Will pubs be the next big Labour U-turn?

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

0:26so welcome to 2026 and a very happy new year from the political currency podcast yeah how exciting i mean we've both been doing new things in the new year you've got a brand new studio at good morning britain and as far as i can see it's now the susanna and ed show i mean there used to be various other characters knocking around but uh you're now the top billing certainly not but monday to wednesdays me and susanna and the new studio was great this week actually it's a move from white city the old bbc studios down in shepherd's bush to the itn building on grayson road wholly new set built it's the same place as the lunchtime and the evening news as well come from slightly smaller but still great studio and i think the important thing is um it looks pretty much the same as it did before.

1:15And that's what you want. The most important thing is continuity. So me and Susanna, Richard Maidley, Kate, Ranveer, we'll all be presenting every week. Hold on, isn't the key thing, there's that nice Italian restaurant opposite now that you can pop into for an early lunch after you finish. And a Costa just up the road. I mean, you know, it's got everything. Although I have to say, at 3.45 in the morning, it's not open. Oh, no, you can't get a bowl of carbonara? No. Oh, what a shit. No, not that early. And how about you, Noah? You are not in the UK. This is why we are remote. You are on the West Coast.

1:49For me, a new studio. For you, a new job. Yes, I've started my new job at OpenAI. It's been absolutely fascinating. Once I've settled in, I'll talk a bit more about it. But it's been most extraordinary few days. I feel I'm kind of touching the future. Although I'm also feeling as I walk around with my pass and my laptop under my arm, I'm a bit like a character in The Internship. Do you remember that movie? with Owen Wilson and Vince Vaughn who like going, I guess it's supposed to be Google. They're middle-aged people retraining to be tech bros. And there's a bit of that that I feel I'm doing. But it's interesting and exciting.

2:27Anyway, we've got a podcast to record. I mean, so much has happened since we did our last kind of live podcast, if you like, before Christmas. I hope you did enjoy the episodes we put out over Christmas with Bridget Phillipson and with Ed Davey and the special EMQs. But this is when we're back talking about kind of current affairs. So we're going to start, obviously, with the US action or invasion, depending on how you describe it. You don't get paid out if you predicted an invasion by polymarkets. US action in Venezuela, what it really means for the US's relationship with its allies and the US's place in the world.

3:06And then the UK political debate has been dominated by America, Trump, foreign policy. But in the week when Keir Starmer was attempting another reset, another relaunch, we're turning the corner. He's saying this week the cost of living is now his priority. And it may be a new year, but we've got some old U-turns. Very familiar feature of British politics last year from the government. We had a U-turn just before Christmas on the farming tax, the changes to inheritance tax for farmers. That came out on the 23rd of December. And as we're recording this podcast, it looks like there's another U-turn underway on business rates on pubs.

3:47And the government seemed to be caving into pressure from prominent publicans and I guess lots of pressure from Labour MPs. So lots to talk about today. But let's start with the big story of 2026 so far, which was the US action to seize President Maduro, take him from his home and his wife, deliver him to a New York courtroom. And I think we're allowed to blow our own trumpet here. I'll blow your trumpet here, Ed, because just before Christmas, we were doing our New Year predictions. And this is what you said. if Donald Trump is under that degree of polling pressure what does he do and he could make decisions in the spring into the summer of next year to anticipate that I mean war in Venezuela we've already seen the seizing of the oil tanker but you know you could quite easily see a Trump Falkland style desire to do something strong man to to say I'm going to go hostile against the narco states.

4:52He already has federal law enforcement active in American cities. Very unusual for the president to do that, causing much unease in California and more widely. Do we start to see him doing more of that in the spring of next year to be the strong guy? Well, spring started in the first week of January. And you were on the nose there about the action in Venezuela. And of course, we've also had the news overnight of the killing of a woman in Minneapolis by the immigration enforcement agents and the kind of essentially the federal authorities in these cities, which is, as there's a big breaking story here in the US, and something I know I was talking to people about last night here, because the news started to drop, that is going to be quite toxic in terms of the American political culture.

5:40Yeah. And that's what you were referring to about kind of federal troops in US cities. I mean, let's start with Venezuela. A week on from the action, or approaching a week on from the action, what are your sort of overall thoughts? I think, look, I certainly wasn't expecting the invasion of Venezuela and upping of action by federal troops in American cities to happen in the first week of January. So it's sort of, it's sort of shocking and terrible. I guess here, from a British point of view, it's all been American foreign policy dominated. The combination of the Venezuelan incursion, the arrest and removal to New York of Maduro.

