243. Identity crisis: why the government can't make up its mind about Digital IDs

0:00Basically, this is a very old fashioned and slightly cynical political judgment by the government that if they just bail out the pubs, people won't notice that all sorts of other businesses that matter are going to go down. The president is turning America into a developing country without robust institutions. I mean, they didn't use the phrase banana republic, but that is the expression that others have used.

0:28Hello and welcome to The Rest is Money with me, Steph McGovern and also Robert Peston. So loads to talk about today because, I mean, there are just so many U-turns happening at the minute. I don't know which direction we're actually going in, but we're going to talk about those. The latest being the U-turn on digital ID cards and also business rates. What does it actually mean for everyone? And the big plans for the North, the Northern growth strategy. I'm obviously buzzing it's got the word North in it, but what does it mean in reality for all of us up here? And will it bring growth to the whole economy?

1:01That's what we're talking about today. We're going to start on these U-turns though, aren't we, Robert? A ton of stuff to talk about today. We thought we were going to be talking largely about a growth-enhancing project by the government, what the government might have thought of as good news, but they've managed to get themselves into a terrible mess again with mishandling previous announcements. So we'll talk about a combination of chaos and maybe a bit of progress by the government And then yet more Trump interventions in the, you know, American economy. I'm beginning to wonder whether or not he's just an old fashioned sort of developing country state socialist is given the kind of things he's doing.

1:43So that's my argument that he's turning into the kind of left wing socialist that, you know, sort of, shall we say, countries without the democratic history of America would expect. But lots to talk about, isn't there? Yeah, there's lots to talk about. And you know what, Robert, I honestly thought today I was going to be saying to you, there's some good news for the North. and that's what we're going to be focusing on. But as you have rightly said at the start of this, they've like done himself a job again, haven't they? At this point, it should be you and I going, talking about these plans for the North, about their Northern growth strategy and what difference that's going to make.

2:25It's something I obviously care massively about up here, but not just for me, but for the whole country. But instead, we have to talk about the U-turns And it feels really chaotic, Robert. It's like self-harming. It's like watching someone self-harm this. It is extraordinary. And there's two of them. One is that they've rode back on their pledge, their commitment, that by the end of the Parliament, and this was, we should be under no illusion about this, this was something that Keir Starmer himself said unambiguously. He said that by the end of the parliament, anybody changing jobs or applying for a job would have to show their prospective employer a digital ID.

3:14That was the commitment. And, you know, it was big stuff for, you know, for people. It was big stuff for businesses. Right. And yet, literally overnight, late yesterday into this morning, they have made clear that that will no longer be the requirement. Yes, there will still have to be checks by an employer that you are entitled to work. And actually, just to be clear, there are already checks, actually, that employers have to make on any employee that you're entitled to work in the UK. But they have said that there will be a variety of checks. One of them will be the digital ID as an option, just an option, not compulsory.

4:01But you might be able to get away with just showing your passport, for example. So this is a massive U-turn. And then the second U-turn is, you know, in the budget, they came up with a proposal to put up the rateable value or rather they announced that the rateable value of a whole load of different businesses was going to increase. But there was going to be help for some of those businesses with the increased rates that they were going to pay. But it became clear in recent weeks that the Treasury did not do its sums properly. So lots of pubs, for example, and other hospitality and other high street businesses facing massive increases in their rate bills.

4:44And they have done a part U-turn, although we haven't got the detail of it. They've announced already there's going to be a part U-turn there. So this is just, you know, the thing that I suppose comes through to me more than anything else is why is it that this government seems incapable of thinking through all the detail, all the consequences of quite big policies before they announce them? And it is that inability to do the groundwork so that they are then, because they're not able to do the groundwork, they then do these U-turns. Yes. And just on the, you know, like, for example, the business rates point, that is that impacts so many parts of life.

5:28It's not just some greedy business owners who are paying this. It's everyone. It's consumers through prices of products. And it impacts, you know, so many different people in different ways. you know i often talk about it because it's one of those things that's kind of not massively been in the headlines in in the last budget so not the budget just gone but the one before but actually it was quietly in there that the rate relief so the relief on business rates which was given to the hospitality and uh retail sector after covid because of the pandemic would slowly be reducing in other words the discount you were getting was reducing therefore putting business rates up and I remember when I said this to Rachel Reeves, you know, that is a, that's an increase to cost for business.

