Britain Is Broke

0:00Quick heads up on the podcast today, we're going to be talking about British credibility, British economic credibility against a background of maybe yet another prime minister.

0:11David McWilliams: That would be seven prime ministers in 10 years in the UK, political paralysis, the guilt market selling off. Where does it leave the credibility of British economic policymaking? So it's all London, it's all Britain, and it's all coming up in a couple of minutes. And also we're going to be talking to Ibeck about what Irish businesses are seeing through the lens of Washington, London and Brussels.

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1:42David McWilliams: Just before we start, I have a little bit of news from Dorky. we would like to congratulate Ramita Navai, whose brilliant documentary, Gaza, Doctors Under Attack, has just won a BAFTA for current affairs. If you want to talk to, to see, to read, to listen to Ramita Navai, check her out at dogybookfestival.org. To understand the economy, you have to understand human nature. This podcast is powered by Acast. How you doing there? It is time for the podcast. This podcast, John, is going to focus on the United Kingdom. State of the place. What's happening. It's 10 years after the Brexit, folks. It is 10 years.

2:35David McWilliams: It's hard. It's hard to get your head around that. Yeah. But it's obviously the UK is in the centre of a political storm. That political storm is having a massive impact on UK guilts, which are UK long-term interest rates. That's the rate of interest at which the UK government borrows. And UK government borrowing is moving dramatically in the wrong direction. So we're going to look at all that and see. And of course, you have a political scrap now. Keir Starmer is in a scrap at the top. Seems so unnecessary. seems so unnecessary in actual fact I've always looked at that guy and said he seems alright yeah like he doesn't seem like a bad bloke but the thing for me about Starmer is before we get into it is the fact that he inherited a mess from I know that's the old excuse but he is trying to pick it apart and it's not always working for him but he's been nothing's working for him the poor lad and he's getting abuse it does remind me remember John Major was this subject of abuse they used to have him in his underpants yes remember that cartoon eating peas He's under his white fronts, his yellow white fronts.

3:39And everything was grey. But we're going to look at the UK. We're going to look at the problem in the UK guilt market.

3:47David McWilliams: Now, 12 months ago, we were suggesting, I was suggesting the UK is going to have a fiscal crisis. And I still think the UK is going to have a fiscal crisis. And when you look at this immediate problem they have, that's one thing. But also then look further out what the political forces are you have in effect the Reform Party and the Green Party seem to be galloping ahead in the polls. The Labour Party are divided and we're likely to shift to the left. And the Conservatives are offering nothing new. And this is the party of Brexit. This is the last big Conservative policy was Brexit. And we know where that's got them.

4:28But more importantly, John, all this problem, the UK guilt market,

4:33David McWilliams: and I'll explain why this is problematic, comes against the background of a growing realisation all around the world that the rate of inflation globally is rising as a result of the Straits of Formulas. So for the first about two months... But that's only very, very recently. Only very recently. So the first about two months of the war in Iran, it didn't have, even though prices of oil went up, but didn't have a significant impact on the immediate rate of inflation. In the last week, what you've seen is the rate of inflation in the United States has jumped to 3.8%. So just shy of 4%, which is 2 % above where the Fed wants it to be.

5:15David McWilliams: So it's running at double almost the Fed's target. The Fed are going to have a new guy in there, right? He is going to have to have a policy which rains down on inflation. Now, what does that mean? that means that the expectation in the US is that long-term rates of interest are going to remain quite high. And the reason that long-term rates of interest remain... And this is what Trump doesn't want. So Trump definitely doesn't want, right? Yeah. So basically long-term interest rates reflect two things. One is the expectation of future rates of inflation, right? So if you think inflation is going to be high in the future, the long-term rate of interest is going to be high to match that.

5:56David McWilliams: Why is that? because investors need a higher rate of return to accommodate from the higher rate of inflation because what inflation does is erodes the value of your investment. So if you're lending to a government for 10 years and you think the rate of inflation is going to be 4 % over those 10 years, well, then you have to be offered 5 % to give the government your money for them to spend. That's the first thing. And the second thing that impacts on long-term interest rates is what they call the issuance, which is the amount of long-term debt that is being issued every year, i.e. the borrowing requirement of the country.

