283. Does the UK need to be rich?

13:23But one of the things that has become clear to me is that your political capital, either as a minister or as a government, is at its highest when you arrive in office. So if you're like chief executive of British Airways, you can arrive in the job, you can get your feet under the table, work out how everything works and maybe two years in say, here's my plan to make BA the best airline in the world. You can't do that as a politician because your political capital is draining away from the moment you arrive and therefore you have to do the big things early. So I think the reason, irrespective of the rights and wrongs of their policy decisions, the reason that Keir Starmer and Rachel Reeves have got into trouble is that they didn't do the big radical.

14:09They did do big stuff, though.

14:10Steph McGovern:£40 billion worth of tax rises. You know, there was big stuff that came in. The big radical changes that we need, that are talked about in the book, which I think some of which they would agree with, like welfare reform, like the planning system, those didn't happen early. Now, I want to address your other point, Robert. About national insurance. About national insurance. Because I could just about see the case for the first cut. The second cut, I just thought, was profligate. Well, it wasn't at all. Because, first of all, it was within the fiscal rules. But, you know, my answer to...

14:36Robert Peston:Yeah, but you cut the headroom to the bare minimum. I cut headroom to 10 billion. But let me answer your question because I think it's very important. No, not come on. It's too little. No, it's not. Because look what the OBR said about those tax cuts. They said that they increased GDP by 0.6%. Now, it sounds a small amount, but it is significant. They take 200 ,000 people off welfare into work. That was my growth strategy. And I could have chosen tax cuts that were much more salient with the electorate that people understood. No one was asking for cuts in employees' national insurance. People wanted cuts in inheritance tax at the time, in stamp duty, in income tax.

15:17Employees' national insurance was not on the list, but that was the tax cut. If you talk to people like Paul Johnson, that was the tax cut.

15:24Robert Peston:Paul would agree that the second one was totally unaffordable. I've asked him about it. Paul said that these are those. I have asked him about it. Yeah, I know, but you're not letting me answer the question, Robert. Those tax cuts were the ones that had the biggest impact. Now, if you don't want to do those tax cuts, then you have to answer the question, what is your plan for economic growth? Now, in that chapter, I have a whole chapter in that book. In the book, I have a whole chapter on tax. And I think I prove in that that actually reducing the burden of tax is one of the ways that you grow the economy.

15:52Because if you look around the world, the countries with lower taxes are the ones that are growing faster. And I think we need to go on that difficult journey. And the only way you can do that is to show restraint in public spending, which is what I also did in that final budget.

16:09Steph McGovern:On the point which Robert makes around the decisions feeling short-termist, it feels like we're seeing a lot of tactics rather than principled decisions. And on your point about cutting taxes, when Liz Trust came in and suggested this, all hell broke loose on the bond markets. If you can't prove you've got the money coming in, then you get hammered on borrowing costs. That was right. And her mistake, and actually the reason I became Chancellor, and the reason I, by the way, ended up on holiday in Brussels and getting a text message from Liz Trust, which I thought was a hoax. So I ignored it, asking me to come back to London and be Chancellor.

16:49That happened because the tax cuts that Quasi Quarteng introduced in the mini budget were funded by borrowing. And that's not a real tax cut. That's actually stacking up debt on future generations. And the markets, quite understandably, didn't like that. And so, you know, if you're going to reduce the burden of taxation, this is not something you can do overnight. It is a long, hard slog. But the evidence, I think, is very clear in the book that the countries that have done that, I mean, you know, the example I give in the book is the state of Mississippi. Yes. Which happens to have a governor who's called Reeves, not Rachel Reeves, but Tate Reeves.

17:24And he's reduced state income tax to its lowest ever level. In fact, he's got a plan to abolish it. And Mississippi, which was the poorest state in the US, has now overtaken the UK in GDP per head. Well, they're not at what's called purchasing power parity. So it's, you know, but the point is... There's a lot of debate about whether they're really richer in Mississippi than here. But what there isn't, there is, you're correct, Robert, of course. But what there isn't is a debate that over the last three years, Mississippi has been growing at about 3 % a year and we've only been growing at 1 % a year.

