Healey steps into Number 11

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1:02BBC Sounds. Music, radio, podcasts. Wake Up To Money from BBC Five Live. Hello, welcome to Wake Up To Money. The UK has a new Chancellor. It's great to be back in the Treasury after nearly 20 years and just a huge honour to be here as Chancellor. Step forward, John Healy. So what might the former Defence Secretary bring to the job and what might it mean for the UK's future spending plans? Also, the future of the UK's oil and gas industry has been subject to much speculation as Andy Burnham begins his role as Prime Minister. We'll hear from the boss of one of the UK's biggest North Sea producers and I'm guessing, given the time, you're fully loaded with the morning coffee.

1:44Well, Italian roaster Lavazza claims Coffee drinkers are buying less but better. So, do you consider yourself a bit of a coffee slob? Let us know. Wake Up To Money from BBC Radio 5 Live. Good morning. Welcome to Wake Up To Money. It's Tuesday the 21st of July. It is four minutes past five. What a day yesterday. Let's just have a look at the papers. We've got the Financial Times front page. Burnham takes over as Premier with pledge to make Britain believe again. We've got the Daily Mail. Let's pray he knows what he's doing. Definitely a bit of scepticism in the papers this morning, it's fair to say.

2:20Daily Express, let's hear how you will bring back hope then, Andy. There you go. We've got It Starts Now from the Mirror. Daily Telegraph, Burnham pins hope on Healy. We're going to get into all of that. And we've got two fantastic guests with us this morning. Joanna Jensen, founder of the skincare brand Child's Farm, and now an angel investor. Joanna, good morning. Morning. April LaRouze as well is here with us, head of investment specialist at Insight Investments, a big guilts investor. April, good morning to you. Good morning. So, Joanna, I'm going to get from you, well, I'm going to get from both of you just a reaction from yesterday.

2:57I'll start with you, Joanna. Was it what you expected? Are you hopeful? Is it what you're looking out for? Well, hope's the word, isn't it? That was a very polished entrance to Downing Street, wasn't it? It is, it's a lot of talk. We haven't seen any plans yet. He's alluded to a 10-year plan on its way. I will, I'm in a sort of wait and see mode, if I'm being really honest. Yeah, that's fair enough. And again, we got that from the papers this morning. There is a bit of scepticism. People are waiting for the policies. April, are you feeling the same way about it? Yes. And I think I was just looking to see if there was any reaction kind of in the markets after the UK closed.

3:42And actually, I think we're all in wait and see mode. We don't really know what exactly the policies will look like, especially with a sort of a surprise chancellor, I guess, at least if you're a guilt investor. I know, it was a complete surprise. Were you shocked by it? Yeah, and I think, you know, not that we spend a lot of time looking at the betting markets, but nobody even had him on the radar. And I guess looking back, that was probably a mistake. because clearly the man has experience having worked in Gordon Brown's treasury. So, yeah, he looks like he's going to come in with some experience and probably some ideas.

4:17We're going to talk all about that in the next hour. So let's just do a recap of yesterday. So the United Kingdom's latest new prime minister has officially begun life at number 10. I have just come from Buckingham Palace where I have accepted His Majesty the King's invitation to form a government.

4:42So Andy Burnham has become the seventh Prime Minister to occupy number 10 in the space of a decade. Speaking in Downing Street, he said he wants politics to be more collaborative, more about problem solving than point scoring. I know people at home are fed up with politics. I hear you and I want to be honest with you. We have not been good enough and we need to be better. We will be. He said his government will be a circuit breaker for Britain and promised to introduce a new political and economic model. He also repeated his pledge to increase devolution across the UK. And we will take power out of here and carry it into every postcode in the land so that they can do more.

5:27And in doing more, build a new economy where we put life's essentials back under stronger public control to make them affordable to you again. Reindustrialising Britain, using public procurement to back British industry. Then just to list a couple more promises, he also said he'd help young people into work by changing the education system, that he'd build more council homes and bring down the welfare bill. April, when investors hear the promise of an entirely new economic model, what are you hearing? What was your reaction to that? Well, there's a little bit of sceptibility because the previous government was saying similar things.

