The existential threats facing Keir Starmer

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

0:28George Osborne has landed. We are in the studio. We're actually together in the same room. It's not remote. I wanted to be here for your birthday. It's your birthday week. You're a day late. Okay, maybe. But I've still got a card for you, which I'm going to hand over. Thank you. Oh, my gosh. I am now firmly in my 60th year. 60. You're not 60, you're 59. I know, but it's my 60th year. But that's the kind of nerdy thing people say at school. Happy birthday from the team. I'm not 59, I'm in my 60th year. I know. Actually, but Susanna really told me yesterday on GMB, she said, breaking news, Ed Ball's birthday.

1:05She said, you've got to celebrate it, your health, your happiness, doing great things. I know, she's totally right. And? Thank you, Susanna. Thanks for the invite, then. No. It was live on television. I didn't have a party. I actually had all our kids came around, my brother and Yvette, who flew in from Ukraine. And we watched Norwich Beat Sheffield Wednesday on the TV. I mean, you know, what a birthday evening. What a shame I missed it. Anyway, you've been celebrating your birthday week by mansplaining to the leader of the opposition. Yes. For people who don't know, shall I? So, Kemi Baden-Ock was being interviewed on Good Morning Britain by you and Susanna.

1:42And then Martin Lewis, who's the kind of money expert, comes and sort of stands over her. And then you're both talking to her and she says, stop talking over me. And anyway, it went not in sort of quite in Taylor Swift scale, but it nevertheless went a bit viral. Look, she did actually brilliantly on this. Just to tell you what was going on, we are interviewing Kemi Badenock on the sofa, Susanna and me. Susanna's talked about Andrew. I was then asking her about student loans and her proposal to cut the interest rate. and pointing out to her that it only benefited the richer students, which is the fact.

2:16And then we hear these shouts from behind us in the studio. And Susanna and I, we actually thought it was Kemi Badenoch's press officer trying to disrupt the interview by giving her the line to take. But this person's persistent shouting. And we suddenly realise it is Martin Lewis, who is actually being interviewed by us 10 minutes later. He's come in the studio. He couldn't contain himself listening to Kemi's answers, then walked in and then sat down on the sofa and started conducting the interview now at the time I was already in the interview and you know I should have just shut up but you know I tried to carry on which ended up with me and Martin both talking at the same time which was stupid I mean she was so cool about it I think pretty much any other senior politician being um what looked like set up an ambush in that way would have been furious and actually she said it was of great i was hugely impressed i mean look let's be honest when the dust settles she's still got a problem with the policy i don't think cutting the interest rate is right at all and that's what martin was saying what she needs to do is reverse what rachel reeves has done the freezing of the threshold which hits lower middle income students hardest cutting the interest rate doesn't really work in election campaigns she'll be exposed for that it may be that martin lewis and her will come up with a new policy but i was really impressed by kevin bagnal she's definitely hit her stride hasn't she at a time when quite a few people are struggling and how about your week you flew in from india um this morning you were you know just like the old days a photo op were you in a hard hat and high viz it was very like the old days i haven't done anything like this for years which was i was standing in front of the big billboards the digital billboards in Piccadilly Circus, where the people who own the billboards had very kindly given us a free 10 minutes to advertise the arrival of the Bayer Tapestry to the British Museum later this year, and the fact that tickets will be on sale from the 1st of July.

4:16You must be so nervous about this. No, I'm very excited. If it gets damaged in transit. It's not going to be damaged. Are you sure? It's going to be the greatest show on earth. One of the great things about being the chair of a board is that if it goes wrong, you're there to take responsibility, aren't you? Yes, of course. Anyway, look, I don't want you to feel nervous. No, I'm not. It's quite valuable, this biochats, isn't it? I mean, it's like quite historic. Have you seen the insurance policy the government's written for? No, it's the government paying. You are. All people listening to this podcast, all taxpayers are…

4:49The insurance policy is all very well. If it gets damaged in transit, there's only one person whose neck is on the block. the person who persuaded Macro and Starmer this was a good idea, George Osborne. I just hope you enjoyed the publicity this morning. Do you want to get in and see the show? Look, I've already seen it. But I don't mind coming back again. One of the most exciting things, I never went to it when I was like five, six, seven years old, when Tutankhamen came to London in the early 70s, the massive historic find, Egyptian king, young king. And this is... I think we call them pharaohs.

5:21Well, okay. I was actually... We should come to the British Museum. We've got a whole gallery on it. I was using English rather than kind of faux Egyptian. But it was, I mean, this is going to be as big a cultural moment as Tutankhamen in the 70s, isn't it? I think it will be. I think it will be the kind of defining exhibition of our generation. But anyway, on with the show. And talking of kings and royalty and rulers, we are going to start, of course, can't avoid it these days, Epstein. The ongoing fallout from the Epstein scandal and how it's impacted the monarchy through the entanglement of Andrew Mountbatten-Windsor, as everyone has to call him, and Peter Mandelson and the impact on the government.

6:03This all, by the way, on the day we're recording this, that Hillary Clinton in the US is giving evidence to the US Congress. And the day when people are voting in the Gorton and Denton by-election, which is also happening and is undoubtedly affected by the events of the last few days. So we'll talk about that first. We're then going to have a look at Donald Trump's historically long State of the Union address, what he said about tariffs and the economy, but also Iran and foreign policy, and ask how big a deal was this week in the Trump presidency. And then finally, we're going to look ahead to next week.

6:36it hasn't got much of a billing, but Rachel Reeves, the Chancellor, is next week going to unveil the spring statement or the spring forecast, as she's calling it. A year ago, this was a big deal. This was the big welfare package that then unraveled. But this year, it promises to be less of a big affair. And we're going to ask whether that's the right way to play it. And we're also going to take a look at an interesting proposal from a think tank on how the fiscal rules might be changed. So that's what we've got ahead of us. Let's start with Epstein. We've got lots to unpack here. Let's start with the royal family.