6:14But also we've had the British government cooperating with the Americans, seizing a tanker, taking oil from Venezuela back to Russia, an unflagged ship on the dark shipping lines, breaking sanctions. We've also had some wild language about Greenland, with the White House refusing to rule out the idea of military incursion into Greenland. And while I think understandably British politicians have been very careful not to start making public judgments about the legality or sanity of the Venezuelan action, when it's been on Greenland, there Keir Starmer has been willing to be much more open in saying that he stands with the Danes who are the legal holders of that Greenland territory just to the north of Canada.

7:02So here it's been wild and very American dominated. But from your point of view in America, first of all, because I think that would help to inform me and very many of us. How has it been reported as an act of foreign policy, an act of war or aggression? Or is it seen, the Venezuelan action, as much more about US legal enforcement of its laws against a drug running criminal? Well, it's all been about Trump. I mean, again. So the coverage here has been, you know, really centered on him. And there's been a lot of analysis. You know, if you read the American press, you've watched some of the American television.

7:41There's definitely a lively debate here about whether this was the right thing or the wrong thing and whether America wants to get drawn into another, you know, Latin American conflict or imbroglio. And it's interesting, the polling here shows that the US public don't particularly support the action. I wouldn't say it's been unpopular, but it certainly hasn't been popular and jingoistic. It's not been, if you use the kind of parallel in your prediction, like the Falklands. There's not a sense of America getting back what's rightfully hers. I think what has kind of really surprised people is that there's no pretense that there's some kind of higher cause.

8:19I mean, you can make a very strong cause against Maduro's regime, that it was corrupt, that it was undemocratic. that it stole the election from the opposition leader who just won the Nobel Peace Prize. You know, America has an absolute right to deal with kind of narco-terrorism that, you know, leads to drugs destroying its youth and corrupting its inner cities. You know, you can put it in a long context of American action in Latin America, from the Monroe Doctrine of the early 19th century to Theodore Roosevelt taking action in Cuba to John F. Kennedy and, you know, the Bay of Pigs and Ronald Reagan and Nick Reagan.

8:59You can put it all in that context. But if you listen to Donald Trump, he doesn't even pretend. You know, I'm not sure where the kind of left-wing conspiracy theorists go who say, yeah, yeah, they say all these things, but it's really about oil because Trump has totally agreed with them. I mean, listen to these clips of Donald Trump talking about this. In the middle, you'll hear Senator Lindsey Graham, one of his allies, attempt another justification for what is happening, a more kind of classic American justification for the way it acts in the world. But Trump's having none of it. We're going to have a presence in Venezuela as it pertains to oil, but we're going to get the oil flowing the way it should be.

9:36We're going to be taking out a tremendous amount of wealth out of the ground. We need total access. We need access to the oil. In other words, we'll be selling oil. There are going to be Americans alive today because he shut down a narco terror state called Venezuela. This is a good thing, not a bad thing. And the oil companies are going to go in and rebuild their system. They're going to spend billions of dollars. So that last bit was a clip, by the way, on Air Force One. I'll just leave you this clip from Trump when he's asked about, isn't this like Iraq? He says, the difference between Iraq and this is that Bush didn't keep the oil.

10:12We're going to keep the oil. Well, so how is this landing, you know, in Britain and in the government and the Labour movement? Because what I see is a lot of ministers, including the Prime Minister, essentially paralysed about what to say. Look, I think they are caught in the middle of two more polarised reactions that you have seen in the international and in the British reaction to what's been happening with Donald Trump. By the way, it's not surprising to me that he's talking about the oil and the oil flowing, because as you said, the American polling is not great for Donald Trump. It's not clear that there is widespread support for a foreign war from a party, the Republican Party, which should become increasingly less interventionist.

11:01What he's trying to do is make the argument that this is going to be good for America, good for jobs, good for prices, good for the cost of oil, for driving your car. So he's trying to bring it back to his domestic agenda. But in terms of the reaction here, on the one hand, you have what you'd expect from the sort of more liberal wing of things. Ed Davey speaking to this position in the House of Commons in PMQs this week, but also lots of Labour backbenchers. This is terrible. It's illegal. It is undermining the international rule-based order. it will undermine, could destroy the transatlantic alliance.

11:40And that's before you even consider the sabre rattling on Greenland. And that's been reflected, by the way, by quite a lot of foreign ministers around the world. Even in France, Macron was rather more circumspect and rather similar in his response to Keir Starmer. But his foreign minister was absolutely on that, you know, this is all terrible and illegal and American bashing. On the other side of it, you have this sort of much more pragmatic power politics response. Peter Mandelson had a piece in The Spectator yesterday in which he says, you know, that since the rise of China, this international rule-based system has, you know, become defunct anyway.

12:23And this is what American presidents have always done. And this is the operation of power. And Europe's got to grow up and deal with it and become strong and effective itself. And, you know, and it's definitely true. as you said. What did you think of that? I mean, I thought it was good and interesting to see Peter Mandelson after a pretty, you know, poor, from his point of view, end of the year, kind of back on the horse and getting stuck into the British political debate again. I mean, that was his sort of re-entry into talking about British politics. But what did you think of his argument that this is kind of Trump realpolitik and Europe's got to wake up?