6:31If that is going up and the rate of inflation is going up, then what you will have is you will have a spike upwards in long-term interest rates. The reason this is important, John, is that the American long-term interest rate is what's called the risk-free rate of return. And it is the base price for all global assets. So if... And all the other central banks follow the Fed. Follow, feed off that, feed off that, right? Now, it's not that all the other central banks will have interest rates that are higher than America, but America will set the tone. So, for example, European interest rates have been lowered in the Americas for quite a while because European inflation has been lower, because European growth has been lower.

7:12But what you will find is that all sorts of countries that peg themselves to the dollar, like our friends, the UAE, remember we spoke of them? they will have a significant increase in the cost of capital. Now, why this is bad for the Arab countries is the Arab countries are trying to rebuild after this war. I mean, they've done enormous damage to their economies. Well, they seem to be kind of rolling back on a lot of their big spending, whether it's the line, the GNOME project, and even in their sports washing, like Live and all that kind of stuff, they're rolling back on all of that. Because they're running out of money.

7:47Because they're running out of money, right? And ironically, they're running out of money at a time when oil prices have never been higher. And this is the interesting thing. Yeah, but oil's not getting through.

7:56David McWilliams: But oil's not getting through, so they've no revenue. So again, the UK has to be seen in the context of what is happening in the rest of the world. But the reason the UK is more acute and its problems are more acute is that the UK has had, since Brexit, a credibility problem. People don't believe the fiscal and monetary mix in the United Kingdom. They really, they don't believe it, but it has been messed around with so much, like Liz Truss with her 44 days in power. And her lettuce and all that. But I mean, what has happened in the UK is that the financial markets and the people who lend money to the British government are thinking, I'm not 100 % sure that they know what they're doing.

8:45That's the key. And that's when you lose that credibility, you pay for it in higher interest rates. Now, why that matters is that when you're heavily indebted, little changes in interest rates make a huge difference. So I'll just give you a figure for the United States. So the United States at the moment, right, their overall debt is$39 trillion, okay, which is greater than GDP. And this means that at a rate of interest, they are now, think about this, they're now spending about a trillion dollars just to accommodate the increase in debt and the increase in interest rates. Right. A trillion dollars, to put it in the context, you talk about Saudi Arabia there, is more

9:28David McWilliams: than Saudi Arabia's economic output for a year. Oh, right. So this gives you a sense of why the United States is in a very difficult position. but its position is nowhere near as acute as the position in the United Kingdom. So what we focus on is because the UK is in a political, well, there's a battle for stormers position but there's also coming down the road more political instability in the UK and that's why people are thinking, hold on a second, what are these guys at? But one of the plus points of Brexit that the UK public were told is that you'll have more independence when it comes to things like setting interest rates and stuff.

10:11So they have more control. As opposed to, say, Ireland, where we are kind of stuck with the ECB, whatever the ECB say, we have to follow along. But they have independence now to set their interest rates and therefore have technically more control over their inflation. See, this is what they don't get.

10:30David McWilliams: So UK long-term interest rates are 5.1 % today. Irish long-term interest rates are 3.8 % today. So UK interest rates are substantially above Irish ones or German ones or French ones. Now, the question is, what has that independence given the UK? Because the UK was always setting their own interest rates. I mean, again, sterling never went into the Eurozone. The UK never after the 1992 crisis where sterling fell out of the ERM, which is a long time ago, right? But it has affected UK policymaking. And what you find in the UK is that the essential problem for the British state is that the economy cannot generate the growth it needs to generate the tax buoyancy to get them out of this brace, which is they're consistently overborrowing.

11:25David McWilliams: So unless they come up with a trick, you know, when I say a trick, a policy that generates growth for them, at least growth in revenue, they have this problem. And then you superimpose upon that the political turmoil, which is all related, right? So what you have is you have a game of musical chairs at the top of the Labour Party. The Labour Party are probably going to move to the left because what Starmer is fighting is the left wing within his party. The left always spend more. That's their thing. They'll promise more for education and more for health and all those sort of things. But at the same time, the centrist part of the Labour Party, Starmer's side, the people who actually won the election, right?

12:13What their promise to the UK government, or the UK people, was no new taxes. Or no new big taxes on income tax, for example. Yeah, I remember when Rachel Reeves said that, it was kind of like, oh, really? Are you sure?

12:27David McWilliams: Well, again, to say no new taxes, those people with a long memory will remember that it was actually George Bush Sr., George Herbert Bush, who said, read my lips, no new taxes, just as the Americans went into another oil-dependent recession in the early 90s. And, of course, Bill Clinton won the next election on the basis of it's the economy stupid. It's always the economy stupid. So what you see in the UK now is that Rachel Reeves and Starmer have been cursed by the fact that the UK electorate never really trusts Labour governments. There has been a history in the United Kingdom of Labour governments being undone by the financial markets.

