Business Secretary Peter Kyle: being let down by Mandelson & the UK-China relationship

15:45Ian Wright:So this is something that we're working towards. Well, for Chinese, we'll be doing the manufacturing here. Well, no, no. So you're looking at there are lots of partnership opportunities. There are lots of opportunities because we have such... If you take BMW's plant where they make the Mini, that's one of the most productive plants of any motor manufacturing anywhere. They make a million six hours from start to finish. We have real things here. We need to just puff our chests up a bit about how brilliant we are. China is looking at Britain in order to do the manufacturing here. These are the things that as a government to government, if we are engaging, if we're in the room, and we have respectful, frank conversations that we can incentivise.

16:25Ian Wright:Cherry, for example, as a result of this trip, is now headquartering its European headquarters in Liverpool. These are the sorts of first steps that we're seeing towards investing in Britain, but also building out in Britain, which means that, of course, if you do so, you abate a British law and you are then accessible to all enforcement agencies.

16:45Steph McGovern:So can I ask on that point about manufacturing then, because that's where I started. So I used to work for Black & Decker up in Durham, and all of that manufacturing capability got moved to China. So all of the parts of the Black & Decker products are made there. There's still a product design team in the northeast because we're brilliant at that. So are you saying that we're going to do more manufacturing here then? Are we going to grow that sector? Because the reason it moved is because it was cheaper to do it there.

17:09former German Chancellor:That is my mission, yes. That is what

17:13Ian Wright:I'm trying to see out of this. And this is what I started laying the pathway for when I first visited in September. And that is the nature of some of the agreements that you saw from the visit with the prime minister. There'll be more to say coming up on this, but this is the direction of travel that I am working towards. It doesn't mean that China is going to stop manufacturing. But look, they've got a big decision to make in China and they're aware of this. They've got a trillion dollar trading surplus. Now, that means that the rest of the world is going to balance that by either putting tariffs up or importing into China.

17:44Ian Wright:I also took over with us, the Prime Minister and myself, 56 businesses from Brompton Bikes to AstraZeneca. All these massive to smaller businesses, all of them have now got much, much bigger export opportunities into China than they had before. Sporting groups coming over, the Premier League and snooker, both of which have now got deals that have been signed over there. So we can balance this by having better access to the Chinese market, but also trying to incentivise Chinese activity here in the UK, in those areas that we identify are safe and they are areas where we are comfortable with. But the more that we build and construct and have the jobs and lots of the wealth circulating within Britain, rather than cheaply importing the final product, it's a win for us and it's a good step forward.

18:32Steph McGovern:Because at the moment, we have a trade deficit in terms of goods, don't we? 52 billion pounds. But we have a trade surplus in terms of services. Is that where you see it? You mentioned the snooker, the Premier League and things like that. Is it the services side of things that we're delivering to them? Is that where we're going to see the service? Not necessarily.

18:50Ian Wright:We do do some great things. I mean, Brompton Bikes, for example, now has got a great deal, and they're going to be able to import into China. People might think, well, that's small beer. But your listeners know full well that China at the moment has 400 million people in its middle classes. That will grow by 2035 to 800 million. It's going to double. Even though the GDP per capita is about a third of ours in the UK, that will rise too, and it'll get to just under half of ours by 2035. So increased wealth and an enormous expansion of the middle classes. So those are the kinds of products that we make here in the UK really successfully and will have access to an enormously growing market.

19:31Ian Wright:So just take the deal that we did on this visit to halve the tariff on whiskey. Imagine getting into the Chinese market at the early stage when you have a growing middle class that is moving away from traditional spirits that you drink locally to globally prestigious drinks such as whiskey. Now we have the opportunity that we're in there with a tiny tariff on it and a world-beating one, that has the potential to have access to the massive market, the biggest middle class in the world, but that's going to double. No, but hang on, Peter.