6:16She said, oh no, but we're still, we've still given you a discount, but the discount is less. So there's been that pressure. And, and it's the thing that, you know, I've got this fitness business now, the, the, obviously we've talked loads about my slime one, that it's the thing that the people I run those businesses with talk to me the most about it is, that's the thing, that's the biggest pressure because you need some continuity as well. So you know what your costs are going to be in the year ahead. And it feels like it's a constant guess of what's going to happen with business rates. And on top of that, just another aside, you know, you're behind this, I'm behind this, the reading campaign to get more people reading.

6:54We have a huge problem in this country with literacy. It is, and particularly in deprived areas, you know, it's really shocking the literacy levels. And so Bridget Phillipson, Education Secretary, launches this big national year of reading campaign. She had everyone at the Emirates, didn't she? Richard Osman, who obviously top selling author, one of our family and the rest is, and various other authors and every publisher has been getting people behind it like us, you know, we're all coming out. You and I have both been promoting it in our own way. Yeah. Yeah. And then what if you go on the bookseller, which is kind of the main trade mag for people in the industry, one of the big things that basically dominate in is the business rates and how it impacts bookshops.

7:42And so, you know, on the one hand, you're saying we want more people to read. On the other hand, you're hitting high streets with these independent bookshops who are really struggling to pay their bills because things like business rates are going up so much. And this is, you know, my concern about the nature of the new system that they're going to announce because we haven't yet got the detail of how they are going to help businesses that would struggle to pay the higher rates bill as a result of this upward revaluation of properties. But what they have indicated is it will be largely focused on pubs.

8:29And, you know, I was talking to a very senior man of the cabinet yesterday who says that they still haven't been told by the Treasury whether there will be any help for hotels, for restaurants, for bookshops, for other kind of struggling high street shops. And this minister was genuinely concerned that it would just be pubs. I mean, look, So pubs have a problem. They have been facing all sorts of pressures for years. But I can't help, I'm afraid, the slightly cynical view that the reason the help is focused on pubs is because historically, you know, pubs are British institutions that, for example, you know, our tabloid press always get behind.

9:19And, you know, basically, this is a very old fashioned and slightly cynical political judgment by the government that if they just bail out the pubs, you know, people won't notice that all sorts of other businesses that matter are going to go down. with a limited pot of money. They're just going to give it all to the pubs and to no other businesses. And I think if that were to happen, I mean, the damage to important independent retail businesses, the damage to our high streets would be serious. And you and I have talked on this programme, particularly the problem in towns. Those sorts of run-down areas can't cope with another blow of this sort.

10:05Yeah. And I've said this before, you know, I've seen owners in tears about their business because, for example, where I have the fitness business now, it's in a kind of suburb of Newcastle, quite a wealthy suburb. but a lot of the shops around there are independent shops. A lot of them are like young entrepreneurs who've started up like they're kind of lean cuisine cafes, you know, focusing on healthy protein, you know, grab and go fuel stuff at their places like that, funky coffee shops, but they are like really worried about the uncertainty here. You know, and I mentioned bookshops, talking to the booksellers association that they were saying that you know they've talked a lot to their to bookshop owners about this they did a survey of them and 85 percent of them that were surveyed the booksellers have said that they're less likely to invest in things like you know their staffing employing people events premises as a direct result of their business rates changes so that's businesses not investing to grow because of these changes and therefore it comes back to that point we always say how do you get growth if you're squeezing the businesses who are going to give us that growth who are going to employ more people and of course it goes to another point we make which is you know you can't expect higher growth if there is instability of this sort and then and just related to that and i say let's get on to powerhouse rail in a second.

11:37But also, it's almost heartbreaking the way they have squandered both a public sector modernisation programme, or at least the sort of perception that this is a government that understands about the importance of modernisation, plus an initiative that would actually help the productivity of all sorts of businesses. And I'm now going back to this digital ID project. If the digital ID project had not been inextricably linked to an idea that does upset, you know, very large numbers of British people, particularly older people, which is effectively that you have to carry around in your smartphone, some kind of proof of who you are.