17:57And so, you know, you have to have a plan to unlock growth. Now, my employees' national insurance was one part.

18:03Robert Peston:My argument is not that you shouldn't be cutting taxes, particularly taxes which relate to essentially the ability of businesses to grow and employ people. My argument would be, and let's not get bogged down in it, my argument would simply be that that tax cut, the second one, not the first one, but the second one was too risky given the state of the public finances. That's my only point. My point will be very straightforward. I mean, in that budget, as you may or may not remember, I signed up the NHS to improve productivity by 2 % a year. and my plan had I been, the government being re-elected, would be to roll that across the whole of the public sector.

18:49So yes, I was very conscious that the implication of doing that is more restraint on public spending. But I think that is what we have to do if we're going to get growth.

18:59Robert Peston:We're not going to agree on this particular tax cut, but let's just get into some of the individual policies.

19:03Steph McGovern:Yeah, well, can I just ask as well, your thoughts on this idea of more of the money being devolved. So, you know, the English Devolution Bill, giving regional authorities more discretion over, you know, how they use the regions to evolve budget. I, as someone in the regions and talking to people, you know, obviously it's not all about the North East. Some fella came up to me in the street the other day and he was like, you're always buying on about the North East. I live in the South West. We have problems too, you know. But there we are. But I have felt like there's more of an inertia towards change and understanding of what those regions need based on, you know, the potential of using money that's devolved.

19:44Steph McGovern:Do you think that's part of it? Do you think that will work? I do. And I think that it's really interesting because let's just, if I can just do this segue between what Robert was saying and what you were saying. So tax is very highly politically charged. You know, for all our lifetimes, Tories have wanted lower tax. Labour's wanted more money in public services. So it's like very politically charged. I deal with that in the book. But there's a whole lot of things in the book that are not ideological at all, like making it easier to build things, making the NHS more efficient. And, you know, the two quickest wins, I think, well, actually, probably the three quickest wins would be to bring down energy prices, to get more people off welfare into work and unlock the power in our regions.

20:30And, you know, this is so interesting.

20:32Steph McGovern:What does unlock the power in our regions mean? So the interesting thing is that you can go back 30 years and there has been no shortage of effort by national governments. You know, all the way back to Michael Heseltine in Liverpool or George Osborne's Northern Powerhouse. Boris Johnson's levelling up. You know what Keir Starmer and Rachel Reeves are doing with their place-based programme. But nearly all of those programmes, one way or another, have involved the Treasury giving money to the regions. And that is all very well. But what other countries have done is actually allow their regions to sort out their own problems by giving elected mayors the real power to sort out planning, to issue bonds, to raise taxes.

21:18And I think our devolution is a bit of a fraud in England because what we have is elected mayors like Andy Burnham or Andy Street or Ben Houchen who have political legitimacy, but not the agency to solve their problems. Now, I'll give you an example. Manchester, a bit topical now with Andy Byrne, right? You compare what's happened in Manchester to what's happened in Bilbao in Spain or Denver in the United States. In the 1980s, all three cities had similar income per head. They were all deeply depressed by deindustrialization. and over the last 40 years Bilbao and Denver have basically caught up with the richest cities in their country Madrid and New York Manchester still is on an income of about half London's income and Manchester actually the area that's had the most devolution of power but can Andy Burnham raise three billion dollars which is what the mayor of Denver did to build Denver International Airport no he can't so can I ask you about this

22:26Robert Peston:because one of the things I really like about the book is you look around the world at what works in different countries. And, you know, you even praise systems in countries that, you know, many of your Tory colleagues would never do. So France, for example, you say they've got quite a lot right in France when it comes to planning and building. Now, one of the things that's really interesting about France, which you point out, is that if there's a development in a commune, some sort of area, local area, the gain in terms of, you know, increased taxes as a result of the development flow to the local government.

23:16Robert Peston:They don't flow to the centre, right? Whereas here, there is no incentive for a local authority or a mayor to build because almost all the revenue gain that's going to come from that is going to go to Westminster. Is there, I mean, you were in the Treasury, right? I mean, we would love to see those sorts of powers transferred to mayors and local authorities so that they have an incentive to really develop their area and actually say to people who are complaining locally, look, we're going to get all this money in and we're going to compensate you in other ways with better services because we're just going to be more vibrant.

