In short
The episode discusses Andy Burnham’s surprise choice of John Healey as Chancellor, why he’s seen as qualified (Treasury experience under Gordon Brown, plus defence, housing, local government and skills roles), and whether he can fund major priorities.
Key claims
Healey’s first priority will be defence spending rising to 3% of GDP by 2030, potentially via a new “defence/war bond” scheme; he’ll also face big budget pressures from welfare and the pension “triple lock,” plus high borrowing costs. Notable examples include Burnham’s VAT cut on electricity bills (5% removed from October; estimated ~£850m/year) and the plan to shift housing public money toward council housing, aiming for post-war scale building.
Guests
Steph McGovern and Robert Peston (hosts). Also featured: Greg Jackson, founder and CEO of Octopus Energy, discussing heat pumps designed for British homes (up to 70°C).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOContext on John Healey
1:48 to 2:21
Discussion on John Healey's qualifications and political background.
“It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.”
Surprise Appointment and Political Dynamics
2:21 to 3:21
Exploration of the reactions to Healey's surprise appointment.
“So we have a new Chancellor in the form of John Healy.”
Market Reactions and Media Speculations
3:21 to 5:20
Analysis of market expectations and media narratives around the Chancellor role.
“about how I thought it was going to be Ed Mediband, you know, I have to say, that was, as I say, on the basis of talking to people, shall we say, close to Andy Burnham.”
John Healey's Background and Experience
5:20 to 7:33
In-depth discussion on John Healey's political experience and qualifications.
“Because it did when, you know, there's a lot of theatre around all of this, isn't there?”
Defence Spending and Economic Strategy
7:33 to 11:43
Debate on Healey's approach to defence spending and fiscal policy.
“And also, you know, he's done roles in housing, in local government.”
Implications of Bonds and Economic Growth
11:43 to 14:00
Discussion on the implications of issuing bonds for government funding.
“Just on that point about having specific bonds for particular parts of government spending.”
Economic Context and Government Dependency
14:00 to 19:26
Discussion on the UK's reliance on hedge funds and the implications for government borrowing.
“And whenever you get that, as I say, whenever you get a movement of falling government bond prices globally, ours tend to fall, UK governments tend to fall more, relatively speaking, than those of other nations.”
Economic Context and Government Dependency
19:37 to 20:31
Discussion on the UK's reliance on hedge funds and the implications for government borrowing.
“But we know it can feel overwhelming knowing where to get started and even dipping your toe into investing can make you feel out of your depth.”
Burnham's Economic Plans and Challenges
20:31 to 28:00
Analysis of Burnham's proposals for VAT cuts and social care funding amidst economic constraints.
“Well, let's talk about the very first thing that he has announced, that's Burnham, which is removing the 5 % VAT rate on the electricity bills that we all pay.”
Housing Ambitions and Challenges
28:00 to 29:39
Discussion on the ambitions for council housing and the challenges in achieving them.
“and the question was asked of the Scots, were you supporting England or Argentina?”
Show all 13 chapters
The North vs. London: Investment Needs
29:40 to 34:16
Exploration of housing and employment disparities in the North compared to London.
“Because if you look at our experience so far of building any homes, like we're rubbish at it.”
Government Structure and Business Relations
34:17 to 37:54
Analysis of government reorganization and its impact on business and innovation.
“One has to take seriously a prime minister who says, as Burnham says, that I mean, he literally says this, that he's the most important prime minister for more than 40 years.”
Closing Thoughts and Reflections
37:55 to 39:25
Final thoughts on the topics discussed and a wrap-up of the episode.
“But another blooming reorganisation of departments.”
Transcript
Automatic transcript. May contain errors.0:00Steph McGovern:Now, one of Andy Burnham's first big jobs as the new Prime Minister was to pick his Chancellor. There was lots of talk about it being Ed Miliband or Shibana Mahmood. He's actually gone for a Treasury veteran in the form of the former Defence Secretary John Healey. So what makes him qualified and what will be his first priority? Could he turn to war bonds, for example, to get the country's defence budget up to that 3 % of GDP by 2030? but there are other sacred cows we need to talk about as well like the triple lock on pension should it go the welfare bill is he likely to tackle that first we've also heard vat's coming off electricity bills from october in a bit to try and just tackle that cost of living that we keep talking about as a huge problem but is it fully funded and of course robert's been in down in street all week speaking to burnham and others so there's loads to find out and discuss including plans for income tax and housing so let's get into it we're proud to say that the rest is money is powered by octopus energy this year and greg jackson the founder and ceo is with us greg i wanted to ask you about heat pumps octopus energy now make them why not just import them from china you know what we want to make heat pumps that work that are designed for british homes and And that are cheaper to run, cheaper to install, and actually cheaper for the hardware.
