that is the question which we need to talk about today. Here is just a clip from, I think, the key soundbite moment where she basically says, without saying it, I'm not just raising taxes, I'm raising your taxes and in the process breaking the manifesto. To protect our public services from a return to austerity and to ensure that the economy that we hand down to future generations is secure with debt under control.

7:39If we are to build the future of Britain together, we will all have to contribute to that effort. Each of us must do our bit for the security of our country and the brightness of its future. So yes, I think you're absolutely right. If this was going to be a budget where they only raised taxes on wealthy people, you would frame that very differently, wouldn't you? We have to have a fairer society. We're going to ask more from those with the broadest shoulders. That's the kind of thing a chancellor would have said to kind of roll the pitch for taxes on the rich. It seems very unlikely she's going to go back to taxes on business after the reaction to the employer's national insurance rise in her budget a year ago.

8:18And indeed, the briefing today, they're not going to be taxing banks. I mean, that, however, is a very bold thing. I mean, in a kind of yes minister kind of way, very courageous thing. For a Labour chancellor who won an election and a Labour prime minister who won an election on an explicit promise not to tax working people and an explicit promise not to raise VAT or the rates of national insurance on employees and income tax to at least create a fevered speculation that that is exactly what is about to happen. We don't know. And of course, the budget is not yet done and dusted, although around now will be exactly when the major measures in the budget, the biggest items will be being nailed down and have to be these days audited by the OBR.

9:08Let's just start with the pitch rolling. I thought it was a good thing to do. She was obviously clearly trying to, I mean, a good thing to try and, as we've been saying on this show, you've got to start preparing people for this budget politically. And she clearly also wants to start establishing what's gone wrong. Why are we coming back with another big budget when she told us explicitly a year ago, she wouldn't be coming back for more taxes, that this tax rises, this was all done. And she had an excuse, which is that the productivity forecast in the OBR is worse than it was a year ago. And she all but said that in the speech.

9:43So she's got into at least the sort of political ether, the reason why her numbers are deteriorating. And then I thought what was odd, in some senses, is what we've been calling for, but I thought it was a sort of odd way to do it. She said her priorities were to cut NHS waiting lists, to reduce the deficit, and to help with the cost of living. So we've been saying, you know, set out the purpose of this government, define your objectives and so on. But I thought it was a rather odd choice. For a start, I think any of the last six Tory chancellors would have said those things. Rishi Sunak and Jeremy Hunt used to go on and on about cost of living and indeed trying to get NHS waiting list now.

10:23And of course, you know, I used to talk about reducing the deficit seven chancellors ago. So there was nothing sort of distinctively Labour, no language on fairness, no language on child poverty, no language on equality. I thought that was odd. And then there's obviously missing things like nothing on climate, even though the prime minister is at the COP summit today in Brazil and green energy was one of the five missions of the government. So it's an odd choice of things. And it's also slightly odd to put reduce the deficit in amongst the other two, because there's something I would have established more of a hierarchy, which is because we're getting a grip on the public finances, because we're taking the tough decisions to reduce the deficit, we can reduce NHS waiting lists.

11:04We can help with the cost of living because it will make it easier for the bank to reduce interest rates. You know, we can help with a fairer society. So I would have established more of a hierarchy than just sort of throwing reduce the deficit in as a sort of an end in itself rather than a means to labour ends. It's also a bit jarring to tell working people if this is what she's doing. And we don't know she's going to break the manifesto, although that is absolutely what she's setting herself up to do. To say that my priority is to tackle the cost of living and then to say, and I'm going to do that by raising your taxes.

11:39I mean, it's a tough message to deliver. But the argument is we have to fix the foundations to kind of get the economy sound and the public finances sound in order to do that. And that's the argument she wants to make. And it is possible to go out there and make a big argument about the importance of a tax rise and win the public. I think that Gordon Brown did do that in 2001, 2002, about the tax rise for the National Health Service, something which we prepared for for a very long period of time. It pains me to... Yeah, but hold on. You know, he was politically very strong. The government had just been re-elected with a huge majority.

12:13They hadn't made an explicit promise, or you hadn't made an explicit promise in the manifesto not to do it. The economy was doing well, so people's incomes were rising. It was a very different situation from an unpopular government one year into office having explicitly promised not to do this. Definitely. But it pains me to say it. In 2010, although there's lots of what you did I don't agree with, you did win the argument that you had to raise taxes, in that case VAT, with the support of a coalition to sort out a deficit and get the national debt falling, even though you didn't quite manage to do that for a long time.

12:47But that was an argument that you went out and the public came around and set you up for the 2015 election. Jeremy Hunt, after the Liz Trust quasi-quaten catastrophe, becomes the chancellor with Liz Trust, goes out the day after and issues in a sort of doctor-style way the painful medicine, the need to raise taxes and reverse tax cuts in order to sort things out and took the public with him. I think the real question for Rachel Reeves is whether, as you say, this is an argument which lands and lands with the public. Because the problem is, if Brexit and the pandemic and low productivity and Tory bad growth and austerity, she has a pop at you, are the problem, that was all clear as you and i said on this podcast before the election when she chose to box herself in if there was a black hole in the public finances which i think there was and we talked about that it wasn't simply a one-year black hole in the first year of the government it was about the parliament and probably the next one when she came to last year's budget and raised taxes she didn't have to say that that was it for the parliament and she did she had lots of moments where she could have said we need to reconsider because of defence spending and what was happening in Germany and the Russian-Ukraine battle or what was happening with the Trump tariffs.

