Put down your pint, Healey! 'Appalling' Budget is nothing to celebrate

0:03The Telegraph.

0:09Pessimism. It's never going to improve a disconnected healthcare system. Next. So what will? At Optum, we're working every day to connect primary, specialty, and pharmacy care, and help lower prescription costs. Will we fix it all overnight? No. But we'll wake up trying again and again until healthcare works as one for everyone. That's healthy optimism. Learn more at Optum.com.

0:41Britain is on an autopilot into oblivion. As Healy knocks back the booze, punters are set to get poorer after this nothing burger budget. So is the election lectern about to reappear outside Dining Street, despite the Prime Minister's denials he will be calling one soon? This was just a pretend budget, a decision to buy a bit of time to give the Prime Minister, you know, some space to decide what he wants to do. We have got it into our heads, haven't we, that wealth is an embarrassment. It's actually a moral defect. There must be something wrong about you if you're making a lot of money. And so I don't think the argument is just about financing the welfare state.

1:20I think the argument is now cultural in this country. It's become about whether or not wealth is something to be tolerated. The prime minister wants a general election. He either wants it immediately or more likely in May. And he wants to keep his popularity going by doing nothing really for the next few months. We're here for day two analysis of the budget. I have just asked our guest what is his title. And of course, it's my boss. It's actually editor of the Sunday Telegraph. For the last 10 years, Alistair Heath. Thank you for joining me and Jacob. Thanks for having me. We want to begin by talking about John Healy's pint.

1:53He downed a pint to celebrate the end of the budget.

2:01What did you make of that, Jacob? Well, until you told me it was real, I thought it was AI. I couldn't believe that the Chancellor would do this. He didn't look unnatural at it. And I think there is a problem for people like John Healy and indeed me, fundamentally uncool, trying to pretend that we're cool. When you hold great offices of state, you need to recognize that you're quite a serious individual. And downing a pint in one was great as a university trick, but perhaps in quite the right image for a Chancellor of the Exchequer. I disagree. I think chugging a pint is a sign of being a real man.

2:35And I think it's not about being cool. I think to be able to do that, you have to do it quite often. I don't think anyone, Alistair, could you down a pint in one? I doubt it. No. It's not really my thing, I'm afraid. Pints. Is it anyone's thing? I mean, I have no problem with the Chancellor doing it at all. My only slight issue is there was nothing to celebrate from his appalling, useless, irrelevant budget. But I mean, I don't have a problem with him doing that. Is there anyone on the front bench who could have made a better Chancellor? Well, a less bad one, you mean, perhaps. I mean, I think the problem here is that right-wing commentators always like former Labour defence secretaries.

3:17Yes. Because they always assume that somehow, because you are a former Labour defence secretary, it means you're on the right, because defence is, you know, right-tinted, effectively. And therefore, you'd be a good chancellor. But I'm afraid to say that's not the case. OK. He's not a good chancellor. And, you know, I was very depressed by his budget. Because he made a joke about the speculation over who would become the next chancellor. And we were threatened with Ed Miliband for a while. Yeah, and obviously Ed Miliband would have been worse, really. He found it hilarious when he said that. He almost broke the bonds of his straitjacket.

3:47Yeah, I didn't quite see the joke, really. I think my sense of humor is just as defective as my ability to down point him on. I think you had to be in the lunatic asylum to get it. Jacob, you were in a taxi the other day and you were mistaken for a well-known public figure. I was indeed. So I left here and went off for lunch. And as I was paying the taxi driver, he said, I think I recognize you. And of course, I was feeling frightfully important and thinking, my goodness, he knows who I am. And he said, aren't you David Miliband's brother? So he thought I was Ed Miliband. Now, I've always rather liked Ed Miliband, so I didn't mind this, though I think his politics are bonkers.