20:05Robert Peston:Sorry. I mean, Steph hit on an incredibly important point. We are a service economy. Manufacturing, for better or worse, many of us wish that successive governments had a rather more effective industrial policy, but manufacturing is what, at best, around 10 % of the British economy. You know, as it happens, I'm a Brompton Bikes owner, user, I rode on one here today, great fan of them, but with best one in the world. You know, you could quintuple Brompton Bikes exports as a result of the China deal. And we're still going to have a massive trade deficit, not just with China, but with the rest of the world.

20:48Robert Peston:Well, Steph's point is the correct one, that unless we can get greater access for our services in China, it's not going to be a particularly valuable market for us.

20:59former German Chancellor:Well, firstly, I'm not going to do down small manufacturers and small producers.

21:03Robert Peston:Who's doing them down? I've just picked it up. I know you do. I'm a listener.

21:07Ian Wright:Let me finish my points. Every community has got a business which has the potential to export. companies that export when they're small and medium organisations, they are more resilient during times of economic challenge than they are if they just rely on the domestic market. And they are more likely to have a sustainable business and a growing business into the future. So every community should have businesses which are small. In my case, I've got a tiny business called Brighton Gin. I took over a bottle of Brighton Gin to give the commerce secretary for China as a gift. These are the small businesses that actually will enable our whole country to flourish from these opportunities.

21:43Ian Wright:Secondly, one of the biggest deals that we did in China was on services. Now, what we're not doing, and this is illustrative of our approach to it and my approach to this, it would be huge for British services to have access to China. China, because it's an enormously fast expanding market, and the scale of the market is hard to understand unless you're there and you see it and you meet the people driving it. So our services, whether it's architecture, whether it's financial services, education. What was the deal that you did? So the deal that we did was to do a feasibility study into what a deal could look like.

22:18Ian Wright:So this might sound like it's being cautious, but I am being cautious. But right now, we have now started this feasibility study between the two countries. China really desires our service sector in there. We need to make sure that we do it and we do it in a way that we get it right.

22:33Robert Peston:are we talking about? Finance, architecture, law, accounting?

22:37Ian Wright:Law, education, and accounting right across the board. It's everything. It's everything, but we're doing a feasibility study into what that looks like.

22:44Robert Peston:And when will we see the results of that?

22:45Ian Wright:Well, as I said, this is a feasibility study which we need to get right. So we'll see how it goes. I will give oversight to it. And when I believe that the study is able to give us a clear direction of what is possible and what is appropriate in terms of a deal -

23:00Robert Peston:But for us, what are the downsides for Britain? There are no security issues here, are there?

23:05Ian Wright:Well, that's what we have to check out. And of course, people want to be careful. What would they be? What would the security issues be? I'm not going to discuss what they could be.

23:10Steph McGovern:Is it not just a case of going there and saying, do you want any of this stuff we've got? And then saying, yes, I'm not.

23:15Ian Wright:No, it's not. We're talking about lots of issues from data to expertise to infrastructure and so forth. Now, we have to make sure we get it right. So I am undertaking a feasibility study. this is a deal that I signed when I was in China, and it could lead to us doing a full deal. But rather than just jumping into the weeds of the deal, I want to make sure that we are explicit between the two countries about what we can and can't do. I want to be explicit about what the possibilities are. I need to understand where China is thinking in terms of allowing access to the market for services. Then we will move, once we've done it, towards actually what the writing on the page looks like.

23:55Ian Wright:When we move to a country, people talk about our deal with with India, with Korea, with the EU. These are countries that we have got very, very longstanding trading relationships with. We can go straight into layering new deals on top of it because the economy has moved forward. With China, this is the first step. I want to make sure, because the potential is so vast, but also the challenges that exist, that we get it right. Oh, for fuck's sake.

24:22Steph McGovern:Are you joking?

24:25Peter Kyle:We'll make sure they've got everything.

24:27Steph McGovern:And that was when the fire alarm went off in the middle of the recording. It wasn't a drill. It was a real alarm. So we all had to go and stand outside the Spotify building. It was quite an eclectic mix of people, if I'm honest, because there was me, Peter Kyle, Robert Peston, also with us, Alistair and Rory. Ian Wright was there and the former German Chancellor Olaf Scholz. After the break, we will come back with the rest of the episode for you. This episode is brought to you by IG. Now let's talk about commission fees because some investment platforms charge between£6 and£12 per trade. Pretty standard, right?