13:00First of all, We know with Donald Trump that he doesn't like people who criticise him. And if you have a go, he'll have a go back. He'll raise the ante. He will fight fire with fire. And if you are Keir Starmer and you are trying to bind Donald Trump into supporting Ukraine and the NATO alliance against a threat from Putin, the one thing you're not going to do is start doing a public running commentary in a sort of liberal slash naive way, which makes it much harder for you to get America doing the kind of things that you need it to do in Ukraine. And also, while you may say Greenland's legitimacy and the role of Denmark should be respected, you don't particularly want to pick a fight there, because let's be honest, America has been a big player in Greenland through the NATO alliance for very many years.

13:51Anyway, I mean, America is already in Greenland. However... It's also a bit complicated because, you know, Denmark's relationship with Greenland looks a bit colonial and old fashioned. It's quite odd to defend kind of Denmark's right to Greenland anyway. That's right. Although I think if the White House went from saber rattling to actually launching a military incursion against another NATO member, at that point, it probably would be a pretty bad moment for the NATO alliance. Where I think I disagree with Peter is it's all very well to talk about the reality of power politics, but for countries like ours, the rule-based international order is actually really quite important.

14:34And it has been used over the years to try to bind countries into cooperation rather than conflict. And that is particularly true in the area not of security and defence, but in the area of economics and prosperity. And I think one of the ways Donald Trump has really taken aim at the international rule-based order in the last year has been around trade and tariffs and trade wars. And that is actually something very dangerous for Britain and for the global economy. And Peter Mandelson, as a former EU trade commissioner, understands very well how important that rule-based order is and how dangerous it is to have, in a different way than we've seen American presidents doing in the last 50 years, taking aim at that whole international rule-based order.

15:22But it will all be poorer as a consequence if that tariff war carries on. So I'm not going to go with Peter down the rule-based order is all gone and defunct and in the past. But nor am I going to criticise Keir Starmer for the realpolitik that calling out Donald Trump in Venezuela, especially when it was the removal of a dangerous and illegitimate leader in Maduro, calling that out in a public way at the expense of peace and stability in Ukraine would be a really stupid thing to do. So I think the reality is whether you are Macron or Mertz or Starmer, if you are a European leader living in the real world, you have to walk this tightrope.

16:06And I think that Keir Starmer has been doing that sensibly. Of course, it will mean some people will have a go at him, but I'm not sure he'll be too bothered about that. He will think that binding Donald Trump into cooperation is a more important thing at the moment. But I don't think in some very pragmatic way saying the rule-based order is gone and we shouldn't be seeking to defend it and preserve it where we can, I don't think that's sensible. And to say that that's naive, I think is slightly missing the economic point. No, but there's also been this very important announcement, hasn't there, over the last week that Britain and France are prepared to station soldiers in Ukraine after a peace settlement if one is reached there.

16:49And George, we also had the news that Britain cooperated with America in the seizing of that tanker, that oil tanker, that shadow oil tanker. John Healy, the defence secretary, was very keen in parliament this week to make it absolutely clear that this was an internationally legitimate and legal action, which is what enabled Britain to cooperate with America in doing this. It didn't feel, when you listen to John Healy in the House of Commons, that the international rule-based order had gone and was now irrelevant. It felt as though it was actually still very important and was being used as a lever against Russia for sanction-breaking.

17:30So I don't think it's, you know... No, no, I think you can... Look, I mean, I remember this. One of the most memorable evenings I spent in Downing Street was on the eve of Margaret Thatcher's funeral. Oh, hold on. Sorry, I've just got to get the door because this is my coffee for my breakfast. Oh, for God's sake. Okay. So now you've actually got your coffee delivered by room service. Can we carry on trying to understand the challenges to the global world order, which we were discussing before you put rather more prosaic concerns first? But I've got my steel-cut oatmeal and my applewood smoked bacon to somehow eat while we're doing the podcast.

18:09Can I just tell you how uninterested our listeners are in what you're having for breakfast? I think they will. Well, we're keen to know what you think of the international rule-based order and its future. You know, one of the most memorable evenings I spent in Downing Street was on the eve of Margaret Thatcher's funeral where David Cameron threw a dinner in the state dining room for the visiting American delegation. And it was a remarkable combination of people. It was like George Shultz, James Baker, Henry Kissinger, Dick Cheney, all these people who interacted with Margaret Thatcher over the decades.