7:11It's been quite a week in the House of Commons, hasn't it, where the royal family or members of the royal family have been criticized against the kind of classic convention. But I'm going to I don't want to reveal too much of the inner wirings of the podcast. But several weeks I've asked, like, is the Andrew story really that big? Doesn't everyone know, you know, he's a wrong and. And, yeah, it's going to be a big deal if he's charged and let alone convicted. And what he did was very wrong. But are there really any broader kind of constitutional implications? And I think you have persuaded me each week.

7:45No, no, no, George. This is really important, not just because of Andrew and what he is alleged to have done, but actually the implications for our head of state and our royal family. Look, it is a massive event simply to have the arrest of Andrew, former Prince Andrew, a member of the royal family, the first sibling of the monarch to be arrested since the young Elizabeth who became Elizabeth I back in 1554. What, she was arrested? Yeah, she was arrested by Mary. Also, Sophia, George I's wife, was imprisoned for adultery and died in custody. I think that was the last member of the royal family to be arrested.

8:27So this has not happened for quite a long time. But I think the point you make is right. I mean, it is so hard for how the king and the Prince of Wales handled this. It is about their family. And, you know, the question is going to arise. And there's no escaping for this in the coming weeks and months as this investigation. and we'll see if it comes to a charge for Andrew unfolds. I mean, we know that millions of pounds were paid to Virginia Dufresne in an out-of-court settlement. By the late queen. By the late queen. His mother, yeah. With, we presume, the agreement of the then Prince of Wales.

9:03How much did they know at the time about what had happened? The whole problem with these Epstein files is how much were people involved in a cover-up? That is why this is a problem coming further down the track. But just in terms of the last few days, following the arrest of Andrew, the Speaker of the House of Commons, Lindsay Hoyle, made it be known when the Liberal Democrats were having a debate on Tuesday that the normal convention, which has been there for decades and decades, not to criticise the royal family, that was suspended for the purpose of this debate. I think it's more like a Victorian.

9:37I mean, it's been around for hundreds of years. It's part of Erskine May, which is the rule book for the House of Commons. So if you listen to the government minister, Chris Bryant, in the House of Commons responding to the Lib Dem debate and the language he uses, this is language which would never have been used at any time in Parliament in any of the years that you and I were there. Just listen to this. I doubt there is anyone in this House who is not shocked and appalled by the recent allegations. Colleagues and many civil servants have told me their own stories of their interactions with Mr Mountbatten-Windsor, and they all betray the same pattern.

10:14A man on a constant self-aggrandising and self-enriching hustle. A rude, arrogant and entitled man who could not distinguish between the public interest which he said he served and his own private interest. Look, Chris Bryant always likes a bit of theatre. However, and he's also... I should say Chris Bryant was really helpful in getting the Bayer tapestry. I just want to mention that in passing, because when he was arts minister, yeah. And he's also a kind of great historian of Parliament. He would have known what he was doing there. And I just think there is a change happening. You see this in the polling, the attitudes of young people, more angry, shocked, judgmental about what's happened within the royal family than older people.

10:55but to have parliament reflecting a national mood of anger and criticism to Andrew in this way I think in Buckingham Palace they'll be worried about this because they will know that this is a change the genie is out of the bottle I'm not saying that this leads to you know the downfall of the monarchy or anything like that I just think it changes things I think it massively empowers William to say this monarchy must change in terms of how it's financed its scale its obligations. I think the idea of the broader royal family will come into question. I just think it's a big significant turning point.

11:30As I said, there may be further dangers down the line for the king if it turns out through the lens of 2026 that decisions were made about payments to support Andrew when they shouldn't have been made. But in a way, regardless of that, it changes the relationship between the monarchy and the citizen in a way which won't easily and quickly be reversed? No, look, of course, you know, if you've lived through the Annas Horribilis and the Diana and Charles divorce and then Diana's death, arguably the relationship with Harry and Meghan. I mean, there are always kind of dramas in this family, and I guess it changes people's attitudes over time to monarchy.

12:08But the one area where I think it probably could have a lasting impact is that I think a lot of questions are going to come out about the money that Andrew was receiving and the official support he was receiving to carry out this role as a trade envoy. So that's public money. And that's, you know, he was getting something akin to the support that a minister gets. The great irony was this debate was called by Ed Davey on behalf of the Liberal Democrats demanding the government comes clean on how Andrew was appointed and how he was financed. And then it turned out Ed Davey himself had said publicly that Andrew was doing an excellent job as trade envoy when Ed Davey was business minister.

12:52And I said to him on Good Morning Britain, look, you know, both of us said these things. In retrospect, we were wrong. We all need to have a bit of humility. And playing party politics with this, Ed Davey, doesn't really kind of sit that well. I thought you looked a bit sheepish. Yeah, I mean, much as I respect your politician of the year and valued member of the coalition government as he was, he did look a bit foolish with that. But I think I tell you where you think I think you could take this. The charge that Andrew has been arrested on is about misuse of public office. It's not to do with the girls, the island, the sexual abuse, the underage allegations, all of that terrible as all that stuff is.

13:30What he's actually being charged with is abuse of his role as trade envoy and forwarding information, government information. And as far as we know. Yeah. So, I mean, of course, he denies all this. That's where this has gone. And if you think of the royal family, if you think of like the head of state, the Prince of Wales, they carry out official duties. They are members of the government. I mean, it's the king's government. The head of the government is not the prime minister. It's actually his majesty's government. You know, of course, they are staffed by the civil service. They receive official support in that role.

14:01And there's not that much transparency. transparency there's much less transparency than attaches itself to a cabinet minister who has to declare all their financial interests can't have any external interests and so on whereas senior working members of the royal family are both members of the government in effect and at the same time they have lots of private interests and it's quite a gray area it's always been quite a gray area so i can see that as the kind of parliamentary inquiries unfold as this court case if it comes to court unfolds. That's where it's going to go. It's going to go to like, how did these individuals, both members of the British state, members of the British government in the broadest sense of it, but at the same time, private citizens with private financial interests?