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27:00Steph McGovern:I'm back with Peter Cowell, but unfortunately Robert cannot be here because he is with the Prime Minister. You get me, Peter.

27:07former German Chancellor:It's nice of you here again. What next, an earthquake?

27:09Steph McGovern:I know. It was really surreal. Stood outside, wasn't it? I was just looking around at everyone. Oh, there's Olaf Scholz. There's Ian Wright.

27:16former German Chancellor:It's quite interesting to see who comes out of the studio fast and who just sits there. Anastasia Campbell was last to leave. He was, wasn't he? He came out on a throne, as far as I could see, being carried by his team.

27:25Steph McGovern:Yeah, I think he was. But thanks for coming back, Mo, because I know you are very busy at the minute. So we were talking about China when we were interrupted. and we you know you talked to us about the importance of the deals there and what they mean one of the things i wanted to ask you about was the last time robert and i were met and we were chatting about the the chinese trip we were talking about the fact it was quite interesting how many people from the cultural world went from the vna museum you've mentioned snooker there were lots of other people there and and we got a lot of feedback from people yeah just saying And actually, it's really important.

28:03Steph McGovern:We do a lot of business with them. What is it we do in terms of culture? How important is China to that side of our world and our economy?

28:11former German Chancellor:Well, your listeners and your viewers get it then. That's really good. I wondered if they'd be, I don't know, taking the mickey or something. No, no, there weren't. Good. Look, it's really important. So, the Royal Shakespeare Company is doing a lot of productions in China. There is huge interest, of course, in British literature, in British film, in British culture, the English language, music. We have the second largest creative arts sector in the whole world. So somewhere like China has always been quite fascinated by our culture. I think China has been, in the conversations I've had sometimes with Chinese representatives, quite frustrated that they are so populous and they are so important.

28:49former German Chancellor:And yet everybody's singing British tunes and they're interested in British culture and watching British stuff. So, very important that when we go over on these delegations, we don't just take the big businesses, although that's important, and we did. We also took medium-sized and small businesses, but also creative sector and sports. So we took Premier League, we had snooker, and we had table tennis. And these things were hugely important and real interest being spoken about by my counterpart, the Commerce Secretary for China, talking about all these sorts of things. I don't think it's inappropriate to say, but when Keir had the conversation with President Xi, the first formal bilateral exchange, President Xi started by talking about his childhood and talking about growing up in the Cultural Revolution.

29:39former German Chancellor:And he spoke about having to walk 10 miles to get books that were banned because he lived in the countryside. And one of the books he got was Shakespeare.

29:46Robert Peston:Oh, wow.

29:47former German Chancellor:And he read it as a young person and he spoke about that. And so people might not realise this, but it's a very important thing. Good economically as well, but really important, of course, for the soft power that Britain has, extending our reach in what is the fastest growing market and a hugely significant, complex, but consequential country like China.

30:11Steph McGovern:Yeah, yeah, that's really fascinating. Thanks for explaining that. One of the deals as well to come out of the trip was with AstraZeneca, obviously the big pharmaceutical company. You know, this is a company that's been supported for decades by the NHS and lots of know-how from UK universities. And essentially, this deal is where they're investing£11 billion, isn't it, into China to expand the manufacturing and research and development there. Why is that a good thing for us, for us to be creating jobs in China for a British company?

30:43former German Chancellor:Really good question. And I'm pleased you raised it because I think most people just think about what do we get out of it? What do we get from Chinese investment into the UK? We have world-class companies. We have world-class companies that are able to trade abroad, but also to innovate abroad. Now, somewhere like AstraZeneca, which is obviously life sciences, pharmaceuticals, people have to understand just how advanced China is getting in its ability to innovate and do scientific work. The education system in China is very high quality in certain circumstances, not in all, but in certain. And one of those areas is in science.