1:24And that's what we did. So, for example, Octopus created heat pumps that run at up to 70 degrees C, as hot as a gas boiler. So you don't necessarily need to worry about having, you know, excess insulation and changing your heating system. That sort of thing makes it much cheaper for British homes.
1:40Steph McGovern:Nice one, Greg. Thanks for explaining that. Right, we're going to go to the episode. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+.
2:20Steph McGovern:Hello and welcome to The Rest is Money with me, Steph McGovern.
2:23Robert Peston:And with me, Robert Perston.
2:24Steph McGovern:So we have a new Chancellor in the form of John Healy.
2:28Robert Peston:We do.
2:29Steph McGovern:Yeah. A bit of a surprise for people, this one, wasn't it?
2:32Robert Peston:It genuinely was a closely guarded secret, except for you.
2:35Steph McGovern:I briefly said it on this podcast just because I knew we had treasury experience, but I wasn't. I'm not saying I'm Mystic Meg in this moment.
2:43Robert Peston:And I do remember saying on this podcast, which I don't feel embarrassed about, because it was, you know, excuse that awful journalistic cop-out, it was true at the time.
2:51Steph McGovern:It's so funny that though. It was true at the time. Ed Miliband is going to be Chancellor. It is true at the time.
2:57Robert Peston:In my own view for what it's worth is Ed Miliband will be the Chancellor. And it's partly because he's one of a tiny number of people at the top of government who's worked in the Treasury, understands how it works. I think you're saying so long as his appointment is accompanied with what you would regard as a coherent growth plan. Well, it was true at the time. I mean, let's be absolutely clear. You know, when I was talking on this podcast about how I thought it was going to be Ed Mediband, you know, I have to say, that was, as I say, on the basis of talking to people, shall we say, close to Andy Burnham.
3:34Robert Peston:But then as, you know, we saw this markets backlash against Miliband. And because there are trade union leaders who actually massively dislike Ed Mediband because they feel that he's been blocking development of further oil and gas fields in the North Sea. They were campaigning against him becoming chancellor. Various business leaders were campaigning against him being chancellor. So then we got this narrative running, which was in a number of places, Bloomberg and FT, that it was going to be Shibana Mahmood. And again, I, you know, I didn't make me sorry about it, but I talked. I mean, I think that was also their reporting was true at the time, as it were.
4:17Robert Peston:I mean, I actually wrote a blog and a sub stack about how I thought there were huge risks in appointing Shabana Mahmood, largely because she really doesn't have any treasury experience or any economic experience. And if you look at the history of chancellors over the last 30, 40 years, the chancellors who succeed are those who have a very clear vision for how the economy, well, a very clear idea of how the economy works and a vision for where they want to drive the economy. It's very hard to find anything that Shamanah Mahmood has ever said about how you revive growth in this country.
4:58Steph McGovern:But there was a sense, though, that the markets might react better to her because she was a bit more right-leaning economically. And that was the guess, even though she hadn't said anything economically. There was a sense that she would be a bit more right-leaning on it. And therefore, that would be better for the economy. So there was that weird feeling doing the rounds, which was impacting things as well. But, you know, can I ask you then? Because it did when, you know, there's a lot of theatre around all of this, isn't there? this whole carry on I mean I was watching you yesterday in the back of everyone's shot on telly why weren't you watching me in the front of my own shot
5:35Robert Peston:you weren't watching ITV that's why I cannot believe you were being so disloyal I was flipping between channels
5:39Steph McGovern:I was you know just making sure I was staying impartial and I kept seeing you in the background of every shot is that really true yeah and you've got a resting bitch face by the way so you need to smile a bit in the background but what made me laugh was the way they walked Miliband and Mahmood up Downing Street together you know just to add to this I feel like the journalists have been led and merry dance by Burnham like he's gone let get them two to walk up the street together everyone there will start going oh which one of them's going to be chancellor um and you know was this part of Burnham's plan to just go do you know what I'm not doing it the same way as everyone else I'm not leaking everything you're not all having the story first.