6:14And not a lot changed, to be honest. But I think the real focus for at least the investment community is what is going to happen. You can make lots of plans, but how are you actually going to pay for any new projects which are going to happen? So I think that's the first point. The second point is devolution, they've been trying for a number of years to decentralize some of the way the government spends and raises money, but it doesn't really seem to have made any progress on that. So I think we will have to wait and see exactly what that means for spending and economic activity generally. Yeah, it's interesting also, even if there was progress on that front, does the experiences of places like Greater Manchester actually support that theory that once there's more economic spread or that there's more power in different places that actually it does benefit the average person?

7:14It doesn't guarantee that there will be success if somebody else is spending the money. So, you know, it's a nice idea, but I'm not sure, you know, from the point of the UK government bond market, I'm not sure it's that much of a focus. Yeah, Joanna, you've built a national consumer business, you know, invest in growing companies. Would it make a practical difference to a founder, whether decisions about skills or transport or investment, whatever it might be, are taken locally rather than in Westminster? Again, it's sort of quite woolly, isn't it? And, you know, we're looking at Andy Burnham who has had a great success with Manchester.

7:56What concerns me is where are all these other Andy Burnhams that are going to do these roles across the country? Because as yet, we're yet to see them. You know, we talk about Manchester being the success story. Where are the rest of them? We haven't seen them. And what concerns me that this is a fabulous dream, but the practicalities of it, I'm not sure we can see. And what worries me about moving these power bases to all around the country is how does that work when, you know, the British Business Bank, which I suppose is the biggest supporter of SMEs, small to medium sized enterprises in the UK.

8:40So therefore, one of the biggest drivers of investment into UK businesses already runs all their funds on a regional basis. And they already have investment committees on a regional basis. So I'm not sure how that is going to change so dramatically. And let's not forget how many of these local councils are actually in chronic debt. Is there any extra powers that you would actually want a mayor or regional authority to have that they don't already have? Probably not. I mean, you know, as somebody that lives in the country, I live in Wiltshire, you know, sort out those potholes. But they've had the opportunity to do this for however long and it hasn't been resolved.

9:25And I think this is my point. What is going to change so dramatic? they already have funds for their area. I'm just not sure. I'm not convinced that a local authority or a local council is going to have the ability to invest in a potential business. Imagine if it's something like life science or AI, which is fairly complicated and you really need to understand it. Are you telling me that there are suddenly going to be these multiple hubs of brilliance, investment brilliance around the country. I just can't see it happening. And we need to act because I think in the last, since 2025, we've had over 60 billion of investment capital leave this country.

10:10Now, April, you mentioned this. One of the biggest issues is how to fund a significant shift in priorities that Burnham is pursuing. Now, one potential option is welfare reform. That's something Sir Carus Starmus' government struggled to get through Parliament. Jim O 'Neill, Lord O 'Neill, has been advising Andy Burnham on Radio 4 yesterday. He made the link between welfare spending and the UK government's elevated cost of borrowing. I think people have to stop thinking about these things that have been around and costing so much money as untouchable because somebody is going to be upset, which they obviously will.

10:45but the reward would be for a considerable improvement in the performance of our gilt market because that's, at the end of the day, why we have such a premium in the first place together with deciding to leave the EU. Now, April, you are our gilt market guru, so what do you make of all that? Well, I think he's absolutely right. I think it can be very, very hard to make cuts in spending And, you know, obviously the bond markets were expecting that under the previous government. And it was just impossible to make those tough changes. So, you know, I suppose there does appear to be a bit more unity in the party at this stage.

11:30And we would hope to see something pragmatic, like, you know, perhaps mean testing some things that perhaps you are looking to cut. So it isn't impacting people at the lower income levels and focusing spending where it needs to be spent. So if you do that, the gilt market will be quite relaxed about any projects where you're looking to spend a bit more because you've costed it. But isn't that totally impractical, though? I mean, to means test every single facility that we have, I just don't think we've got the capacity and we certainly don't have the software to be able to do that. And how are we going to pay for it?