14:04She has a pop at me because, you know, I was saying she could look at her fiscal regime again and she says that would be the wrong thing to do. It would lead to more borrowing. Although, by the way, separately in her speech, she says, I changed my fiscal rules to allow more capital investment, by the way, paid for by more borrowing. She could have come out at the time of the conference and said, the world has changed, but instead she said, no, we stand by our manifesto. That was the right thing to do. So having not taken all these moments where she could have changed the argument to now say, I'm doing it because I've always been consistent and it's all the fault of the Tories and the world and Trump and nothing to do with me.

14:45I felt as though she had to give some ground and say, look, we didn't get it all right and let me level with you. And there wasn't really any levelling. And that's partly, I think, why it doesn't feel as a coherent political argument. I think it's why it's much harder for that to land with the public. And people say, look, to be fair, she's on it. She's sorting it out, taking the tough decisions, but we know we need it in the way which Gordon Brown, you and Jeremy Hunt all did. Thank you for the compliment. As a piece of politics. And by the way, she does make a reference to the long-term economic plan in the statement as well, which is even more kind of galling.

15:20No, no, no. Well, we're all in favour of long-term economic plans, as you know. OK, that's all true. And it's very late in the day. And this is, you know, as I think we've said before, your second budget should be your predictable building on your first budget, not the restart. And by the way, she calls it her second budget. Let's be honest, in the spring, she had a second budget, an emergency budget, because already the fiscal rules were off course. This is the third. But I think we should ask ourselves, why are they contemplating breaking the manifesto? There is fevered speculation, as we say.

15:49I mean, if you go through the other options, I think this is why they've kind of reached this point. So the first of all is they haven't ditched the fiscal rules or altered them. I mean, I've heard it said to me privately. Actually, I'll return a compliment here. Ed Balls was right. Earlier this year, we could have changed the rules and done a special sort of defense spending thing, as they've done in Germany. With other countries. With other countries. And at the same time saying we are going to have debt on a falling downward path. But in this moment, we can have a one-off step up because we need it for defence.

16:21I think it was quite difficult. I mean, privately, people have said to me, we missed that moment. So they've decided they've got to stick with the fiscal rules. I think that's the right judgment. I think it's the only judgment. And out there, there is a very jittery bond market looking pretty closely at the UK. And we remember the UK's inflation is an outlier. But by the way, we're recording this on the day that the Monetary Policy Committee is meeting. And we'll update people later in the show. But everyone's expecting them not to cut rates. Because they'll wait for the budget. Even though the Federal Reserve has been cutting rates and the European Central Bank has rates much lower than us.

16:54So they can't ditch the fiscal rules. They're now trapped by their own rule and their own forecast. The nature of the parliamentary Labour Party's rebellions this year means I think they've concluded they really can't do that much on spending. And they've kind of given up, I think. I bet you they will try some. I think there will be some. I think there will be some. But let's say the black hole. I mean, who knows? but the black hole may be around. She can't attack you for your austerity and say I'm going to get the deficit down by reopening my spending review and cutting spending. But I think there will be some spending measures because she's also flagged that.

17:25But say that if the black hole is around 30 billion pounds, that's the kind of speculation. So there may be a few billion coming from that. Okay, so then you're left with a lot to do on tax. And I think they must have concluded, you know, they were boasting they're still looking at 100 measures, which doesn't seem to me like a very sensible thing to do with two weeks to go to a budget. But anyway, once you start adding up all the smaller things. Council tax bans for more expensive properties, maybe some additional changes to inheritance tax, capital gains tax, treatment of first homes, maybe some other way of taxing rich people.

17:58Even income tax threshold freezes, which I think is politically probably the easiest route, but is definitely a tax on working people. It falls disproportionately on the poorest element of income taxpayers. I think they must have just added all those things up and that we're not close. Or if we do all of these things, we're going to send such a negative message about the UK that they've kind of come like we're going to have to do one of the big taxes. And I think now they'll be thinking we can't just like announce an increase in income tax. I thought all that speculation put out there and some of the think tanks like the Resolution Foundation talking about it, you know, Resolution Foundation with good links into the government, that they might be put income tax up by a couple of pence, cut national insurance by a couple of pence.

18:42The net effect being that quite a lot of working people won't be worse off and that some people who fall into the income tax net, but not the national insurance net, like pensioners, will end up paying more tax. I can imagine presenting that as a reform. By the way, there are some very strong cases for that kind of reform in the tax system. But they mustn't miss the elephant in the room, which is they promised they wouldn't put up these tax rates. And so put it this way, they're going to try and sell a reform message. Then I would do it eyes open, cards on the table, don't pretend you're not doing what you are doing, which is breaking the manifesto promise and putting up one of the main rates of tax.

19:19I have a theory. This is just speculation. I don't know if this is right, but it sort of follows on from what we talked about a week ago and two weeks ago about what's been happening. If you go back to the party conference where Rachel Reeves and Keir Starmer both said that we're going to stand by our manifesto on the tax pledges, I have to say Keir Starmer, when you listen to his interviews at the time, doesn't sound as though he believes it. It's quite wobbly. That's partly because he's not deeply and naturally an economic communicator. Rachel Reeves really sounds as though she believes it. And she says, you know, those commitments were made for good reasons and those reasons still apply.

