151. Do the Tories have a new economic message?

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1:14Hello and welcome to The Rest is Money with me, Steph McGovern. And with me, Robert Peston. So we've had the spring statement. We've spoken to the Chancellor. Obviously, everyone's got an opinion on it now, not least the Shadow Chancellor, Mel Stride. So we spoke to him, didn't we? We did. And to be clear, I sort of feel I already know what he thinks about the spring statement itself, because broadly he's done that thing that shadow chancellors usually do, which he's been absolutely everywhere talking about it. So I was much more interested in talking to him about essentially who he is, what his core beliefs are and what we can glean from that for where the Tory party is going in terms of the big policies that it will develop over the next couple of years.

2:07so you know I think you and I sort of agreed you know before we sat down with him that we'd stay away from the sort of normal sort of political back and forth and try and see if he's got any big ideas yes so here's our interview with Mel Stride Mel thanks for joining us a pleasure you've come prepared with snacks I see your go to snacks I raided your larder oh did you I mean I tell you, it's one of the really interesting things about particularly people from, shall we say, you don't spend as much time as we do in places like Spotify. They come here and they think, why is my office not providing me with all this free food?

2:47No, no, I've got a free banana. It's been worth coming already. Yes. Free banana and a packet of crisps. A bag of crisps, I know. And we'll check what's in your bag on the way out as well. Obviously, we've got loads to talk to you about in terms of what's going on in the world. But before we get into all of that, can you just give us a sense of who you are? and you started in business and you then moved into politics. I always find it really interesting when people make that move. Why do you do it? Is this sense that you can change the world by becoming a politician or is it you think it's going to be easier or harder?

3:19So who am I? Do you know very few people ask me that in politics. You always get asked about policies and things, don't you, and all that kind of stuff. So where do I start? So I got a free place at a grammar school and I got a place at Oxford University, the first person in my family to go to university. So that was great. So what did your mum and dad do? My mum and dad left school at 15 and 14 years old. So my father went out and set up his own business, a kind of insurance brokerage, that kind of thing. So when I was younger... How old was he when he did that? Gosh, you're testing my mental arithmetic now.

3:52I mean, he must have been, I'm guessing, his early 30s, something like that. All right. So as a young boy, I would have been aware of growing up in a family in which a small business was being struggled with and created and, you know, all the long hours and the triumphs and disasters that went with it. I was aware of business at a young age, and I was by extension aware of politics, not directly, because neither of my parents were overtly political at all. But I do remember sitting down and listening to the results of one of the two elections in 1974, I don't know whether it was February or October, and my parents being passionate about whether the Conservatives won or not.

4:30They wanted the Conservatives. They did. And I assume that was because my father was running his own business at the time. And for whatever reason, he felt they were the best option for the country and for him. So I knew that politics mattered, even though it wasn't there on a day-to-day basis. Then, not long after I left university, a couple of years after that, I set up my own business. Doing what? Exhibitions, conferences and publishing. And probably, because of course it was kind of in my DNA from having watched my parents, my father in particular. But had you been political at uni, though?

5:01You were involved in it. Yes, that was when politics really started. So I was involved in the Oxford Union. I was president of the Oxford Union and of the Oxford University. Why did you want to do that? Conservative. Because, to me, going from a grammar school in Portsmouth out into this wide vista of bright, smart people in Oxford with all sorts of ideas was just the most amazing, mind-expanding experience. You know, not kind of mind-expanding experience. You probably had, Robert, in your youth. You named something different, but who knows? We'll talk about that. We'll talk about it. We'll park that for now.

5:30But no, it was just the most amazing thing. And I suppose I carried that sort of sense that politics mattered with me. And now it was an opportunity to engage with it. So I started getting engaged, particularly with debate at the union and all that kind of stuff. And I just absolutely loved it and arguing things and working out what I believed in life and thought about. And then to your question, Steph, I then went into business and I did that and built companies from scratch, from the kitchen table. you know, sort of scaling those metaphorical mountains, putting teams of people together and all that kind of stuff on my own and then with others.