14:51Exactly. And although Andrew wasn't being paid to be the trade envoy, from the Epstein files, it was clear he was using that role as a trade envoy and passing on documents to Epstein, which were aggrandizing for him and from which he financially benefited. And as you said, he denies all of this. But the problem for the government and for Keir Starmer is that exactly the same charge is now applied to Peter Lord Mandelson, who was also arrested earlier this week. Now, you wondered yourself whether the police decided, and these are different police forces, if you arrest Andrew, do you also have to arrest Peter Mandelson?

15:26Although Peter Mandelson was not just arrested. He was then bailed, which means he has tighter restrictions on him in an ongoing way than Andrew. It turned out the reason the police acted in this way is they'd been tipped off by the Speaker of the House of Commons, who had just been on a visit to the British Virgin Islands. Lindsay Hoyle had had word from somebody senior who apparently should know that Mandelson was about to abscond to the Virgin Islands, although presumably there's an expedition treaty and he could have been sent back well i think the clues in the first word british exactly and then um he tells the police the police in error mix up the speak in the house of commons with the um the lord speaker lord forsyth former conservative cabinet minister and they tell mandelson's lawyers that it was actually the other speaker then peter through his lawyers tells the media that this is an outrage and he was going to be questioned in the next few weeks without the need for the arrest and what on earth is going on this is all made up he just wants to cooperate but what do you think is going on my theory is this it may be the police decided you couldn't arrest Andrew without arresting Peter but if you're Peter you think to yourself my best opportunity here is for it to be clear there can't be a fair trial that you know perversely as this may seem the more publicity Peter gets now for his arrests and how he's being treated and the more he's on the front pages of the papers the easier it's going to be to claim further down the track there can't be a fair trial here do you know you're the second person who said that to me this week and the other person was a senior person in the government so it just strikes me as a bit too kind of clever by half let's attract really let's get myself arrested so that i can't have a fair trial i don't think that he got himself arrested but once he's arrested the lawyers see the opportunity here and you know i mean peter is a skilled PR operator.

17:21And that is exactly the playbook you would play. I think it's worth just pausing. And if you read this in a novel, that the Speaker of the House of Commons tipping the police off about the former First Minister of the government absconding to the British Virgin Islands to avoid charges connected with his relationship with a paedophile American financier who committed suicide, you would definitely go, that is ridiculous. While the former prime minister gordon brown is writing to police forces around the country demanding access to flight logs to see when the pedophile was flying in trafficking victims and to what extent was um andrew or others involved in this that's also pretty i mean gordon brown as bergerac i mean you can't make it up but gordon brown is son of the manse he's not uh middle england or middle guernsey or whatever the track was there the a former investigative journalist you know Once you've got the skills, you're using it.

18:14I think it's odd. I mean, listening to Gordon Brown, you're a reminder of why he was a towering political figure. I don't quite know why he's so kind of engaged in this. And I think he must be thinking this reflects on my government because I appointed Peter Mandelson. I don't think anyone. I mean, yeah, to some degree. But, you know, I don't think anyone thinks Gordon Brown is sort of complicit in it. Yeah. Anyway. He's consumed with anger at what Peter did. Right. the leaky of the emails what peter said about him when he wrote in his subsequent book and he'll be consumed with annoyance himself that he brought him back in the autumn of 2008 i mean he just he just will be and that's natural and understandable but what i think you're right in all of this the moral purpose will be the burning yeah no and you know that was also one of his great strengths as a politician in terms of implications for the government now i mean we'll go on talking about this.

19:09There were just some thoughts that came to mind, several things, isn't there? I mean, the first is, it's absolutely impossible for the government to talk about anything else. You know, they launched a big strategy on special needs education this week, which they're very proud of. Gets not very much attention because, you know, there's this enormous news. In fact, well, Rachel Reeves has good public borrowing numbers, but no one reports it really because, or no one hears it, because this is blotting out all attempts by the government. The government actually made an announcement on a hugely controversial political issue of support for children with special educational needs.

19:43And it didn't become a massive crisis in which Keir Starmer contradicted himself in 24 hours. I mean, it's a triumph. And the fact that it went under the radar may be OK. Maybe they can just get on with governing, which is what everyone's been asking them to do for the last years. There's that point. Second, there's a point I've made before, which you may not agree with. But, you know, I think it's true that Labour politicians have often thought that they are on a kind of morally higher standard than Conservatives. And there's a sort of self-belief, you know, belief about that. I've always thought that's not true.

20:13And I don't think Conservative politicians think they're on a higher moral standard Labour. But this is a big figure in the post-war history of the Labour government, Peter Mandelson. And it's going to be very hard, I think, for Labour to do that kind of moralising, which some Labour politicians engage in. You know, we're intrinsically better because we're the party of the working people. None of them are going to be feeling like that. They're all so, and especially the women MPs, but I think very many other men as well. They're so stung by it. You know, when Kemi Badenock yells across the dispatch box at PMQs, you know, this is the pedo-defending party.

20:48That is stinging. Matthew Doyle, Peter Mandelson. And the reason why this is a problem is because this isn't going away for weeks and months and maybe years. I mean, how long is it going to take these police investigations into Andrew and Peter Mandelson to happen? They're not going to be able to release the key documents, which they've now promised to release until much further down the track. And this all comes back to the question in the case of Peter Mandelson of Keir Starmer's judgment. What he knew? Was he duped? but his only defense is i didn't know what was going on which isn't a great defense because everybody else did i mean they didn't know everything but they knew enough to have been very very cautioning about this um decision so the question of the prime minister's judgment is going to be there in a vivid and constitutionally massively significant way for a long time yes i mean i don't i mean we'll see what you know when eventually these documents are released and i think obviously they're trying to get on with releasing as many as possible and still my advice would be despite the risks to a prosecution, there's a kind of public interest in the government getting all this information out.

