Political Strategy and Future Election Outlook

This is Hannah Pret, the associate Business editor of the Sunday Times, and I'm here with Dom O'Connell at the Times CEO Summit For those who don't know Dom, what is the EO suummmit? Well It's a gathering of the great and good of British and actually international business. You get top politicians along. We've had the Prime Minister and the Chancellor of successive administrations. You probably get about a third of the four thousand one hundred and I think over time It's become an absolute fixture in the British business calendar, one of the top fixtures. Today we had really good sessions on the future of the workforce, the future of AI, and interviews with Rachel Reeves and Kimy Bayenoock, the leader of the opposition And let's start by listening to that interview with Kemy Badenlock. She was talking to the Times columnist, Fraser Nelson Okay, so Early on, Kemmy, we heard from Paul Thwait the chief executed at West who they were asking him what sort of things could you do to get the economy back running He was talking about the restrictions on banks and gash he was saying that for every One pound of capital released, you could get eight pounds of credit Now, I reckon this shows the power of the timeimes CEO summit because twentywenty minutes after he made that remark Kemmy Baaden made a speech down in Westminster saying that she was going to overhaul liquidity requirements. So why don't you tell Bom a little bit more about your plan I think a couple of people were actually in the audience when I gave the speech this morning to the City UK and We are in desperate need of an economic revolution There are several things that we need to do across the board. in every sector, But for the city specifically Deregulating, cutting red tape is particularly important. We have left rules in place and added more and more on that are restricting our banks from really unleashing capital One of these issues is ring fencing. We're the only country that's still ring fencing, even though the Bank of England now has a resolution regime We have capital requirements where different regulators, the FPC, the PRA, everyone's been adding buffer after buffer. We've got the Basel buffers, we've got the PRA buffers, the counter cyclical buffers. And it's restricting how we are able to just fund the country. If we're going to grow the way that we need to We're going to need the city to really go gangbusters. The revolution that we need is going to have to be bigger than the Big Bang. That means it needs to go beyond the city, but the city can be the powerhouse and what's basically happened as always with regulation is people add on new layers, but they don't remove the ones that are no longer needed And I'm sure all of you would have seen this in your sectors, in your industries that we actually need to take away some of the things that are holding us back. With banks, it's the capital requirements. We do need a baseline level for stability. But we've g banks are holding more than the Bank of England is actually suggesting is necessary capapital requirements are stopping ring fencing and changes to the financial ombudsman as well, which is actually reducing the products which are available for people. There's a huge advice gather. On the very richest are getting access to the full sway of financial products. These are three pretty radical steps, abolish ring fencing entirely cut back the capital requirements and replace the financial ombudsman service Now these are things which the Tores looked at a few years ago for a big review in twenty twenty two. And they decided not to do it because they thought that the ring fencing was useful and it protected savers. Now Rachel Reeves wants growve as much as you. She wants to reach for that great one to eight pounds multiplier of credit But even she has basically heeded the calls, not just off of sort of conservative types, but banks themselves. I think the chief executive of Barclays was saying I don't think ring fencing should be relaxed or scrapped. It's a very good system and a very strong one You've also got the Gvernor of the Bank of England who is saying that you shouldn't do So are you being a little bit incautious? Are you sowing the seeds for the next crash? So Is it really radical To do something that no other country is keeping in place? I don't think so. What I'm offering is radical common sense. And what I saw in governments is that anyt timee you wanted to do anything, there was always someone saying, No, no, no, no, we can't do that. We mustn't touch this. We should leave that alone. And this is why we are in stasis Yes, Barcl' thinks it's fine, but that's because Barcays is doing quite well out of it. They' already ring fenced. No other bank think thinks this is fine. All the other banks have been writing for us to remove that. And the Bank of England Gvernor might be saying this, but the outgoing head of the PRA, even people like Andy Healding, are saying it is time for us to let this stuff go I don't think Rachel Reeves is going to change it because one of the things that I'm also trying to get across is that it isn't just about regulation We need to change the culture The culture of the treasury, the culture of risk aversion, the zero risk culture whereere absolutely nothing bad must happen to anyone at any time, and we're going to bring in as many laws as possible to make sure that everybody is okay But the flip side of that is that if you have no risk, you have no reward. And one of the things that is stopping us from growing is that we have tried to eliminate risk from across the sector. We need some risk. We don' want everyone to take crazy risks. We don't want people to go wild But we do need people to be able to make some decisions, which may not necessarily go well, but if they do, then the economy will go gangbusters. And all of this stuff is not going to work unless we set out that foundation. So I talked about cutting red tape and this is what that looks like for the city But there are several other things that we need to do. We need to lower energy costs across the board. We need to remove unnecessary taxes. We need to lower tax cuts. We need flexible labor markets, and we also need to change our approach to business. We keep talking about business as if it's a problem to be managed rather than an assets to be championed You do those five things and that helps everyone What's been happening so far is that the pension sectorays, well, what are you going to do for pensions? An investment association wants to know what we're doing for them. All these little setctor specific schemes reviews and consultations about having more and more consultations. We're just kidding ourselves. None of this stuff is working. I just think that there is a real problem here. We need revolution, we need a war effort, and we're going to need everybody, whether it's banks or business or investors or workers. everyveryone is going to have to get involved to get us out of the mess we're in Right, well, let's say you succeeded in abolging these liquories. Let's say it's same all goes fine and we don't end up with a repeat of the a rrational exuberance which led to the last crash So if you want to cut the tax version You're going to have to cut spending. I mean, conservatives, every single person whose roomers are conservatives, all as long as we can remember saying, we need to cut taxes What did we end up with the last consonservative government the biggest tax burden since the war Now you might say Tories are under new management now, but the Tories have been quite good at providing new management over the last few years. So you can see why