6:03And I did that here and in the United States. I went to the States and grew a business there. I thought your wife was involved, no? Well, she is now a shareholder in the business, but certainly not. I had not even met her at that point at all. So I built this company and I did that for many years. So I let go of the politics, really, in that active sense, but had always been interested and always concerned about it. And in the end, I reached the point in my later 40s, actually, where I thought, do you know what? I'm fed up with going down the pub and moaning and complaining about politics and what's going on.

6:35Did you feel the impact of politics in business? Is that why you were moaning about it? Yeah, absolutely. So look, in the 1980s, I set up my business, 1986, 87 or thereabouts, in the middle of Maggie Thatcher's time. And that was a time when the zeitgeist was that you could go out and do these things and it was cool to do so. I remember that image, for example, of Margaret Thatcher and Richard Branson on a boat going down the Thames with a sun playing on the water like an endless stream of opportunity. Well, that's how it seemed to me. And Nigel Lawson sort of dropping people's, cutting taxes and getting rid of regulation, then big bang in the city and privatisations and share ownership.

7:13There was something going on there that was deeply exciting. Were you successful from the start? It took off relatively quickly. the initial idea we talked to Jeremy Hunt he had quite a few failures before yes well absolutely I mean you just have to keep trying it took off fairly quickly I mean my first idea actually was to try and address this issue as to why Bright graduates didn't go into industry but went into the city and things like that and I decided there were several reasons but one of them was the general image and secondly was that young people probably didn't know enough about industry and money well yeah exactly they thought it was all sort of manufacturing nuts and bolts and going down coal mines or whatever it was at that time.

7:51That was the kind of image that it had. So I got out of bed one day and I got up very early and I picked the Times 100 list, which in those days of industrial companies had Shell at the top and BP, I think, was second. And I phoned up the chairman of all those companies and I was only 25 years old. How did you get their numbers? I phoned their head office and I said, could you put me through to Sir Peter Holmes, who was then the chairman of Shell. Did you get through? Well, this was the interesting thing. I figured it was a numbers game. So I actually ended up making something like 100 calls on the basis that I'd strike lucky at least once.

8:24The top 100 chairman. Yeah, and I struck lucky once. And it was Sir Peter Holmes, the chairman of Shell, the largest industrial company in the country at that time. And I got him on the phone. And I figured if I phoned early, the secretary wouldn't be in or the gatekeeper wouldn't be in, which is exactly what it was. He picked up the telephone. It was early in the morning. And I said, look, I'm Mel Stride. I said, you won't know me from Adam. But I've got this idea. I think I can help you recruit more bright people into industry. No way. So tell me a bit more about it. Anyway, I knew after he'd been on the phone for about 10 plus minutes with me that I kind of got his interest.

8:59Yeah, you were in. And then he said, I don't know whether you've got a good idea, but what are you doing for lunch tomorrow? So I said, well, nothing. Clear my diary. He sent his car around to where I was working. What? And I was picked up by his driver and they drove me to the... And this was the day when they had chauffeurs and butlers and all that kind of stuff. Absolutely. And you were 24, did you say? 25. I was 25. And I was driven to the Athenaeum Club and I had lunch with... Is that a posh one? It is. It's one of the ones in Palmel. And I had lunch with Peter and we talked about this idea.

9:34And at the end of it, he said, right, I will back you. And my idea was an exhibition to showcase what industry was like, what careers in industry could be about. Yeah. And through him, of course, I was able to network into the boardrooms of all the other big companies. Of course. Because Peter knew Charlie, knew Bert, knew Tessa, knew whoever it was. And round I went as this interesting individual who had this bright idea. And then I had a brilliant meeting. You know, you get all these breaks in life with the then sales director at Ford Motor Company. And Ernie Thompson, bless him, he's now passed away.