12:11That's a good point. Where would you get the money for that? I would assume that the money could be had from the savings that, I don't know, does everyone need winter fuel allowance? Oh, well, that's I mean, that would just be another nail in the labour coffin, wouldn't it? Because, you know, again, if you look at that population, I've got an elderly mother who benefits, who's got dementia and Alzheimer's, so benefits from a huge amount of assistance from the government. But isn't it her right after having paid, she was a nurse for the NHS, having paid her dues, her tax, her national insurance, that then her expectation is the state that will then look after her in her twilight years.

12:51Currently, from April next year, all of the savings that she has made are going to be charged at 40 % anyhow. And then when she dies, you know, we're completely stuffed and her pension is worth nothing. So any financial planning she's done up until now is worthless. I guess the real challenge is that somewhere there will have to be savings. And obviously, I don't know where they are, but we are spending almost 9 % of government revenue servicing the debt. and so at a certain stage you just can't keep spending without actually finding a way to afford that spending and from a sort of bond market perspective you can't just keep borrowing especially not when servicing that borrowing it's just eating up the ability to spend more so somebody will have to make some difficult choices and obviously I'm not that person but certainly the financial markets are definitely telling the government you know, please be sensible about the entirety of the picture.

13:54There's a couple more options, though. Doesn't he have April, rather than just, you know, cutting fuel allowance, you know, he's looking at raising tax for higher earners, that sort of thing? Yeah, yeah, sure. That's an absolutely another choice. And I'm sure that the new chancellor will be weighing up all of the various options. But, you know, the key thing is when you go into a kind of new government with a big pile of previous debt, you can't just assume you're going to be able to pile on yet more. And so somebody will have to look at it in the round. Yeah, I was going to say, but this is where all roads lead to North Sea oil, don't they?

14:34Because there we go. I mean, there has been muttering that he'll drop the ELP, which is the tax on oil. When we look at what Norway have achieved with a 1.7 trillion sovereign wealth fund because they drilled their own oil. They didn't give it away like Margaret Thatcher did. They kept it for themselves. There is an opportunity now that we can do this because part of this government's problem is they've got a£40 billion hole in their financials because, and I don't think people really understand this, Rachel Reeves in November, yes, she increased the ELP by 3%, But what she also did is she removed a huge offer on North Sea oil drilling, which was worth 26 % of tax.

15:19Currently, it's 78 % in the pound you pay in tax when you drill, which is why revenue's gone down for 50 to 10 billion, because people aren't drilling. If the UK, let's not forget that all these North Sea oil is owned by the Crown. We own it if we started drilling that. And I know it can be a bit distasteful, but it will give us the capital to do so much more, which will include things like reservoirs, like nuclear power. It will allow us to sort out our water industry, which is an absolute travesty. Unless we do something, it's sitting there, it's a gold mine, literally sitting there, a capital.

16:00We need to exploit it because it will pay for so much. plus ultimately give us the Sofa and Wealth Fund. But it shouldn't be a 10-year plan. It should be a 30-year plan. Well, do you know what, Joanna? I'm glad you mentioned that. You should be doing my job here because we are going to be talking about oil and gas. No, no, no. Absolutely, completely welcome. Because as you mentioned, the future of oil and gas production in the North Sea is actually back in the spotlight, not least amid continued pressure from across the Atlantic. President Trump said overnight it was mentioned in his first call with the new Prime Minister.

16:31So there's a fun fact for you there. And Andy Burnham says he will stick to Labour's promises not to issue any new oil and gas exploration licence. But that would not necessarily stop projects that have already have licences like Rosebank and Jackdaw from going ahead. So I guess the question is, could a change in tone from the new government lead to more investment in the North Sea? And we have David Lattin, the chair of Circa Energy, which delivers over 10 % of the UK's gas production and employs more than 300 people. David, good morning. Thanks for joining us. Good morning, Leanna. Hi. And what Joanna's saying is music to my ears.