19:58And I understand why Rachel Reeves, having dug herself in so hard on these manifesto pledges, would not want to break them if she possibly could. But we also know that people in Number 10 will have been saying to Keir Starmer over the last year on the winter allowance on welfare reform you should have confronted the treasury when we were worried and you didn't do so and we can't make that same mistake again i think that kia's economic advisors may well have been saying to him in september if you try to raise the amount of money they want to raise from taxes on the wealthy and on pensions that's going to be very messy cleaner to do it on something which applies to everybody we're all in it together.

20:35If you're Rachel Reeves and that is the way things are moving, you have to turn that into a virtue, into something which actually will strengthen you rather than weaken you. And I think the most revealing moment on Tuesday wasn't in Downing Street. It was this exchange when Andrew Marr on his LBC show puts to Rachel Reeves something quite stark, I think quite challenging, maybe took her a little bit by surprise and her response is fascinating. Just have a listen. You could say to the British people on Budget Day, look, things are really bad. The headwinds have been harder. The situation has been stronger, worse than I thought.

21:10Therefore, I have to raise income tax. But I promised you I wouldn't. So tomorrow, I'm going to resign as Chancellor of the Exchequer, having done the right thing. That would be, I'm not going to behave like the last lot. I'm not going to play those games. I'm going to be honest and honourable. And what do you think would happen in financial markets if I did that? It depends who took over, I guess. Oh, come on, Andrew. You know, look, I have been able to build a reputation that I can be trusted with the public finances. I've steered this country. The fascinating thing there is you can see the thought process.

21:42The markets know the deficit's got to come down. I've said this before in the last few years, they're not going to believe big spending cuts for this Labour government, even if they might have believed them a year ago, not after the welfare reform U-turn. The thing which we know that they will believe in is the government saying we're going to raise income tax or national insurance or VAT, something which is clear and clean and applies to everybody. and what the Chancellor is saying is I'm the one, they'll trust to get this sorted out. She says in the speech I'm not going to put party interest before the national interest there's no appeal as you said to labour and labour values, no nod to education or child poverty when Andrew Marr says if you did the right thing and then resigned her immediate reaction is what would the markets do?

22:28How would the markets react? The argument is I am the only one who will take the tough decision on tax for the public finances, regardless of the political cost for Keir Starmer or Labour or the government. And the gamble is, if it works over the next two years and you can absorb that political cost of the U-turn on tax, the economy recovers and people say the strong thing, the tough thing. It's an attempt to do, as I said, what Jeremy Hunt tried to do and what you tried to do. and in a different way Gordon Brown tried to do. But it's actually about the market reaction. You know, I will not do Liz Truss's thing and I'm the only one who can be that guarantor.

23:12And you can see, I mean, it's a tough thing to do. It's kind of a stubborn thing to do. The question is whether people believe it's real or credible. And the question, as you were referring earlier, is whether the politics of that really stacks up. Is it possible for Rachel Reeves to be the market guarantor against all the political collateral damage which happens from that kind of U-turn? Well, first of all, I would observe it's a position that quite a few Labour chancellors find themselves in. Not Gordon Brown, who was the longest-serving Labour chancellor of all. But, you know, I think Alistair Darling at one point thought, I'm the only person holding together the credibility of this government in the markets.

23:50Roy Jenkins? Roy Jenkins, Dennis Healy in the late 70s. There is a common theme here. What happens after Roy Jenkins? What happens after Dennis Healy and what happens after Alistair Darling? This is not a great precedent. They lose the election for those who haven't got the punchline. No, I think, you know, she now is that person. I'm the only thing that stands between the Labour movement and the bomb market. It's essentially, I mean, you know, there's that famous Dennis Healy speech, isn't there, from the conference floor in the late 70s, which is, you know, where he's sort of exasperated with his own comrades.

24:23By the way, there is credibility in what she says, because when it looked like she might resign or quit a few weeks ago, there was a bond market wobble. And bond markets have got stronger. For the British government in the last three weeks, as the speculation has grown, they are going to raise taxes on working people and in particular on income tax. So there's no doubt from a bond market point of view that it works. But politically, I mean... OK, but let me say... I think it's the right thing to do to raise taxes at the moment. My critique of her and the government at the moment... They shouldn't be in this position, right?

24:56No, no, I have two critiques. One is they shouldn't be in this position, absolutely. But secondly, if you're going to do it, you have to show a bit of humility, but then get on the front foot about the big future offer. And that is a thing which has to be a uniting message about the economy and growth and living standards and fairness and the National Health Service. I don't think it can be me against party. Okay, but the question I've got for you, by the way, we don't know what's in the budget. We don't. But let's imagine... And it may be a clever thing to kind of get everybody talky about it.

25:26And then, in fact, not have to raise taxes and keep the manifesto, in which case, I'm not sure it's wise, but they'll get away with it. But let me pose the kind of question to you. So let's say she stands up. She announces a big reform of taxes on income. So she cuts national insurance, but she increases income tax. And therefore, there are quite a lot of people who lose because it's got to raise money. But there will also be some people who win. and she'll make an argument that it's the fairest way to do it. And this system has needed reform for decades. She probably also has something on the cost of living.