4:24But it works on two levels, isn't it? Not just the mistaken identity, but also that it's David Miliband's brother. It's not Ed himself. No, no, it's not. I didn't realise in the public consciousness, David was a bigger figure. Bigger than Ed, unless they've got a third brother who we don't know. Perhaps it's me, secretly. Denzel Miliband. Alistair, we're going to talk about the budget. First of all, the economics of it and then the politics of it. On the economics, it always takes about 24 hours to figure out what happened and what the impact's likely to be. And actually, the consensus seems to be, to quote Peggy Lee, is that all there is?

5:00Not a lot happened. I was watching some graphs on Sky with Ed Conway, and there were a couple. I'll come back to the second one later. But the first one that amused me was, if you look at the number of measures in this budget, there are the largest number of measures since 2009. But if you look at the actual spending implications of the budget, it is the lowest figure since 2009. So this was really a lot of hot air, wasn't it? Well, I think that stat you mentioned is actually quite telling, which is, you know, we are now resorting to extreme tinkering. More and more measures that achieve less and less and less, massively diminishing returns to scale as the entire system is effectively broken.

5:42I mean, to be honest, Britain is on autopilot towards oblivion. And doing nothing is effectively doing something, which is refusing to turn the ship around. It's a choice. It's a choice, yes. And this was very much a choice to do very little. There were a large number of measures. Almost all of them are bad. One or two good ones, but I'd say 95 % to 99 % were bad, very bad. But despite all these measures being bad, they were not bad enough to have a truly negative effect. Nothing really is going to change. Now you have some really horrible tax increases on savers, for example. If you've got interest payments, if you've got money in the bank, you get interest.

6:20You've got to pay even more tax. There's now a dual system where you're penalised for interest. Interest is taxed more heavily than labour on purpose. It's a sort of Marxist-infused idea that, you know, income from labour is better, is morally superior to income from interest. It's a war on the rent here. It's bonkers. There's an intellectual context to this, isn't there, which is Thomas Piketty and the idea that the problem is the asset-owning class has become dominant in our society. to shift power back to the people who work. Yeah, so if you've got 500 pounds in the bank and you're lucky to make a few pounds interest, you will pay more tax on that interest than you would if you're earning money, you know, as a banker or something like that, which is obviously completely ridiculous, but there you go.

7:08It's monstrous because you're actually losing money, potentially, because of inflation, and therefore you're not being taxed on an income stream. You're being taxed on keeping your capital up with inflation. And so it's actually a capital tax because you need to be making whatever it is over 3 % to be keeping steady with inflation. If they were to put a tax on the amount above inflation, that would be different. But they are taxing the nominal value whilst the real value of your money is going down. But basically, the top rate of income tax is now 49%, not 45%. It's 45 % on labor, income from labor above£125 ,000 a year.

7:49about 49 % on interest payments. So we've now got a 49 % top tax rate, top income tax rate, though no one's really noticed. That was one of the many bad measures in this budget. But even though nearly all of these measures were bad, because they were relatively small measures, they won't noticeably ruin or accelerate the ruination of Britain. No. That's already happening anyway, because the biggest tax increases came from fiscal drag and measures that had already been announced before. to explain that's where rates are fixed. Where tax thresholds are fixed, there's a lot of inflation. And when your income goes up a little bit, which it does with inflation, you suddenly find yourself in that higher band paying a larger rate of tax.

8:30Yes, and crucially, the OBR is saying that we're all going to get poorer on average next year. Real disposable incomes are falling at the moment and will fall next year more. And by 2030, 31, people will be maybe 2 % at most richer than they were before the pandemic. So effectively another wasted decade, which is, that's a scandal made in Westminster. I just want to throw in here a quote from the Resolution Foundation, which I mentioned because it's one of the favourite think tanks of the Labour Party and the left. And it says that between now, 2026 to 27, and the end of Parliament, 28 to 29, typical incomes are forecast to fall in total by£1 ,050 or 3%.

