318. What’s the cost of Andy Burnham's big plans?

0:00Steph McGovern:There were tears, laughter and 11 standing ovations. But are the policies announced in Andy Burnham's speech going to bring hope again for the economy in the way he says it will?

0:13Robert Peston:And when you say hope for the economy, what we're really talking about is hope for British people that their living standards are going to rise. He said a lot that could raise living standards, whether it's a much closer relationship with the EU, including possibly joining the EU again. this plan to create a national care service will make many elderly, frail people feel less anxious about their futures. And so there are these massive headwinds that he has to contend with. We've got a budget coming. So the big question is he's saying we've got to hope again, but how long are we going to have to hope before there's delivery?

0:53Steph McGovern:Support for this episode of The Rest Is Money comes from Octopus Energy. and back with us is the CEO and founder of Octopus Energy, Greg Jackson. Right, Greg, you're dead successful for lots of reasons. Do you ever get imposter syndrome? Yeah, I once read a report about some research, I don't know how they did it, about rats and mice. Right. And it said the difference between mice and rats is mice know they're not welcome. So when you go into the kitchen and turn the light on, the mice scurry away. The rat just sits and stares at you because the rat, you know, thinks it's got every right to be there.

1:27It's almost like, what are you doing here? So my advice when I do talks for students and people starting their careers is be more rat. Now, by the way, it doesn't mean be arrogant, don't be entitled. You have to do your work. You have to justify the place. But if you do that, you've got every right to be there.

1:42Steph McGovern:That's great advice. Be more rat. I like that. Thanks again to Octopus Energy for powering The Rest is Money. You'll be hearing more from Greg in the rest of our shows. When you need to build up your team to handle the growing chaos at work, Use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast.

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2:51Steph McGovern:So Robert, you are in Liverpool as we speak. What's the vibe been like there? Because honestly, if you believe all the news headlines on this, it's like the Messiah spoke to the nation yesterday.

3:04Robert Peston:Look, it was a really impressive speech. And in some ways, I think it was the most significant political leader's speech I've heard in decades because he did something pretty unusual, which is he did announce some very significant policy shifts, whether it was electoral reform, whether it was moves potentially to rejoin the European Union, setting up a new national care service for the frail elderly is going to cost a fortune. And he said he'd pay that by reforming the triple lock for pensioners. This is big stuff. You don't normally get three genuinely significant changes, potential changes of direction for a nation in a single speech.

3:51Robert Peston:And he also connected with people in a way that Keir Starmer found almost impossible to do. Keir Starmer talked about his toolmaker dad. For whatever reason, it didn't really resonate with people in the Labour Party hall or with wider voters. And it became a bit of a sort of joke. Whereas, you know, when Andy Burnham was talking about the recent death of his father, genuinely it was moving. My mum died earlier this year and, you know, he has this ability to make you think about your own circumstances in the way that really good communicators do. You know, Ed Milibandu's mum also died. I spoke to him immediately afterwards because I saw that he was crying.

4:38Steph McGovern:Yeah, yeah. I found that very surreal when I saw it cut to Ed crying.

4:43Robert Peston:You know, he said it was, you know, because, you know, a bit like me, because his mum died comparatively recently and it just, you know, woke up all sorts of emotions or stirred up all sorts of emotions in him. And not all political leaders can do that. So it was genuinely, it was an important and powerful speech. Which, and the other thing just to say about it, is the mood here is the mood I sort of expected two years ago after Labour won that landslide. And, you know, you and I talked about it at the time. The mood at actually Labour conference two years ago after the landslide was weird. You know, it wasn't joyful and optimistic.

5:24Robert Peston:I mean, you know, we'd had the summer of protests against migrants in hotels. We'd had all that furore about the sort of free suits and free spectacles for the prime minister. And people were just feeling a bit down and a bit anxious. This literally felt like a party that had just won a general election and had some very big things to do. And again, the other big difference. And I would say this is the most significantly important political judgment that Burnham has made. But obviously, we're going to get on to the economics and the implications for business of all of this. But I would say that the most important political judgment that he made, which is one that Starmer should have made two years ago, which is, you know, he is capitalizing on Labour's big majority by trying to, in a sense, dictate the conversation in the UK by doing some very big things.