25:58So lots of speculation that there might be, for example, getting rid of VAT on utility bills, domestic energy bills, right? So there's a kind of cost of living measure, which she's got to pay for, remember? And I assume there's got to be something on kind of child poverty and something for the labor benches, which by the way, may be a partial reversal of the two child cap, which I introduced and we've speculated on about in this program. And I was asked about at the Treasury Select Committee this week. So let's say she does all those things. You could definitely present that as a labor budget, a reforming budget, a bold thing to do.

26:32And I think you get a lot of policy experts and economists saying that's the right package, particularly the major kind of income tax reform. You know, quite often in politics, I would say get the policy right and then fix the politics. But, But you are breaking not just any old manifesto promise. It was a central manifesto promise that made people feel safe about voting Labour again. And it's very associated not just with Rachel Rees, but with Keir Starmer. You know, sometimes in politics, you can get too clever by half and go down these rabbit holes and convince yourself with all the Treasury spreadsheets that it's all OK.

27:07And then on the day, you just like hit around the head by whack. You've broken your manifesto promise. Look, it is a massive gamble, if that's what they do. It is the budget of the century, as we said last week. I mean, it's such a risky, bold thing to do. I think, by the way, your presentation of that is right. It cannot be me and the markets versus the government or versus the broad Labour constituency. You have to make a broad Labour argument. You've got to throw it forward and say it's prudence for a purpose. Can it be done? I don't know. Is it incredibly risky? yes would you be really worried in their situation about the politics of that manifesto breach because as you said this isn't at the moment a popular government and it's not the first time that they've done things which people feel angry about welfare reform but also the winter fuel allowance and so there's not a lot of credit in the bank but as we said last week i don't know that there is an alternative to that strategy available to this Labour Chancellor because they can't cut spending in a way a Tory Chancellor but it has to be owned by the Prime Minister and the Chancellor and the whole cabinet and you have to get everybody behind it and say this is for a broader political purpose and what it can't be is Rachel Reeves and the markets versus the rest because if that's what it is then it won't work yeah now the person who's got to respond to the budget without any knowledge of what's in it, although I guess like the rest of us, she'll have read all the speculation, is Kemi Badenok.

28:40That is the job of the leader of the opposition on Budget Day. And we're going to take a look at how she's done in her first year as leader of the Conservative Party after this.

29:00So welcome back. While Rachel Reeves was delivering her tough message on Tuesday, Kemi Bajnock has been celebrating her one year as Conservative leader, a year which has all been about rebuilding Conservative brand. The positive is that she's been doing better in recent weeks at Prime Minister's Questions. The negative is that she's still way behind in the polls, but also way behind Nigel Farage as the best alternative to Keir Starmer. And I think now, After a year, she can be challenged in office if Tory backbenchers want a change. And the polls suggest, the Ashcroft polls suggest that the public think that she's likely not to be the Conservative leader come the next general election.

29:42But that is a big open question. She had a very good line on Rachel Reeve's statement on Tuesday, though. Let's hear it. Chancellor's speech was one long waffle bomb. A laundry list, a laundry list of excuses. She blamed absolutely everybody else for her own choices, her own decisions, her own failures. It's a good phrase, isn't it? Waffle bomb. Never heard that phrase before. Maybe it's not original, but it certainly sounded original to me. It was talked about a lot in the papers Wednesday and on the broadcasters we were using because it was such a great phrase. Now, that is part of the job of the opposition leader, particularly early in the parliament.

30:17You've just got to oppose the government. You've got to find creative and imaginative ways to do so. So how is she doing? Well, I think, you know, if you were to take in the most sort of straightforward analysis, of course, things have not gone well for her or the Conservatives because they've gone from 26 percent in the polls when she started to 17 percent of the polls. And that's at a time when the government's own poll ratings, the Labour Party's poll ratings have also collapsed. So you would think the natural beneficiary would be the opposition, but it hasn't been the case. They've gone down.

30:47And on that kind of straightforward analysis, it's not been a success. But I think you would ask yourself a question like, could anyone else have done better if the party had elected James Cleverley or Robert Jenrick or Tom Tugendhat? Would the Tory party really be in a better position a year later? Would any of them have done a better job at resisting the rise of Nigel Farage? Indeed, is there anything the Conservative Party can do at the moment to stunt the rise of Farage? I think that's one question you could ask. And then I think if you were trying to make the case for Kemi Badenock, and I agree with you, I think it's a lot easier to make the case for her today than it would have been, say, at the end of August, when, frankly, I thought she got off to a pretty poor start as a Tory leader.

31:29But in the last couple of months, things have definitely improved. Here's the kind of case for her leadership. So, first of all, she has stabilized the party organization and she has stabilized the party finances. And, you know, it's actually quite remarkable. I was looking at these numbers. In the last quarter that political donations were declared for, i.e. the last published figures, which is Q2 of this year, the Tory party raised£2.9 million. The Labour party raised£2.6 million. And reform raised£1.3 million. She's out raising the other political parties, despite all that talk about Tory donors going over to reform and being courted by reform.

32:07So, you know, she's raising, and I say she because there's a huge effort that the leader needs to put in to do this, but she'll be supported by the treasurers there. She's out raising two to one, more than two to one, Nigel Farage. That is in the first year of opposition, which is when it's really hard to raise any money from anyone. So she's stabilized the party organization and the finances. I think she gave the best conference speech of the season. Kirsten's speech was good, but hers was the best. I think that shows she's capable of kind of upping her game, which is what you want in a political leader.