21:55Okay, we'll show obviously there was very thin vetting, that there was probably no deep vetting that would normally have attached itself to a senior appointment like this. And it was just a sort of cursory trawl of newspapers and a couple of questions asked of Peter Mandelson. Can you think of any person to appoint as American ambassador where you would not think it was more important exactly to do the vetting? No, no. So I think that will be revealed. But that is sort of incompetence, isn't it? And bad judgment rather than kind of a scandal or at least a scandal that we don't already know about.

22:24What we don't know is whether in any of these other emails and messages, there's going to be other things that are revealed. I mean, of course, what the Epstein files have done is they've shown, you know, once you start releasing all this kind of information, all sorts of hairs are set running. And there's still, it's interesting, we should probably, you know, move on because we can talk about this for weeks. It's a regular observation to me and you by people it's amazing how epstein is kind of ricocheting around the world causing trouble in so many different countries so many different governments lots of companies where you know people have had to resign and yet it hasn't landed in american politics and hasn't yet kind of in any way as far as i can see kind of got close to donald trump that's interesting because i think you know this podcast we're recording before these events that all might change the next 24 hours with Hillary Clinton's testimony today and then Bill Clinton's testimony tomorrow.

23:18That is the first time an American president has essentially been forced to come to Congress to give evidence. And so we're talking about the big moments in British history, like the criticism of the royal family in the House of Commons, and a former American president being forced to give evidence in Congress is a big, big moment. But the other thing happening in the next 24 hours is the by-election. And we don't know what's going to happen. Just remind everyone, it's a three-way fight, isn't it? At the last election, Labour won 50 % of the vote. This is a Labour seat. It's a more complicated Labour seat than it used to be when it was Dental and Reddish, but it's still a Labour, you know, comfortably Labour seat.

23:57Nobody knows who's going to win this. Labour could just scrape it. They've got the ground game, they've got the data, but they don't know what's going on in some of the awards. That would be a huge, huge moment for Keir Starmer. If he holds this by-election, you know, it will settle Golan Nervs, right? But Labour could come second to the Greens, and then it becomes about Gaza and the Middle East. He could come second or third to reform. But if Labour doesn't win it, the question is raised, well, but if Andy Burnham had been allowed to stand, would it have been better? Did the Mandelson appointment and then scandal affect the result?

24:35And you know how this works in politics. We saw this with Boris Johnson and Partygate. When you have a scandal which won't go away, after a time, people start to say, well, we've got to move on. And I don't think it's going to be easy for Keir Starmer unless, as you say, he gets all this out there quickly to move on from these Peter Manesson questions for months and months and months. And, you know, if Labour loses and Andy Burnham is brooding from the sidelines, at a certain point, Andy Burnham starts to say, well, look, you know, surely to move on from the Epstein-Mandleson disaster, we need a change.

25:15and the catalyst in the case of Boris Johnson was Chris Pinscher. But in the end, it was moving on from party gate. So if Keir Starmer doesn't find a way to move on from the Mandelson saga and this by-election goes the wrong way, the May election is coming up. At a certain point, people like Andy Burnham start to say, well, in that case, he needs to be moved on. So this isn't only existential, I think, for the monarchy. I do think the king and Prince William will navigate their way through this, but they need to lead this and they need to get ahead of the story and they can't assume as with the late queen that silence will help them i think the same thing is true with kia starmer if kia starmer doesn't get ahead of this there is a risk that it consumes him the by-election will is one test of that in the coming hours and days no i think that is that is very true just one final question and you know it's a mugs game because people are literally voting while we're recording this, but would Labour rather lose to reform at this point than lose to the Greens?

26:17Because if they lose to the Greens, it's the sort of opening up of a second front on your left. They've already got the front on the right with the reform. What's the best of a worse world? I think that it's not impossible Labour wins this. And the worst outcome is coming third for Keir Starmer in a way, whoever he loses to. But of the two, if he's going to come second, he'd much rather come second to reform because he can then turn to the whole of the centre left and say you know it's your book we need to unite enabled whereas if the greens beat kia starmer it's much much more deeply worrying for labour mps across the country because you have less of that sort of galvanizing argument to make of course the interesting thing just to note is that historically it would have been the lib dems who were the galvanizing alternative to reform and labor in this seat and the tories are absolutely nowhere in this the lib dems is strong in manchester yeah yeah that is um also worth noting but i don't know what the result's going to be and i don't think anybody does um and we will you know find out very shortly after this podcast drops well i'll find out when i wake up tomorrow one of the days when i used to have to wake up in the middle of the night to see what the by-election result was.

27:33Anyway, we are going to move on to Donald Trump and the State of the Union and those American aircraft carriers moving closer to Iran after this break.

27:55Welcome back. So this week, Donald Trump delivered his State of the Union Address. That's the annual speech that American presidents give to both houses of Congress. It was the longest speech in the history of the Republic, at almost two hours long, and had lots of sort of Trumpisms in it, but also some pretty serious content for the rest of the world around tariffs and Iran, which we're going to come on to. But here's, in case you missed it, partly because of all the news around Epstein, here's a little medley of the speech. Members of Congress have the high privilege and distinct honor of presenting to you the president of the United States.

28:31Inflation is plummeting. Incomes are rising fast. The roaring economy is roaring like never before. Any of the wars I settled was because of the threat of tariffs. I wouldn't have been able to settle them without. We'll remain in place under fully approved and tested alternative legal statutes. That's why in a breakthrough operation last June, the United States military obliterated Iran's nuclear weapons program with an attack on Iranian soil known as Operation Midnight Hammer. Here with us tonight is a group of winners who just made the entire nation proud. The men's gold medal Olympic hockey team.