6:24Steph McGovern:I am going to control this narrative myself and you're not going to have it first.
6:28Robert Peston:It is genuinely unusual certainly in my experience of observing all sorts of different governments that when market expectations are wrong about who's going to be Chancellor, when they've been set by papers like the FT and the Bloomberg and Bloomberg, that the government then doesn't correct through leaking before the announcement is made. And they really didn't. I mean, the Healy appointment was the kind of surprise we don't often get.
7:01Steph McGovern:And just to give you some context on John Healy, obviously, we know him most recently for being the former defence secretary, where he resigned because he wanted that commitment from the Treasury that they were going to increase spending for defence. You know, he wants it to be 3 % of GDP by 2030 and left over that. So, there's big questions around that. But I think it's just interesting to remind everyone his background. You know, this is somebody who did work in the Treasury. So, he has that experience. He did about five years under Gordon Brown in the Treasury. And also, you know, he's done roles in housing, in local government.
7:41Steph McGovern:He's been a skills minister. And in the shadow sense, he's done health and housing and those roles as well. So he knows his way around a lot of the departments. Before that, trade unions guy. So it'll be interesting to see how that influences his views around workers' rights as well. The context of him is he's not actually that much of a shock of a choice when you think about the fact that he is a man who has experience in the Treasury, unlike others that we've talked about
8:09Robert Peston:Now, it is interesting to me how this will ultimately play out with markets. He is politically, I think, would be characterised as somewhere between the sort of soft left of the Labour Party, which Miliband occupies, and the more right of the Labour Party. he's you know he is definitely a a brownite in that sense you know he's always been seen as associated in some ways with gordon brown actually one of the things i did wonder about i haven't checked this out with gordon brown yet but when i when i saw philly's appointment i did think to myself i wonder if burnham has been sounding out gordon brown or gordon brown has intervened in some way because it's looked it looked like um the kind of thing gordon brown would recommend particularly since he actually you know this is a guy who worked for gordon brown at the Treasury.
8:56Steph McGovern:Yes, so he's got Treasury experience, which is a big plus, I think, isn't it?
9:02Robert Peston:Whether he ends up being, however, someone whom the sort of bond vigilantes like, you know, more than an Ed Billaband, is, I think, slightly moot, because one of the things that he has talked about is funding, you know, he, as we know, because he resigned over it, he thinks that defence has to have a ton more money. He was Secretary of State of Defence and he resigned from Keir Starmer's cabinet because he felt Keir Starmer and Rachel Reeves, the then-chancellor, had really been jeopardising the security of the nation by not finding at least another£10 billion a year to fund defence. So, you know, he, I'm sure as Chancellor, will prioritise finding that money for defence.
10:02Robert Peston:But he's talked about doing that, issuing a new category of government bond. A defence bond. Defence bonds or war bonds or whatever. And I personally take the view that the way to reassure markets is to get the growth rate of the UK economy up. We might come back to that later in the program. And to be rather more ruthless in tackling some of the exploding budgets that we've got. Like, you know. Health and social care. Well, there's the welfare bill. Yeah. and there is also the guarantee for pensioners that the state pension will go up, the so-called triple lock. But a government debt is a government debt, right?
10:56Robert Peston:Whether you call it a war bond or just a regular UK government bond, a guilt, a debt is a debt, right? Simply branding it as something else seems to me to be a bit of a nonsense.
11:13Steph McGovern:You're still going to have to pay it back at a cost.
11:15Robert Peston:I mean, there are all these gimmicks that they're talking about, like persuading people like you and me to buy war bonds. And if we buy war bonds, maybe they won't be subject to inheritance tax when we pop our clogs. I just don't think it works as an idea. So if he does pursue the war bonds idea, I think his idea, this notion that he's somehow a much safer pair of hands than Ed Miliband when it comes to stewardship of the public finances. Not sure I buy that.