32:38She herself says, I'm learning on the job. I've made mistakes, but I'm starting to get things right that I wasn't getting right a few months ago. And I would say also her PMQ performances have markedly improved. Third, she has landed some real opposition hits. At this point, you're not the alternative government. You're trying to prove you've got fight in you. And after years of being in office, you can handle opposition. And then she landed big wins on like Peter Mandelson, his resignation for, you know, kind of cornering Keir Starmer, Prime Minister's questions on that, getting Keir Starmer on tax promises actually last week.

33:12You know, the Tory opposition is kind of landing some hits and doing kind of damage to the government. And then finally on the economy, we've been giving her advice, which is get off identity politics. It's still, by the way, an absolutely remarkable thing that the Conservative Party is led by a black woman who's an immigrant to this country. I went to his play this week, The Line of Beauty, which is the Alan Hollinghurst novel about the Tories in the 1980s. It would have been absolutely amazing to say in the 1980s that the Tory party was going to be led by a black woman who came here from Nigeria.

33:43And that was her sort of selling point. She's actually got off that. She's no longer doing that. I'd say the selling point in that she sort of stood against identity politics. She's no longer doing so much of the identity politics, which I think is very good, or anti-identity politics. And she's doing much more on the economy. I mean, I think we can come on and discuss there's lots more she needs to do. And I wouldn't necessarily have started sort of spending the money immediately on tax promises. No one can remember even a few weeks on. But I think they are now more focused with Mel Stride, the Shadow Chancellor, on landing the economic message.

34:13And here's my final point. If you look at the polls, they are ahead. Mel Stride and Kemi Badenock are ahead of Keir Starmer and Rachel Reeves on economic competence. And that is one of the absolute leading indicators, or at least has historically been, of whether you're on your path to getting yourself back into office. That's right. Although that's partly a reflection of the fact that the Keir Starmer Rachel Reeves rating is so low in terms of economic confidence rather than Baden-Ock stride being high. but I think you're right but a thought experiment if she had decided a year ago or nine months ago I think when you first said on this podcast get onto the economy think of the position she would be in now if she had spent the whole of the last nine months I think Mel Stride wanted to do this banging on about the danger tax rises would do to the economy the danger that the approach she was taking to kind of taxation and international investors would do to people's willingness to locate and invest here in the UK.

35:15If she had spent the last year, rather than trying to out-compete reform on those identity political issues, if she hadn't been lured by Robert Jenrick into thinking that that was where she had to place her fight, think what a stronger position she would be in now. This week, in the run-up to the budget, she'd be saying, I told you so. She would be saying, all along, I warned this was what was going to happen, and you have proved me right. In passing, she would have been much more credibly able to distance herself from the Tory legacy on the economy while dissing Labour's contribution on the economy in the last year and a half.

35:53And I just think that she came late to that party and she hasn't done it as wholeheartedly as she could have done even in recent weeks. And that's a mistake. And it's a mistake for two reasons. One, because of the situation this week we find Rachel Reeves in, but also the situation that Nigel Farage finds himself in this week. Because this week was about two manifestos. It was about Rachel Reeves, it seems, saying, I'm going to break the Labour manifesto on tax promises. But also Nigel Farage, who made big tax promises before the general election in 2024, big rise in the personal allowance to£20 ,000, rise in the starting rate of high and top rate of tax, raising the inheritance tax threshold to£2 million.

36:41The IFS costed this at£90 billion of tax cuts. Nigel Farage has now concluded he has to distance himself from his own tax manifesto promises because he can try and ape Donald Trump on identity politics, on immigration, but on the economy, what Trump can do around tax cuts and borrowing, you just can't get away with in a small open economy like ours. This is Nigel Farage making his speech in the city earlier in the week. We want to cut taxes. Of course we do. But we understand substantial tax cuts, given the dire state of debt and our finances, are not realistic at this current moment in time. Just to go back to that point about the Tory legacy, this is Nigel Farage who said in 2022, that the Liz Trust budget was the best conservative budget since 1986.

37:42And he can't get away from having said that, even if his troops now say, I know he's learned from history, in exactly the same way, because he can't get away from saying Vladimir Putin was, you know, his most respected international leader. Kemi Bednock had the opportunity to distance herself from both Labour on the economy and Farage on the economy. and I think this week, because of both the Reeves and the Farage speech, she's in a better place on the economy, but she could have taken that opportunity much more wholeheartedly in the last nine months. It would have been a much easier speech to have made on Budget Day when she responds to the Chancellor of the Exchequer than the one she'll have to make.

38:24And as I said, I don't think they needed to make the tax promises in the conference. I mean, I think they probably thought we've got to get, or she thought, I've got to get through this conference and my leadership is under threat. And so I've got to throw some red meat at the Tory faithful. And that was the pledge to abolish stamp duty. But normally, you would want to save all your firepower for later in the parliament as an opposition. I mean, the thing about Nigel Raj's speech, I mean, it really pains me to say this. You know, he's basically saying almost exactly what I said as shadow chancellor.