18:43And James Baker, the legendary Secretary of State under Ronald Reagan, you know, told the story of having to phone Margaret Thatcher up and explain that the Americans had invaded Grenada, whose head of state was Her Majesty the Queen, and Britain hadn't been informed. And so, you know, I think the kind of picture of essentially kind of European or British powerlessness in the face of American operations in Latin America is not new. Although Margaret Thatcher did make publicly a stinging rebuke saying that invading sovereign territories in this way would lead to more wars and was the wrong thing to do.

19:23I mean, as you say, it was the Commonwealth. And I think if America invaded the Falklands, we might have done the same thing. Yeah. I mean, I guess I have sort of two sort of observations, which are, I think, somewhat different from that era. I mean, the first is, you know, you happen to have a prime minister who came in as a human rights lawyer, you know, appointed a prominent human rights lawyer as attorney general. You know, and built his whole career on like there are international rules that need to be followed. and the utter kind of exposure of the weakness of that human rights regime, which I support, but the weakness of it, if it's not backed up by American cooperation and American hard power, that we have for decades been living on this pretense that there's an international order, but the policing of the international order, the force behind the international order, has been the United States.

20:17And so when the United States does something outwith the international order or doesn't appear to have kind of legal grounds to do what it's done, you know, there's no recourse effectively. And I think it's interesting. I mean, I grew up, you know, I'm the same age as you. And if you think in the 1980s of the kind of noise on the British left around the Sandinistas, the Contras, you know, what America was doing in Nicaragua at the time or El Salvador and what, you know, there's, okay, I know Jeremy Corbyn's popping up and so on, but it's pretty silent. You know, the parliamentary Labour Party is pretty docile because, like, I guess, you know, what's there to say and do?

20:55It's part of a broader thought I had. And I think we talked about it on another podcast. A whole set of issues from the 1980s, which are relevant now, like nuclear disarmament, seem to have entirely sort of disappeared off the sort of political agenda. That was the first thing. And then I think the second thought I had was, you know, if you we often say, like, China has a big kind of strategic hundred year plan and the West doesn't. And the West kind of muddles through and the West, you know, is utterly unstrategic. But if you were taking a kind of big power view of the United States interests over the next 100 years, in the same way that Britain might have in the 19th century with its, you know, controlling the Himalayas or controlling the Suez or whatever, you would say, you know, the United States needs to secure its oil supplies.

21:38it needs to keep China out of its backyard and China was all over Venezuela and quite a lot of the people who were killed by the US in the action were Cuban soldiers not Venezuelan soldiers and we need to secure the Arctic from Russian and Chinese incursions and you know it's not good enough anymore to just have Greenland in this sort of strange sort of limbo status you know if you were taking if you were writing a kind of policy paper for the united states of like what how do we secure the u.s's vital interests and therefore western democracy's vital interest to my earlier point which is this whole human rights democratic rules-based order is underpinned by american security it looks quite sensible what the u.s is doing in terms of you know setting itself up for a very competitive superpower competition with China.

22:32Look, there are goals and there are means. And in fact, the paper you are talking about was written, and we discussed on this podcast before Christmas, in which that statement from the White House of America's foreign policy objectives did talk about hemispheric control. It did talk about securing its borders and its regime to the south and to the north. And I think people don't often realise that Greenland, as well as you say, having been for 180 years or more, a colony of Denmark, and before that Denmark and Norway, is also considerably closer to North America than it is to Europe. But there is a question about means.

23:11And, you know, people said the international rules-based order was coming to an end when Tony Blair and George W. Bush, in the Coalition of the Willing, went ahead with the war in Iraq, having failed to get international legal backing from the UN. But I think you could argue that both the UK and America were weakened by the appearance of going into Iraq and the aftermath without that broader international imprimatur of the legal backing. And I have sympathy with America wanting to make sure the Greenland is properly secure, but sabre rattling about military invasions is not the right way to go about this.

23:54And so on the other hand, if you're Keir Starmer and you want to be Prime Minister until 2029, I mean, Donald Trump may not be the president at the end of your term. In fact, he may be a very different president in less than a year's time if the midterms go the way they're going to go. And what you don't do if you are sensible and strategic is pick a fight with America in a long-term destructive way, simply because Donald Trump at this point is playing this political game. And I think the political game is, as you say, partly about international strategy, but it's also about domestic challenge and in some ways, domestic weakness, that actually Donald Trump is worried about in the midterms.

24:37And that's why he's playing these political cards in Venezuela, but also in Minneapolis. and it's not clear it's going to work because in Venezuela, as we said at the beginning, there isn't widespread American support. And then when you look at this killing, some will say murder of a woman in Minneapolis by federal agents. I mean, is that going to be supported by the American public or will the American public say, this isn't the way in which we do things in America? And you may have people from the White House saying this was the act of a domestic terrorist. But when people see the footage, a suburban street, a young mother, the way in which she was killed, I think rather a lot of Americans will say that isn't the way we do things in America.