17:09I agree completely. What exactly about what Joanna is saying is music to your ears? Tell us. The last thing I heard her say was, of course, you need to think on a 20 or 30 year time horizon. And in fact, that's, you know, one of the things Norway's done so well is to think long term about their industry. And unfortunately, the UK, and it doesn't really matter who's been in power, generally hasn't thought very long term. But we're an industry that makes decisions over the long term. And so we need some kind of policy stability. That's the first thing we need. And then encouragement, actually. You know, we want to be a force for good in the UK's economy.

17:46And we believe we still can be, but we do need some encouragement to invest. Well, David, Labour's deputy leader, Lucy Powell, has described this as a change of emphasis rather than a change of policy. But are you, you know, encouraged by that? Has that meant anything meaningful has changed for you? Well, our industry is by nature an optimistic one, Liana. So, you know, we deal with significant risks and really challenging environments and we use cutting edge technology. And we've got a world leading oil and gas industry and supply chain. But, you know, the policy headwinds have been tiring. So, yes, a change in tone is definitely something we would welcome.

18:27You know, I think a tone that recognises that we have a strategic national asset, as Joanna's just been saying, we've actually got the second largest oil and gas resource in Western Europe here on our own doorstep. And it's a longstanding source of economic value. I mean, it has been. We've been producing oil and gas for almost 60 years. So you could say we're kind of middle-aged and we think we're still quite healthy and we'd like to live to beyond 100. But we need a bit of support to be able to do that, right? And we've got a lot of people across the UK. It's not just Aberdeen and Scotland. There's someone living near every single speaker, every single listener, I would say, on this programme.

19:09There's probably someone living near them that works either in our industry or in some part of the economy that supports our industry or is supported by it. David, official UK oil and gas stats and projections suggest that 93 % of the oil and gas that is likely to be produced from the North Sea has already been extracted. So have we done as much as we can? Well, you know what they say about statistics. I'll give you another one, which is, you know, Serica, we produce 10 % of the UK's gas at the moment. We have a gas plant in Shetland, which is west of the UK in the islands in Scotland. And offshore from Shetland is a relatively unexplored part of the UK called the west of Shetland's Basin.

19:52And it's estimated that there there's something like five trillion cubic feet of gas waiting to be produced. Right. Now, that would keep I know these are funny numbers, right, for your listeners. But five trillion cubic feet of gas is enough to supply every household in the UK for around five years. Right. That's that's significant. So, you know, the thing is with oil and gas is in order to keep it going, you have to keep investing. And whilst companies like mine are prepared and willing to keep investing, surely we should be encouraged. How much investment? Sorry, Leanna, but especially when the alternative is to import, because we know that the UK, and it's the government's climate change committee tells us this, We know the UK is going to need between 13 and 15 billion barrels of oil equivalent between now and 2050 under any scenario.

20:46Right. Why would we be importing all of that when we could be producing half of it in the UK? Devin, just wondering how much investment can actually still happen, though, without issuing any new exploration licences? We can still invest in discovered fields and we're grateful to hear support for that. So I think you mentioned two of them earlier, but there are others. And certainly Serica has been busy drilling in and around our own fields, tying back satellite fields. So there's still a lot to do there, but there would be more with exploration as well. So a willingness to approve the development of new oil and gas fields that aren't yet developed, brilliant.

21:30Revisiting the decision on exploration would also be very, very good. and isn't actually it's complementary to renewables and growth of renewables, right? It's an and thing. We just need more energy of our own. Now, because gas produced in the North Sea is still sold at the market price, how does producing more of it here make energy cheaper or even more secure? Well, it certainly makes it more secure because it goes straight into the homes here, right? So as I said, if we produce the gas in the UK, it goes straight into the businesses and homes in the UK. So there's absolutely no security issue.

22:06It doesn't affect the price, to be honest, but it does put more money in the pockets of the exchequer and, of course, all of the people working in our industry. There's about 200 ,000 people across the country who directly work in very well-paid jobs in our industry, and they're well-taxed, and they also spend money in our economy. April, I'll bring you in on this as our investment head. Would it make a material difference for energy bills here? Oh, yeah. potentially a huge difference. And I just think generally energy policy needs to be, you know, do everything. We don't just have to do one thing.