13:14Yeah, because the kind of the default government for the UK is the Conservatives. Has always been, yeah. And you kind of forget that in our lifetime

13:22David McWilliams: because Tony Blair was such a successful prime minister, you forget that in actual fact, as you said, the natural government in the UK, it's a conservative country. It has always been a conservative country. And the first past the post system gives that party that is slightly or modestly ahead, it gives them this massive, what they would call, thumping majorities. Now, the interesting thing, the thumping majority is, it's a very British word, it's not a thumping majority, The interesting thing with the thumping majority is the two prime ministers who have had the biggest overall majorities in the last 10 years are Boris Johnson and Keir Starmer.

14:00Right? So Johnson, we forget, Johnson won by a fucking landslide after Brexit. But he was just a good spin doctor and had a bit of character about him but delivered nothing. Well, delivered Brexit and then we'll talk about that in a second.

14:13David McWilliams: So Starmer should be absolutely secure. He's won a massive, massive majority for the Labour Party. The Labour Party are unassailable in Parliament. And at the end of the day, he's the Prime Minister. All he needs to do is get a good whip to actually whip his all MPs and he should be fine. They can't even do that because the Labour Party are plagued by this internal left-right, left-centrist. I mean, it's something that you kind of feel like saying would you snap out of it yeah but it's also with the backdrop of you know now the the war in iran but prior to that was immigration trump and trump kind of lobbing in bombs you know metaphorical bombs every so often and criticizing this and criticizing that you know and the tariffs and that you know everything so he's kind of up against it I don't know if it mattered if there was somebody else.

15:17If Burnham was in there at that stage or streeting, they wouldn't have done much better. I assume. I don't know. The point is that the UK guilt market,

15:28David McWilliams: they're now costing them above 5 % per year to borrow money. The UK guilt market is suggesting that the British economy has a credibility dilemma. And the credibility dilemma is how can you expand the economy, expand your revenue base, and deliver on the promises that you've given to the people in a whole host of health and education and housing in those areas when you seem to be completely entrapped by the fact that the economy isn't growing quickly enough, right? So that's the fundamental problem. And the reason the British economy isn't growing quickly enough goes down to productivity. that British productivity is very low.

16:14Now, Irish productivity would be very low if we hadn't got the multinationals. But they don't have the multinationals. And prior to Brexit, Britain had one great strategy, which was the City of London, which was the financial centre of the whole of the European Union. That was throwing off so much tax revenue that they could actually pay for everything in the regions. So their one trick was they doubled down on finance and insurance in the late 80s, early 90s. And that worked for them in the sense that it threw off huge tax revenues. Those tax revenues then could be spent in Belfast and spent in Edinburgh and spent in Glasgow and all those areas.

16:58The dilemma is that now with Brexit, the financial sector has contracted. And the reason it has contracted is finance requires capital to be able to flow in and out. And capital can't flow in and out. Can I just say, just a slight aside, I mean, there is a lesson here for Ireland, surely. Because while London was throwing off all that money and it's being spent in the regions, it wasn't being spent in the right way. They weren't developing new industry, new infrastructure and all the rest. and that's why there's this massive divide, the north-south divide in the UK. Yeah. And it's the same for us.

17:40The northerners are just better crack. It's a crack divide. Yes. Northerners are much nicer. But it's basically what Sinead O'Sullivan is saying as well. It's the same dilemma. That we're not spending our loads of corporate tax where it should be spent, infrastructure and developing new industry.

17:56David McWilliams: The interesting thing is that the Blair government did spend wisely in those three consecutive elections. They built up the education system. They built up the health system. There was a lot of devolved spending in Wales and Scotland, Northern Ireland, all those sort of things. But since the 2008 crisis, what has happened is they responded to the 2008 crisis with austerity in the UK and austerity driven by the Tory party. They then doubled down on austerity by having Brexit. Brexit, of course, was a massive shock to the UK economy. It didn't liberate the UK economy. The UK economy continued to underperform, not dramatically, but sufficiently to make that fine balance of budget deficits and interest rates and the rate of exchange sterling.