31:22former German Chancellor:So their ability to partner and do life sciences development work is actually really good and very complementary to the work that we do here. We have four of the world's top 10 universities. We have a culture of scientific endeavor. We have great partnerships between the private sector, capital investment and higher education, university public research. We've got the Crick Institute, for example. These are all world leading. But China also has areas of expertise. And this is one area where we see two-way collaboration. There's also Chinese life sciences, which are commissioning research and doing research in partnership here.

32:00Steph McGovern:Giving them IP, though. Are they not there now on the IP? And are we not giving them lots of jobs we could have created here, particularly in manufacturing?

32:07former German Chancellor:Well, we could only have created those jobs if we could have created the IP in the first place here and been first to market. What AstraZeneca has decided is, yes, they are a British company, they are doing loads of research here, but they could also do additional innovation if they did it in China as well.

32:26Steph McGovern:So it's not instead of?

32:27former German Chancellor:It's not instead of, it is complementary to. And of course, this is the thing, the IP remains with a British company and the IP will remain with that British company. Where they manufacture it, any innovations that are done, well, these are things that are open to negotiation going forward. But we are a country which is producing global companies, and we need to produce more of them, because ultimately, the shareholder value will be generated here, because AstraZeneca is listed in the London Stock Exchange. A lot of the other research will come back to the UK. Some of it will remain in China, but Britain will benefit from it.

33:02Yeah.

33:03Steph McGovern:And obviously, you've explained why doing deals with China is important. Trump, however, is less happy about us doing that. What do you make of him saying that it is very dangerous for us to have closer business ties with China?

33:19former German Chancellor:I'm really grateful that you asked us that question so far into this interview, because most of my experience with doing media interviews in China and since is asking this question at the top. We might move it to the top.

33:31Steph McGovern:No, I'm only joking.

33:32former German Chancellor:I keep looking over at Robert. Of course, this is an empty chair. A lot of people look in at the way that Britain is trading around the world. The first thing that they're asking us is about conflict. How does the work you're doing in America conflict with your work with the EU? Is it possible to do these two deals? Well, we proved it was. Conflict with China. Is China in conflict with your deal with India? When you look at the world through my eyes as the person that leads on these trade negotiations on behalf of our country, all I see is opportunity. Where there are challenges or areas where there is potential conflict, you just deal with it.

34:07former German Chancellor:We have very mature, grown-up, frank conversations with all of our partners, including the US and China. Very, very different in nature.

34:14Steph McGovern:Even though it looks really irrational as a person watching this, what Trump's doing.

34:18former German Chancellor:Well, what he's doing is very disruptive and very unpredictable.

34:23Steph McGovern:That must be hard, though, to try and walk that line of, as you say, of balancing all these different interests when you've got someone who can just come out and say something you weren't predicting.

34:33former German Chancellor:It is. But it's also, I didn't get into this job for the easy days. And it is a very steep learning curve, but I am loving the learning curve, which is why I love my job so much. But I meet businesses every day in this job, and they are dealing with adversity. JLR didn't go into business to make cars so they can get cyber attacked and shut down. They had to suddenly adjust to that. And when you look at how businesses like that, large and small, adapt to adversity, but also seek opportunity in adversity, we need to bring that kind of entrepreneurialism and confidence into government. I am confident in this government.

35:08former German Chancellor:I am confident in our country and the businesses that drive our country. Therefore, why should I be cowed when I see global disruption? I should be getting right out into the middle of it, engaging with it, puffing my chest out on behalf of our country, and seeing how we can strike more deals. Just to say on the US, even after the Greenland situation and a bunch of other things that were highly disruptive, I was there in Davos. And because of the relationships that I've got, I was speaking directly to James Greer, the lead trade negotiator, ambassador for America, and Howard Lutnick, the commerce secretary.

35:42former German Chancellor:And because of the relationships that we've got, we can have these frank conversations with them. And of course, we did find a way through it.