11:44Steph McGovern:Just on that point about having specific bonds for particular parts of government spending. You remember we've talked about this, about whether you could do that locally as well and whether people who put their money into cash ices, who we have talked about before and not getting the returns that someone who put in it in stocks and shares have. and the government want to encourage people to invest more in British businesses and things. I wonder if there is a way of doing that, if there is, like you say, a way of getting people to take that money out of cash ices, giving them that sense that they are definitely going to get this money back with interest, but it is going to go into a specific area of government spending of their choosing.
12:28Steph McGovern:I don't know how attractive war bonds would be to people, But if you then pitch it as, you know, whether it's infrastructure bonds or things where we do need that spend, we do need money and there is a way that you could contribute but get returns on it, that does feel more like appealing and that might play to people's, I don't know, that might be an incentive for people then if they think, okay, I am going to get this money back with a bit more. but I'm also going to help build a new rail line or more council homes or whatever else. It might work, might, isn't it? I don't know whether.
13:04Robert Peston:Well, I think that's a very good, look, I think that's a very important idea that, you know, you've exposed there for two reasons. One is, you know, if you talk to, you know, senior people at the Bank of England, for example, One of the things that they are most anxious about is how much of British government debt is owned by international investors with a short term investment horizon. One of the reasons why every time Trump does something economically nuts, like, you know, as he's doing again, dropping more bombs on Iran, which leaves the oil price to surge and people to worry about rising inflation.
13:54Robert Peston:You know, we are, you know, UK government debt is far more exposed to anxieties in the global debt market. And whenever you get that, as I say, whenever you get a movement of falling government bond prices globally, ours tend to fall, UK governments tend to fall more, relatively speaking, than those of other nations. And that means the interest rate the government pays rises more than that of other nations. And the reason part of the reason for that is, you know, this government is too dependent on the likes of international hedge funds who, you know, buy and sell at the drop of a hat in the way that, you know, domestic lenders to the government wouldn't.
14:38Robert Peston:And so, you know, another way of illustrating this is Japan has debts as a share of its national income, something like two and a half times that of the UK. but over you know actually now decades it's had relatively more you know this should have been under the conventional model you know seen as a nation that was effectively bust and the interest rate for the risk should have been skyrocketing but it didn't for years it was unbelievably low it's now actually rising and there are very interesting issues about what what the outlook for both the yen and Japanese government bombs may be But one of the reasons why the Japanese government was able to borrow these colossal sums is because Japanese people had massive savings and they tended to lend their money to the Japanese government for a long term return.
15:36Robert Peston:Now, one of the things that has changed drastically in the UK, you know, for most of my adult life, the complaint about British people, British households, is they, we, spent too much and saved too little. Yes. And one of the reasons we've been our economy has been in the doldrums for donkey's ears now since the financial crisis of 2007, 8. And this is doubly true since Covid is British people have just been hoarding their savings. The savings rate in the UK is, you know, the highest it's been in this country for, you know, I mean, decades. And if only, you know, so there are two things. There are two sort of aspects of that.
16:28Robert Peston:One is any government that wants to get the growth rate up would somehow give people, British people, more confidence to spend if you have a lower savings rate. But actually, the point that you make, I think it's a really important point. OK, if you could just persuade British people not to park their money in the bank, but to lend it to the government. I mean, maybe in the form of war bombs, maybe, you know, as you say, in the shape of, you know, if Andy Burnham is true to his word about devolving all sorts of economic powers to, you know, mayors and combined authorities. And, you know, maybe that, you know, maybe British people could be attracted to lending, you know, to the, you know, to Middlesbrough example for whatever you think Middlesbrough needs in terms of new infrastructure.
17:16Steph McGovern:If you look at why reforms, popularity has grown so much as well, it's been a lot about patriotism, isn't it? It's been a lot about what is happening to me in my country, in my area. And so they could really play on that to get people behind the sense that you, with your savings, however small or big they are, if you could put them into something which is then you are going to see tangible change in where you live or, you know, across the country, we're going to be able to get around the country faster. or you're going to see more homes with people who couldn't afford them previously, people would get behind that because then they would feel a sense of them doing something as well.