23:56Robert Peston:But is it remotely realistic that any Chancellor is going to give away that tax-raising ability? Well, I certainly would have done it if I'd stayed as Chancellor. Would you? Genuinely? Genuinely, I said it was probably the single biggest reform. It's a kind of big... Did you think about this? Absolutely. It's a kind of big structural reform that you have to do in the first year of a Parliament. Because there's a big upheaval and you have to bed these reforms down. But it was absolutely, I would say it's top of my list. But, you know, that comparison with France is fascinating because it unlocks a fascinating mystery, which is that, you know, over the last 40 years, you could not have two countries, France and Britain, that have followed more different paths.

24:41I mean, we've been low tax, flexible labor market, light regulation, you know, competitive regime for taxes. And France has been high tax, you know, big labor market restrictions, quite anti-business. And yet our GDP and our GDP per head with France have kind of tracked each other over the 40 years. They've hardly diverged at all. And why is it? I think the main reason is because France is just so much easier to build things. And in the 1970s, we had about the same number of houses, dwellings as France, similar populations. Now they have 25 % more because they make it easy for people to build things in France and we don't.

25:23Robert Peston:And it's also, it's not just houses. I mean, you've seen the cost of HS2 now spiralling. Just, you know, I looked it up. You can cycle to Birmingham, believe it or not, in 12 hours, right? We're spending£100 billion on a link to Birmingham, which, I mean, there was one report today that says it's more than it costs to land somebody on the moon. I mean, this is... Why are we so terrible? France, on the other hand, has got so many high-speed railway lines, and it's one of the reasons their productivity is so much better than ours. Well, they just have a system which aligns the incentives of local authorities.

26:03To give you an example, I mean, in the 1970s, France built six nuclear power stations, Quite a big achievement, actually, for a decade to get six nuclear power stations off the ground. And in one part of the Loire Valley, there was so much tax revenue that they went to the local area that they not only slashed their equivalent of council tax, but when broadband arrived, they had free broadband. And they still have free broadband in this area. So, you know, they've actually had a tradeoff there. And the local people are quite happy and they see it's worked. And so this is the kind of thing we could easily sort out here.

26:37Steph McGovern:What's stopping us? Well, look, what's stopping us? I think the truth is that we've gone in the wrong direction. We've thought the issue, what we need to do is to have elected mayors. I think they're good. But you need to give elected mayors the power to transform their areas. And that means tax raising, effectively. It means tax raising, but it also means receiving the taxes that are generated by new businesses that they are allowed to take root in their areas. Isn't the danger, though, for some areas that they might not, you know, they'll essentially areas will become in competition with each other, especially if it's foreign investments.

27:11Steph McGovern:Isn't that a good thing? Well, maybe. But what about those areas then where they haven't got the infrastructure like Manchester has at the moment? They're, you know, they're behind the curve and all that. And then they're trying to compete. And then if it is then connected to how much tax is, you know, earned in the area, received in the area, then they don't get enough. And then they have less money. And, you know, there's that problem as well. I totally get what you're saying, Steph. And you're worried that the kind of the places that are a bit behind could get left even further behind. Yes.

27:43What I would say is that's basically what's happened in this country. I mean, it is. If you take Middlesbrough, somewhere very close to your own heart, you know, if they decide what they really need in Middlesbrough is a new ring road or a new rail station. Right now, they have to get down to London, bang on the Treasury door.

28:01Steph McGovern:Which takes ages because the transistence is... Beg the Chancellor for money. The Chancellor's got all these pressures that Robert and I were talking about earlier. And it never happens or it takes an age for it to happen. Whereas in any other country, a city like Middlesbrough would be able to solve that problem. And, you know, this is where we've gone wrong for a long time. And it's time to put that right. And we can look at nearly any other country. By the way, the disparity between London and the South East and our regions is far higher in Britain than any other major economy. because we don't allow areas to solve their own problems.