some people might think, yeah, this is all just basically Torory cliche. Why should they take you seriously this time? So you are right. There's been a lot of new management. I think with labour, we're going to see some new management coming in as well. What is happening is that it is getting harder to govern because people are straying from first principles We need to start thinking again about what it is we are trying to do And if you want to know why I will be different, you only have to look at what I did when I was in government. And yes, I know that past success is not a guarantee of future returns. But I think it's a good enough guide as it is, certainly in politics, it is. What did I do when I was business secretary I deregulated. I scrapped loads of corporate audiit regulations that those of you who remember the Karillan scandal, lots of stuff was put in train in twenty eighteen, landed on my desk in twenty twenty three. And I looked at it and I thought Well, all that will happen is that the good guys will have more regulation and the bad guys will just ignore it. Why are we doing this? I scrapped these regulations and I got lots of letters from people and WhatsApp saying, than you. Nobody wanted this. So glad someone saw common sense What was on the cover of the FT KPNG complained that I got rid of these regulations, and I know why because there was lots of advisory work that was coming that would have been fantastic for KPNG, but not for the rest of the system. You need people who are going to be tough, who can say no, who don't care about what the papers, especially the FT are going to write, people who are prepared to take difficult decisions And what we have seen so far is a lot of changes in new management with no principles underpinning. People know what it is that I believe. I believe in personal responsibility. I believe that it is not government that creates growth. it is business that creates growth. Government needs to create the conditions for growth and get out of the way So yes We will be able to do this. We will be able to lower some taxes. We have to reduce spending That starts with the welfare budget. It is astronomical. We're going to be spending two hundred billion pounds on health and sickness benefits alone by and out of work benefits by twenty thirty one We got a plan for wefed till twenty thirty one. The Prime Minister cannot get out a defense investment plan for next year. This is extraordinary This is I cannot tell you the peril that we are in for a defense secretary to say that we're unable to protect the country. We do have to bring spending down. But if we're going to really get our defense industry up, that's going to need business supporting, the critical supply chains, what do they all need? They need capital They need funding. And where does that come from? The city. That's why when you have these foundational plans, you need to have the specific things that you're going to do to help unleash that capital in the right way as well Otherwise you'll just create another bubble in housing. You need to make sure that all of your policies are chain linked. So we are going to bring down spending. We found forty seven billion pounds cuts last year, there's more coming. We're going to have a very difficult conversation with a lot of people in the country who think that we can just spend as much as we like on the never never. We do not have this kind of money. We also do not have time to waste. We have to start thinking about an economic revolution now And People might like what you're saying. But they might think, well, realistically, is this more than a theoretical exercise? Your personal ratings have improved quite a lot since last year's CUS summit. You've g minus thirty to sort of minus eight sort of define gravitity. minus one now. minus one. Congratulations. Im I'm the least hated political leader of the country.ight But if you look at the Conservative partarty's ratings, they're absolutely flat up at eighteen percent. We're also now the least hated for this Right, but Isabet b to here, Pish should actually admits that this is something to be proud of. where is the path, the plausible path for your lot being in power to implement any of this, to make what you've just said anything other than Theoretical exercise. Yes. So how do you know that all of this isn't just theory that will never become reality We have to look at the political landscape as it is and not use the rules for when we had a very clear two party system for today The political landscape is completely fragmented. A lot of people talk about reform UK. They're polling about what we got when we lost the election in twenty twenty four. And there's three years to go. There's everything to play for And people respond when you ask them a simple question, which they often get at a general election. In twenty nineteen. The question that the public was asked was How do we just get Brexit done? And there was a very clear answer in Boris Johnson We were all behind him for Brexit. And then after that, people started arguing, should we spend more? Should we cut taxes? Should we build housing? Should we not build any housing? Should we have lockdown or no lockdown? You win an election on a single question You can run into problems later. In twenty twenty four, what was the question? How do we get the Conservatives out of office? And people voted whatever they could to remove conservatives The mistake that Kir Stahmer made was believing that there was this huge love for labor, which the landslide caused by reform also getting involved, gave him. But there wasn't. And so he's run into trouble because there wasn't an agenda, there weren't principles that were underpinning. We know that the next election, there's going to be a question. What do we think it'll be? It has to be something that goes across the board with a full agenda. Who is going to fix our economy? It has to be that, because if it is not, then we are going to run into a lot of trouble. We will go bankrupt There is only one party that has a serious economic plan and a serious economic agenda. People are going to be asking, who's going to get me higher wages, Wh's going to create jobs and real jobs, not government created jobs that have no productivity whatsoever I have set out an agenda. All of it is costed and funded. We don't announce things until we have a plan We have said, for instance, we're going to put the two child benefit cap And we're going to put that money straight into recruiting for the army. Nigel Farage, who' said yes and no and yes and no on that, he wants to use that money to reduce bear duty. This is not serious. You have to look at how other parties are spending the same money again and again and again. We can't afford to do that. We need a serious plan What are the chances of people voting for you and finding theories end up propping up for No chance whatsoever. Really? Yes. I've been very, very clear. I'm not doing a deal with Nigel F. We were talking after the elections Same thing. what are we doing a deal on? He has said all sorts of things that I don't agree with. He wants to nationalize He wants more benefits He wants a bigger state. just one that he is in charge of. This goes against so many of the things that we believe in. And just as at the last election, people were voting against more than they were voting for, I do think there will be an undercurrent of the next election of How do we remove labour and stop perform? I think that there is going to be that element there, and we are the answer to both questions. Okay. On that note, you've now got a times radio interview and they wait for no amen. so please join me in thanking Kemi