9:13Now, Jacob, that's partly to do with the Iran war, right? That and the cost of living. It's not just government policy, but there is a difficult economic context that the government's operating in. Well, I'd say it's government policy because if we had a sensible energy policy, we wouldn't be so affected by the Iran war that if we had maximized what we're getting out of the North Sea, if they'd approved Rosebank months ago, likewise Jackdaw, if they'd started fracking, we would be getting lots of cheap energy into this country. So there are decisions that they've made that have been deliberately expensive.

9:45And this rebuilding of the grid, which is completely unnecessary if you have fossil fuels, you need normal capital investment, but you don't need to restructure the grid. It's all about policy decisions that are making us poorer. Okay. And I think it's important to pick up on what you're saying, Alistair, about assets, to explain to people the philosophy guiding this. And it's an anti-saving philosophy, right? Right. So Rachel Reeves wanted to go after ISIS and John Healy decided not to do that, which is a good thing. But one reason why they wanted to do it is they had this argument that that money is just sitting there and it's not doing anything.

10:22It's not doing any good for the economy. And they're obsessed with this idea that the middle classes have too much wealth that's squirreled away. It's untouchable. You either were not taxing enough or it's not being put to work in the economy, right? So some of what they're doing is about trying to actually break down middle-class wealth and get it, in their view, working in the economy. Well, this is a profoundly anti-capitalist government, right? You talked before about Ed Miliband, but Ed Miliband's won the intellectual war in the Labour Party. For the last 10, 20 years, you've had this debate, at least in the post-Blair era, you've had this debate in Labour about whether you should tax wealth or only tax income and consumption, right?

11:05Yes. The last time the Labour Party had that sort of debate was in the 70s when they had agreed to start taxing wealth but realised it was impossible to pull off, so they didn't do it. So once again, we're taxing wealth, the existing stock of wealth. The Chancellor confirmed yesterday that in 2028, the mansion tax will kick in on properties worth£2 million or above. And if you earn less than, And if you earn£35 ,000 a year or more, you will have to pay that mansion tax immediately. If you earn less than that, it will be rolled up and you'll effectively have to pay it if you sell your house or when you die.

11:40So all of that's coming in. You've had this increase in the tax rate on savings. You had an equal increase in the tax rate on rents. You've got a massive, massive crackdown on landlords. You effectively got rent control through the back door coming in. Basically, judges can now effectively determine, in many cases, what rent you're allowed to charge. You've got inflation roaring and therefore eating up the value of assets. And you've got a collapse in house prices in London's southeast. Very severe collapse in house prices in London's southeast. Probably houses are often now down 10%, 15%. And, of course, in central London.

12:13Did I really say that was on purpose? No, I think it is on purpose. I think there's demand destruction. There's a deliberate policy of demand destruction in the housing market. massive stamp duty, war landlords, you know, rich people are fleeing, obviously in quite large numbers, the UK. So I think, you know, you've got this crimping of the economy. Obviously, right, Labour doesn't, Labour didn't set out to deliberately reduce house prices because that's bad news for them when it comes to stamp duty receipts and things like that. But the policies are deliberate. The war on wealth is deliberate.

12:51The war on expensive homes is deliberate. This is my theory, is that Labour has this list of bogeymen, and they're basically the middle class. Yeah, but Labour's winning this war. Remember Keir Stummers once asked, what is a worker? And he said it was someone who didn't have savings. I mean, if that's your definition, then that's an awful lot of people. But listening to Alistair has unfortunately reminded me of a conversation I had with David Gork when he was in the Treasury and I'd been in Parliament a couple of years, where he was advocating the advantages of taxing wealth, and he felt the capital was insufficiently taxed compared to income and expenditure.

13:21and unfortunately it's not Labour, it's the Treasury orthodoxy has come to the view that you need to attack wealth and that's why you had the ridiculous short-sighted increases in stamp duty under the Conservatives and these policies are just a continuation of the same. We must take our share of the blame for having set this trend and thinking that government expenditure is fundamentally good. If you remember the nonsense being talked between 2005 and 2008 by the Tories, when we were saying we would share the proceeds of growth, by which we meant that we would keep on spending more money. And there's been no proper argument on the right until very recently about saying, how do we restructure the state?