17:54Steph McGovern:And it gives you that hope, doesn't it, of you doing this together? Like, you know, we've just had the World Cup. Whether you like football or not, it suddenly united everyone together, didn't it? Like, you know, all the kids going into school, doing football parties. My daughter was doing that. It felt like everyone came together with this shared purpose. And I think that's what we've been missing in this country is. And reform's totally played to that well, making people go, this is our country, what are we doing to make it better? And actually, that's a really good way of getting growth. I suddenly sound like I'm on some mad political soapbox.
18:32Steph McGovern:But I just think this is a real chance for Burnham to do what he wants to do, increase equality across the country, but also do it in a way where people could make money from it and be part of a bigger cause.
18:44Robert Peston:And I mean, obviously, some would also argue that Burnham could and Healy could do it slightly more credibly since as far as we know, the Labour Party and indeed them as individuals are not receiving, you know, money from a crypto billionaire who happens to live somewhere else. And, you know, that doesn't sound quite so patriotic.
Read the full transcript
19:06Steph McGovern:does it right we should probably go to a quick break and then get into some of the detail of what john healy might do because of course there's lots of talk around income tax thresholds this knocking off the vat and electricity bills and of course housing this plan to build more council
19:21Robert Peston:houses so how's he going to do it good idea and they are big challenges he faces we will tell you more after the break this episode is brought to you by vanguard look if you're listening to a
19:36Steph McGovern:podcast about finances, you likely already know that your money could be working harder. But we know it can feel overwhelming knowing where to get started and even dipping your toe into investing can make you feel out of your depth. It's a mindset that's pretty hard to shake without the right guidance. You might even find yourself wishing you could just get the pros to invest your money for you. Well, you can. With their managed ISA, Vanguard's experts do the hard work for you. They'll match you to an investment plan that feels right for you and they'll handle the rest. No second guessing, just smart professional management.
20:14Steph McGovern:So stop wondering how to start investing and start making your money work harder. Search Vanguard Managed ISA to find out more. When investing your capital is at risk, tax rules apply.
20:30Steph McGovern:Welcome back to The Rest is Money with me, Steph McGovern.
20:32Robert Peston:I'm with me, Robert Peston.
20:34Steph McGovern:So where should we start?
20:35Robert Peston:Well, let's talk about the very first thing that he has announced, that's Burnham, which is removing the 5 % VAT rate on the electricity bills that we all pay. It's not a massive bung. I mean, it'll cost, I think, something less than a billion a year.
20:59Steph McGovern:Yeah, 850 million is the guesstimate, isn't it?
21:01Robert Peston:And there's already sniping about, you know, whether or not it's actually being properly funded. I saw Andy Burnham with a bunch of other political editors. He gave us a quick briefing in the Garden of Downing Street. He insisted that all his pledges this week would be properly funded. Interesting that Darren Jones, who's been sacked as Keir Starmer's chief secretary in Downing Street, is already pointing out that he doesn't think it's funded properly because what Burnham said was that in abandoning the digital ID card scheme, that would save money. But Darren Jones says actually that scheme was never properly funded.
21:47Robert Peston:So one scheme that wasn't properly funded is being abolished to fund something else. So, you know, maybe the money ain't there. Now, that's, you know, let's be clear,£850 million is not going to bankrupt Burnham. But he can't afford to set these hares, to allow these hares to run. that, you know, essentially everything he's going to be done, everything he wants to do is going to be funded by increased borrowing on the, you know, or by the tooth fairy, as it were. Healy will have to, will have a job on his hands to promote confidence that this is a sensibly run programme of giveaways. And this is not going to be the only one, right?
22:27Robert Peston:There are going to be other measures to reduce the cost of living. And then he's also said, Burnham, he's going to announce a 10 year plan to fix all the big things that are wrong. Dad's got Alzheimer's. And actually, it was moving and upsetting to hear him talk about how his dad is, you know, so ill with Alzheimer's. He has no idea that his son is now prime minister. But let's be clear, you know, putting social care on a firm footing and doing what actually the Labour Party has talked about doing, which is, you know, essentially creating a national care service equivalent to the National Health Service, when, you know, none of us would actually pay for our care if we've got Alzheimer's or somebody debilitating a condition like that in old age.