10:06But he sat down and he said, I'll tell you how you make this exhibition really fly. Your credibility is zero. So, you know, you're not even an exhibition organiser. You've just got an idea. He said the credibility is in the people that might sign up to it. So take me, take Peter at Shell, take somebody, Mark Spencer, and form us as a group who will refine your ideas but also give you the credibility because it becomes our idea. And that was brilliant because on the strength of getting 12 or so companies together to support me, I was able to go out and sell it to many others. And they all reinforced each other.

10:39and then I had a show and I had the then chairman of the CBI opened it. I went on. Who was that, Harvey Jones at the time? No, it was John Bannam at that time, 1987 this was. Right. And then went on the Today programme. I got invited on that. I reached about 9 million people. Did it at Oxford University. Had about 20 % of the university came through and looked at what industry was doing. And it was just incredibly exciting. So my experience of business was just fantastic. It was a great sort of rollercoaster ride and lots of things to do. Look at that. It's so interesting, that kind of serendipity of him answering the phone.

11:14Yeah, but you make your own luck, Steve. That's what it shows. I do agree with you. If you just sort of thought, oh, well, I'll drop them all. My approach was to go in early and cover the whole lot on the basis it was a numbers game and somebody would come up. But it's also what's interesting about it is I would imagine if people just, particularly young people, met you just randomly, they would think privileged white bloke, he's obviously sort of born with a silver spoon. Whereas what your actual story is, which is actually relevant to anybody who's young, is you've got to really make your own luck.

11:48You've got to go out there and graft. You've got to take some risks. Your story is pretty much relevant to any young person who just wants to make their way in the world. Yeah, but there's a big political point in all this, which is how have we gone from where that story was possible, including home ownership, incidentally? because one of the things that then followed was I got on the housing ladder. You know, it became the foundation for the rest of my life. You know, the wife, my wife that I hadn't met, family I hadn't created. But that first block was actually not just business. It was actually being on the property ladder and having my own property.

12:20So how do we make that happen for young people today? And that's what I want to do. So I want to do, over the coming years, as the Conservative Party now hunkers down and does the hard, deep thinking around some of the big issues that we face as a country, right at the heart of it, I want to get back to some of that excitement and enterprise and dynamism that I've just described, because it was there once, and we lost it. But we are creating vast numbers of young... We are, we are. I'm sorry, vast numbers of new businesses are being created all the time. They are, but if you look at young people and you survey their attitudes, a lot of them will no longer believe in democracy.

12:54They think that the strongman autocrat is the answer to our problems. No, it's very depressing, as you say. They're not that interested necessarily for fighting for king and country and all the rest of it. And I think that speaks to disengagement. And I'm not saying that an enterprise culture is the only answer, but I think it is part of the answer. Having a slice of it is important. There's also a lack of confidence, though. There's not many young people who would have the confidence to think that they could contact a chairman of a company or a chairperson of a company. I think that's definitely changed because I was like that growing up.

13:26You know, I come from Middlesbrough, as everyone knows. And one of my big things was when I joined the BBC and was a bit of a northern upstart, I used to regularly email the DG or whoever was in the big jobs and say, I think you underestimate in the north and things like that. And I often would get replies. But I just think that I had that confidence because I think my school taught me because it was quite illegalitarian where it was about we've all got skills no matter what your background is and all that jazz. I just feel like it doesn't feel like that now in education it doesn't feel like young people have got that sense that they can be whoever they want to be I mean I do think this is such an important subject we both do a lot in schools I set up a charity called Speakers for Schools you know 15 years ago and its heart is just trying to encourage young people to be more confident, to be more ambitious.

14:28I mean, if I think about my own, you know, I always have been absurdly overconfident. And I think in my case... Don't I know it. But I think in my case, I was lucky. I just came, you know, all of our parents are sort of flawed in different ways, but in one respect in which, you know, the most important thing I got from my parents was self-confidence, right? And that came from my family. Unfortunately, huge numbers of young people don't have parents who support them in that emotional way to believe in themselves, which is why it's so important that schools can pick that up. Yes, but I don't think that's the parents' fault.

