Nigel Farage at Davos: 'The Consensus Era Is Over'

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0:41That's Vanguard.com slash audio. All investing is subject to risk, Vanguard Marketing Corporation Distributor. Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're the hosts of the Bluebird Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now.

1:15And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

1:50Bloomberg Audio Studios. Podcasts, radio, news. President Trump is taking this economy in a different direction. He ran on that, he promised it, and now he's delivering. We're in the process of imposing reciprocal tariffs. This is going to hurt our economy before we get to any possible retaliation. Thank you for being such a pro-business, pro-innovation president. We're very excited to see what you're doing to make all of our companies and our entire country so successful. The big promise was that he was going to bring down prices and make America affordable again. And everything he's done is the opposite of that.

2:29We have the greatest economy in history. This economy, in my opinion, is going to blow it away. Let's face it. The globalist idea that we should all do the same thing, have the same regulations, have the same targets. And the EU, of course, is the epicenter of all of this for the globalists. That's now for the birds. There's a change of debate. There is now something called national interest. And that's the new politics that you're seeing.

3:05I'm Stephanie Flanders, Head of Government and Economics at Bloomberg. And this is Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy and what on earth is going to happen next. This week, I wanted to play you a lively conversation I had with Nigel Farage, leader of Reform UK, on the sidelines of last week's World Economic Forum in Davos. Probably no single individual better embodies the conflicted and contradictory mood in politics today than Nigel Farage. He's deeply associated with Britain's exit from the EU, something that a significant majority of Brits now regret.

3:46He's also made a virtue of close ties with Donald Trump and the MAGA movement in the US, celebrating election night with Mr Trump in Mar-a-Lago, at a time when barely 20 % of the UK population have a favourable opinion of the US president, a number that's falling fast thanks to the row over Greenland and Trump's deeply insulting comments about the service of non-American soldiers in Afghanistan and Iraq. And yet, Despite all this, Reform UK, a party which won only five seats in the UK Parliament in the election just 18 months ago, is now more than 10 points ahead of both of the main parties in the opinion polls, and the political betting sites give Farage a much higher chance of being Britain's Prime Minister after the next general election than the current incumbent, Sakhir Starmer.

4:38So it seemed like a good time to dig into what a reform version of Trumponomics would look like. Whether the UK could get away with being quite as cavalier as Donald Trump has been about boring things like central bank independence or inflation target. In a week when populists all over Europe have also been rushing to distance themselves from the Trump administration on many issues, I was interested to find out what reform's foreign policy would look like and whether reform's voters would really want him to put quite so much trust in the US. I think our chat was revealing. It was also, I have to admit, rather fun.

5:28I'm a bit surprised to see you. You used to really slag off all the globalists at the WEF. Oh, I slagged off the European Parliament for 20 years, but I still went there once a month. And I think I genuinely upset them virtually every time I turned up. Isn't it interesting? I mean, you know, five years ago, here at Davos, the main topic of conversation was climate change, DEI, all that baloney. And here we are, five years on, and the debate's completely different. It's being dominated by AI, tech, energy. And the one thing I've enjoyed over the last couple of days, there is genuine debate. There are different opinions now, rather than the sort of consensus view that I certainly felt was coming out from the globalists.

6:12So yeah, no, no, I found it really interesting and worthwhile. It is quite funny that there's so many honest conversations this week and it sort of suggests, you know, what were the conversations like before? Well, I think, you see, it's interesting, isn't it? I mean, 10 years ago, we had the Brexit referendum result. We had Trump winning the presidency. And I think everyone thought, well, these are just aberrations. These are short term. I remember Tony Blair saying these are sort of short term fits of rage. Normal service will be resumed. And now everyone realizes that actually, these were the first tremors of a very, very major change in political conversation and debate.

6:49And that, I think, now is writ large. I think a lot of people are interested in how you're seeing foreign policy, the UK's role in this new world that we've all been talking about this week. But just to get into sort of core Bloomberg territory for a few minutes, one of the consensus views out there, if you ask economists, many people in the city, what would happen to UK borrowing rates if a reformed government took power, they go up. At least that's the consensus. So why do you think investors would be, seem to be quite nervous about reform? Yeah, well, as a former commodities trader, if there's a big consensual view, take the opposite trade position.