23:23Robert Peston:I mean, we're talking about tens of billions of pounds of cost for that. None of us have a clue where any of that money's coming from. We said earlier, John Healy's got to find at least 10 billion a year simply to hit the target that he says is crucial of making sure defence gets 3 % of national income in funding by 2030. And, you know, Burnham's also committed to the NATO target of 3.5 % by 2035. You know, that's something like another 20 billion at least per annum additional to all of that.
24:08Steph McGovern:So we're talking about big money. Yeah, it's worth just pointing out as well the context in which we're in, which is that borrowing costs are still really high for the government, still over 5%. The headroom that Rachel Reeves increased is going to be under pressure, given we've still got all the problems with the Middle East and the oil price being high. So there isn't and that could easily be wiped out by something else Trump does, you know, whether it's tariff changes, whether it's more tension geopolitically. All of these things could mean that they don't even have the wiggle room.
24:40Robert Peston:I mean, look, but, you know, broadly, you know, Resolution Foundation, as you basically implied, has, you know, done some work on this. And, you know, they basically say the headroom that was more than 20 billion at the last budget is probably less than 10 billion now and might even be less than that.
24:59Steph McGovern:The context in which we're in is not good. Terrible growth. Broiling costs are high. Loads of chaos geopolitically, which means we don't have any wiggle room. And then he's got all these big plans to do things like, you know, eradicate rough sleeping, to increase care, to bring down the cost of living, to, you know, he's also pledged to increase the number of council house building and things like that, which, you know, I was really pleased to hear his optimism. I think that was really important because we need hope and positivity. But there are lots of big questions that are now going to be asked about how we're going to do this.
25:32Robert Peston:Yeah. But it's also interesting to me, the politics of, in a sense, his economics. So in reducing VAT on electricity, you know, that's something that goes to everybody. But of course, it's way more valuable to those people with bigger houses and bigger incomes who use more electricity. And I am struck, as it were, that the very first thing he's done has been to give a bung to everybody that is more valuable to the rich.
26:11Steph McGovern:Yeah, although I don't think it's going to be long before we hear things like that, the tax threshold for lower income being going up, because that's been at, what,£12 ,570 since 2021-22.
26:24Robert Peston:But even that, to be clear, is more valuable to people who are on higher incomes. Now, if you're on the absolute top rate of tax, you don't get it at all. Right. But if but but but actually, you know, it is, again, a more valuable concession, you know, until you get to the absolute top rate of tax than it is for people, you know, lower down.
26:49Steph McGovern:Maybe that's a good thing, because I also think there is a lot of division in the country on the basis that people think it's only those on benefit who are getting all the help. It's only those, you know, Labour only helps people who are low income families. And there's a lot of people in the middle class who feel, I don't know, they feel like they're the more squeezed because we've talked before about how the super rich managed to escape lots of taxes. and the people at the lower end of the scale get lots of help and then people in the middle are the ones who are squeezed the most. And actually, it doesn't take massive salaries to be classed in as middle class and be getting squeezed in every side.
27:27Steph McGovern:So maybe it's a good thing for uniting people to say we're doing this together and everyone's going to benefit of it.
27:33Robert Peston:He obviously wants to, you know, you were talking earlier about the collective spirit of the English nation around football, not the United Kingdom.
27:43Steph McGovern:Scotland, you know, there was a whole brilliant, I was totally supporting Scotland in this as well. So that's a good point.
27:50Robert Peston:It was quite interesting that, as I say, in this gathering of political editors in the garden before Andy Burnham, there were a couple of Scottish political editors there and the question was asked of the Scots, were you supporting England or Argentina? And there was a sort of silence before, very sheepishly. They said, well, sort of England.
28:09Steph McGovern:Yeah, yeah. Well, yes, okay. But with coming back to that, just to defend myself on that, you're right. I was talking very much about English football then, although the Scots did an amazing job. But at least with Bonds, it would be collective to where you are from. And the point is, there's things that you can unite us quite easily if it's creative enough.
28:31Robert Peston:But can I just ask you on his ambitions with housing?
28:37Steph McGovern:Yeah.