6:27Robert Peston:and that is not what Labour did after it won the election. It concentrated on the deficit in the public finances, the mess that had been left by the Tories, rather than giving a direction to the country that would persuade significant numbers of people that they could hope again. And it is, again, they've chosen a slogan that does capture what he's trying to do. Hope again is the slogan. It's a plausible slogan because he's doing what all parties should do in these circumstances or circumstances of a big election victory, which is do something big, occupy the political space in a positive way.

7:08Steph McGovern:Yeah, yeah. And that's definitely what it felt like watching it as well. You know, as you describe a great orator, amazing at the storytelling and linking it to really tangible things that people can relate to and those big policy points that were made. And interesting that there were lots of long-term ideas rather than the kind of short-term wins, which we'll get into as well. So, should we talk about some of them? I mean, there's going to be weeks of analysis, especially in the run-up to the budget on the 28th of October. But obviously, the big thing that you and I have talked loads about is this kind of burden of the triple lock on state pensions and the fact that that is now going to change from 2030.

7:53Steph McGovern:So from 2030, instead of the state pension going up by either inflation, average earnings or 2.5%, whichever is highest, it's now going to be inflation or 2.5%. So it's losing that earnings element, which is essentially by having three ratcheting it up unsustainably. So it was costing a hell of a lot of money. The predictions were it was going to go from costing 5 % of GDP up to 9 % of GDP over the next century because of this ratcheting up by the triple sense of it. So it's going to go to a double lock. Lots of analysis is now being talked about in terms of how much money that's going to save because Burnham's saying or his people are saying it's going to be 15 billion pounds a year by 2040.

8:45Steph McGovern:it's very hard to predict the future though isn't it definitely you and I would both say this is good news because it is too costly and it does it did need to change it does need to change so what the IFS have done have looked at what this change would have meant if you'd looked at the figures in the past so if this new policy had been in place since 2011 the state pension expenditure this year would be nine billion pounds lower than it is today so halving that 16 billion pound annual cost that we have this year um so that is a lot of money that could be

9:19Robert Peston:saved um here what are your thoughts on it robert well two i mean the first is um there is just one nuance that i have to uh inject to your excellent analysis and and it is that actually it's sort of moving from a triple lock, not to a double lock, but a sort of, I don't know what the proper adjective for two and a half is. It's a sort of two and a half lock. And the reason why Burnham is not being dishonest when he says he's not scrapping the triple lock, he is saying, and he has said, he said yesterday, and he has repeated that today, that there will still be a link with earnings, but it'll be a lot weaker and it'll be only applied over a period of years.

10:12Robert Peston:So what they're saying, and there's been some quite interesting proposals made along these lines, which he's basically picking up, which is, yes, you're absolutely right that under the new proposal in any given year, the state pension will go up by the higher of 2.5 % or inflation. But if over a period of years, that means that pensioners have significantly fallen behind earnings growth in the economy, there will be top-ups related to earnings growth, right? So he is saying that there won't be a complete cutting off of a link with earnings. It just won't be as generous as what we've currently got.

11:00Robert Peston:I think the other point I wanted to make is Jim O 'Neill has, I think said at least twice on the podcast, that one of the most important things that Andy Burnham should do would be to reform the triple lock. He referred to it, remember in that episode, we kept talking about the sacred cows. And Andy Burnham has has slain this particular sacred cow. And it just is interesting to me that even though Jim O 'Neill is not in the government, he didn't take a job, Andy Burnham is plainly still listening to him because there are plenty of people in the cabinet and there are plenty of senior people in the Labour Party who are quite anxious about what Andy Burnham has just done because they are worried, rightly, that the politics of this will be difficult for him.