12:29And for lots of older people, this is something that they do not regard as British. Now, as it happens, I personally have never had a real problem with the idea that we should carry something around that proves who we are and entitlement to work or to use our public services and the rest of it. But the truth is, it's a deeply, deeply divisive issue. and you know there are lots of people who think there are there's an infringement of civil liberties and i get all that right so you know and the reality is if if the government was going to go down this route which it did try and go down which is to make a digital id compulsory when it comes to getting a new job you know they should have built you know should have made the case through speeches, through interviews over a period of weeks and months, rather than simply announcing it as they did literally out of out of the blue.

13:34So what they've met, but having done that and having now you turned on that, they have turned something that would have been actually a very practical benefit to millions of people into something that now feels a bit toxic. And the practical benefits would have been I'll give you just a very, you know, Because weirdly, in the run up to their announcement, when it was still just a development thing within government, I talked to officials and ministers, particularly within the science department. And the point for them of what they were developing was if you had this form of digital ID, let's just say you're a young person, you've got this digital ID.

14:13At the moment, if you're a young person trying to get, for example, a bank account, it's a bit of a nightmare. Right. Proving your identity and all of that. This actually this digital ID card for a young person would have literally instantaneously given them the ability to just open a bank account. Literally almost like a click of the fingers because every bit of information that the bank needed would have been on that card. So in terms of convenience for all sorts of people, it would have just it would have been jolly useful. Equally, I think there probably is a case that most British people would accept that this form of robust ID actually probably most people would say, actually, if you're getting all sorts of welfare benefits, actually, maybe you should have to prove your identity in a more robust way.

15:03Same with all sorts of, you know, same perhaps with things like your relationship with HMRC and getting tax refunds. We know there's a lot of tax fraud in this country. So I think, you know, there would have been if you'd simply over time made the case for this is modernisation of how the state operates and indeed then modernisation of how British citizens interact with all sorts of important businesses like banks. I actually think you could have made a positive case for this. But unfortunately, it got dragged into, you know, this highly contentious issue of, you know, the state holding too much information about us, the state knowing where we are at all times, the, you know, you know, the fact that in many people's minds, identity cards are somehow associated, I think completely crazily with being, you know, in Nazi Germany or something, you know, it got ludicrous.

15:59Unicrously emotional. So, of course, they've now done this U-turn. They are still pressing ahead with the development of digital ID. But now there's a sort of nasty taste around it, whereas this could have been, again, a good news, a better news story for the government. Yeah. And, you know, we've been here before. I remember Alan Johnson when he was Home Secretary back in 2009. It was his big thing to bring in national identity cards. And I remember, I mean, he still carries his around now in his wallet as some like relic of the time. If you ever ask him, he'll whip it out of his wallet and show you.

16:37But similarly, you know, the plan was to make it compulsory, wasn't it? And then as you know, there was lots of controversy around it. He was saying it was a no brainer to tackle things like fraud, as you say, all the things you've laid out. But there was that controversy around what it means morally and ethically. So it got scaled back and scaled back and then abolished. And it's weird that they didn't even learn from that. I mean, they thought that this is a government that would have looked at the Blair, you know, the Blair government's and Alan Johnson's failure and, you know, learn from that.

17:09It's extraordinary, really. Yeah, it is. And like you say, if you've already made the announcement and you're going through it, hold your nerve. It's the same with the welfare reforms. It's the same with the winter fuel payment. People might not like it, but you've just you've already gone through all this shit from them. So just hold your nerve and OK, if there's a whole revolt against it and it's like entirely bringing down everything, maybe you need to rethink it. But not they're too quick to U-turn. So let's talk about something where we both agree that this is we might think they're not being ambitious enough and we'll get on to that.

17:44But let's talk us through their plans for regeneration, their newer, slightly revamped plans for regeneration in the north with this huge new rail project at the centre. So the government are billing this as the biggest transformation to travel in the North in a generation. And I think that is possibly true. But there's a lot of caveats which we'll come to. But what they're saying is, because the problem we have in the country in terms of connectivity is, it's not terrible getting from North to South in terms of going from, you know, Scotland to London. Or in the Northwest going from in the Northwest to London.