29:14Come on in. If you haven't been following this, America's victory in the ice hockey final and the Winter Olympics over Canada has completely gripped Americans and briefly united the country until people saw clips of the locker room afterwards where the FBI director, who's very controversial, was celebrating with the hockey team. And they took a phone call from Donald Trump. I guess that's not so unusual. British Prime Minister would call someone who's won a gold medal. But in this phone called President Trump appeared to mock the women's team, the women's American team, that also won gold. Understandably, they were not very happy about that, and they boycotted the event.

29:54Let's start with the tariffs. So the Supreme Court struck down the legality, the legal basis upon which Trump had acted without the authority of Congress in imposing these tariffs all over the world and basically the economic story of the last year. And then he's come kind of straight back, attacked the Supreme Court, even though two of the justices who struck it down were people he had personally appointed to the court. And he said, now, you know, I'm having 10 % tariffs everywhere. And then he, like a day later, said 15 % tariffs. What do we think about, let's start with the tariffs element of the speech.

30:29Isn't it more of the same, which is goods are still going to be more expensive. Tariffs are in place where they weren't or much higher than they were previously. And it's also very erratic and unbelievably hard for companies and countries to plan with any kind of consistency because they just don't know what's going to happen next in the United States. I think you have to see this speech in the context of both that Supreme Court judgment a few days ago, but also the midterms coming up this autumn. This was a domestically focused speech about road testing, the midterm messaging from a president who at the moment is hugely unpopular.

31:08unpopular. I mean, his approval ratings are going down and down. And the interesting thing about his approval ratings is even on border security, his big strength of the first period of his presidency, he's down to zero net approval. But on everything else, on jobs, on prices, on the economy generally, on healthcare, he's negative and going down. And that is like across the board. So conventionally, as a politician, you would be thinking to yourself, I need to respond to this polling situation. I need to show people that I feel their pain, that I understand how hard it is. I'm going to turn things around.

31:47And so the first thing about the State of the Union is he does the opposite of that. I mean, he not only doubles down, he basically says to all of these voters, including independent voters, you're wrong. He says, basically, you're stupid. He says, the economy is going gangbusters. The tariffs aren't hitting you in your pocket. They're making you better off. It's a jobs miracle. He's telling the voters, you're wrong and I'm right and you should believe me. This is all a Democrat get up. It's all a lie. I mean, it's incredibly risky as a political strategy because people are feeling the opposite.

32:22And as you know, in politics, even if you've got some good policies to announce, and he's got he had some policies in there around, for example, drug pricing or jobs. If people think that you don't understand their lives and you don't get it, they close their ears. And he just sort of doubled down on the front it out strategy, which then takes you to the terrorist point. This was the opportunity, if he ever needed one, to listen to those on his own side in the Republican Party and in business saying the tariff strategy is not working. It's not working economically or politically. It's damaging investment.

32:59It's damaging jobs. It's pushing up prices and businesses and consumers are paying. he had the opportunity to say, look, OK, I'll recalibrate. He did the opposite. He basically says, they're all mad, these Supreme Court judges, and I'm going to carry on regardless with my tariff strategy. I think you're right. It doesn't change much because he can find a way to recalibrate his tariffs in order to bring it back within the law. But this was the opportunity to say, I got it wrong. And he didn't take it at all. So he's basically deciding to front this out until the midterms on the basis of a strategy which the polls say is at the moment catastrophic.

33:36I have some sympathy not with tariffs and so on, but I do have some sympathy with, we've discussed it before in terms of the Starmer government and the Sunak government saying, I feel you're paying, cost of living is a real problem, but then they don't have a kind of plan. So you can be overly leaning into listening mode rather than leading mode. And he believes, He genuinely believes it's an absolutely consistent part of Donald Trump's political ideology, he thinks, and has been since the 1980s. He thinks that tariffs have an important role to play and address trade imbalances with the US and are also important instruments of foreign policy.

34:13So I can kind of see why he says I'm not going to be – I can't retreat because I don't – A, don't believe in retreating and B, it would be politically very damaging to me because it would show weakness. I do have a question, which maybe the answer is already out there, but I couldn't see it. I wonder what it does for the British-American trade deal, which actually was part of the kind of Mandelson legacy and one of Keir Starmer's big achievements, which he has said is one of the main reasons we can't join the European Union Customs Union. You know, if he says when Labour MPs, including Wes Streeting, says and David Lammy speculate about rejoining the Customs Union, he says, no, well, we got these that would endanger the US trade deal.

34:49But, I mean, Peter Kyle, the trade minister, has said the deal's not affected by this. But, I mean, I think it's quite early to make that call. Now these tariffs have fallen and he's got these universal 15 % tariffs. Britain actually might be in a worse position than it was with that agreement. So I think that's an interesting thing with the sort of British angle. I think generally the overall US tariff level falls marginally. the Yale budget lab who measured these things say the average level of tariffs falls from 16 % to 13.7 % due to the Supreme Court ruling but as you say that is mainly because the massive tariffs on some countries they have to come down but you're also right there'll be some countries you see a modest rise in their tariffs and we are one of them mainly mainly just let me observe to any Labour people listening it's a good excuse now to go and join the EU customs union you still got three years for the election it would measurably increase uk gdp and help small businesses ever anyway but that's for another day but he is telling the whole of american business that they're wrong i mean he has to in order to double down on his his view on tariffs he has to take on everybody it's easy for them to slag off the fed the u.s federal reserve whose research says most of the tariffs have been paid by american consumers and american businesses the problem is he's not just the demonized fed this is what american business believes this is what american voters believe so he is telling people they're wrong in their lived experience that's a dangerous thing to do however worth noting i think people felt that the system of government created by the founding fathers where power was divided and there were checks and balances had disappeared in the last year because trump had control both of congress and appeared to have control of the Supreme Court.