11:56Robert Peston:Reform has already said it's going to campaign all the way to the next election against reforming the triple lock. The Tory party, I don't think as we speak, has absolutely conclusively said that it's going to campaign against these changes, but I am 99.99999 % certain Kemi Baden will also oppose these changes. And so he's got, you know, even though I think, you know, personally, I think the economics of what he's doing makes sense. We've spoken on this programme about how unfair it is over the last 20 years that there has been this very significant shift of income and wealth from particularly younger working people to retired people.

12:41Robert Peston:And a little bit of redress there, which this would achieve, is no bad thing, particularly since, you know, this launch of the National Care Survey, which means that everybody gets free personal care, either in their home or the care that they receive in in some kind of outside residence all of that will be free and you know obviously we all hope way better than what's available uh today that is a significant benefit uh to you know older people uh it's either a direct benefit if you are frail and need help or it reduces an anxiety about the costs of all of that yeah you know it's a package which you know he thinks he can sell some of his cabinet are a bit worried about it but it seems to I mean personally I think both the politics and the economics are plausible.

13:40Steph McGovern:And it is about the storytelling here as you say like it's that package of you as an older person are looking at what's going to happen to me if I become unwell if I need help if I need to go into a care home versus how much your state pensions going up by. You will think of this as a whole if the story is told well, which so far it has been because Burnham is really good at that. But just on the National Care Service, because I've been looking into this a bit because it's interesting because as you've just said, you know, this is essentially a service where you will be given free personal care, nursing care, whether in your home or essentially in a care home and they have this already in Scotland.

14:25Steph McGovern:It's called the free personal care scheme. So this is the state paying the personal care and nursing costs of someone in a care home or in their own home if they need care there. But it's not the accommodation cost. So there's, you know, there's been some number crunching on this in terms of how much would it cost then if we had what they have in Scotland here, which it sounds like that is what Burnham is wanting. So if we had the same scheme in England, it would cost seven and a half billion pounds a year. If you then wanted to add the accommodation cost, which it sounds like that's not what is happening, but that would take it to something like 18 and a half billion pounds a year that would be needed to fund people as well as the personal care, nursing care, the actual cost of accommodation, essentially the bed and board, as it were, of that care.

15:13Steph McGovern:So he is not saying he's going to pay for that would be a hell of a lot more expensive. This, as I say, was something that Labour introduced in Scotland in 2002. If you look at how it works there as well, it's paid via the councils. So it comes from council funding that the state government decide each year how much to give the councils, but it goes through the council. So it kind of fits with Burnham's idea of devolution as well, if it goes, runs through the regional mayors in this. But I think an important point in this is in Scotland, it is capped the amount, the cost per week. So it's something like 260 quid a week for personal care, 117 pounds a week for the nursing care.

15:56Steph McGovern:It's capped at those costs. Now, that doesn't sound like a lot of money, does it? 117 quid a week for nursing care. I mean I don't know because I'm not in the system but from I've got an elderly neighbor who's who's dealing with this at the moment and it is you know a lot more than that so although this is great that there's anything that's going to be there to support people as they get older I think there is big questions around the numbers because if this is if using the Scottish model to look at England, it's seven and a half billion. And that is on the basis of costs being capped per week.

16:38I just think this could be not as attractive as we might think it might be.

16:45Steph McGovern:It might go somewhere into helping people, but I don't think it's going to be brilliant. We're going to get free care when we need it, when we're older. I don't think it's going to be as simple as that. I mean, obviously there's still loads of detail, as we said, to work out on all of this, but Another thing I'm interested about is whether this is just for elderly people, this National Care Service, or whether it's for anyone who needs care across the system. Because, for example, in Scotland, it is not dependent on age. So how much more is that going to cost? But, you know, I think it's important too that this isn't just for elderly people.

17:21Steph McGovern:So it'll be interesting to see what we hear on that.

17:23Robert Peston:You know, you've raised some very important issues around what it will be in practice. He did say in terms yesterday, and he hasn't rode back from that, that this would be the equivalent of the free at the point of use care that we get from the NHS. and I think it's going to be quite hard to row back from that. Now, you know, he has also said that he, you know, to an extent this is like what's available in Scotland, but as you say, what is available in Scotland is not the equivalent of, you know, essentially free at the point of use, round-the-clock care that we get from the NHS. And I think if at the end of the day, you know, he is not talking about that, then I think people will feel shortchanged and a bit disappointed.