14:04So yes, Ed Miliband is the real intellectual of the left, perhaps accept that, partly because there's none other to compete with him. But the conservatives have failed to intellectualize, to think through what a conservative economic policy ought to be. And so when we were in, we tinkered in much the same way as Healy was tinkering, not quite so many, not quite so trivial. When the chancellor is announcing expenditure of under 10 million pounds in the budget, you know you're wasting your time I'm listening to it. It's utterly insignificant in the scheme of government expenditure. But we went down this track.

14:42George Osborne went down this track, and I'm afraid we never got away from it. The only attempt failed. Now, I agree. And, you know, to be clear, there's been a 30-year failure in British economic policy, a 30-year catastrophe, a betrayal of the British people by the three largest parties. You know, the traditional Labour, the Conservatives, and the Liberal Democrats have all taken part in this. And, you know, 30 years ago, the economy was growing by two and a half, three percent. That was a good, you know, a good year with three percent or more. Now, the economy is going to grow by one to 1.2 percent this year and next year.

15:17These are horrible, horrible figures, dire figures. You've got, you know, people becoming poorer. The average person is becoming poorer. Wages after tax are not going up. The tax burden is going to end up being six percentage points higher than it was before COVID over the next few years. They're getting poorer at the same time that the size of the government is actually growing. You see, the tax take isn't going to get bigger because people won't pay the tax. But it seems to me there is a limit in the UK. How do they get away with that? They just leave. They stop working and they leave. If you look at tax rates in the UK and tax as a percentage of GDP, where the tax rate's been 98 % or they've been 40%, we have never gone above 38 % of GDP in tax payments for any extended period.

16:03I think it's extremely unlikely that we will do so again. You put up the tax on savings, people stop saving. They keep the money in cash. They leave it in their current account. Partly, they can't be bothered that if you're being taxed at 49 % on your savings, you've then got to fill it out in your now quarterly return. Why bother? Why not just leave it in your current account and not get any interest? Doesn't make much odds to you. So people change their behavior so the revenues don't come through. As you mentioned, they leave the country. People on£100 ,000 a year ask to be paid£99 ,999 because of the enormous cliff edge they face at that point.

16:43And they work less because they don't want to earn the£105 ,000 where the next£5 ,000 almost all gets taken in tax. So that limits the tax take whilst expenditure is going up. That is how you head to bankruptcy.

17:04Pessimism. It's never going to improve a disconnected healthcare system. Next. So what will? At Optum, we're working every day to connect primary, specialty, and pharmacy care, and help lower prescription costs. Will we fix it all overnight? No. But we'll wake up trying again and again until healthcare works as one for everyone. That's healthy optimism. Learn more at Optum.com. I've done

17:41Another graph that caught my eye on Sky is one showing the deficit. And as Ed Conway pointed out, in every budget, someone always says, what's going to happen is it's going to go up for the next couple of years, then it's going to come right down again. So the graph they always draw is a hill. But Ed said if you actually take the historical trend, the graph is actually an Everest that goes up and never down again. Alison, this trick really frustrates me and we see it every year. Yeah, but the trick works. How do they get to claim that despite all of this massive upfront spending, at some point in the future, somehow the graph will start to go down and the deficit will be reduced?

18:17The trick works. It even fooled the IMF. The IMF the other day said that Britain had this great programme to reduce the budget deficit over the next few years. So everyone buys this nonsense. And the national debt just keeps getting bigger and bigger over a long period of time. But the OBR also produces figures that it knows are not true because by statute it has to. So for the last 16 years, the OBR, it hasn't quite existed that long, but the OBR has assumed every year since it's existed that the fuel duty escalator will apply because that is government policy. At every budget, the fuel duty escalator has not been applied.