36:39I feel this week, you know, the Supreme Court has shown it's not a Trump poodle. For people who, you know, have worried about the kind of health of American democracy, maybe this has been a good moment, right? And also the public and civil society response to what ICE was doing in Minneapolis and other cities around the country has provoked a public backlash, which the polls reflect, which has led to a change in the strategy from the Trump White House and at the centre. So it is the case in politics that you have to respond. And presumably kiboshed any British plan from Farage or whatever to forcibly deport people who are already established in the country here.

37:19But as somebody who ran elections campaigns, when your supreme leader says, I'm right, the polls are wrong, the focus groups are wrong, and I'm going to carry on regardless because it's a winning strategy. Do you think that's leadership? Well, the British parallel here is, of course, Trump himself is not up for election this November. There's a lot of members of Congress. So it's a bit like local elections where you just plough on going like, nothing's wrong. There is nothing more striking than on the day after the local elections when you are a local MP in the governing party and your local councillors have just lost all their seats.

37:52and the venom that they vent at you and your party leadership. I remember this in 2008-9. You'll have experienced it as well as a Conservative MP. It's bad. Yes. Now, what about the foreign policy aspects of speech, and particularly Iran? He didn't actually mention Greenland, as far as I can see, in the State of the Union, and the Board of Peace met last week. So there's a lot going on in Gaza and Israel. But as we've been noting on this podcast, the American forces continue to grow around Iran. There is now another aircraft carrier moving into position. These flight blogs and flight posts, which you can follow on social media, are tracking all sorts of American military aircraft moving into position.

38:34You know, here there are negotiations going on between the sort of Trump team, which is Trump's son-in-law and his friend Steve Whitcoff, with the Iranians. And it's all supposed to be about not restarting the Iranian nuclear program that was hit by that operation Trump was talking about. So it's not directly related to those protests on the street a few weeks ago. Two things, we don't know what's going to happen, although it feels to me quite unlikely that the president will pull back having assembled all of these military forces in the region. And also, how long can you actually keep them there?

39:10That second aircraft carrier, which is the largest ship in the world, the Gerald Ford, is not yet in position, which I find something hasn't happened potentially. And then there's an interesting British angle to all of this, which is, and I remember this from when I was in government, one of the issues around a strike on Iran, which was a possibility back when I was in office, a US or Israeli strike or joint strike on Iran, was the use of Diego Garcia, which is a British air base, which the Americans make use of, on the Chagos Islands. and there's that whole deal which Keir Starmer pushed through shortly after becoming prime minister and there's a long history to this which we don't have time today to go into but you know one of the kind of features of the Chagos island deal was this question of whether America could continue to use this airbase going forward and there's an immediate question for the British prime minister which is a British government has to consent to the use of the airbase so they've got an immediate problem which is do they allow the American strike to go ahead using Diego Garcia And second, is Starmer's Chagos Island deal now completely unravelling?

40:17So the British government is not going to agree to the use of any UK bases unless they can make the legal argument. And the reason why Trump suddenly threw everything into a spin on Truth Social, backing off the Chagos deal and American support for it, was because, as he put in his own Truth Social post, he was worried about a reluctance from the UK to allow the use of British bases. And of the two he mentioned, one of them was Chagos. And so that is clearly what is going on here. I guess if you're the British government, you would counter a very good piece in the Sunday Times last weekend from Ben Judah, the former advisor to David Lammy on this.

40:55If you don't do this deal, which America has been urging on Britain for the last few years and secure the American British presidents on Diego Garcia for the next hundred years, then the danger is that legally Mauritius decides, well, it's a free agent and can decide to allow China to start accessing those atolls down in that very sensitive part of the world. So... Although an odd feature of this is that the Chagossians themselves, who were displaced by the British decades ago and moved to Crawley, of all places, they don't actually want to be with Mauritius. So there's a weird kind of decolonialisation act where you're then forcing people to be with some islands thousands of miles away, which they claim not to have any connection with.

41:37And if reform don't win the by-election, people will be asking whether Nigel Farage was right on his private plane to go down to South Asia, rather than being in Denton and Gorton in order to try and fight this by-election. So there's some politics to play out here. The one thing you can say, if you're the British government, is if you don't do this deal, and this will be what the State Department and the Pentagon both know, that it's going to make it much harder to use Diego Garcia in any operation of this general type in the coming decades. That has been the reason why they've been urging Britain to make this deal rather than not.

42:11But on the broader point about what is going to happen, I mean, you've now got half of American air power in the world in location for this attack. It looks to me from the outside as though there's one faction in Iran saying, you know, do a deal with Trump and give him his way out. And the other faction saying, the last time we did that, he still attacked us. So therefore, let's dig in and provoke the fight. The one thing you can guarantee is the fight here will be messier than any intervention into Venezuela. American troops going into Middle East countries in past decades without a clear plan, get into terrible political and military problems.

42:50But we also know from Libya, if you don't go in with boots on the ground, it's also hard to get an outcome which doesn't turn out to be messy. I guess to relate this back to the State of the Union, the one thing you can absolutely guarantee is if Donald Trump decides, I've got all this power there, the Iranians aren't playing ball, I've got to put my money where my mouth is, I'm going to intervene. The one thing you can absolutely guarantee is that the impact on oil prices, and therefore on energy prices, and therefore on the cost of living for hard-pressed American voters in the months before the midterms is going to be big and difficult and messy.

43:29And American politics will turn around and say, why are we involved in this and why are we consumers paying the price? And Donald Trump may think he can win the argument on tariffs that no, these tariffs aren't affecting your cost of living. It'd be pretty hard if the oil price continues to spike as it already has begun to do so will do, I guess, hugely more if there is conflict in the Middle East. So that is probably how things relate back to domestic politics. We saw this week the British government saying, isn't it good news? We've cut energy bills through the British energy price cap by£117 for the average household.