28:35So this is a no-brainer. This is not left or right or, you know, Labour or Conservative. If we closed half the gap between London and our regions, that adds about 4 % to GDP. That would make the average household about£1 ,000 a year richer off.

28:49Robert Peston:We've talked about this a lot on this podcast, and you're right. I mean, the fact that our second cities are so much poorer than London compared to France's, you know, Lyon, for example, Marseille, They're all way richer compared to Paris than our second city. I mean, you're right. If we could just close the gap, it would make an enormous difference. Jeremy, so much more we need to talk to you about, but we'll be back in a minute or two.

29:16It's nearly that time, everyone. The Rest is Football will be on Netflix every day for the world's biggest tournament. Join myself, Alan and Micah for daily debates, unfiltered takes and the most special of guests. all from the heart of New York City. Yeah, that's right. We're excited too. See you soon.

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32:09Robert Peston:One of the things you say, which is patently true, that our GDP would improve tremendously if we could just get more of the population here into work. And there's a lot in the book about reforming welfare and a lot of the book about helping people to acquire the skills and indeed the confidence to work. So I suppose what I'm getting at is, of course, in the context of the UK, if we could get more people into work, that would be a great thing. But it can't be any old work because one of the reasons we're in the mess we're in is because too many people are in poverty and yet are in work. Totally agree.

32:51And I think what I do in the book is I look all over the world and I try and look at the best things in every country. Now, America is brilliant at innovation and growing global tech giants. They're very good at giving their local cities proper autonomy to solve their own problem. They actually have a lower proportion of adults in work than we have in Britain. And when it comes to getting more people in work, I think the most interesting models are countries like the Netherlands, Denmark, and Switzerland. And let's look at the heart of the problem. If you live in London and you're on the three main benefits for people out of work, which is the local housing allowance, personal independence payment and universal credit health component, and you're living in a one-bedroom flat, you'll get about£46 ,000 from the state.

33:37If you work full-time on the national living wage after tax, you get£22 ,000.

33:42Steph McGovern:Yeah. If you're in Middlesbrough, by the way, on those three benefits, you get£31 ,000. So you still get like 50 % more. and it's just not possible to have a modern economy with those sorts of incentives. Now, I fully accept these are difficult reforms, particularly for a Labour government, and we all know the trouble they've had. But let me give you an example of the kind of reform that could transform this, which patently left or right, north or south, I think most people would say makes sense. So if you have moderate anxiety or depression at the moment, by citing this, it can up your number of points in the benefit system and then help you to qualify for not having to look for work.

34:21So it's too easy? Well, when I was health secretary, every psychiatrist that I met said that if you've got anxiety and depression, which are real conditions, the one thing you need is social contact. And, you know, if you sign people off having to look for work, you're actually making them more isolated. You're making the condition work. For a fraction of the cost of their benefits bill, we could be giving them talking therapies by expanding the services that the NHS offer and actually get people back into work.

34:49Steph McGovern:And for me, though, a lot of the reason why you have, and particularly we talk about the NEATS, the one million young people not in education, employment or training. If you look at, you know, the mental health problems in that community, it stems from school. A lot of them have been written off at school. They don't have the structure at home to do well academically. But the Conservative government, you know, particularly where Michael Gove was Education Secretary, was all about rigorous academics. It was all about you have got to come out with all this knowledge-based curriculum and you were a failure if you didn't come out with that.

35:27Steph McGovern:So therefore you've got this cohort of young people who feel like they don't have any skills because no one's valued any vocational training they've done. There's this obsession with getting your GCSE in English and maths. And obviously we need literacy and numeracy, But does it have to be this rigorous knowledge-based curriculum that gets them there? And that's why we've got all these young people who are just disengaged because they've been told they're not smart. And yet they probably are. They can probably analyse risk better than any of us because they've had to survive that way. Or they've probably had to talk themselves out of situations because their lives are tough.

36:03Steph McGovern:And yet we don't ever tell them they're skilled. It's such an important problem. And we've got this half right and half wrong. And I think the half-right, by the way, I'm a big supporter of Michael Gove's school reforms. But actually, it wasn't just Michael Gove. The reforms we've had over the last 30 years, going back actually to Ken Clarke and David Blunkett, have introduced rigour into English state schools that have made them some of the best in the world. Our reading standards are the highest in Western Europe. Our maths standards have been catching up with South Korea. Is that what the workplace needs, though?