15:04I think there's been a lot of people who've been let down by the education system over the decades because the education system has siloed people as either being academically clever and worth something or not and not being worth something. So lots of the parents I deal with in schools that are really struggling, they have a real lack of engagement with education because they feel like education did nothing for them. So there's that problem as well. I don't think it's that they don't want the best for their kids or it's just that they don't see education as the way that they'll get there because they just think, well, it didn't out for me because I got told I was thick when I was...

15:40But entrepreneurship doesn't need loads of education. If you look at some people that have been brilliantly successful, actually often they left school very early. Yes, but what do they always say to you? And they made it. Those people will always tell you, I'm not very clever though they always start by saying I didn't do well at school, those people those entrepreneurial people we shouldn't be doing that in schools schools should be making everyone feel like they are smart and that everyone's got skills and people learn in different ways I think some of it is culture so I haven't been to New York for a long time you may have been more recently than me but I'm told that if you get into a taxi there's a reasonable chance that the taxi driver might say something like well, what do you think about Apple, right?

16:23Probably because he's got some shares in it, right? The level of share ownership in this country amongst individuals is incredibly low. Particularly in women as well. And people doing it and trying things. And businesses, of course, you don't have to grow huge, great monolithic companies, do you? You can run small businesses in your local community, make a contribution, earn something for yourself, pay some tax that helps to fund public services, and that's what a vibrant economy is about. So it doesn't have to be people who have to be super confident, But there does have to be a culture that says it's a kind of cool thing to do.

16:55It's valued by society. It's a great thing to do. So I'm interested in this because obviously I've been around this scene for a terrifyingly long time. And one of the things that was interesting in the 80s, definitely one of the positive things that Margaret Thatcher did, was to value business creation and entrepreneurship. And I remember it was really quite interesting seeing, I mean, you mentioned Branson. So Branson, for an astonishing long period, and it's no longer true, was probably the most popular person in the whole UK. I remember in the run up to the 97 election, the way in which Tony Blair was just desperate to have a formal endorsement from Richard Branson because he thought it would make all the difference.

17:47In the end, Richard Branson slightly cleverly sort of half endorsed without ever actually saying the words. And that was the sort of high point, I would say, in this country of people thinking that wealth creation really mattered. And then, particularly after the crash of 2007-8, actually people became much more down on, I mean, I think people confused, which is sad, some of the bankers who did take really stupid risks and dangerous risks and behave recklessly with business in general. And all of business then got tainted in a way that I think has been damaging for wealth creation in this country.

18:25I think that's true. I think it's true also of social media companies and tech companies and the power that these organizations have. I think there is a dichotomy here, actually. I think those attitudes are prevalent towards big business, which is unattractive and wrong, actually, in my view. We need to regulate businesses and make sure they do the right things, but they are extremely important. I think when it comes to smaller and medium-sized enterprises, actually people have a very positive attitude towards those by and large and think they should be more supported, for example, and helped along rather than restrained, which is a view that they might have of large companies.

18:59Mel, still lots more to ask you, but let's go to a quick break. This episode is brought to you by Vanguard. Now, if you've been putting off sorting out your ISA, you are not alone. Investing can feel complicated. But with Vanguard's managed ISA, it doesn't have to be. It's a stocks and shares ISA, but instead of managing it yourself, Vanguard's experts do all the hard work for you. They'll help figure out your risk appetite, match you to an investment plan and handle the rest. No second guessing, no endless research, just smart professional management. And that means more times for the things you'd rather be doing, whether that's focusing on your career, spending time with family or even listening to this podcast.

19:42With over 50 years of experience, Vanguard is all about making investing simple, accessible and cost effective. So if they're sorting out your ISA, what will you do? I mean, I know I've got a garage to sort and that has been on my mind for a long time. If Vanguard's sorting your ISA, what will you do? Discover managed ISA today. When investing, your capital is at risk. Tax rules apply. So let's sort of translate this into a sort of onto the bigger picture. So I know that, you know, your leader has got a sort of 18 month process in terms of coming up with detailed policy. But given what we've just said about the importance of encouraging entrepreneurialism, encouraging enterprise among younger people, providing the right kind of support for businesses to both be created and then scale up, grow.