22:42And I think for some time there seems to have been this belief that, you know, you just want to focus on renewables to the exclusion of all else. And obviously the most recent two wars we've had, you know, and unfortunately in rapid succession, have both massively impacted energy prices. And of course, we're now acutely aware that We are at the mercy of every other country for our energy, which is obviously suboptimal for industry, for the economy, for everything. So this is an opportunity to do something. I don't know what, but yes, I completely agree. Let's rethink domestic energy supply. Obviously, David, we need oil and gas at the moment.

23:23We'll probably need it still in 2050 and beyond. But then at the same time, even if you need some oil and gas project, it doesn't necessarily mean that every project should go ahead, does it? Because you still have to test whether that actually is compatible with our net zero goals. Ah, yeah. No, I'm glad you asked about that, Leanna. I think testing whether or not we are doing things as cleanly and efficiently as we could do is an entirely valid thing to do, right? But when you think about the environment, and I think it's important to recognise the environment, is, I mean, our atmosphere is global.

24:02It's not national, right? So if we choose to import gas from Qatar or Louisiana in the United States, it's actually about four to six times worse for the environment than producing it here, because you have to freeze it over there, put it in big ships, send it here, unfreeze it to get to the same state it would be in if you just piped it from off the coast. So, you know, I think it's easy to forget that. And whilst striving for national net zero targets might look attractive, we care about a global atmosphere rather than a national target, right? So we could sit here feeling good that we've hit a target, but actually done a worse thing for the environment by importing all our gas.

24:48Do you think the industry would accept tougher requirements and things like methane, flaring, platform electrification, decommissioning, that sort of stuff in exchange for faster decisions and maybe more predictable tax and licensing regime? Well, we've already been pretty tough on ourselves when it comes to methane emissions. And you'll see the industry's reduced year on year on year. I think offshore electrification is a tricky one, right? So if you look at Norway, which produces very clean gas because it has offshore electrification. That electrification comes from onshore hydroelectricity and is sent offshore and it's relatively cheap.

25:25And what it does is it allows them to power their offshore platforms with that electricity. That means they don't have to burn any gas in turbines, which would be used to either suck more hydrocarbons out of the ground or push it down pipes, right? So they don't have to burn any. So their emissions are lower. That means they can send it all to us, right? Now, the problem with doing that in the UK is if you generate electricity to send offshore in the UK, guess what's being used to generate the electricity? Largely, still, oil and gas, mainly gas, actually. You can, of course, generate electricity with renewables, but we don't yet generate enough to have huge amounts of spare capacity to power the offshore oil and gas industry with them, and we won't have for quite a long time.

26:12OK, David Lattin, chair of Serica Energy, which delivers 10 % of the UK's gas production and employs more than 300 people. Thank you so much for joining us. Thank you. Joanna, is this a wider problem for Britain? You know, you're an investor that we have businesses that want to invest, but then companies don't necessarily trust that rules are going to remain in place long enough for them to see return, that they want more certainty, as David was mentioning. Yeah, well, this is the fundamental problem. And where is this investment coming from? And, you know, I mean, going back to the oil and gas, if the government starts paying towards the extraction there, suddenly we are at the beginning of a potential sovereign wealth fund like they have in Norway.

26:58And so that will then be able to be used for all sorts of things like renewables, like to secure water security, food security. We then secure our energy security. But for investing in businesses, I'm seeing businesses take their investment overseas. And the most frightening sector that I've seen is the defence sector, whereby their Series C raise, which is your third big raise in the growth of a company, 100 % of those defence businesses are owned either by Middle Eastern investors or Chinese. now this is a reality and we rely heavily in this country on individual investors family offices wealthy individuals in this country to invest in this business and it goes back to my point earlier of 60 billion of investable assets leaving this country since 2025 your point about you know one of the tools in the toolbox is to raise taxes do that at your peril because you know there are the wealth has been leaving this country in droves.