44:04Not if Donald Trump goes to war in the Middle East, we won't have. I'm guessing the Supreme Leader is not using his regular bedroom to go to bed every night. having looked at what happened to the Venezuelan president. I imagine he's hunkered down in some bunker somewhere. It feels that Iran is preparing for war, but is the rest of the world ready? Lots to keep a watch on. We should also note this is the fourth anniversary of the Ukraine war this week. President Zelensky gave a very powerful address. And again, I didn't feel there was that much in the State of the Union about Ukraine and All the sort of US pressure to cut a deal feels like it's dissipated somewhat.

44:44Now, let's turn finally, after the break, to the British economy and next week's spring forecast from the Chancellor of the Exchequer. And we'll be back after this.

45:06So welcome back. We are going to have next week the Chancis Chequers spring statement in which the Treasury is telling everybody she's going to be very boring indeed. There is going to be an OBR update on the economic forecast and the fiscal forecast expected to be modestly improved from the autumn. The OBR is not going to make a judgment on whether the government's on track to meet their fiscal rules, although all the information will be there for everybody to see. But beyond that, the Treasury say nothing of interest, no policy announcements, no substance. Is this the right call? I don't think it is.

45:44Well, it's only put it this way. I'm not sure I'd have a whole mini budget again. That's what we had a year ago. And it was a fiasco for the government because Rachel Reeves, you remember, she was off track on her fiscal rules, the OBR, in their spring statement. They published two forecasts a year. And until now, because they've just changed the rules, they would judge the government on whether it was hitting its own rules twice a year. She then announced those welfare changes, which then got rejected by the parliamentary Labour Party. And, you know, that got the year off to a bad start. I totally understand the desire not to repeat that.

46:17On the other hand, it's still a big moment. I mean, this is one of the two moments in the year when the chance exchequer sets out what the independent assessor's view of the British economy is and the government's view about that. There's a bit of a parallel. In my very first autumn as Chancellor, we had an autumn forecast and it came in and around the time of a spending review, but the spending review was a separate announcement in Parliament. And so we just thought this autumn forecast should just be a kind of regular ministerial statement by me in Parliament, essentially just reading the forecast out and that's it.

46:50So nothing like a budget or a big kind of treasury statement. I actually remember standing there in the House of Commons reading this thing out saying, I think I've undercooked this and this is all a bit of an error and I should be making more of it and I should be using it as a big moment to make my argument about the government's economic plan. And we didn't do that again. And it was really just a mistake. It was a sort of oversight. We were busy doing everything else. We just thought this wasn't important. And anyway, we didn't make that mistake again. I wonder whether this is the right thing.

47:22If I was Rachel Reeves, you know, you've actually got some good news to tell now about what it seems we'll see what the actual figure showed but you know maybe borrowing is a bit better or certainly some of the recent numbers have suggested that why not make a bigger deal and if things are worse that's all the more reason to not try and brush it under carpet but lean into it and say and that's why we're doing this and that's why i'm redoubling my efforts on that and so on i think it is completely the wrong call as well and look you and I have consistently said for the last three years, this obsession with only having one fiscal event a year doesn't make any sense.

47:56You don't want to have one every week or one every month. And you certainly don't want to be in a position where you have to be forced to do emergency budgets with emergency legislation. But two moments a year when you set out your stall is better than one. And the law says you have to have two economic and fiscal forecasts. And I think there's three different reasons why I worry about this strategy. Firstly, narrowly, on fiscal credibility. The Treasury has persuaded itself that not commenting on the fiscal situation more than once a year is the right strategy. But if you take next Tuesday, there are big fiscal questions about where the government is at the moment in terms of its approach to the economy and to the public finances.

48:39And these are questions which have not yet been answered in last autumn's budget or in the spending review. So the question of our military defences, our military capability, the path to 3 % and 3.5 % of GDP, where only last week you had Keir Starmer saying, we need to move and spend more quickly. If you don't address that issue and show how you're making provision, there is a question mark about your approach to the public finances. The same thing is true. We referred earlier to the special educational needs reform, where the big question is, what is the provision for this extra money, billions of pounds extra, to finance this reform after 2028?

49:20The OBR said there was a big hole in these numbers last autumn. At the moment, there is an assumption that education is going to get the money to pay for these reforms. But is the Treasury signed up to that? How's that going to be paid for? You wouldn't necessarily have to address those now. You could let those sit, couldn't you, till the autumn? Well, but it accumulates... There is a question about what's going to happen to petrol taxes, where at the moment there's an expectation of a rise in petrol taxes, which nobody thinks is going to happen. There are tax rises programmed in before the budget.

49:52What I'm saying to you is that these are all questions about whether these public finance numbers add up at the moment. And if you decide not to say anything about any of them, then there is a question about your fiscal credibility. The second thing is there is an opportunity to address new problems. We saw this week, number 10 saying they want a move, it seems, from the prime minister on student loans. That is after the Treasury's announcement last autumn. They're going to freeze the threshold now. We discussed this on EMQs. It's become a kind of iniquitous system, hasn't it? Where people are sort of stuck in a government created debt trap.