36:37Steph McGovern:Because AI is going to be able to do all that for us. I think basic skills. It needs communication. We need to be able to communicate with each other. But basic skills like reading and maths are going to be fundamental because what AI is going to do is mean people do several different careers in their life and constantly need to retrain. And if you can't read, retraining is very, very hard.

36:56Robert Peston:I don't think anybody disagrees that English and maths are absolutely core and everybody's got to get them. But I think there are two points. Well, I certainly think that. But the bigger point is we haven't valued vocational skills training. And secondly, because we are going through this artificial intelligence revolution, social, economic, and it will be governmental as well. I would argue that the current curriculum is absolutely not fit for purpose because what people ought to be concentrating on are skills to do with deploying AI. And a lot of them are to do with developing skills of team working, resilience, creativity.

37:35Robert Peston:None of that is part of the curriculum here. And many other countries are already trying to adapt their curriculums in a ways we're just not. Well, I think overall, I genuinely think that our state schools have really transformed over the last three decades. In many cases, they're better than independent schools, which cost a lot of money. But the bit that I think we've got wrong is that the 50 percent of school leavers who don't go to university and our universities have done very well overall. but you know if they were in Switzerland or Singapore or Germany they would leave with vocational skills that meant they could be confident they would earn the average income for the country which in the UK is about 39 ,000 pounds not immediately but over the course of their working life they would be able to build up to that average and I don't think we give that cohort the people who don't go to university, the practical skills.

38:29I couldn't agree with you more, Robert, that in an age of AI, we need to think very hard about what those practical skills are. But I think this has been the missing link in education policy.

38:39Steph McGovern:They are essential skills for everyone, though. It's not 50 % need practical skills and 50 % need academic. Everyone needs these skills because you're also getting loads of people coming out of uni that aren't work ready. So it's not one group is this and one group is that. It's everyone needs them. And the curriculum isn't doing that at the moment. It's a fair point. And I think, look, there's an upheaval going on all over the world because of the onset of AI. All I would say is that, you know, let's also be glass half full. The UK produces more AI trained graduates than anywhere else in Europe.

39:12London is one of the two global AI hubs alongside San Francisco, according to Elon Musk. And so I think we do have actually on the tech side, we've got a lot of stuff going for us. in this country.

39:25Robert Peston:We do talk a lot about that on the podcast. So I just want to take you back to, though, some of the more sort of basic questions, basic questions for government. So you made what I think many people would agree with, the point about how mental health support through the NHS has been inadequate. And I think, truthfully, it is still grotesquely inadequate. If you look at the OECD statistics about how we compare in terms of welfare spending to other countries, the way that they measure it is they actually lump together pensions, payments, support for the unemployed and health spending. And if you lump all that together, we are in the middle of the pack.

40:17Robert Peston:Would that suggest to you that even though there is a very strong case that the NHS is not productive enough, that nonetheless, actually, we've just got the balance wrong, you know, when it comes to where we spend the money, that actually more money needs to go into health support, if you're going to have any chance of actually reducing the money that you spend on paying people to stay at home? Look, we are going to need to spend more on the NHS as the population ages, and we have to be realistic about that. But what I'm saying in the book is, you know, if I think about those very chaotic first few hours when I was chancellor, what is the – when it comes to economic growth, what is the one thing that I wish someone had told me right at the very start?

41:08But it is that the way that you unlock economic growth is not difficult. There's actually widespread agreement amongst economists and there's widespread agreement across the political spectrum. But the thing is most of the things you do will take five years before they show through in the figures. At least. So you've got to be really determined. If you talk about like the planning reform that make it easier to build a nuclear power station, which ridiculously takes about 20 years in this country. If you change the law so that it only takes 10 years, that would be a good thing, but you won't see it in that parliament.