38:54You know, my speech to the Conservative Party conference in 2006, which only I remember, I'm not expecting anyone else to remember, was literally, we can't promise tax cuts. Stability has to come before tax cuts. I think that was when you were saying you're going to match Labour's spending plans. Well, that was an attempt to not avoid what had happened to previous Tory shadow chancelors, which is being crucified on the economy at the election on promises. Which, by the way, is still a big vulnerability for Nigel Farage. At the moment, Farage and are fighting the next election on a Portillo or Letwin position, which is we will cut spending to cut taxes.

39:30And unless you can show those spending cuts are not going to be cuts in the pension, cuts in the health service, cuts in defence. We got crucified in 01 and 05 on those things. And that's why before the crash, we were lining up in 010 to do what Gordon Brown had done in opposition, which is match the government spending plans. Farage is definitely moving in the right space Because what is the biggest obstacle to people now voting for Farage? I think it is project fear that will come at him from Labour and from the Conservatives. I mean, I use that knowing full well. That's what people say I did at the referendum, both the Scottish referendum and the EU referendum.

40:07But that's, you know, you tell voters you vote for Farage on Thursday, you're going to have an economic crisis on Friday. And as Morgan McSweeney is saying to people at the moment, we know this because it's been reported in The Guardian. they may hate us but these people thinking about voting green or liberal democrat they hate nigel farage more and that idea that you can use fear to galvanize people who may have to hold their nose and put a peg on it in order to um but i do no i mean that is it's not the most attractive political strategy but it you know quite often works but farage is anticipating that isn't he and he's trying to close down this potential flank that he is an economic risk and that's why he's starting to emphasize economic stability.

40:49Anyway, it's a pretty interesting development. And of course, it makes it a little bit harder for the Conservatives because they thought they'd carved out a niche of being the kind of fiscally responsible ones. Although the interesting thing, I guess, if you reflect on what we've been talking about in the podcast today is that all the parties now are trying to occupy this space of fiscal responsibility, deal with the debts first, we can't make lavish promises on tax cuts. And in the case of Labour, we're going to have to put your taxes up. And of course, we have just seen a guy elected as a self-proclaimed democratic socialist in the home of free market capitalism, New York City, as the mayor on a promise to raise taxes.

41:30And we're going to turn to the Mamdani victory next.

41:43Welcome back. I have to admit, I am slightly obsessed at the moment with Zoran Mamdani's social media because I've started looking in preparation for this podcast at his clips and the algorithms which therefore drive my social media feed have been showing me even more clips than I wanted. And he is brilliant. I mean, they are really, really energetic and real and thought through. And, you know, he's recorded things a year ago that he's now playing. There's sort of been preparation. and he's unbelievably charismatic. And there's a bit of the kind of young Obama in him. There's something almost messianic about him.

42:21Who is he? He's a 34-year-old assembly member in New York City. He's not really done anything much other than politics. I'm not against that in people's lives, but his opponents in this election said he hadn't done very much. He absolutely has put himself as the champion of working New Yorkers. He uses the phrase the working class, which is much more unusual in American politics than it is in British politics, where actually politicians have tended to ally themselves to the middle class. And he's made the centerpiece of his campaign affordability, which translates in Britain to cost of living.

42:57And he's got some policies we'll go through, but they're kind of like government run grocery stores in areas where people won't set up shops in New York and free bus travel and a much higher minimum wage and so on. A couple of other odd things about him. First of all, he was born in Uganda. So we don't need any speculation about whether this guy is going to be the next president of the United States. He can't be. The Constitution doesn't allow him to be. And although he has made himself the champion of the working people, and although he speaks very authentically about it in these social media clips, he is in fact the son of a very successful Hollywood director.

43:36His mother was the director of a big hit a couple of decades ago called Monsoon Wedding. So he's actually got a Hollywood royalty. But put that to one side, doesn't matter where you came from, it's where you're going. I don't know about you, but it's a bit of a breath of fresh air, isn't it? In an American political climate, which at least for the last 12 years seems to have been dominated by septuagenarians and octogenarians. And we all like, where are the young Obamas and JFKs and Bill Clintons in American politics? Well, here we have the new mayor of New York City. This was Donald Trump who's weighed into this race in the city, which, to be fair, you know, he is a New Yorker.

44:14But he doesn't hold back in. This was an interview he did a few days before the election on Tuesday. Zorhan Mandami, 34 year old Democratic socialist. He's the communist, not socialist communist. He's far worse than a socialist. Some people have compared him to a left wing version of you. charismatic, breaking the old rules. What do you think about that? Well, I think I'm a much better looking person than him, right?

44:40I just wanted to play that clip because it's so funny. Anyway, we played the clip. But the point was that not just Trump, but in fact, the Democratic establishment, the Democrat Party establishment, for example, Chuck Schumer, the leader of the Democrats in the Senate, you know, refused to endorse this guy, have absolutely seen him as far too left wing, far too on the sort of radical Bernie Sanders, AOC end of the Democrat Party. And even today, you know, not all of them have sort of got behind his victory. To understand, I think, his appeal, you've got to look up his social media videos of him talking to ordinary New Yorkers.

45:19Here's one he did, as I said earlier, months ago, preparing the ground for his run for the mayoralty. How's it going, guys? Do you have 60 seconds to talk to us about the election? How are you guys doing? Do you guys want to talk about the election for a minute? How's it going, sir? Excuse me, ma 'am. How you doing, boss? One year ago, we were here talking to New Yorkers after Donald Trump won the presidential election. What we're finding today, do you remember exactly where we went? There are far more people excited about the possibility of politics in this city on the same street, where last year there were very few.