25:26So it's not clear to me that the politic this ends up working for Donald Trump. And you have to have an eye on that if you are a statesman trying to sustain a long term relationship with the United States, which could at some point be a post-Trump United States. no sure i mean the footage is um it's pretty shocking because it's obviously not a kind of aggressive act by this woman trying to run over the agents which is what people have been saying but look all of this does blow back into british politics and um certainly has uh overshadowed um i don't mean that necessarily in a negative way but it's you know that's the facts of life in politics, you know, events.

26:06It's certainly, anyway, taken Keir Starmer's attempt to, I guess, get off to a strong start on the domestic front in 2026 off the front pages. But we will turn to that next.

26:25Right, welcome back. So I have to tell you that one thing that has not really penetrated the Californian bubble here has been Keir Starmer's cost of living speech and his attempt in the new year to make that the new defining mission of the government. How has it been received there? Well, I think it's been pretty under the radar here as well, because the news has been so dominated by Donald Trump. But the week did start with a very long 45 minute interview that Keir Starmer gave to Laura Koonsberg in which he declared that 2026 was the year in which Britain would turn the corner. And he vowed that he was going to sort out the cost of living crisis.

27:10and I have to say I mean it felt like a huge hostage to fortune because you know I think the OBR the Office of Budget Responsibility forecasting living standards to grow by 0.2 % over the course of 2026 and over this parliament this is set to be the second slowest rise in living standards of any parliament since the second world war the only one worse was the last parliament which saw the Conservatives lose the election in 2024. And of course, when it comes to the cost of living, on the one hand, you know, those numbers are driven by wages not rising very fast and taxes rising. But it's also that inflation has been so strong.

27:55Inflation is expected to come down this year. But as we know from the American experience with Joe Biden, it's not necessarily rising prices, it's the fact that prices have risen people feel at the moment that milk butter a steak at a restaurant they're all just much more expensive than they were three and four and five years ago and when Keir Starmer says I'm going to sort out the cost of living crisis he's not going to get any of those prices down at all and is there a plan for the economy to grow strongly and to have wages rising much faster so that people start to feel better off this year a feel-good factor hard to see that so I felt as though this was a big hostage to fortune.

28:36Shall we just have a quick listen to Keir Starmer setting out his stall? Our challenge for this year is to prove that politics can deliver and nowhere is this more important than when it comes to putting more money in people's pockets and I know that so many families across the country are still worried about the cost of living. For most people, it's the single most important and the biggest issue that they are facing. And we are on their side. So what I would say in response to that is I want you to kind of close your eyes and listen to that, those words. And those words are exactly what Rishi Sunak was saying for the last 18 months of his premiership.

29:23There's no feature to what Keir Starmer is saying that has a sense of this is a labor mission, this is what labor governments are in power to do. It's very prosaic. I mean, this was also a challenge for Sunak as well. You know, once you say your challenge is the cost of living, you are then fighting a kind of month-by-month, hand-by-mouth kind of battle to deal with forces which are beyond your control, which are you know the o or at least beyond your immediate control the overall state of the economy the overall state of inflation and real wages and you end up sort of saying and therefore we're taking 150 pounds off people's energy bills in april you know which is you know can be completely dwarfed by inflation going up and runs completely counter to the budget you just launched which was to put taxes up on working people, right, to freeze income tax thresholds, which may not be visible in terms of kind of headlines, but is very visible in people's pay packets.

30:30It's a kind of quite a dangerous place for a government to get itself in. It's exactly where the last government got itself into. And as you say, you know, it's a big hostage to fortune. And also what it lacks is any kind of sense of mission and zeal. And, you know, there's a reason why we're in government and we're changing society. All of that is gone. Think of the journey we've been on over the last two years under this Labour leadership from kind of very high-minded missions and milestones and all now down to somehow we've got to make people feel a few pounds better off rather than a few pounds worse off.

31:13And as a result, gone by the wayside can be some other things like, you know, we're putting up taxes to improve public services, or, you know, we're charging a higher price for energy because we want to decarbonize the climate, you know, those other what people might call progressive goals, you know, all fall. And, and you're following the kind of monthly announcements on inflation, praying the Bank of England might do another one or two interest rate cuts and hoping that kind of real wages start to rise and living standards start to rise and you know it's it's quite a it's quite a narrow place for a government to have ended itself up in it's totally right look we said at the time of the budget you have moments where you can really have a cut through moment to turn things around with a a new and better way of telling your story.

32:07And although Keir Starmer's interview with Laura Koonsberg was all about how he's rejecting soundbites and easy slogans, the reality is cost of living has become another slogan. There isn't any underpinning analysis, other than the fact that the Labour government are not the Conservatives. There still isn't an argument as to why growth and living standards have been so flat for a number of years, which means that the levers he says he's going to pull, it's not clear why pulling those levers in the way he talks about is going to turn things around. I think people need an argument and a story rather than simply a slogan and some claims.