18:22although there is kind of capacity problems and things like that the biggest beef issue is going across the country so from newcastle to manchester takes absolutely ages often involves train changes and the like and between those northern cities which are you know we've talked about this before growing uh well uh yeah there's problems but they're still that we're still seeing in growth in those big cities like Manchester and like where I am in Newcastle, it could be a lot better and productivity could be improved if we can get more connectivity between them. So what they've announced is a phased process of regenerating that network, that real network.

19:06And it's going to start in the east side, it's going to be around connecting, I'm just looking at the map now, So it's connecting Bradford to Leeds and York, because that's been a big issue with Rotherham and Sheffield as well. Then the next part of it is going to be that line from Liverpool to Manchester. And then they're going to sort out the middle, which is the kind of third phase of this. Newcastle and Hull, a bit more of outliers on this, which is one of the things that I'm slightly concerned about with this. But overall, the plan is that this will provide a better train network between those places.

19:47And that will encourage investment in, you know, there'll be shorter commutes, better jobs, new homes, blah, blah, blah. That's how the government are pitching it. And they're saying this is all part of this northern growth strategy. and to do this they are going to put they're saying they're willing to put in 45 billion pounds into the scheme through to the 2040s so this is the money they're willing to put in but that will be topped up by money that's coming locally from agreements and plans made with the regional mayors so obviously those mayors have all got their own views on what they want to make their area better and the connectivity better.

20:29I'm sure we'll come to Andy Burnham and what he wants in Manchester. But the scope and I guess the output of all of this is going to be defined by local leaders working with the government on this. And to be honest, the press release on this is hilarious. It's like the government have gone round to every single person connected to the north and begged for a positive quote. But it's like anyone you can think of who has. I didn't see one from you, Steph. Why didn't they come to you? I know, I know. I know. They might have been worried they'd get the truth from me, though. No, I'm kidding. But on the whole, you know, you can see there is definitely positive sentiment about this.

21:11And I was talking to Justine Green in this morning, actually, who former Transport Secretary, former Tory Transport Secretary. And she was saying, actually, I can see the benefits of this as well. This is a long, you know, a plan that is much needed, good for the long term. But we can come to the issues in a minute that I have. I think, you know, you said at the start about is it ambitious enough? No, it's not as ambitious as it was in the past. But, you know, I'm going to start with the positive. What's your sense from this? Because, you know, there was a lot, there's a lot to it. I mean, I am going to work very hard to give a glass half full case here.

21:55But I suppose if I've got slight disappointment, it is that it's taking quite a long time to get shovels in the ground. And because actually the economic benefits, the benefits to the north, but therefore by extension to the whole country, would be potentially very significant from this investment, particularly in that core project, which was given the name Northern Powerhouse Rail when it was first created. And I think as a concept, and I think it's worth reminding people that George Osborne initially announced his ambitions to connect Liverpool with York in this belt of really quite important industrial, commercial cities and towns running all the way west to east.

23:00just south of where you are in the north. Back in 2014, that's when Northern Powerhouse Rail was first announced. And a guest on this programme a few times, Jim O 'Neill, very distinguished economist, was very much associated with promoting this scheme. And the work that they originally did on the economic benefits of this kind of investment is they calculated that it would add 0.2 % to GDP growth every year because of the productivity benefits, right? Now, for a country that is, you know, what are we growing? You know, there's a bit of a dispute about what the underlying growth rate is in this country.

23:51But let's give, you know, the UK the benefit of the doubt and say the underlying growth rate is nearer 1.5 % than 1%. Even if it's 1.5%, right, an increment of 0.2 % every year is a lot of money. The Treasury itself has calculated that if this has the effect of bringing productivity in the north up to the average level for the UK, that would add 40 billion pounds to the gross value added. It's another way of calculating the income of the country. And then it would lead to higher tax revenues every year for the Treasury of 15 billion pounds every single year, which is more than they get from, you know, a 2p increase in the basic rate of tax.