7:28I've always believed in that quite strongly. I mean, look, obviously we're talking about supply-side reform. One of the big frustrations is that since Brexit, businesses, particularly the small and medium-sized businesses, are now more heavily regulated, more penalised by whichever regulator is relevant to their area than they were before Brexit. It's a massive frustration. So do we want to reduce the size of the administrative state? Yes. Do we want to attempt genuine supply-side reform? Absolutely. Do we want rich taxpayers to flee the country and young entrepreneurs to flee the country every year or come back to the country, invest, employ people, spend money?

8:09So that's the agenda. there. And people say, well, if you do all of that, you're kind of going to be following a little bit of the quasi-Kwarteng budget, and the market's going to take fright. So that's where the view comes from. And I think the one big lesson from the trust-Kwarteng budget is they did not propose to cut spending. They basically said, we won't increase spending in line with inflation. So for our programme to work, what we absolutely have to do is to say to people, we are going to reduce welfare spending. We are going to reduce excessive government waste. And I think if we do that, the markets will applaud it.

8:49You step back from some of the more sort of aggressive tax cut promises, said it's an aspiration. But one of the big savings in your plan currently is to save money that the Bank of England currently spends on paying interest on bank reserves. So, as you know, there's a lot of concern about that from the Bank of England. They think they're going to lose control over interest rates, which is a pretty core part of their monetary policy. And certainly, bankers quite clearly see whether it's, I mean, I think you've said 30 billion, 35 billion. Yeah, no, no. I think it's more like 20 billion. But that's a 20 billion tax on banks.

9:23Yeah, look, that's less relevant now than it was because we're not going through the QE programme in quite the same way we were before, as you know. In fact, the opposite's been happening in some regards. But that's where some of the savings come from, actually, from the sales of the QT. We were the only party to point out just how much this was costing. And I think that's what we're good at. What we're good at is introducing new debates. And it was very interesting. When I went to meet Richard Tyson, I went to meet the governor of the Bank of England, which was a very interesting clash of cultures, I would say.

9:54And I just said, it's really interesting that you're making massive decisions here that have a huge impact on public finances. and yet it's being done with no debate in parliament whatsoever. But that's not true. I mean, it's true that there's no reform MPs on the select committee but they go all the time to give testimony to the House of Parliament. Yeah. The government controls... And these subjects... It takes these policies, actually. Part of these agreements are agreements with the Treasury of what they've been doing. And these subjects don't get talked about properly. There's no proper open debate and, frankly, the committee system in the UK doesn't get the coverage, doesn't get the publicity.

10:31We have not had any debate in the floor of the House of Commons on this subject at all. But you say you're going to do it. It's a part of your plan. It's not just part of your plan to discuss it. No, no, we're going to do it. At least 20 billion. We're going to do it. We're going to tax the banks 20 billion. And some of the banks won't like it. You're quite right. They will all pass it to their consumers. Well, I don't like the banks very much because they debanked me, didn't they? And wouldn't give me an account and tried to force me out of the country. No, look, this will be tough for banks to accept.

10:58I get that. But how do you think they're going to pay the 20 billion? I'm sorry, but the drain on public finances is just too great. But how do they make their money if they don't make it there? Don't you think... I mean, it's pretty clear. It's going to go on to interest margin. It's going to go on to the mortgage costs and the interest rates they charge your voters. Or they become more efficient, or they cut costs, or they do whatever. This money, they should not have had this money over... Look, frankly, the whole QE programme has not achieved anything very much other than to make the rich richer and the poor poorer.

11:27And everything we've done on QE since George Osborne and co put it into place has been bad for most people in the country. That's been really helpful because it's very clear. You are happy to have a very hefty extra tax on banks. It's not a tax. So sort of more anti-bank than this government. It's not a tax. They're just not going to get free money anymore. It's taking£20 billion from the banks. It doesn't really matter how you call it. They'll adapt. They'll adjust. Business does. Right. You disagree with the Bank of England governor on that. If we have an election on schedule, there'll be a new Bank of England governor by the time you would become prime minister.

12:03They'd come in in early 28. One of the other things that people are worried about is that you're actually questioning one of these key pillars of UK economic policy, one of the few stable pillars in the last 15 years or so, 20 years. The Independent Bank of England, will you let that new Bank of England governor continue in their term, their full term? Well, given what a catastrophe UK economic policy has been over the last 15 years, I think we should challenge every single tenant of it. One of the biggest mistakes, I mean, we vote Brexit. Now, if you vote Brexit, use it as an opportunity to do things differently.