18:51So the OBR's figures are automatically wrong because they are not allowed to make judgments against government policy. But Tim, I'll give you a good example of what you're talking about. So public spending as a share of GDP is going up this year and will go up again next year. And then it's due to fall quite severely over the next two, three years after that. So you're talking about a massive cut to public spending as a share of GDP of at least 1%. And that is even before we increase expenditure on defence, which we keep being told is going to happen. These figures are fantasy, bogus, right? The government is assuming there's going to be severe cuts in certain areas and overall large cuts.

19:31This is not going to happen. Yet our entire financial stability, the fact that the gilt markets are relatively calm at the moment, is predicated on pretending that this ludicrous lie is true. None of it makes any sense. And seriously, the defence expenditure that's going to have to come through would blow all of this stuff away in any case. So we face a really big issue here, which is the reason why I think this budget was basically what the Americans call a nothing burger. This was just a pretend budget, a decision to buy a bit of time to give the prime minister some space to decide what he wants to do.

20:11The deficit is like in Family Guy when Peter talks about tomorrow, Peter. I'm not going to do that today. Tomorrow, Peter can handle that. let's talk then about the politics of it because one thing that was missing in it was welfare reform and there is an argument some are making that everyone acknowledges this was a breathing space budget not for the public but for the government to buy them time and one argument is is they're not going to hold an election it's just that the the major spending decisions are going to be made next year in the spending review and they will be informed by two reports coming out in november one from Stephen Timms and one from Alan Milburn on the future of welfare.

20:51So the most friendly argument towards the government is nothing much happened because actually the really big stuff is planned for early next year. Would you buy that argument? No, I think this budget was a very clear signal that there's going to be an early general election, especially when the budget is taken together with the prime minister's comments on effectively rejoining the EU and reintroducing freedom of movement. Which I just want to add, John Healy has not contradicted, but when he was asked, do you think we'd be growing quicker if we were in the EU? He demurred and said he wasn't sure that was the case.

21:25Yeah, and obviously we wouldn't be. I mean, it's a complete farce. It suggests that they've not discussed this. This is not some grand strategy among the front bench. This is just Andy going around saying stuff that comes into his head. But the Prime Minister is the Prime Minister. He's the boss. And, you know, he seems to believe that rejoining the EU is the answer. So my take is the prime minister realises that Britain's broken. He realises that we're getting poorer. There's basically no economic growth. Nothing works. We're in total crisis. But his solution is the opposite. His analysis leads to very different conclusions to my own analysis.

22:02I think, you know, we are too socialist. We're too regulated. You know, taxes are too high. He thinks we're not socialist enough. We're too capitalist. We're too free market. We're too deregulated. there's too many private companies there's not been enough nationalisations and crucially we left the EU which he thinks was a disaster why does he think it's a disaster? for no particular reason but he needs some sort of panacea some sort of dream economic solution to cling to it's his five year plan so his solution is we reach on the EU we nationalise everything we regulate a bit more perhaps we get rid of stamp duty and counter tax and introduce a revolutionary wealth tax a proportional wealth tax we change everything and out of this socialist nirvana comes utopia, comes much higher economic growth.

22:48So if he has any kind of belief, any kind of vision, that's his vision. He wants to go down in history as another Lloyd George, another Clement Attlee, another Tony Blair, in other words, a man of the left who will change Britain forever and put us on a new course. But this budget doesn't do that. No, no. So this budget cannot do that and no budget could have done that because to do what I'm saying, you need to repudiate the referendum, you need to put up income tax. To go to Jacob's point about increasing the tax take, I think you can increase the tax take, but you need to put up the basic rate of income tax by, say, three points.

23:22I think you need to put up VAT by eventually five points. Eventually, we need 25 % VAT for this kind of socialist vision. You know, you need to put up corporation tax. You need to do all that stuff. And for that, you need a new mandate. And for that, you need a general election. And as it just happens, the stars are aligning for the Prime Minister, I think. Why do I say that? Because Labour is quite substantially ahead now in the opinion polls, maybe five points, according to some polls, maybe more even. Reform are in crisis. They've fallen back to, say, 20%. The Tories have returned roughly to where they were the last general election, which is just not enough to win an election.