32:48Interestingly, we had West Streeting on Good Morning Britain on Tuesday, and Susanna Reid asked him about the cost of living argument. And I interjected, because I don't know if you saw just before Christmas. I think he was your politician of the year 2025. And he did an interview in the New Statesman where he said, the problem with this government is that it lacks a story. It just sounds like the maintenance department just listing the jobs it's going to do without there being, you know, as you say, a driving rationale, zeal about why it matters, how it's happened, and what's to be done. And this is how he responded.

33:26And in one sentence, how will people feel better off this year? And don't make it a maintenance department answer, Wes Streeting. We want the story, not simply the job. Yeah, I was about to do a shopping list, Ed, of the things that we're doing to tackle the cost of living from freezing prescriptions to£150. Don't do that. I think that's maintenance department, Mr Streeting. Yeah, thank you. Hoist by my own petard. But I think what I would say is in terms of the approach the government's taking overall, we've got to get growth back into the economy. And you've seen the way that the prime minister has used foreign policy and trade deals to get growth and jobs here at home, to protect jobs and growth here at home.

34:05That is what we're doing across the board. The only way in which we improve living standards in this country, reduce the burden of taxation, improve living standards is to getting our economy growing again. So there we are. I mean, as you said in your Christmas awarding him of that prize, you said that he, at the moment when he was being criticised by Number 10, when they went out and briefed against him, this was a big opportunity which he took really well. And the reality is, I think he's able to continue to take that opportunity to set out a different way of telling the government story from the way it's being told from the centre.

34:40Yeah, I mean, it's worth noting, isn't it, that something else potentially quite significant has happened, which is that the Labour Party has now fallen behind the Conservatives in the polls. So I think then the kind of narrative of the last year and a bit has been the Labour government's done badly, but the Conservatives haven't benefited. Nigel Farage has benefited, and the Conservatives are an even worse mess than Labour. But as we were discussing just before Christmas, you know, Kemi Badenock looks much more secure in the Conservative Party leadership than Keir Starmer looks in the Labour Party leadership.

35:13And although these are very small differences, it is striking, but I think it's the first time in this parliament that this has happened, that if you look at the latest poll, Labour is on 17%. The Conservatives now are on 19%, but that is ahead of Labour. And Reform are on 26%. Now, that's not actually that far ahead. People think kind of Farage is walking it. it's a much more fragmented political picture where each of the parties I mean I haven't gone into the Liberal Democrats and the Greens but it's much more fractured but that's true but now Labour is sitting at the bottom and you know that is quite striking and I think will add to the pressure I mean we don't have to go into on this show because we can come back to it over the coming weeks but you know the pressure is on Keir Starmer and if the new year was going to be like new Starmer I felt it's a bit flat and it's a bit as I say kind of limited in the promise the promise this year is 150 quid off your energy bill at the same time as you're putting up tax and it's just I don't know and freezing you know some fares and stuff it I don't know it doesn't feel to me like one of the great progressive governments of our age well to return to the point you were just making about Rishi Sunak and the other thing Keir Starmer did in his Koonsberg interview on Sunday was to say that he has a mandate for five years, he's going to serve the full term, and it would be hugely destabilising if he was to be removed at this point, how the public wouldn't forgive the government, they'd be losing their focus, and they all had to stick together and get the job done between now and 2029.

36:52And it did sound a bit like Rishi Sunak in 2023, 2024, saying, you know, I must finish the job. I guess my final observation here is, particularly given what we were talking about first and Donald Trump. You know, for many years people kept saying, you know, Britain's becoming a more presidential system and it's all about one person and, you know, what's happened to our parliamentary system. I mean, I would say Britain's become a much more parliamentary system over recent years and the kind of the lead person, the prime minister kind of comes and goes. And that is not the case here in the US where you are constantly reminded that it's very much a presidential system with one person on top.

37:34Anyway, speaking of the government's start to the new year, we have got to turn to something which I don't know was in their new year grid, but looks like it's about to happen. And that is the U-turn on business rates, which follows on a U-turn announced just before Christmas on farming taxation. And we're going to look at why the government is doing these U-turns, whilst at the same time promising a clearer sense of direction in the new year and we'll do that next welcome back now um i said earlier in the show that we were going to blow our trumpet or blow your trumpet head on um on your prediction about venezuela but um we're gonna have a serenade of trumpets because uh we also discussed before Christmas whether the government would U-turn on its inheritance tax changes to farming, the farmer's tax.