41:44And so what you have to do is two things. First of all, you have to be really determined really early and get those things done quickly while you've got the political capital. But secondly, amongst all the things you can do, there are two or three things that would have an almost immediate impact. And concentrate on those because they will show through in the numbers. Now, one of those is getting more people into work. It reduces the amount you pay in benefits, and it also increases the number of people in work. It means the taxes paid are high. It helps the economy expand.

42:14Robert Peston:Would you have liked to have done something much bolder on child, because you did do childcare reform. You did provide much bigger subsidies for childcare. But I think you actually wanted to be more ambitious. I did, and I would have liked to have done, if I have a, probably my biggest regret, actually, as Chancellor, is that I didn't crack into welfare reform right at the start. because I did crack into it, but I did it after a year. But can I just say, welfare reform is one. That has a pretty immediate impact. For Rachel Reeves, thinking about, you know, finding money within her fiscal rules, that would be a big help.

42:44But the other one that has a very immediate impact, which I know you, Robert, talk about a lot on the different media channels you're on, is bringing down energy prices. Yeah. Because literally everything in the economy uses energy, and we have the highest energy prices for business. It's about, you know, they're about 75 % lower in America, but even in France, they're 35 % lower. And, you know, this is something where I think, you know, we have the madness of the four largest offshore wind farms in the world off the North Sea. And yet we have to switch off half the electricity they generate.

43:22Robert Peston:Don't weep every time anybody talks about this. It's so upsetting.

43:26Steph McGovern:On that point, though, because you said this right at the start about, you know, all the different geopolitics and pandemics and everything else we had in that, you know, last 10, 20 years. But we always get hit hardest. You know, take the situation with Iran now in the Middle East. It's us that everyone's talking about as being the inflation. But, you know, we're going to be hit hardest by inflation. So what can we do about that as well? So we stop hearing chancellors, blame all these geopolitical situations that we have no control over. Here's the funny thing, Steph. This is, you know, one of the things that probably Rachel Reeves and I actually have in common.

44:04We always get hit hardest by the commentators who say Britain's going to suffer the most. And then we always get the biggest upgrades when afterwards they say we're not actually quite as different to other countries. And we've just had an upgrade this week. and the truth is actually that we have not done badly compared, you know, over the last 15 years we've grown faster than countries like France and Germany and Japan but we haven't done as well as we need to and the point about this book, what I'm trying to say to people actually put aside your party politics actually we can do this and there are some very practical things we need to do you've got to have resolve, you've got to get cracking quickly we may have in the next few months a new Chancellor and a new Prime Minister and if that happens they may have a bit of a honeymoon and that is the time to crack into these things crack into it and actually do the things that could make a longer term difference

44:57Steph McGovern:so one quick question then because i know robert's got another one on that then if you're saying you know we are the commentators um of not are not getting it right they think we're hit hardest but we're not but the bond markets react as well don't they and that is an immediate impact that is instantly the borrowing costs go up so it's not just about people talking about it there is a genuine tangible impact. It's true and there are lots of different reasons why we have to pay more for our debt but let me make a bigger point about debt because I think this is something that we need to talk about a lot more.

45:30You know if you look at the 110 billion pounds we pay in debt interest which is more than we spend on the entire armed forces it's more than it's nearly three times what we spend on the police and then you add to it the pensions for civil servants which which we have to also fund as a liability of the state and for retired doctors and nurses and so on. This comes to about 19 pence on income tax, those very, very high levels of debt. That is a drag anchor on growth in the economy. That's money that doesn't go into building nuclear power stations. It doesn't go into buying things that cause shops to boom and factories to boom.

46:09And in the end, it's not sustainable. And I think we have to ask ourselves, whether it is morally right to pass on this kind of level of debt to our children and grandchildren, not least because it is condemning them to the kind of low growth we've got now. So what's the solution? Because I don't want to talk about problems. Let's talk about this. I think it's very straightforward. I think that all governments of all colours should just adopt a very simple, you know, what Rachel Reeves calls a fiscal rule, but a very simple rule which says that we will not grow public spending what the state spends faster than economic growth.

46:45Because the root cause of this problem is that, you know, over many years we've been growing the spending by the state faster than the economy, and that is in the end going to lead to bankruptcy. But there is a connected question.