24:04The Lib Dems are in crisis and the Greens are imploding. So in poll terms, this is good for Burnham. His bounce has succeeded, and this budget is designed to keep the bounce going a bit longer. Secondly, a lot of things are going to get worse by the end of next year. So the cost of living crisis will get worse. People will feel poorer because they are getting poorer. There's probably going to be another attack on Iran, so you can blame Trump for that stuff, which is good for Burnham. The new changes to the way we vote are at the moment in the House of Lords and will become law quite soon. Votes at 16, making it easier to vote.

24:42You will no longer need photo ID. There'll be a crackdown on some donors, which could hurt reform. So all of that stuff's quite imminent now. And, you know, and then, of course, if you have a general election, you can defer decisions on welfare reform, which could be quite toxic for the Labour Party. I mean, I suspect many Labour MPs would refuse to vote for the source of policies that Alan Milburn is going to call for. Defence, how on earth do you square that circle? You need massive, massive tax increases within the Labour world where you can never cut spending. You're talking about£25,£30 billion a year in tax increases just to pay for defence, probably.

25:19So how would you do that? And if you want to, you know, put up income tax or change the system to fund local government, you need a general election. And crucially, if you want a real care service that's free, not completely free and that costs a fortune, you need to put all that in a manifesto because you need very large tax increases. So all of that stuff put together, combined with this nothing of a budget, makes me think that the prime minister wants a general election. He either wants it immediately or more likely in May. And he wants to keep his popularity going by doing nothing really for the next few months, blaming Trump for all the problems and deferring all the difficult decisions on welfare, defense and tax until after that election.

26:05Jacob? Just on the constitutional point about an election, the king is abroad at the moment. If he wants one immediately, he can have it. I checked this. The councillors of state are not permitted to grant dissolution except by instruction from the king. And the act, which is in the 1930s, that provides for this allows the message to be sent by telegraph. So rather splendidly, even with the king abroad, it would be possible to get a dissolution. People were worrying about that. I think the problem is, I think Alistair, as always, makes a compelling analysis. I might quibble on whether you can get above 38 % of GDP because when the base rate of tax was 33%, you still didn't get above 38 % of GDP in tax.

26:50I just think people changed their behavior to avoid it. But let's leave that to one side. The problem with the do-nothing budget is that people have noticed and that I wonder whether the popularity that the prime minister's got will survive. and the difficulties of reform make this a huge risk. Say we were to have an immediate election, the 10th of December, which people have been gossiping about. The first two weeks of an election campaign could be taken up totally with reform candidates who have done stupid things. Reform's process of vetting is hopeless, and reform people admit that. Suddenly people on the right think, well, the only thing to do is to vote conservative.

27:33And the two blocks of left and right have remained amazingly consistent in polling terms. It's all about how do you consolidate your wing of politics. If reform continues in its current difficulties, and I'm not sure it will because I think Nigel Farah is a formidably able politician and may well be able to turn it around. But if reform were to continue along that route, where else do people go? They go back to the Tories. And that means if you look at the volatility of opinion polls, that Burnham should be very nervous. Look what happened in 2017. Theresa May had a 20-point lead in the polls.

28:12She had some of the best local election results in recent times for the conservatives. And then she lost the slim majority that she had. So there may be a certain caution thinking we've got a majority of 160. We can ignore our manifesto commitments. Actually, we can put up tax if we want to. We can say times have changed, that when we made that promise, there was no war in Iran. You can always use a war to change manifest movements. Then why not do that now? Yes. Because I think he's keeping his options open and has probably boo-booed. I mean, I think this is a boo-boo budget that failing to do anything, your point is absolutely spot on.