38:32And we had a question on our questions episode, EMQs, from the president of the NFU. And this was your response, Ed. I think the reality is that a small change, which doesn't cost a huge amount of money, could buy back quite a lot of goodwill. And I think good chancellors know when a small course correction can buy back goodwill and Rachel Reeves has already done that around the detail of her non-dom tax reforms as well. So you thought a U-turn was coming I mean I don't think you would have expected the U-turn which was to raise the inheritance tax threshold for family farms remember there wasn't the family farms were exempt from inheritance tax altogether and the you know the original change was to say if they were worth more than a million pounds they would now be caught in the inheritance tax net, that's now been raised to two and a half million.

39:28And the Treasury is saying, well, that's, you know, 85 % of farms excluded because you can transfer it between a husband and wife and so on. But I doubt you were expecting the U-turn to come on the 23rd of December and for this tax change to be announced not by Rachel Reeves or indeed any Treasury minister, but by the Environment Secretary, Emma Reynolds. No, look, when we were giving the answer to Tom Bradshaw, the president of the NFU, we felt, it was back in October, that change was likely to come. Although you said, I don't think the Treasury will want to do this because they've got other priorities.

40:09They need to raise money rather than give it away. And I said, I don't think the Treasury has its head buried in the sand. And if they see that for a small amount of money they can deal with this political problem, then they'll do it. And I thought they would do it in the budget. And the budget came and went and nothing happened. And then on the, just a day or two before Christmas, an announcement of a tax U-turn. But as you say, a tax... It was like the Grinch having his change of heart on Christmas Eve. Well, the Times reports very clearly, Steve Swinford, that this was a number 10 decision imposed upon the Treasury.

40:48Can you remember any Chancellor... done in the budget? I'm sorry, why? Because I think the Treasury didn't want to do it. And then Number 10 waited another three weeks and said it must be done. And I mean, just listen to this. This is Emma Reynolds, the Environment Secretary, in charge of farming policy, but not in charge of tax policy, making the announcement. It's important that as a government, we listen to those farmers and businesses who will be affected by changes in policy and as a result of the announcement that I'm making today 85 % of farming estates who claim agricultural property relief will now pay no inheritance tax and those farming estates and others who are paying inheritance tax will be subject to a lower liability.

41:41The Environment Secretary saying as a result of the announcement I am making today. And then she makes an announcement about inheritance tax. Did you ever, as the Charles Exchequer, allow another cabinet minister to make a tax announcement? It's unprecedented. I was quite reluctant to let the first Lord of the Treasury make tax announcements, but occasionally allow it to happen. But I don't remember Gordon Brown. You'd be surprised Tony Blair never wanted to do them. He always wanted Gordon Brown to do them for him. Yeah, I don't remember Gordon Brown saying, Alan Milburn, why don't you make this tax announcement?

42:15Stephen Byers, you have a go. Would you like to announce a business tax change? I mean, it is staggering. Why would you do it on the 23rd of December? I mean, there's no prospect of it getting covered other than as a... I mean, it doesn't look remotely kind of auditedly, does it? I think, look, I was doing GMB that day. It was the day after Parliament had closed, so there was no scrutiny. The Treasury clearly did not want to make this announcement because it was such an admission that they'd got it wrong. And that building pressure. But of course, it came after the U-turns on the winter fuel allowance, which had been resisted, and on the two-child policy, which I think the Treasury was telling people wasn't going to happen.

42:56And of course, the welfare reforms, which then were U-turned on earlier in the year. So it was another U-turn, which was going to cost money. And clearly, the Treasury and the Chancellor refused to announce it. and so number 10 just before Christmas when there couldn't be a parliamentary row because parliament had closed for Christmas sent out the environment secretary to make a tax announcement also I felt by the way I think it was the right thing to do I just can't believe it was done in such a disorderly way because it cost a small number of hundreds of millions I mean you know it wasn't a big change hold on the whole measure was only going to raise a small number of hundreds millions in the first place and i felt the in that case why would you absorb such massive political cost for something look but you could say the same thing about um business rates and the pub industry which has also um been a running sore ever since the um the budget and um according to the bbc another u-turn is in process today so this is the there was a during covid wasn't there there was a kind of new, much lower rate introduced for the hospitality sector to support it during that incredibly difficult time for pubs and restaurants and the like.

44:09And then, you know, the Tories never got round to or, you know, didn't have the appetite to sort of return to the status quo ante and say, well, now COVID's passed, we're going to go back to the kind of rates that were charged for pubs. And then the Labour government did what I guess the Treasury would say was the sensible thing of like let's get back to a normal rate system and and they tried to make a claim even you know we've done it but but it's still better than the system that existed pre-covid none of that washed because if you're a republican like tom carriage who's been the kind of prominent face of this campaign uh with his four pubs you go well hold on i'm just like you keep telling me you're supporting business or dealing with the cost of living and the like and now suddenly i'm facing a massive increase in my rates bill from last year not from 2020 but from 2025 again why you know three four weeks after a budget why how do you how do you start your new year when you're trying to get off onto a kind of strong footing and you know what you're doing and you're projecting confidence how do have you ended up in this situation where you're having to do another u-turn well i think just before christmas a publican in uh rachel reeves constituency announced that she was banned from her local pub and sparked a whole series of pubs around the country announcing that Labour MPs were banned because of this tax change and, you know, being taken up by the newspapers and Kevin Badenock has been on this from the Conservatives.