12:37And the trouble is, from day one, the Conservative government viewed it as a damage limitation exercise, as opposed to an opportunity. And Andrew Bale is a perfectly plight, nice man. But they should have picked somebody who was a Brexiteer to be in charge of the Bank of England and to think totally differently, especially around financial markets, financial market regulation. We've ignored this. Like every other independent central bank, they think about their inflation targets. So you're suggesting after Brexit, they shouldn't have been focused on inflation. Take the whole world of cryptocurrencies and crypto trading.

13:12We are just lagging so far behind many other parts of the world. And yet the Bank of England, I want to know. I mean, there was even a proposal from Bailey just recently to restrict the number of stable coins any individual can hold. So you see, I'm talking about having people, the government of the Bank of England, I'm not questioning the independence of it. What I am saying is that we need a new, more innovative approach to all of this. OK, but if you get rid of the one who's there and there has been a tradition that reflects the independence of the central bank that the terms don't necessarily coincide with election terms, you're saying you would suspend that because you'd want to have your own person in there.

13:51If we don't do things differently, we're going to get poorer and poorer. But people will want to know exactly how you're going to do things differently, not just say we're going to have a big debate and we're going to question all this. We're going to pick different people with a different attitude towards everything to do with economic policy. Including the inflation target. Well, the inflation target, fine. We're not meeting it anyway with what we're doing. Now, of course inflation needs to be controlled. Of course it needs to be controlled. And there are other debates too. I mean, you know, the role of the OBR.

14:19I was going to ask you about that. I mean, when did they last get a forecast right about anything? What useful purpose do they say? That just means they're economists. What useful purpose? Well, I know they're nearly always wrong, yeah. But what useful purpose do they say? Look, we are prepared to think openly and challenge everything. Just as here at Davos there is now an open debate, honest conversations, as you said earlier, no longer a consensual view, the way Britain's been run, let's say since 2008, we could go back earlier, the way it's been run isn't working and we're having fresh thinking on all of it.

14:55I'm sure a lot of people would think, great, who can be against fresh thinking? Good start. It's a good place to start in opposition. It's not a good place to start at number 10 Downing Street, that you're going to put everything in the air. Tell you what, it worked pretty well in the early 1980s, didn't it? Well, we had a radical government that changed everything about our tax structures, our laws. And yes, there were a couple of difficult years, but did it turn the economy around? Did it lead to a change of attitude in the country? But that's really interesting. Margaret Thatcher did not throw everything in the air.

15:24If you look at the 1979 manifesto, it didn't have any of the big ambitious things that Thatcher later did. And the first few years, she stuck to the plans that she'd had. There was actually a certainty that was offered to the markets. Well, I would disagree with that completely. She didn't just question everything and didn't just suddenly surprise everybody. I disagree with that completely. The first budget that Geoffrey Howard brought in brought top-rate income tax down from 83 % to 60%. I'd call that pretty radical. But there were still some of the core elements of her policy, things like the really dramatic stuff, all came afterwards, after she'd built up support and after they'd got inflation out, which she did say she would stop.

16:01She gave a very clear signal that the country was heading in a different direction. And did it take a long time to get all the trade union laws through and all the rest of it? Yes, it did. You can't change things overnight. but you can signal that you want to go in a different direction. And look, I just think the most ignored section of the British economy, the one where we're failing in the biggest way, are the 5.6 million men and women out there running their own businesses. And they now want them to do quarterly returns as opposed to annual returns. It's just one little example of how we punish small business again and again and again.

16:40And I do believe, I genuinely believe, that if you look at what happened economically in America and in Britain in the 80s, you'll see a lot of that growth actually came from the bottom up in the economy, not from the top down. So I want a complete rethink over all that. I think a lot of people would hear you on those sort of, what we would say, you know, microeconomic things that are going wrong. You say, I'm going to change these micro things. But if you're putting the whole system of the way that macroeconomic policy has been run in the country, particularly the independent fiscal watchdog, independent central bank.