18:49David McWilliams: All those things are in the mix. And, of course, what you do is if you superimpose upon Brexit, which is a massive structural shock, a cyclical shock like something like trusses, we're going to cut taxes and away we go. And then you have an actual run on the gilt market. It makes investors nervous and it makes the Bank of England's job much more difficult. And so they find themselves essentially in a cul-de-sac. And then people are looking, okay, fine. Did they not know that that would be the reaction? And if not, why not? I think in UK economic terms, Britain is a very strange place. It's the home of economics, right?

19:32Economics is, in effect, a British science. Right, okay. Adam Smith and Keynes and all these, you know, it's a lot of great economic theory. Alfred Marshall comes out of the UK. Yeah. So this is quite interesting. It's also got an independent monetary policy. It has the Bank of England, which is the oldest central bank in the world. it had up until recently the city of London. I mean, it still has the city of London. Like it's not, it's diminished, but it's not gone from any stretch of the imagination. So they have had extraordinary financial brains

20:05David McWilliams: at work in the UK for a long, long time. I mean, Napoleon dismissed the Brits as a nation of shopkeepers. And what he basically said is they're just interested in money. Like that's what he was saying. But in fact, the Brits took that as a compliment. They said, yeah, we are. And our use of money. So when you look at the history of British finance and British economics, particularly finance, they have been unbelievably innovative people, you know. So, for example, the Industrial Revolution was as much a feat of financial engineering as actual real engineering because it had to be paid for. They managed to animate this extraordinary power of the UK economy by using money extremely dexterously.

20:47They've always been good at that. And so what intrigues me now to answer your question,

20:52David McWilliams: when I worked in the city, I worked with the smartest economists I've ever met. They were brilliant. They were funny. They had that kind of odd sense, English sense of humor. They were really, really good and incredibly well-educated and incredibly technically well. Technically, they were much, much better than the Irish economists that I'd worked with here. However, they seem to have tied themselves in knots for the last 25 years. And this is, it's intriguing. How? I still don't get it. Too many economists spoil the broth? I don't know. They're not that smart, clearly. No, but they have had. They can talk a game, but they can't deliver it.

21:34David McWilliams: And that's one of the interesting observations that Simon Cooper had. You know, Simon's been on this podcast about how the talents that get you to the top in the UK, right? the sort of Keir Starmer, Boris Johnson talents. They're both lawyerly talents. Yeah, yeah, yeah. Studying the classics and the law, right? So you're good at delivering an argument. You're good at getting up in the dispatch box and being able to construct an argument. You're a bit of a buffoon, but you can actually, you know, it's what they call a slightly windbaggy approach, right? Okay, from the Oxford Union. Yeah. Those people typically can't do sums and they certainly can't do hard sums, right?

22:16If you actually think lawyers and sums don't go together, right? Yeah.

22:20David McWilliams: And they don't like the kind of engineering side of things, the technocratic stuff, the state capacity, the sort of stuff that builds societies. We contrast that with the French way. The French, of course, can build state capacity because they bias their education system towards engineering. So that that science pro whole conveyor belt of engineering talent that goes to build the French economy. The Brits tend much more, it's more sort of, it's more Cicero and Caesar, you know? Yeah. That sort of carry on. They're relying on a bunch of, you know, Sir Humphreys in the civil service to kind of, you know, they make a big speech and Sir Humphreys has to deliver.

22:59Deliver whatever it is, yeah. But he's not able to. Well, I mean, the problem I think in the UK has been that the trick that they had, which was finance, insurance, It's called the fire economy, finance, insurance and real estate, largely London-based, has been badly affected by Brexit, by the selling of all their prime real estate to Russians and Arabs and Chinese people who don't live there. So it's gutted the community. I mean, I walked around, I think it was a Knightsbridge a couple of weeks ago, and it's empty. Yes, it is. It's Mayfair. They're all completely empty. They're all... London and Stan.

23:43Well, it's just this idea that it's become a safe deposit box for Arab and Russian money and Chinese money, right? Yeah. So there's no vibrancy. So it's not throwing off the revenues that it used to do. And as a result of that, they don't have that cushion. And then you put on top of that the prospective ideas, right? So what is UK policy likely to look like? Now, I still think the next government will be a Tory government because I think the Tory government, there is a residual trust that they have in the Tories. I don't know why, but they have it. With Kemi Badenock? I wouldn't rule it out. I wouldn't rule it out, right?

24:23Sorry, I just saw an interview with her recently and I thought she was really unimpressive and back to the same old thing of pointing fingers and it's not my fault, it's their fault and get your act together. And they were the ones who brought in Brexit and sat on Brexit for eight years. And did nothing? And did nothing.