45:50So, you know, for those who haven't seen the clip, you should look it up and we'll put it in the show notes. You know, he's basically walking around with a big sign saying, talk to me about the election. This is after the presidential election. And then he only releases that a couple of days before this contest. And of course, now he gets mobbed when he goes around New York. And there's also great clips of him talking to kind of night workers in New York and so on. He's definitely got a very easy style. He's very sort of relatable, despite everything thrown at him by the Democrat establishment.

46:19His opponent was actually the former Democrat governor of New York state and part of the kind of aristocracy of the Democrat Party, Andrew Cuomo. And they all were having a go, you know, essentially saying this guy is dangerous and left wing. And, you know, he had a kind of relatable quality and he has a messianic quality. And you get I think you get a sense of it in his acceptance speech as well. If anyone can show a nation betrayed by Donald Trump how to defeat him, it is the city that gave rise to him. This is not only how we stop Trump, it's how we stop the next one.

46:58So, Donald Trump, since I know you're watching, I have four words for you. Turn the volume up. So I bet there are a lot of Labour MPs out there. I mean, if I'm interested in this guy, but Labour MPs saying, why don't we have someone like that? And maybe we should be moving to a much more aggressive socialist message, which is tax the rich to help the working class. Jeremy Corbyn said at the weekend, he's my guy, caused controversy by saying that he was getting the vote out for Mandani. There will undoubtedly be not just left-leaning Labour MPs saying that. I think Wes Streeting was out there saying, we've got a lot to learn from this guy.

47:44And they have. Britain's Zoran Mandani. But the thing is always to make sure you learn the right lessons, not the wrong lessons. So let us start. First of all, compelling, charismatic, a great communicator, but also, as Barack Obama actually said in the last few days, he didn't follow Trump onto the issues Trump wants the argument to be about. Identity politics, trans rights, sanctuary cities. He placed it absolutely on the economy and cost of living. And if you look at the results more generally this week, centrist candidates, not democratic socialist candidates, winning in Virginia and in New Jersey.

48:26The polling says that for people who said the economy is the biggest issue, those were the most likely people to be switching over to vote for the Democrats. Democrats out polling how they did under Harris in all of these races, in district after district. young people who people were worrying were going to trump big switch back to um the democrats in particular in new york but more widely also hispanic voters coming back to the democrats trump unpopular not just as he says because of the government shutdown but because people are feeling worse off and prices have been up and by the way his 300 million dollar ballroom is going down like a lead balloon at the moment in america but i think actually tariffs are attacks on working Americans, and that is coming through.

49:17So it tells you, get down to the economic message and then communicate it in a compelling way, in a way which unites your coalition against the opposition, in this case, Trump. I mean, the New York thing, he ran against a disgraced former governor in New York, Cuomo, an establishment figure. Disgraced because he had to resign over a sex scandal. Over sex scandals. But also, this is New York, Democrat New York, in which pretty much every council member is a Democrat. To say that you should learn how to beat Farage in Britain from this is a bit like winning a ward in Brighton from the Greens and then Labour saying we beat the Greens in Brighton with a compelling Green socialist message.

50:02Let's do that elsewhere. And to be quite honest, the same message doesn't quite work in Kefili in Stockton South or wherever. That isn't the point. the idea that you say you could win as a democratic socialist in new york therefore that should be our message i mean it's crackers and i think actually the democrats if they have any sense will not learn that message what they will say is from opposition because they're in opposition in america what you have to do is have a unifying and compelling message which means the left and the center and the right within the democrat party can all come around a positive program of change and in opposition to Trump and that is what they have to do.

50:44It's harder if you're in government. In the UK, Keir Starmer's in power, Rachel Reeves are in power. But I think the same message applies. What you don't do is think, why don't we sound like Zach Polanski across the UK? He's the Green Party leader. The Green Party leader, because that might win us some green votes in Brighton or even in constituencies across the country. Because what you know is that it's going to take you away from the message which you need on tax and the economy and cost of living for many parts of the country. But what you have to do is be charismatic in your communication, which is an important challenge for Labour.

51:18Secondly, you have to avoid own goals, which look like you are moving away from the values which should unite your coalition, like, for example, abolishing the winter allowance. And then you have to think, what are the things which we can talk about, which unite our coalition? And, you know, there's no doubt growth. But I would actually say climate change, international development, child poverty. Well, hold on. They've just slashed the international development budget. Well, I mean, absolutely. That is a problem for Keir Starmer in putting together that kind of unifying coalition. But you can find some ways in which you can talk about tax and fairness and the rich.

51:53The lesson from the US is, and it's harder from government, is unify a broad coalition. be clear that you're talking about the things people really care about, which at the moment is the economy and cost of living. Pick the issues which can unite your coalition in a progressive way and double down on them, and then don't have own goals which split your coalition. I mean, it could be that Labour talks about strengthening the relationship with the European Union. I mean, that works for a green-tempted voter, but actually what we know is quite a lot of... Works for me. Yeah, but it also works for...

52:25If you look at reform voters or reform-tempted voters, There are conservative reform voters who are wanting a farage type message, but there are lots of kind of Labour reform tempted voters who want something quite different, who actually think tackling climate change is quite important. They're working with our international partners on international development is quite important. And what they want is hard policies on the cost of living and sorting out the economy in a way which works for working people. So I think it is possible for Labour to learn good lessons from New York. But if they learn the wrong message, which is let's have another Jeremy Corbyn catastrophe.