45:40Of course, Nigel Farage likes going to a pub. But I think the problem is, if you go back to the budget, there were three different things going on. First of all, you're right. The withdrawal, finally, a very generous rate rebate from the pandemic, which was to the benefit of the pubs. Because the government was worried about the impact of that, they announced in the budget cuts. The Chancellor says, I will introduce permanently lower tax rates for over 750 ,000 retail, hospitality and leisure properties, the lowest tax rates since 1991. It sounds like even with the withdrawal of this temporary relief, cuts in business rates was going to help the hospitality industry.

46:25But the other thing which had happened in 2024 was, for the first time for a few years, a big rise in the rateable valuations upon which these tax rates are applied. And the consequence was lots of pubs facing big rises in their tax bills, even though the rates were being cut. And what the government announced in the budget was a package of support where there were 4.3 billion over the next three years for a property of any size seeing a large increase in their bill. So they clearly knew. But isn't that the classic Ed, come on, we've been there in the Treasury, which is you've got your change announced.

47:07and then you've done the analysis, the Treasury silver servants have come back and maybe your special advisors have done their job and really looked at these things and said, well, hold on, some of these pubs are going to face big increases. And you're like, all right, well, listen, we're going to create a pot of money that is just going to deal with those problems. But what they did was they gave the impression in the announcement they were cutting business rates. Right, right. And then when the detail sinks in with the hospitality industry and the publicans, I think to be fair to the Financial Times, they were out there right the day after the budget saying it's a stealth tax, reporting what the industry was saying.

47:45And the pressure built through December that for all of the rhetoric of tax cuts, it was actually in particular for small pubs, big rises in their business rates. And the thing is, as we all know, politically in Britain, the pub is an important place. And it has a leverage and a standing and and a kind of community-based impact. And if you're going to pick a fight with pubs, you've got to be sure that you're going to win it, and that it's worth the candle, and that the money is going to be so important you can show how you're going to spend it to otherwise good effect. And if not, then what happens?

48:26It ends up with you four weeks later, facing pressure for another U-turn. There's a petition of Labour MPs. Downing Street will be getting agitated and I think this time the Treasury has taken our advice which is you know if it's clear you're going to have to do a U-turn get on with it do it quickly a small course correction can buy you goodwill before it becomes a disaster the trouble is if you do that for the first time and you know you did U-turns when you were Chancellor and we did U-turns when I was at the Treasury sometimes you have to do it but if you if you become a serial u-turner if you had an omni shambles budget every year after a while people would start to say what are they up to i mean how come this keeps happening again and again no i think that that's right i mean i think you know if you take a sort of charitable view you say get the u-turns done clear the barnacles off the boat is what linton crosby would have told us to do get rid of these kind of irritating problems but i think that's fine if you know a lot of other things are going well and there's a sort of overall central mission which people feel the government's on in which case remove the distractions but here where you're trying to establish a central mission you know and it doesn't currently exist or people feel it doesn't currently exist it's the u-turns and the noise just kind of gives an ongoing impression that they don't really know what they're doing and you know it's interesting if last year was going to characterize by u-turns on welfare, winter fuel payments and disability benefit changes and the like, then, you know, you've kind of set the precedent at the beginning of this year that your tax rises can be U-turned on as well.

50:01And there are lots of tax rises pencilled in for the next couple of years. And so if you're a group of Labour MPs feeling pretty jittery on your 17 % poll rating, you go, you know, you'll move on to the next thing. And that just makes it much harder for the government to project a sense of we've got a plan you may not like the plan but we're implementing it and the plan's working and that's going to lead to the you know increases in living costs it just means the whole thing's lost in a noise of each day new story new u-turn you know new change of direction anyway i feel that we're going to be returning to this theme over 2026 unfortunately i feel as though everything we've talked about in this podcast today American foreign policy Venezuela Greenland the American midterms Keir Starmer's determination to show he's tackled the cost of living crisis and credibility in tax policy I think we're going to be be talking about all of this throughout 2026 there we are that's all for Political Currency we'll be back on Monday with Ex-Minister's Questions Yes and remember you can of course get EMQs early and ad free if you become a subscriber and as a Kitchen Cabinet member you can get access to our live recordings our fortnightly newsletter our members only chat your own political currency mug and I hope you enjoyed your Christmas card you got as well over the break so happy new year and we will see you next week and have a good flight back from the west coast of America see you then see you

51:36thanks for listening to political currency this has been a Persephoneca production

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