20:39What does this all say to you about what the priorities of a remade Conservative Party have to be? Can I come to that question by way of one other point? Yeah, sure. Which is about productivity and growth. So if you look at trend growth up to the financial crisis that you mentioned earlier, and we extrapolate that up to the current days. In other words, if the economy carried on growing at that rate, the economy would be 25 % bigger than it is today. Now, we talk about a lot on this programme. Absolutely. Oh, I know you know that. I know you know that. I know you know that. It's really significant.

21:14Starting with that, the opportunity cost. And it's important that we meet that because of the challenge we've got internationally and more on defence and an ageing society and all the pressures that that brings with it needs an economy that is growing and strong. So what are the things that would underpin that? Well, I think entrepreneurship and business absolutely is the source of the river. But you would look at the whole tax system. You would ask the question of the tax system at every level, to what degree is it leaning into growth, into opportunity, into encouraging entrepreneurship and wealth creation?

21:45So I think there's a huge project we need to do around tax. That just sounds like tax cuts, though. Well, I think tax cuts would be part of it. So, for example, if you look at the property part of the economy and all the businesses around that, stamp duty land tax is a very bad tax. It's a transaction-based tax. It stops turnover. stops all those painters and decorators doing the things they do when people move from one property to another, economically damaging because people are not able to move around as much to go to where the work is, all of those kind of things. It's a ridiculous tax. There are some taxes that you would want to really drop that may actually have a sort of laffer effect.

22:23You know, you drop the tax, you get more yield as a consequence. Or you might just get, as you say, a rather healthier housing market, which is what we all want. Yeah, exactly. And people more like to move and downsize, which frees up space. and all of those kind of things that are stopped otherwise. So I think there's a lot around tax, some of which is dropping tax, some of which is simplifying tax. So if you look at the income tax regime, as you know, when you get to£100 ,000, now not everybody is privileged enough to earn that much, but there are plenty that do, and we want them to work more and longer hours and be even more productive.

22:56When you reach that point, the personal allowance, the tax-free allowance tapers away. So you end up with a massive marginal tax rate beyond 100 ,000 until you reach about 125. Now, that is something that's sitting there as an anomaly within the tax system that means that when people get to that level of income, it's not really worth them until they get well beyond it, continuing to work, for example. So I think there are things there that one would do. So can I just ask you on that, because it's quite interesting to me that on, let's say, VAT, I think most of the debate about VAT is pretty incoherent because the popular thing to say, so, for example, I think reform, I can't remember what the Tories were sitting on this, but I think reform went into the election saying they would massively increase the threshold for registering for VAT.

23:48Now, personally, I think that's nuts because broadly, wherever you set the threshold, you'll get bunching. What basically happens is, you know, people that decide that's the limit of my ambition because it's such a pain to register for VAT that I'm actually not going to earn more than 85 grand or whatever the current threshold is. And it's actually, you know, a rather significant deterrent against people being slightly more ambitious and wanting to grow. So from my point of view, the really rational thing to do is actually to reduce the threshold to something like 30 ,000. You bring many more people into the net and then basically you create a system in which there is no longer any disincentive for, you know, for a sole trader or a smaller business to basically grow.

24:37Yes. And you also would have quite a big impact on the cash black economy as well, which would be a good thing. So I think what that illustrates is that right across the tax piece, there are these issues which either lean into growth and people doing things and creating wealth or prohibit it or stop it or slow it down. So I think a huge bit of work around tax. The other thing is the size of the state. If you're going to get the overall tax burden down rather than ever increasing, and it's currently on a trajectory we've learned yesterday to go to the highest level in our history, then you do need to ask questions like, why was it we had 365 ,000 civil servants before the pandemic and today we have 515 ,000 civil servants?