35:48Steph McGovern:And one of the things, given you've mentioned Davos as well, is that you talked about there was about investment in the UK and this idea of picking winners and that we should be investing in businesses and helping them. It's something Robert and I talk about all the time is how do we get greater investment into business? And, you know, are we very good as a country of assessing risk? And do we need to accept that sometimes we're going to put money into things that are going to fail? But that's important. It was something we talked to Patrick Vallance about on the show as well in terms of life sciences and tech and AI and everything.

36:23Steph McGovern:there is however the you know if you are trying to pick winners there are going to be people who will come at you about the failures you know luke johnson's had a lot to say on it serial entrepreneur and who's saying that you're playing at venture capitalism and that you're doing that with taxpayer money what's your argument back to that criticism firstly it's not me personally

36:45former German Chancellor:that is i don't make investment decisions what i've done is changed the risk threshold for for British Business Bank and also for UK Export Finance as well. UK Export Finance just announced an£11 billion facility for high street banks to lend to SMEs to get them exporting. Not all of them are going to succeed, but we are sharing the risk with banks in that case, but we are certainly standing behind them. What I've done is changed the risk threshold and also the speed and the agility with which the British Business Bank is able to make these decisions. So, for example, in the last year, the year leading up to September, we spent a billion pounds on investing in scale-ups and supporting scale-ups.

37:29former German Chancellor:In the first three months of me being Secretary of State, we spent a billion pounds. I mean, we keep that pace up. We've taken the largest equity investments into companies. Kraken was the first one we announced at 25 million pounds.

37:40Steph McGovern:This is obviously owned by Octopus Energy, who sponsored this show.

37:43former German Chancellor:Oh, is that right? Great. Well, it all comes full circle. and the spin out from Octopus. Now, they have huge potential. It wasn't me that made the decision, but what I've done is changed the risk threshold and incentivized making sure that we can get that money out the doors quicker so that we can be there at a point where we can influence the market. I'm not there because I want us to fully fund these companies and their expansion. 25 million out of the billion that has been privately raised in investment for Octopus and Kraken and those group of companies is very small. But being there at the beginning shows confidence.

38:18former German Chancellor:It shows the British government is putting its weight behind a company, a British company. And that gives a lot of confidence and expedites the investment they can get from the private sector, both domestically and internationally. And that is exactly what happened with Kraken.

38:32Steph McGovern:With Kraken, I mean, we've talked about it a lot on the show because we've had Greg Jackson on quite a few times. And obviously, as I've mentioned, he's now sponsoring us. But I mean, you say it's at the start of Kraken. It's been around for a while. And some people would say like 25 million, they don't need that money from us.

38:47former German Chancellor:Well, ask them about that. And they'll tell you a different story. You're right. They've been around for a while. But this is the problem that we have. I'm not using this money. When I was in my previous role at the Department for Science, Innovation and Technology, did an enormous amount of work for funding for collaborations, private, public, and also for spin outs. We are now the spin out capital of Europe. The problem we've got is actually growth. You can get the seed, the pre-seed financing really successfully here, easily here in the UK. Series A, you can do a pretty good job of it if you're showing momentum.

39:20former German Chancellor:But as soon as you start to get to Series B, it starts to slow down. Series C and D is really, really challenging. That is where we can step in and show confidence.

39:29Steph McGovern:This is the scale-up of business we're talking about here. Scale-up.

39:31former German Chancellor:Scale-up companies in the British economy only account for less than 1 % of businesses, but they account for about 25 % of the employment in our country, and even more when it comes to the potential to create wealth into the future. We have to get better at it because we do not have a trillion-dollar company in our economy. We've never produced one.

39:53Steph McGovern:Do you really think we're going to get one then? I do.

39:54former German Chancellor:I do.

39:55Steph McGovern:When? How soon?

39:56Ian Wright:Oh, God. Look, I'm in a rush. Does anybody think that I'm sitting on my laurels here? Yeah. You're literally wearing a tracksuit, so you're ready. Yes, I'm going to campaign off of this in a by-election, but as you know, I don't like wearing suits very much. No, I like it. The different looks.

40:11Steph McGovern:Yeah.