53:09Yeah. And by the way, I said I was obsessed with him a little bit. I'm not obsessed with his policies because they, to my mind, don't remotely add up. So they're easier to talk about before you've won than they are to deliver in government. Deliver in government. Surely, I mean, I would say, obviously, we're talking about what the left in Britain should learn. But maybe actually the real lessons are for the Conservative Party in Britain. In America, as you say, the Democrats are in opposition. I think there are very clear lessons for the Democrats. You have got to move on from this old generation who run the Democrat Party, who now look very long in the tooth and are associated with past failures.

53:42So you need to let the younger candidates come through. And you need to get away from the identity politics, which has obsessed a lot of the elements of the Democrat Party, including the younger elements, and focus on the economy. And that is what he has done very effectively. And Donald Trump won the election essentially on cost of living. But as you say, partly his policies are contributing to a higher cost of living. So that's where you'd go as the opposition. And here in Britain, I think the Conservative Party would do well to study his win. And now he's got a charisma, which is very hard to match.

54:12And it's not an obvious person in Britain, you know, on the right who's got that kind of charisma. But two things. One is he did make brilliant use of social media and he wasn't afraid to do what you can do in opposition, which is so hard in government, to just get out there on the streets and be amongst ordinary folk. it's what Robert Jenrick's done a bit with his videos it's actually what Rory Stewart did a few years ago when he was thinking about a mayoral campaign but that's what Mamdani did and why isn't Kemi Bade not out there and I really study the new forms of communication because I think he has brilliantly exploited them and second it's a repetition of what you said and what we've been talking about on this podcast but maybe it's a good place to end economy economy economy economy economy, affordability, cost of living, because, you know, the Labour government are up against it, partly because of global forces beyond their control, partly because of decisions they've made.

55:05And if they're going to raise taxes in this budget, affordability is going to be a big theme in British politics for some years to come. I'm that's right. But I think there was another wrinkle in this as well, which is relevant for the Conservatives. There was a really good piece by Ezra Klein, the American columnist in the New York Times at the weekend talking about the Democrats and pointing out that these days, party loyalty is becoming much more important in American politics. You're either a Democrat or Republican. But if you have a narrow view of what it is to be a Democrat, then you might win in New York.

55:38But it's much harder on the same platform to win in Maine, or to win down in Kentucky or in Arkansas. You have to be able to win in lots of different places. And therefore, what you can't do is the leadership can't pick totemic issues which you say unless you sign up to exactly what we're saying you're not really one of us because that is narrowing you have to embrace breadth of place to win therefore breadth of view and focus on the things which unite your coalition and for kemi badenock the crawlery with kia starmer if kia starmer simply says unless you are an islington liberal you can't properly be Labour these days, then you lose the red wall.

56:20If Kemi Badenoch says, unless you join me in a Farage-leaning, anti-ECHR, anti-Europe, doubling down on that identity view of what it is these days to be a Conservative, and a George Osborne Conservative is not welcoming the party, she can't win. Yeah, she's got to win back Kensington, Chelsea, Tunbridge Wells. I mean, you know, all the seats in Oxfordshire. And let's be honest, Zach Belansky doesn't have to do that because he can succeed as a green leader simply by winning some green seats in areas where he's got a chance. Nigel Farage was also like that before. Nigel Farage is now thinking, actually, do I want to be a more broad based political party?

57:00Maybe I need to listen to Richard Tice and appeal to the golf club conservative, not simply the hard line MAGA style ideologue. Kemi Bajnock can't fall into that trap as well. And I think that is the right lesson to learn from New York, not be a Democrat socialist or a MAGA Trumpian to win, because that's the wrong lesson to join for political party. You've got to be broad coalitions. No, I think that is a very, very good observation. At some point, he'll probably make a visit to London, won't he, the mayor of New York? I imagine the mayor of London is quite excited. I think maybe the person who sees himself as his brother in arms is Sir Sadiq Khan.

57:36May I say, if you want to get Mandani around for a little group in the Cotswolds to meet Conservative MPs, I would just downplay the J.D. Vans link. Oh, OK. I'm just not sure that's going to work. Yeah, I wasn't thinking I was going to be the guy who brought him to London. You could, but just downplay the J.D. Vans stuff. OK, point taken. That's my advice. All right, thank you. And as we end this recording, and as we predicted earlier in the podcast, we've just heard that the Monetary Policy Committee has not cut interest rates in the UK. They have been put on hold. Anyway, we are going to end the podcast there.

58:14Gosh, lots to talk about and lots more to talk about. We've still got this budget more than two weeks away still. So lots more to talk about in the couple of weeks coming up. That's right. But we'll be back on Monday, though, with the ex-minister's questions. And don't forget, you can always hear us earlier and ad-free if you become a gold subscriber or a member of our kitchen cabinet. You can find the links to do both those things in our show notes. And by the way, we're going to have a budget day special as well, which you can tune into. We're also on YouTube. Search Political Currency and you'll be able to watch all of our best episodes and interviews.

58:48Check them out if you haven't already done so. And we'll see you next week. See you then.

58:58Thanks for listening to Political Currency. This has been a Persephoneca production.