28:51Doing nothing is leaving the autopilot heading towards disaster. and that is being noticed. Yes. But voters have seen that they've done nothing and they're going to see their living standards declining, which they're noticing already because they're already getting the letters saying their gas bills are going up, et cetera, et cetera. Well, even with the current Ofgem price cap, they're looking to pay an average of£1 ,723 a year, in which case£100 off that bill is really no help at all, as far as I can see. I think of the other thing we must mention also So is Poundland struggling, which is a fascinating and very troubling development?

29:29And the Chancellor has spoken to Poundland to try to see what can be done to save its workforce. But Poundland's model of providing good, cheap goods to people, I sound like an advert, but is exactly what you need in a cost of living crisis, right? These businesses are being undermined by tax increases. Yeah, but if you go to a local retail park and you suddenly find the retail park is now full of discount stores, the German retailers have exploded in size. You've got companies like B &M, you've got Ali and Lidl on the German side. You've got supermarkets like Tesco going back to their old roots of being effective discounters.

30:13And you've got Sheen and Temu from China. So I think there's extreme competition now in the retail market. But they presumably cannot have the price of labour going up. No, no, that's right. As dramatically as it's been going up. There's extreme competition. You've got real wages declining and the money people have left over going down because of tax increases and inflation. Yes, you have minimum wage increases, which, by the way, have been far too substantial and have increased unemployment. But there's just not enough money left in the economy to keep all these companies going. So you're going to have more and more companies going bankrupt.

30:48Yeah. And the ABR itself is forecasting that the changes to the labor market with the Employment Rights Act and with the minimum wage is pushing up unemployment. So the government's own forecaster is accepting that. I think it's always very difficult with an individual company because Poundland ought to be in the sweet spot of retail that squeezed consumers going to save money. And if Poundland isn't managing to do well in those circumstances, there's a problem with Poundland rather than with the specifics of that model that Aldi and Little and so on are doing better. And it may be simply that they've outcompeted Poundland.

31:25Yeah. I think it's important through all of this to remember that people swim in the soup of ideas. And Andy Burnham, he may be an element of the chancellor about him, but he is someone who has marinated in the popular ideas of the left for the last few years, probably even more so for having been outside of Westminster and being in a job, Manchester, mayor of Manchester, where you are flattered by think tanks and flattered by left wing people. And they have been telling him, and I read your column, I thought it was absolutely spot on, that the problem is a crisis of capitalism. And the problem is there's been too little government, not too much.

32:02But the irony is, is that if you look at the Western world and where the problems are greatest, it's very often where government is biggest. No one has a more generous welfare state than France. And yet France has had violent riots about inequality. And some people have been sharing Alexis de Tocqueville's observation when touring America in the 19th century, that actually a society that's more equal is more obsessed about inequality because you notice the small differences between people. And it does feel as though some of these social democratic states have reached that point of almost cannibalizing themselves.

32:36They don't know what to do anymore. And so the solution becomes, let's nationalize the trains. But it has no relationship to the actual problem, which is the challenge of creating wealth in the 21st century and in a digital world. That's really what a budget ought to be 90 % about. So, A, Tim, I agree with everything you said. And B, I'll go further and say that Britain is too equal now, much too equal. And that is now one of our great problems. There's something called wage compression, which we suffer from in Britain, which is that many, many people are paid very similar wages, but for very different roles.

33:15Why? Because the minimum wage is now so high that middle earners only earn slightly more than the minimum wage in many cases. and also you've got very high welfare payments which create effectively a kind of base income, base universal income basically. And if you take the top 10 % or 20 % of the population in this country, they don't earn enough. If you're the top 10 % or 20 % in America, you're much, much better off than you are in the top 10 % or 20 % in the UK. That means that the best and brightest over there are much more encouraged. You know, the gains from studying in America are now much higher.

33:52The gains from sending up a business are much higher. The gains when it comes to moving to America are very high for people. We are too equal, right? The pro, for years and years and years, the BBC was leading a campaign to say, you know, inequality is bad. You know, inequality is terrible for people's mental health. It's just awful. And, you know, let's have more redistribution and more taxation. I always oppose that, of course. But now we've reached the end of the road on that. We are so equal that that is one of the reasons why our economy is petering out and is barely growing. And in fact, the only reason there's any growth almost in this country is because of the AI boom.