18:20Robert Peston:And so, you know, he would say there's a lot of detail to be worked out here. But from what he said, people will expect that, you know, they will get the support and care that they actually need. And as you say, in many cases, it will be, you know, rather more than what is available in Scotland. So we've talked about the pros and cons of social care and amending the triple lock, but there was so much more in his speech and we'll get to that after the break.

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20:39Steph McGovern:So I know one of the things that is really interesting to hear is how much you talked about our relationship with the EU and that Brexit was bad. And it felt like, I don't know, it felt like that was the first time we were hearing someone say that, a political leader, you know, our government saying that head on rather than skirting around it. Because obviously that's what the nation voted for, was for us to leave the EU. And I think we've seen our political leaders, our previous prime ministers, worried about saying that that was a bad idea for fear of saying to the nation, you got it wrong and, you know, annoying people.

21:17Steph McGovern:But it felt like Andy Burnham was really clear in that he was saying this was the wrong decision. And now we need to get back to a proper relationship with the EU.

21:25Robert Peston:Yeah, I mean, it was a big moment. I mean, look, in fairness to both Starmer and Rachel Reeves, they had latterly said that leaving the EU was a mistake, but they did not make the big leap that Andy Burnham has made, which was to open the possibility of rejoining. Whenever either of them were asked whether we should rejoin, they dodged. They basically said no. They basically pointed back either to the referendum result or to their last manifesto. So, I mean, Starmer, I think even at one point said, you know, not in his lifetime would we ever rejoin the EU. Whereas, you know, Andy Burnham was explicitly both in a book and indeed in the last 24 hours said definitely in his lifetime he wants to rejoin the EU.

22:18Robert Peston:But actually what he implied was way more ambitious than that. You know, he basically, we've got a summit coming up. with the EU. We haven't got a date for it. And, you know, on the agenda of that summit is pretty limited stuff. It's stuff to help sort of farmers trade with fewer costs with the EU. There is this scheme that has proved quite contentious that would allow students in the EU to come here and UK young people, students to go to the EU, a sort of young people's mobility scheme, which

22:57Robert Peston:is proved surprisingly difficult to agree on. But, you know, let's be clear, it's not going to be sort of transformative of our political and economic prospects. Now, talking to, I had the Europe administration on my programme the other day, a bloke called Hamish Faulkner, and he said in terms that they really want this forthcoming summit to be more ambitious than what Starmer had been negotiating. We'll just have to wait and see, you know, whether genuinely they can get onto the agenda stuff that looks much more like maybe not full membership of the single market or full membership of the customs union, but deals that reduce the costs of doing business with Europe's enormous single market, which, you know, almost all businesses would regard as being very beneficial, both for them as individual businesses, if they're exporters, but also for the British economy.

23:55Robert Peston:But the interesting thing that he said yesterday, and I'm not 100 % clear in my own mind how this will work in practice, he said around the time of that summit, which is, you know, due in December, we think, he will spell out a series of possible options for our future relationship with the EU. These could include what the Lib Dems are signed up for, which is membership of the customs union and single market. That's sort of quite a long way to full membership. Some would say it's sort of, although economically, it's definitely beneficial. We don't get a voice on the rules of the customs union or the single market if that's all we do.

24:44Robert Peston:So, you know, which many would say is unsatisfactory. You know, it could just be one of those that he proposes, the single market or customs union. It could be something weaker than that even. Or, and this is something that excites lots of Labour MPs, it might be that he says, right, we've got to get back on a track for full membership of the EU. There are loads of MPs who think that should be something that they put in their next general election manifesto, that they should fight the next election on that platform, because they think on that basis Lib Dems, Green voters, and, you know, even Tories would vote Labour because for many of those people, being a member of the EU, Trump's party loyalty, and they, you know, there are many people who think that is the best route for Labour to securing an election victory.

25:47Robert Peston:So it's really ambitious stuff is in play.