40:12former German Chancellor:So, no, this morning I was speaking at a conference for UK export finance for businesses who are looking to export. I've been around the world, but crucially, crucially, it is about showing that if the British government steps in at this moment, it really opens the doors for other investors as well. Don't underestimate the power the government has to give confidence to. So those people who say, you know, I shouldn't be picking winners. Well, look, we're not picking winners. It's got us to. It's got us to all these companies who are fleeing Britain to find money. So Luke Johnson has done some great business work.

40:46former German Chancellor:He invests in the city that I represent. But what I'm talking about is widespread support for scale up. The sector is getting better at it. We've had£79 billion of inward investment into our economy in the last quarter based on the Industrial Strategy 8 sectors. But what I'm talking about now is finding those businesses that have the potential to really grow fast and back them.

41:09Steph McGovern:Yes. And, you know, it's something we talk about all the time is how important that is. So that's the businesses who we are excited about in terms of growth and where they're going to take things. looking at another part of the business world the the kind of classic high street bricks and mortar businesses that have been there for you know decades supporting jobs you know often we're talking about businesses in the retail leisure hospitality fitness areas who are first jobs quite a lot for young people um a lot of those businesses are struggling the the pressure of business rates, the pressure of how expensive it is now to employ particularly young people because of how much the percentage rise of minimum wage has gone up for people under 21.

41:54Steph McGovern:You've got the increase in the national insurance contributions. It's really tough to be a traditional business at the moment. I've got retail businesses, I've seen our costs go up dramatically and we're questioning, do we still carry on with some of those businesses? And we're seeing lots of talk in the media about the pubs getting a bit of help, but where does that leave everyone else? And how do you balance everyone's needs? Because everyone's struggling with the fact that they've been hit from every angle.

42:26former German Chancellor:We came into government 17 months ago, and I'm not going to go through it all. People don't like it when we start pointing out what we had, but I think everyone acknowledges how tough it was. We had historic low growth, historic high taxation. And yet, we had to invest in two areas in particular, as far as I'm concerned. Firstly, into public services, but secondly, into something that nobody has talked about. And that's we've increased our R &D spending as a government by 11%. Again, getting that pipeline of innovation to commercialisation, to spin out, to grow, and hopefully stay in scale here in the UK.

42:58former German Chancellor:But in order to do so, we had to raise money as a government in a period where we had no growth in the economy. So we have to go through this period and we have had to make difficult choices to raise money. I want to make sure that we can get growth into our economy as quickly as we can. I am urgent, I'm in a rush, and I accept that even though we are now making progress and our economy is due to grow by 1.5 % this year, it's not enough to do what we want to do as a country, as a government. So those businesses that I recognize have had to endure that period that I've just described. and in addition, you know, have seen sort of layer upon layer of different challenges.

43:38former German Chancellor:Hospitality, retail and, you know, hotels and so forth, they are in the front line of the economy. They are literally embedded in people's communities. And I understand that they are therefore in the front line of the challenges when they see it.

43:51Steph McGovern:So are you all right with some of them having to close in order for, as you say, more money to go into research and development things? Because that's what's happening. businesses around you know where i live in the northeast are regularly closing and they're people who are part of a community some of them are frontline mental health workers in a in a sense because it's where people go to have a chat and it's small business people it's not big the big retailers i hear you got small shops or whatever else i represent the community i've lived in for

44:18former German Chancellor:a long time and i love i adore and i am very well integrated into that community just a few weeks

44:25Steph McGovern:They're being shafted though, aren't they? You can adore them. Well, hang on a sec.

44:28former German Chancellor:Hang on a sec. So we can shovel money from government to support sectors. It's not shoveling money though, right?

44:35Steph McGovern:Because it's the fact that the bills have gone up so much.

44:38former German Chancellor:No, no, let me finish my point because I don't want people to think that I'm being derogatory about government spending. We can shovel money into supporting sectors in time of need. But what we need to do is create the circumstances where businesses can thrive because there is the economic circumstances where people have more money in their pockets to go and spend in the high streets. In addition to that, we need to make sure we have a tax system and a regulatory system which supports innovation and supports the work that people do in small businesses, on high streets, up and down the country, in a very changing landscape when it comes to retail and the move to online.