24:40David McWilliams: And well, actually, it's worse than nothing. I mean, you'd never, ever, ever negotiate a trade agreement, which is worse than the one you went into. And so I think what's happened in the UK, so come back to The Economist, right? The UK used to be a centrist country driven by centrist policies, what English people call sensible. When an English person calls them sensible, what they're meant to do is they actually degrade everything else around you. He's very sensible. It means a safe pair of hands, all that sort of stuff, right? It's now being occupied because of Brexit by the extremes. So Farage's promise to the UK people is that they reform are going to cut taxes.

25:24David McWilliams: It's a sort of an American Republican hyper Thatcherite idea. We're going to cut taxes everywhere. Now, what cutting taxes does, as we know in the United States, is it makes your budget deficit go through the roof. That means more pressure on the gilt market and more downward pressure selling of UK gilts, which means that they will pay more interest rates for more debt in the future. So that's one perspective if reform win. The other perspective is this emergence of the Green Party as being a legitimate alternative to the Labour-Tory axis, let's say. Let me put Labour and Tory in there for a minute.

26:05And that, again, the Green Party's promise to the UK is much more social spending. Much, much more social spending. Are all the Green voters, are they all the kind of, what were the Labour voters, the lefties, just not wanting to go with reform or the Conservatives and they're the only other alternative? Because the Social Democrats have never really featured anywhere.

26:30David McWilliams: That is the watermelon theory, John. Yes, of course it is. which are green on the outside, but you're actually red on the inside. Okay. For those of you who know the Palestinian flag, it's the same flag, but we were talking about the differences. So the watermelon theory is that Marxists who left the Marxist world needed to find a home, a respectable home, that they could be anti... Sensible home. A sensible home. Exactly, exactly, exactly. That they could be anti-capitalist from. Yeah. And they thought, maybe the environmentalist movement because we can shroud ourselves with the good intention of the environment, but in actual fact, we're still the same.

27:11David McWilliams: I think you're right. There's an element of that there. There's also an element of younger people saying, you know, we need an alternative. But the point is for the gilt market, to come back to what we're talking about, a Green Party that offers much more social spending at a time when the economy is anemic in terms of its growth rate is going to also implode the government debt market. and so it means that the British economy is kind of stuck. It's in a trap. Yeah, but okay, so you have Britain that is in a bit of a bind as a whole and it seems that the Labour Party are in a bit of a bind also.

27:48But regardless of who's in charge, the problem with Britain is that there's little or no growth and there hasn't been for a while. And it's effectively running out of money. It's effectively running out of money. You're absolutely right. So what can they do? What should they do? So the United Kingdom, I think it's very important, is running out of money, which is very, very hard to understand when you print your own currency. Yeah. But it's running out of money at the rate of exchange that Sterling is now. They can definitely and quite happily...

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30:01Rules and restrictions may apply. Into lots of money, but sterling will have to fall dramatically in that regard.

30:11David McWilliams: Yeah. And in that case, when sterling falls dramatically, it's not a bad thing. So the problem with the UK is they import a hell of a lot. So it's a very open economy. They cannot feed themselves. So just in a very basic idea, Food prices would go up dramatically when sterling falls because they import most of their food. So what you would find then is if they were to allow sterling to drop precipitously, they would get higher rates of inflation, which would again knock on their long-term interest rates. But they could, over a 10-year period, rebalance the economy away from the domestic economy to the export economy simply because a cheaper sterling will make the UK cheaper.

30:55David McWilliams: That was one of the promises of Brexit, that the UK would be unbound, it would be no red tape, no bureaucracy, this idea of this great trading nation, right? They kept going back to the idea of mercantile Britain, buccaneering on the high seas, all these sort of imagery of almost Elizabethan imagery, right? Yes, yes. Now, they forgot to tell you that the reason Elizabethans got rich is to get the shite out of all the natives, ourselves included, right? It was a sort of wealth down the barrel of a gun, right? But be that as it may, you have to figure out what are they good at? The UK is extremely good at services.

31:33It's really good at advertising. It's good at finance.