28:37Robert Peston:He has basically said the public money that was being allocated by the Starmer government to simply increase house building in general, pretty much all of that will now go to council housing, not to subsidizing so-called low cost housing. because there are various schemes that are a sort of public-private or help people by subsidising mortgages. And as far as I can see, pretty much his entire thrust, well, pretty much what he's decided to do is say any public money that goes into housing will now go to council housing. Do you think that is economically and politically the right way to go?
29:32Steph McGovern:Yeah, it's interesting, this commitment he made straight away about, you know, pledging to build council housing on a scale not seen since the post-war period. Because if you look at our experience so far of building any homes, like we're rubbish at it. So when Labour came into power, they made this commitment, didn't they, of 1.5 million homes by the end of Parliament. And we're absolutely nowhere near that. We need to be building like 300 ,000 a year to hit that. And we're not anywhere near it. And then if you look specifically at council houses, we need around 100 ,000 council houses a year to put a dent in the shortage.
30:17Steph McGovern:And currently, it's something like 1 ,400 council houses on average have been built over the past 10 years. That's according to the Local Government Association. So there is a huge gap between the number of council houses that are needed compared to what we actually have. And the waiting lists, unsurprisingly, are growing because of this. You know, every year there's another headline about it hits a record high in terms of how many years people are having to wait to get a council house. So there's a huge problem there with that shortage of council housing. So great that, you know, Burnham is saying, let's stop this shortage.
30:57Steph McGovern:I'm going to commit to council houses to build more than we ever have, blah, blah, blah, since the post-war period. But how's he going to do that? Because you've still got that same problem you do with trying to build the 1.5 million homes. It's the same things around planning. It's around infrastructure, the utilities around there. It's the nimbyism. It's, you know, it's the funding. It's all of it is making it really difficult. So I would absolutely love to see this commitment held. But I just think history has taught us so far in recent history that it's not possible.
31:31Robert Peston:If you were to look at where social housing is most needed, arguably it's in London. Because there's very, very interesting work that says that shows that if you look at incomes before housing costs between London and say Middlesbrough, the gap is absolutely enormous. But if you, particularly for young people, if you look at their incomes after they've paid exorbitant private sector rents in London, actually, their disposable income after paying those rents collapses. And, you know, the gap with someone like Middlesbrough is not so great. The interesting question for me is if you were going to have that kind of program, there's an argument for saying, you know, disproportionate numbers of that should go to London.
32:19Robert Peston:but is that how's that going to be seen where you live
32:23Steph McGovern:yes but also that's to do with where the jobs are isn't it but you know if you look at the history without going like too deep into you know the formation of towns and things they're built around workplaces aren't they there's so much of our architecture in this country which is built around the business that was there first and then you know the workers housing was built because of that and so
32:44Robert Peston:but where you are but just say you know in Newcastle, in Middlesbrough, in Sunderland, right? Is the problem that there's not enough housing or is the problem there's just not enough businesses?
32:57Steph McGovern:Yeah, I think it's that there's not enough businesses because exactly that. So if you reduce the number of people who need the houses by creating more work where they're getting a decent pay, you wouldn't need the council houses because people would be able to afford to then rent privately or buy privately, wouldn't they? One other thing that I think Burnham needs to be careful about is banging on too much about the North. I think, I know you, I can see your eyebrows go up, but my thing has always been, yes, I've always banged on about the North because I use it as an example because I grew up there and I'm from there and I live there.
33:30Steph McGovern:But you cannot forget about all these other parts of the country that are also in dire need of investment and support. And you can't just keep saying if you solve the North problem, you solve everything. It's about it's basically outside of the Westminster, London media political bubble. That's that's who needs help everywhere outside of it. And so I do think that, you know, you alienate people by saying we're going to have a number 10 of the North because Manchester is not the north for people in Scotland. It's not the north for people in Newcastle. So I think there's a danger of this whole, you know, you might alienate people in the north by banging on too much about it, which I know sounds ridiculous.
34:13Steph McGovern:But I think it's about, if he wants to show unity, it's got to be about helping everyone who isn't in the London bubble, I suppose.