46:59Robert Peston:We should be concerned about bequeathing huge debts to, you know, our children and their children. The biggest part of the welfare budget is what we spend on pensions. This is reforming the growth in essentially payments to those who've retired. It's just been too politically difficult for any government. You didn't do it. You do think, though, that the time has come to reform the triple lock, don't you? So what would you do? Well, I think it does need to be reformed because I think that if pensioners knew that their very generous pensions ultimately really being funded by debt piling up on their children and grandchildren, I think they would think again as to whether it's the right policy.

47:43What would the rule be for you? Well, I think it would need to be part of a bigger change in pensions policy. I actually think Australia's got a very good pension system. That's the one I think we should learn the most from. But I think you could link pensions to prices or to incomes. But not both. But not both at the same time. But I just want to say something a little bit more positive because all these are kind of difficult reforms. I think that if you step back and you really look at Britain and our opportunities, we've got some brilliant things going for us. And it's worth reminding ourselves of these because there is a lot of doom and gloom.

48:18Outside the United States, we have the most respected universities in the world. And what does that mean? It means that we have huge numbers of startups in science parks and business parks across the country, not just in Oxford and Cambridge and London, across the country. We have the third largest tech ecosystem in the world in the century of AI. We're a huge services economy, which is the direction all these things are going. And I think, you know, British innovation is amazing. I agree.

48:50Robert Peston:But can I ask you what? There is a connected question, which I do think is, I know something you thought about when you were chancellor. and you know again Steph and I are talking an enormous amount about you know not only our amazing universities but just the vibrancy of the tech sector life sciences, AI and all the rest of it but there were some stats out this week which showed that just so far this year overseas interests have bought listed businesses worth £150 billion, British businesses, have been bought by foreign companies. The numbers of businesses actually floating on the London Stock Exchange is about, I don't know, it's trivial.

49:39Robert Peston:I mean, it's like a billion or something. I'm not even sure it's as much as that. But basically, this is just one aspect. I mean, the more worrying aspect is just the sheer number of these startups that when they get to a certain size, in order they feel to become global leaders. They sell out to either a San Francisco interest or Singapore interest. You know, you looked at the problem that British capital is not backing Britain. It's still a grotesque problem. Well, I didn't just look at it. I actually put in place a major program of reforms called the Mansion House reforms to address it. And Rachel Reeves has followed that up.

50:21She and I complete agreement on this. And we've just had a new act passed that will address precisely that issue and will mean that pension funds consolidate and start to invest in, you know, very promising startup companies, not just in Britain, but in Britain, as well as other countries. But this is my point, really. I mean, we do have we do have a glass half empty problem that our unicorns are new tech companies tend to get bought or float overseas. Yeah. But 10 years ago, we didn't have the unicorns. And, you know, what we were saying 10 years ago, I remember this. I was Culture Secretary responsible for the tech industry in 2010.

51:02And people say, you know, we invent all the amazing things and then other countries commercialize it. Well, now we are actually commercializing. We've got these amazing companies. And the reason I just want to give you a note of optimism, because all the books that I write, I want to give people hope. And this is what I would say. My kids are 11, 14 and 15. You've met them, Robert. And if I was saying, you know, which country do you want to make your fame and fortune in? Which is the most exciting country in the world? Well, of course, economically, America is very exciting. But it's also a very polarized country.

51:36I would say outside America, I can't find anywhere where the opportunities are as good as they are.

51:43Robert Peston:We would agree, I'm sure. But we are, you know, very much optimists, Steph and I. But I'm going to pose something that I've heard Steph pose before to you, which is the missing link in all of this is, you know, if you look, I mean, there are some literally mind-bogglingly brilliant businesses at the moment that are raising, you know, billions based in London and fingers crossed they'll stay British, right? Right. But if you are in Middlesbrough, you know, you think to yourself, what is the connection between these people getting unbelievably rich in London and my life when I can barely afford to pay for the for the basics?