50:30And there's a lot of speculation they are about to announce some kind of U-turn. But if the announcement comes next Tuesday, by the way, I think another U-turn for this Treasury is bad. But if they do announce it and they announce it next Tuesday, well, it's become a fiscal event. And if they don't announce it next Tuesday, again, there is a question as to what is the purpose? Who's actually in charge of the economic and the public spending policy? there'll be other things the treasury knows are coming down the track which is concerning them this is an opportunity to kind of get ahead of those things rather than waiting to have a you know a solution imposed upon them and then the third point is people are desperately want to know what is the growth plan how is cost of living going to be turned around what is the treasury's approach to the economy and what are the policies which are going to make the difference there and again this is an opportunity why would you decide not to take the opportunity by telling everybody i'm not going to say anything it's going to be really boring i'm not going to announce anything i mean political leadership is about using the moments you've got to sell your big message and i would be doing this next tuesday so you know i just don't understand what's going on here and you could argue couldn't you whatever the result of the by-election if you've lost you need to start the kind of fight back and if you've won you want to double down on what you know if Labour's won this by-election you want next Tuesday go and by the way our economic plan is working and people in Manchester appreciate it and so you know it's a treasury it's a treasury I love treasury civil servants as those who are listening know but it is a treasury obsession this one statement because they used to try they used to try and persuade me to do it I remember Philip Hammond announcing he was only gonna have one I was like why are you doing that it's a technocratic obsession of some civil servants the Institute for Government of which I'm a board member and the Institute for Fiscal Study only have one fiscal event a year but it is politically tone deaf and when you're the chancellor your job is to say to the technocrats I understand what you're saying and I hear what you're saying but frankly that's not what I'm going to do to the extent there was a problem with past budgets and all the speculation about you know is there enough headroom it was because Jeremy Hunt and Rachel Reeves ran things too tight too close to the margin, which meant a small change in the economy or in global interest rates could suddenly mean they were off track and have to have short-term correcting action.

52:53But that wasn't the problem of one or two budgets a year. That was because they decided to play too tight with their approach to the public finances. In that case, don't do it. But don't give up an opportunity to lead the government. In terms of while we're talking about fiscal technocrats, what did we think of the IFS's paper this week, which maybe not everyone who listens to this podcast noticed, but it essentially said that this is what you're talking about, that these moments when it's all, has she, Rachel Reeves, hit her fiscal rules? What's the fiscal headroom? It's all, you know, is she on track or off track?

53:28All of this is spuriously specific. Trying to hit the headroom number or trying to hit the fiscal target is a mistake. And we should move to a more like a, I think they call it like a traffic light system, which is basically green if things are looking okay red if they're badly wrong and amber i suspect would be it'd be quite frustrating as a driver because i think we'll be stuck in amber forever basically it was from the unable to move forward for the ifs from fiscal rules to fiscal traffic likes rethinking the uk fiscal framework and they advocate that the obr should publish 10 different indicators eight to 10 different indicators with a different red green or amber on everyone i thought your former advisor rupert harrison x of the ifs by the x of the before he came to work for me produced i think he was a commentator at the launch event produced a a thoughtful mildly mannered seemingly uncontroversial but fundamentally excoriating review yes of this document that's rupert style he's very polite he's very thoughtful he's you know he's very respectful to the ifs but he's like actually this is bonkers not bonkers this is just rubbish yeah it doesn't solve any of the problems by the way the eight to ten indicators with traffic lights published by the obr would be a good thing to do yes i actually thought the paper they produced the actual graphic they produced i thought was a good thing that's all fine but you're still going to be like are you on or off track are you hitting your target and the two fiscal rules is the best approach and that is how you're going to be judged and that is the right way to do it i think there's one simple change you can make which is to go back to because the um the golden rule no the fiscal where is the golden rule in the studio have you noticed it's uh i'm sure must be around the fiscal rules were first introduced by us in 1997 and rather than saying you have to meet them in three years time or in five years time or in some point in the future judge them over the cycle we said judge them you know that you meet them over the economic cycle didn't you also say there'd be no more boom and bust yeah before that massive boom that massive bust i have a feeling that you know in the 10 years when we kept winning elections there wasn't any boom and bust but then there was a blast that was global however bank independence still in place from 97 the fiscal rules pretty much still in place with that one change they've gone from cyclical adjustment to three or five years the obr survives well i had a lot of uh back chat after my generic tweet uh but you did the criticism of doing them over the economic cycle is that I know, but the government's marking its own homework and you decide where you are in the economic cycle, what the output gap is.

56:05We now have the OBR who does that for us. So you've solved that problem. But the great thing about over the economic cycle is that if the economy is a bit weaker or it turns out inflation is less strong and you reassess how much space you've got, then you can do that without breaking your fiscal rule in three years time. So it gets you away from that arbitrariness. It doesn't solve the problem about is your margin too small, but you solve that by not having a small margin. So I think my answer would be go back to across the economic cycle, let the OBR assess that, dump this three or five years fiction, which never makes any sense.

56:45Let the IFS publish its eight to 10 indicators as well, or the OBR could do that. don't think that dumping the two simple fiscal rules and replacing them with 10 traffic lights which as you say would just lead to massive confusion and chaos is going to work it won't it may be that rachel reeves will will do that next tuesday because you know she's um allowed all these briefings come out of the treasury saying it's gonna be really boring and then she'll surprise on the upside with something exciting in which pressure's off her actually isn't it we've talked about her before i feel there's less focus on her isn't there at the moment that kind of like kia starr has got to get rid of rachel reeves stuff no it was a few months ago look i think um there've been quite a lot of u-turns she doesn't want another one the economy needs to grow people need to start to feel better off and allowing the prime minister to go out there almost daily on twitter announcing he solved the cost of living crisis is only going to work if people feel better off and if i was rachel reeves i'd be saying to kia these tweets not sure how wise this is because at the moment this doesn't look like an easy year for the economy and for the cost of living and for people feeling better off what i hope she does on tuesday is publish a growth strategy because that's what i would like to see maybe that will be the surprise anyway that's all for this week's episode of political currency yes we will be um we'll be there we are george we'll be back for ex-ministry questions on monday when we're going answer all of your big political questions and some of your small political questions that you send in if you want it early and ad free you can become a member of the kitchen cabinet or a gold subscriber yeah and of course kitchen cabinet members get our special mugs and a members only chat and as well as that ad free version and we've got the mugs in front of us something they've re because remember there was a big they got stolen but they've reappeared also maybe we just lost them also a bi-weekly newsletter in which um we are both supposed every year to provide our commentary and also every week every week i know in your case is every year because you forgot last week but we're going to make sure that never happens again and you'll also get our first reaction to the um gorton and denton by-election result in our newsletter in the next few days see you on monday for emq see you then

59:01thanks for listening to political currency this has been a persephonica production You