34:24Robert Peston:One has to take seriously a prime minister who says, as Burnham says, that I mean, he literally says this, that he's the most important prime minister for more than 40 years. And the reason he says that is because he says he is going to reverse Thatcherite privatisation and he is going to reverse Thatcherite centralisation of power. Right. These are bold ambitions. for a podcast like ours we're going to be pretty busy you know assessing essentially what he means by that we talked already on this podcast about the implication that there's going to be massive nationalisation taking into public ownership in energy in water, in transport it'd be interesting to see with Angela Rayner back at housing, whether she can get, which she probably needs, significantly more public money into the housing programme.
35:34Robert Peston:We've talked consistently about the opportunities of artificial intelligence and these cutting-edge technologies in which Britain is doing pretty well, and, of course, the great risks, because there are, of course, tremendous risks. to jobs, to tax revenues, and all the rest of it from AI. And the decision to close down the science and innovation department and shove all those people and bits into the business department under Johnny Reynolds is, I think, sort of certainly important and risky. I mean, Johnny Reynolds says it's a sign that they're trying to marry science to business and it will be good for the scientific community and good for these fledgling, you know, tech companies, which we are producing, you know, in really quite large numbers in this country.
36:37Robert Peston:There is still this issue about persuading these companies when they get to a certain size to stay here, create the jobs here, not migrate to America or other parts of the world. You know, we talk endlessly about the problems in the UK of not having enough so-called scale up finance so that these businesses can raise money here and, you know, stay here. But I am slightly anxious about even if you felt that you want this science and innovation department to be much more closely linked to business because the commercialization of tech businesses is terribly important. whenever you get a bloody reorganisation in government, what officials and ministers focus on is the reorganisation, not the actual driving of growth and the driving of policy.
37:35Robert Peston:So I am slightly, you know, there is a slight rearranging of deck chairs on the Titanic when governments merge departments. So I don't know. I'm anxious about it. It's great that somebody who's been on this podcast, the AI minister, Kanishka Narayan, He's keeping his job and he will now attend Cabinet. That's a powerful symbol that Burnham takes AI seriously. But another blooming reorganisation of departments. The whole thing is a reorganisation though and it keeps happening.
38:04Steph McGovern:I feel differently to you though. I think the way things are, things are too fragmented and actually business and science and innovation are key together. I feel the same about the Department of Work and Pensions and Education. Like I was really pleased that Jackie Smith, if the skills minister was sitting across both education and DWP, because I don't know what's happening with her now. But for me, there's so many things that are separated that should be together. And, you know, we have reorganisation in government, like literally every couple of weeks at the minute. So, you know, it's just another one of those.
38:37Steph McGovern:What's interesting to your point, though, about business, and because business has been saying this to me, is at the minute, no one really has a clue how to get to talk to ministers. and you know, but as Burnham's been keeping everything really tight in the build up to this, they haven't really known where to go either and I'll be interested to see how that changes because like Johnny Reynolds, I've seen him speak to businesses. I've been at events where he's totally held a room with his understanding of their kind of needs and things. So I think that he's a good person to bring back into that business role.
39:09Steph McGovern:So we will see.
39:10Robert Peston:I mean, and he's, you know, it's also good for him to come back on the podcast.
39:16Steph McGovern:Yeah, and he's from Sunderland. so I'm being kind to a Mackham right should we wrap things up that's it from us and the rest is money bye bye goodbye
From the publisher
John Healey is the Chancellor to increase defence spending to 3% of GDP, but how will he pay for it? Would war bonds do the trick? Is a cut in electricity VAT and a rise in income tax thresholds helping the right people? What will it take to build enough council houses?
With the surprise appointment of former defence secretary John Healey as Burnham's new Chancellor, we look at whether he can revive the UK. Plus Robert and Steph wonder whether the hidden hand of Gordon Brown is behind Healey's appointment.
The Rest is Money is brought to you by Octopus Energy, Britain’s smart energy pioneer.
Email: therestismoney@goalhanger.com
X: @TheRestIsMoney
Instagram: @TheRestIsMoney
TikTok: @RestIsMoney
Advertise with us: Partnerships@goalhanger.com
For more Goalhanger Podcasts, head to www.goalhanger.com
Video Editor: Dylan Bonham
Producer: Isabelle Bougeard
Exec Producers: Chris Sawyer and Tom Whiter
Learn more about your ad choices. Visit podcastchoices.com/adchoices