52:25Robert Peston:And so the missing link in all of this is how does one connect what is sort of economic set, definitely economic success. But how do you connect that with the lives of people who just look at what's been happening in this country for 20 years and say, you know, Westminster just has done nothing for me. And these businesses that are incredibly successful have done nothing for me. How do you make that connection? Well, it's the most important question to ask because people, not just in Middlesbrough, but actually all over the country, are losing confidence in capitalism. And actually, some of them are losing confidence in democracy.

53:03They're saying this system is bust. It doesn't work for me. And what you realise is that over my political lifetime, it's not that globalisation is a bad thing, that free trade is a bad thing, that London being super successful, international city is a bad thing. It is that we have not been good at spreading opportunity. And I think it relates back to what we discovered, what we talked about right at the start, which is that we haven't given regions the power to sort out their own problems.

53:32Steph McGovern:And also, I just want to make that point on capitalism, because I think people think that if you are not living in one of these wealthy areas, you don't want to make loads of money for yourself. But you do. There's plenty of people in Middlesbrough, but also all over the country, not in the media and political bubble, wearing, who do want to make money for themselves and make profit and, you know, do what they like with it. So it's not that, but it's your point of there's no opportunity to do that and certainly no opportunity to stay where they are. They have to move to do it. But these are solvable problems.

54:05And, you know, if you're talking about, let's call it the Middlesbrough issue.

54:08Steph McGovern:My God. Sorry to everyone else. You can look at other countries. You can look at Germany or Japan, where they have actually evened out opportunities across the whole country. There is no difference in the standard of living between Tokyo and Osaka. or between Munich and Berlin. And even France, the difference, as Robert was saying, between Lyon and Paris is half that between London and Manchester. So other countries have done this. We can absolutely do this. But we've got some things that none of those other countries have got. In the age of AI, we've got some amazing things happening right here in the UK.

54:45So I don't think this is a time to lose hope. I think it's a time to actually say, look, these problems are solvable and the solutions are in plain sight.

54:54Steph McGovern:Can I just give you one example to just exemplify what I mean when we've talked about Middlesbrough? I bought a house in Middlesbrough when I was in my early 20s. I was working in London but couldn't afford to buy one in London. So I bought a house in Middlesbrough for£125 ,000. I sold it 20 years later for£125 ,000. So that is like, you know, and it wasn't one I could ever really live in because my job was in London. And so that's the issue here. It's that everything you think will help make you richer. Although if you've been buying property five years ago, you'd have done far better buying it in Millsborough than in London.

55:30Yes, I know. Well, actually, yeah. Because in London they can't write down in value.

55:32Steph McGovern:Yes, and also the rentals is a better margin and everything. Anyway, but it's just that for everything that's tangible to normal people, it feels like it hasn't got better. And that's the point of all this, isn't it? It's like, how do we make people feel like their lives have got better? Correct. And I think it's important, though, to do this in a way that is about substance and not about spin. You know, when I was in government, we said we're going to focus on the cost of living. Keir Starmer said he's going to focus on the cost of living. And normally you'll get a kind of gimmicky announcement at a budget about reducing electricity bills by this or reducing, you know, another bill by that.

56:14Steph McGovern:So you admit you do gimmicks at the start? There's too much gimmicks on all sides in politics. And the truth is that, you know, the things that would unlock economic growth, like empowering regional mayors to sort out problems, like properly transforming the welfare system so that people have incentives to take jobs and not remain parked on welfare, like sorting out the planning rules so we can actually get stuff built. Those are the things that would really make a difference in terms of transforming the prospects for families in this country. And we should build our case on the things that would really make a difference, not the sort of, not the kind of the gimmicky things that tend to find their way into budgets.

56:56Robert Peston:Which I think is a positive note, probably, to draw this to a close. What do you think?

57:03Steph McGovern:Yeah, very much so. Let me tell everyone the name of your book again. so this is Can We Be Rich Again? The Extraordinary Potential

57:10Robert Peston:For the second edition I'll email you through an alternative title You can but I think this title is going to be a winner because I don't think there's anyone in the country who doesn't want to be rich and doesn't think that it was easier before than it is today

57:22Steph McGovern:Okie dokie Excellent Jeremy thank you for your time Fascinating discussion Thank you That's it from us and the rest is money Bye bye

57:29Robert Peston:Goodbye

57:36.