34:31Yes. These American AI companies are spending a lot of money boosting GDP in the UK. This has nothing to do with UK economic policy. The UK will be even more sluggish without this sort of foreign investment. This is a huge Brexit benefit because we've regulated AI in a way that they can actually do it rather than in a way that stops them doing it. And Alistair is absolutely right. Everything balances at zero. We had a big decline in inequality following the crisis of 2008 when the economy collapsed. This is not a good thing. Inequality is irrelevant in a growing economy. As long as everybody's getting a little bit better off, whether somebody is 100 times better off than I am, it's neither here nor there.

35:15or a thousand times. It's completely irrelevant. And governments, including conservative governments, thought that inequality was a policy objective. It isn't. It is not a good thing axiomatically to have a progressive taxation system. You don't want a regressive one, but why is it good in principle to tax people at 45 % rather than at the 20 % rate? In my view, it isn't. Taxation is about raising the money you need, not to try and make some people poorer as a policy objective, so that the difference between the poorest and the richest is narrowed as a policy objective. We have got into our heads, haven't we, that wealth is an embarrassment.

35:55It's actually a moral defect. There must be something wrong about you if you're making a lot of money. And so I don't think the argument is just about financing the welfare state. I think the argument is now cultural in this country. It's become about whether or not wealth is something to be tolerated. But Tim, if you're right, that means we've gone backwards, right? That the entire Thatcher legacy has been destroyed and squandered as a result of 30 years of cross-party failure and a sort of flawed intellectual battle which has led to left-wing ideas basically triumphing in Britain. And we're in a very bad place as a result of all this.

36:26Well, except I think the country is ready for fundamental change. people who were working and are going to see their standard of living go down next year as their effective tax rate goes up as a result of thresholds not increasing and see their next-door neighbor carrying on with exactly the same lifestyle as benefits go up and are kept steady in real terms they've head up with this and they think it's unfair and it's unreasonable the people in the southeast who vated labor who have seen their property prices come down all Lib Dem. The people in Pittington who suddenly discover with a Lib Dem councillor, a Lib Dem councillor and Lib Dem MP that they're going to have thousands of illegal migrants living with them are realising that if you vote for socialist things, left-wing things, you get a very unpleasant life in the end.

37:12And this is going to have a crux point and that is going to make people come back to conservative ideas. Whether it's a conservative party or reform, I don't know. But people are coming back to conservative ideas because they're fed up with this neo-buttsculism that we've had in recent years. I want to conclude with an email from A. Anderson in St. Ives Cornwall, who is an independent small business owner, and I think captures this very well. They say, quote, let's tip away the treasury jargon and put the£100 house energy payment into common man terms. This is the UK's most expensive payday loan, and it's one the public never actually asked for.

37:53The government hands out a flashy£100 token up front via council tax, but funds it by doubling the bank's surcharge to 6%. Any business owner with a modicum of financial intelligence knows that banks won't absorb that in a vacuum. Over the next 36 months, they will logically protect their net interest margins by squeezing savers and hiking interest rates on mortgages, credit cards and commercial credit lines. The ultimate irony of this populist tactic is that while voters think they are£100 ahead today, they are being locked into a predatory, high-interest contract that will quietly extract thousands of pounds from their pockets over the next three years.

38:29Worse still, it completely fails to fix our true long-term commitments, like social care and our military, which are being starved of funding while our sovereign borrowing yields spike. And on that very happy note, I can tell you that we will be back tomorrow at 5pm.

39:10Pessimism. It's never going to improve a disconnected healthcare system. Next. So what will? At Optum, we're working every day to connect primary, specialty, and pharmacy care, and help lower prescription costs. Will we fix it all overnight? No. But we'll wake up trying, again and again, until healthcare works as one for everyone. That's healthy optimism. Learn more at Optum.com.