31:37David McWilliams: It's got an interesting tech sector, right? They have a huge sort of scientific engineering backdrop in the UK. And London is the biggest city in Europe. So they have lots going for them, right? The regions have very good tourist products. If you think about it, you know, Scotland, these sort of places. But what they need to do is figure out what they stand for. Now, if they are going for this Tory reform, buccaneering idea, then they will have to cut taxes dramatically. In order not to have a fiscal crisis in that regard, they'll have to cut spending dramatically as well. And that is probably, but the reform, the problem with reform is reform is a party of old people.

32:20Old people want spending because they're pensioners. They depend on the health service.

32:25David McWilliams: They depend on all these ancillary health services, right? So that's the intellectual cul-de-sac they're in. The Green Party are very much like a social democratic party here. What social democratic parties need is tax revenue because they love promising all sorts of good stuff, right? We're going to fix this. We're going to fix that. We're going to do this, that, and the other. But in order to do that, you need the tax base. And again, I come back to the fact they don't have it. Now, the question then is what about wealth tax? The UK is a highly unequal society. Property tax would seem to me to be a logical area for the UK to A, help their housing situation, and B, allow people to actually tax something which is immobile, like property.

33:09But there is an ideological fear of a property tax. First, the Tories in reform will never introduce it. And secondly, the Labour Party is always looking over their shoulder at these Bond vigilantes who are policing the Labour Party. So it seems to me, looking at the medium term, that the UK just continues to drift, which is bizarre when you think about the extraordinary potential that is there. It still is a country of, what, 60 million people, maybe more? And it has got extraordinary pluses. But it does appear to me to be a country that has no great structural vision about where it's going.

33:52David McWilliams: Now, Brexit was supposed to be their big vision. But can I ask you then, though, because in the recent local elections, what was really obvious was in Scotland, Wales and England and Northern Ireland, all the kind of nationalists came to power or are now in charge. Is that the writing on the wall? That it could be the end of... Of the UK. Of the UK. Well, I mean, the fascinating thing was that around the time of Brexit... Which could solve a lot of things, actually. Well, look, Reform is an English nationalist party. Yeah. They don't care about Scotland. They don't care about Wales. They'd probably get voted in Wales, actually.

34:31David McWilliams: But they don't care about Wales as being integral to the UK. And they certainly don't care about Northern Ireland. Yeah. Farage is on record as saying he doesn't really care about the Union. He's an English nationalist. I think that Farage in power may well begin to treat the regions of the UK in the same way as Donald Trump treats his allies as an irritant. Something that they're not paying their way. I would say a Farage government, if it were to come to pass, would be a profoundly different creature to anything we've seen. So over the last 30 or 40 years, the last 50 years, general social democratic views in the right of centre or left of centre have largely been the anchor tenant in politics in the UK.

35:19David McWilliams: It seems to me that that era is over, well and truly over. And what you have now is the left of the Labour Party, who you would have thought had seen its day with Jeremy Corbyn, but they're back in, right? and a sort of a slightly Trotskyite bent in the left of the Labour Party are this kind of what I call the golf club revolutionaries of reform. You know, they're revolutionaries in blazers, right? Yeah, yeah, yeah. With cravats and drinking gin and tonics in the afternoon. They're talking about, you know, warm beer and sandwiches. Yeah, yeah. Gammon man. Gammon man, exactly, yeah, yeah. And, you know, that seems to me to be a recipe, John, we'll finish here for complete political chaos because, again, I come back to the windbaggery.

36:10It's all about good intentions and great speeches, but no attention to detail. And the problem when you have no attention to detail in anything you do, detail is the key. Yeah, the devil's in the details. It is, you know, and if you've no attention to detail, the people who lend money to you get very very nervous and that is what's happened to the UK now and about a year ago I said it wouldn't be surprised me if the IMF came in and gave them a loan and I still think that this will be the case simply because I can't see where they're going to get the foreign exchange to keep the rate of exchange sterling at the rate it is when all these other pressures are on them to borrow more money, to spend more money, not to pay taxes, to try and get the growth rate up, but they haven't come up with a plan.

37:03And every time they have a prime minister, they fuck them out. They've had seven prime ministers in a decade. I mean, this is extraordinary stuff. You know, it makes Ireland look like a bastion of stability. It's becoming more and more like Italy of old. I mean, it's becoming more and more like Italy of old. And what have the Italians done? The Italians have been running a primary budget surplus since the 1990s, which means that if you take out debt servicing, the Italians have been running the tightest fiscal ship in Europe. The United Kingdom is probably the most fiscally incontinent ship in Europe.

37:40Being Italian would actually be the best outcome for them, not the worst at this stage. We'll talk to you next week.

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