24:56Right. So the economic benefits of doing this look tremendous. Right. But what we're getting in this parliament is one point one billion spent on finalising the route and basically, you know, preparing it in a in a technical sense. We're not getting shovels in the ground to the next parliament. And the reason for that is not because this is a government. I mean, the government recognises the economic benefits. It's just that when they made their. And again, it's a sort of another, I think, missed opportunity for them when they were doing their spending review, setting out their spending plans for the next few years, the years of this parliament.

25:38They didn't include Northern Powerhouse Rail in that. and therefore they haven't got the money to start it in this parliament. And that is, I just, I mean, that's the one bit of it that slightly makes me weak because if, given that this is, I do think, undoubtedly good for the North and good for the country, start it as soon as you can. But they can't because they've already allocated the money for this parliament. It's mad. And that is my fundamental issue with this is, you know, you mentioned Jim O 'Neill And, you know, it was back in 2013 when he was chairing the city's growth commission that he recommended the Northern Powerhouse Rail.

26:18You know, that was 13 years ago. And still we are nowhere near even the design of this thing. And that's what really worries me here is the length of time. And, you know, the government officials were saying it's what? It's going to be 2030s before anyone in the North will feel the benefit of this. And that is only phase one. So, you know, I mentioned the three phases. So that's just that kind of Leeds-Bradford bit. So it's going to be even longer before anyone else notices the benefit. What's going to have happened to the economy in that time? How many different governments are we going to have had by then?

27:00And it's and that's my I don't like to be negative because I think we do need long term plans. And often we criticize government for being too short termist and only thinking about the next election and things like that. So it's really important we have long term strategy in order to properly grow the economy. But it's just with something like connectivity, it's needed now. You know, you're right. You need to start now. And even from a skills perspective, all of that needs to happen now. It can't be suddenly and, you know, however many years, you're not going to suddenly have all the skills there.

27:33It really needs to be something that started now. And that's what I'm slightly worried about. And also, I think the other thing that I just wanted to say, and again, I'm trying not to be too negative, but I am totally, I live and breathe this all the time. This connectivity issue up here, it causes me problems all the time. Just getting from places, missing meetings, you know, not getting home on time to pick my child up, things like that. so the other thing the big problem with the trains system at the moment the railway system is is capacity and i can't see how this helps the capacity problem we have too many trains on a creaking line and yeah there are going to be elements of this that are new lines from what i understand although it was difficult to kind of work out exactly what that new line thing was going to be.

28:20But I think the issue for me is I don't see how this helps capacity because a lot of it is on the infrastructure that's already there. For example, Newcastle and Hull are not getting any new track or anything. They're just going to be on the old infrastructure and it's the trains that are already going to be these Northern Powerhouse rail trains, but they're going to be running on existing infrastructure. And I can't see how that helps capacity when you're moving more and more freight around on trains when we're trying to decarbonize and move more things to things like trains and and not roads how that's going to help the capacity issue and there's a related issue of course which is it only operates optimally when you have much better capacity a new line between Birmingham and Manchester we were originally going to get that line as part of high-speed rail two but as we know the second phase of HS2 from Birmingham to Manchester has been cancelled.

29:31The only part of HS2 that is surviving is London so Birmingham still all sorts of uncertainties around that but this investment in the north would not be optimal unless you create that line from Birmingham to Manchester. One of the things the government has announced, but it's really vague, is they have announced that they will commit to a new line between Birmingham and Manchester. They are very explicitly not calling it a high speed line, but they are saying it'll be a better line, it'll be a new line. But again, no commitments on when it'll be built, what it'll cost. So there's still, sadly, although this is definitely moving in the right direction, and it is great that this appears to be a real project that is at last starting after all these years, there are still things, really important decisions that need to be taken.

30:32And just also just on that sort of political point you were making, the other aspect of this, when you don't start, you know, when they are only spending 1.1 billion, you know, if Labour lose the next election and the opinion polls indicate they will lose the next election, right, there is a great risk, of course, that whoever comes in, all of this will be scrapped. But reform has already indicated that they don't like the Manchester-Liverpool upgrade. They don't like them. So it's not even an upgrade. It's a new line. They don't like the Manchester-Liverpool new line. And, you know, so if, you know, it's all very well to say this is all great.