17:12If that is in question, when you walk into number 10, you don't think there's going to be an enormous amount of concern in international markets that will affect your ability to pay your debt? Well, maybe people will think, finally, we've got a government that actually has within it people who've been in business because we haven't got that now and we haven't had much of it for many, many years. It doesn't sound like you're very worried about having a repeat of a sort of Liz Truss type. No, because we're going to cut spending. For example, you can now go, you can now get benefits if you suffer from mild anxiety.

17:43Well, I have mild anxiety every morning. You know, I mean, we've just reached a ridiculous level with all of this, and it can't go on. It just can't go on. We're looking at a benefits bill of 300 billion by 2030, something like that. So it can't go on. And look, you know, of course I'm there to challenge all of these things. Bear in mind, I've only been back in politics 18 months. You know, I escaped, I got out over the wall, but I'm back again. I've had 18 months to try and build a political party, a structure from nothing. So effectively, I'm the CEO of Reform, and we build departments, and they give their weekly or daily reports in to me, and we're growing.

18:30The next big stage of my development will be that this time next year, sitting here on the bloom bag panel with you won't be me because there will be a team of people appointed to take all of those jobs and that's the next that is the next big stage of the development so perhaps the criticism that could be leveled fairly against me there were lots leveled unfairly against me but the fairly against me is that i've never been in frontline government true and it's a one-man band so at the minute i'm asked to talk about economic policy foreign policy you know law and order borders everything and so it's now about broadening between putting different people in position and then formulating firmer policies than we have but we have laid out already some proposed bills economic bills the concept of the britannia card to try and bring high-tax taxpayers back to Britain, the digital assets and crypto bill.

19:32So I think we are showing a way forward.

19:39Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio.

20:20That's vanguard.com slash audio. All investing is subject to risk Vanguard Marketing Corporation Distributor. I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate, commodities, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller.

21:03Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors, Michael Lewis, author of The Big Short and Moneyball. Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify or wherever you get your podcasts.

21:35You mentioned Brexit. You mentioned that we should have made more of an opportunity out of Brexit. We should have done it immediately. We've talked about we are seeing a new kind of global order. I haven't heard you say, what is Britain's role in this new global order? How do you think about your foreign policy? Number one, we have amazing advantages. Amazing advantages. Being outside of the European Union leaves us free in terms of trade policy. Ironically, you know, the super Romain, Estama, boasts at the dispatch box now about the fact we've got an independent trade policy and we're able to do things.

22:10and I think in terms of being a bridge between Europe and America, we're in a powerful position. I just think we've underutilized the amazing advantages we have across the rest of the world. We turned our backs on India. We turned our backs on the Commonwealth countries in the 70s. We decided that Europe was our future. That became the sort of foreign office and political priority over decades. and we've turned our backs on large parts of the world where there is still a remarkable relationship between those former colonies and ourselves. So we need to think more globally in every way. China is the obvious country that there's been a big debate about.

22:54Prime Minister is going to visit, I think it's the first prime ministerial visit for the UK in eight years. Would you go to China? How would you think about the relationship with China? Well, I don't believe our relationship with China is very good. I think this government is utterly craven in the way that it gives in to China at every opportunity. It's a difficult problem because they've become so big, and to some extent we've become quite dependent upon them, and not the other way around, if you think it through. So it's a massive, massive problem. But it's not a relationship we should trust, and we should be extremely cautious of them.

23:30I mean, if you're Prime Minister, what does that mean? It means you don't allow them to build an embassy on the site of the historic Royal Mint, which could potentially threaten communications. I can't believe it. Isaac Newton would be turning in his grave. I like the fact that you know Isaac Newton used to be the keeper of the Royal Mint. You'd be surprised why I know, wouldn't you? If you have that kind of attitude to China, and you certainly have your great relationship with President Trump, it does sound like you'd be sort of saying, as you go into number 10, we are going to be absolutely, inextricably tied with US and B.

24:08I'm not saying that, but I do think America... Look, what's our growth rate going to be Q4? What's it going to be? 0.2 %? If it's 0.3%, Rachel Reeves will be cheering. She might even smile, you never know. And what's America's growth rate going to be? 5%, 5.2%, 5.4 %? There's a lot we can learn from America, attitudes toward business, and particularly embracing new technology. We literally have front benches in Parliament, both sides full of people who have no comprehension, no comprehension of what this world is. And that's why I've said one thing that I will do is I want to bring people into government from outside the political sphere who are genuine experts in their area, who will take on a job at personal cost to them for four or five years to put something back.