45:12former German Chancellor:In a very changing landscape when it comes to people's personal consumer habits. So there will always be churn.

45:17Steph McGovern:So this is just a blip of where it's going to be tough. Is that what you're saying?

45:20former German Chancellor:What I'm saying is we inherited a very difficult set of circumstances and I am urgent. I am in a rush. I am doing everything I can to get the fundamentals right. Because if you can get customers in there in a growing economy where people have more money in their pocket through organic growth in wages and in the economy, that is the way you have a thriving, sustainable landscape for hospitality and retail. In addition to that, you have a government that's attuned to it, and I am attuned to it, which is why when we saw the negative impact that came from the very complex situation that we tried to adapt at the budget on business rates, we did leap into action after that.

46:01former German Chancellor:But we can talk about specific issues. Fundamentally, we need to make sure that we're getting money in people's pockets and spending, and therefore, those good businesses will thrive.

46:13Steph McGovern:I've got one more question before I let you go because I know you need to run. I spent a bit of time recently with those in the hairdressing sector running salons. They're finding it particularly tough, not just because of the business rates and employment costs going up, but also there's a kind of specific issue for them in terms of VAT. So for hair salons, 60 % of their costs are labour costs. So when taxation goes up on employment, it really hits them hard. And then what you've also got is this issue around the VAT threshold and how much VAT is charged on 20 % on the price of hair treatment and everything else.

46:52Steph McGovern:And what we're finding is salon owners are ditching the usual model of employing staff and instead setting up essentially a micro business structure where it is the salon is owned by someone. But instead of employing people, they basically rent out chairs in order for each of those hairdressers to stay under the VAT threshold and therefore not pay VAT. and then that means that they can bring down their prices, which means some salons are essentially making the same money and have the same number of people working in them but are paying more tax than others. Is there a way of levelling this playing field, like reduce the VAT threshold and bring down the VAT costs for those labour-intensive sectors like hairdressing?

47:41Steph McGovern:Because what the CBI are predicting is apprenticeships in salons will disappear by 2030 because people will not be able to afford salon owners to take them on.

47:52former German Chancellor:So I've heard you mention this. I do listen to the podcast and I have heard you talk about this before. So I went to a salon in Hove, actually in Portslade, in my constituency recently to try and understand their business and their business model. So I understand these issues. When I said a minute ago that I spend a lot of time in my community, the weekend before last, I was walking my dog and I went into pretty much every business along the high street so I could speak to people. So I am very aware of the specific different challenges that are faced. I'm not the chancellor and I'm not a budget as chancellor.

48:26Steph McGovern:Is it the type of thing you'd say to her though? God, it's really tough hairdressing sector at the minute because of this.

48:32former German Chancellor:Rachel and I speak very often and then when we hear insights, good, challenging, we share them. We do share them and we discuss them. Very often, if I hear something very pointed and particular, which is embedded deep down into the economy, we will then sometimes go and do pieces of work on it. Now, what I can't do, and you understand why, I can't say that I'm commissioning something or I'm doing something, but I have heard this. My job as business secretary is to try and understand where there are bits of the economy where there are pinch points and to make sure that their voices are heard and respected.

49:08former German Chancellor:You'll know that as soon, straight after the last budget, when we saw that there were some negative challenges coming out of hospitality, straight away I was sitting down with members of it. And Tom Kerridge, I think, was one of the first to come in with me. And we went through his accounts in that kind of detail so I could really understand it. So these are things I do care about these things. It's not just sitting on planes heading off to foreign countries to do trade deals. I take very seriously the need to be as embedded in the deep front line economy as I can

49:39Steph McGovern:Peter, thank you very much for coming in to talk to us spread over two days

49:42former German Chancellor:Will you have me back another time?

49:43Steph McGovern:Yes, we definitely will but thank you very much I really appreciate that and thank you from Robert I'll empty chair him Yeah, thanks and that's it from us and the rest is money Bye-bye

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