Transcript: ‘Stop doing stupid things’ — Martin Wolf on the UK

This is an audio transcript of the Political Fix podcast episode: ‘‘Stop doing stupid things’: Martin Wolf on the UK’

[MUSIC PLAYING]

Martin Wolf
Once you’ve got politics moving into this sort of identity dog-whistle area, of course it’s cheap. You can keep talking like that. But you have basically said we have nothing useful to say about the core problems facing the country.

[DRUMROLL]

Lucy Fisher
Welcome to Political Fix, your essential insider guide to Westminster from the Financial Times with me, Lucy Fisher. You heard there the FT’s chief economics commentator, Martin Wolf, on the state of UK politics. Also coming up, Martin gives his view on Britain’s economic prospects. But first, I’m joined in the studio by my FT colleague George Parker. Hello, George.

George Parker
Hi, Lucy.

Lucy Fisher
And also on the pod today is the FT’s Stephen Bush. Hello, Stephen.

Stephen Bush
Hi, Lucy.

[DRUMROLL]

Lucy Fisher
It’s been a rather sluggish end to the parliamentary year, hasn’t it? We’ve had the sheer brass neck of Michelle Mone, the Tory peer who’s admitted to lying repeatedly to the press. That’s kept some of us bystanders agog. George, we were among reporters who descended on Downing Street for drinks with the chancellor and prime minister this week. And Rishi Sunak, true to form, avoided making headlines in a one-and-a-half-hour grilling at the liaison committee. So we’re facing the prospect of a welcome break from politics over the festive season. But before we charge headlong into what’s likely to be a very busy election year, let’s just stand back and take stock at the past year and what it can tell us about the year ahead. So George, what’s your assessment of where Sunak ends this year?

George Parker
Well, I think you’re right that everyone has ended up in sort of slightly exhausted state at the end of the year. And that big vote on Rwanda, I think, was the sort of the . . . After that, everyone just wanted to go put their head on a duvet and instead of spend a few days in a befuddled partying state. But look, I mean, the headline of it is Rishi Sunak’s more or less where he was at the start of the year, which is he’s about 20 points behind Labour in the opinion polls. The five tests he set himself, only one of them has been achieved, which is the one about halving inflation and even that one, I don’t think anyone would say that was particularly down to anything Rishi Sunak did. So he’s in a difficult position. Labour have spent the year basically doing very little, not giving the Tories a target to aim at, and I suspect that’s going to carry on into the new year. So look, I mean, one of the things that Rishi Sunak did say at the Downing Street drinks party were both out; apart from discussing his penchant for Heart Radio Christmas, Heart Christmas, was that 2024 would be an election year. So he seemed to be ruling out the idea of dragging it out to January 2025.

Lucy Fisher
Small mercies.

George Parker
Small mercies. But next year is the election year, and I think that has its own momentum. I think going into the new year, everything will be framed by the fact that the poll is coming, and I think that will be a sharpening moment for everyone.

Lucy Fisher
And Stephen, I mean, George had a great scoop earlier this week on the five pledges that the Statistics Authority had given Sunak a rap over the knuckles for incorrectly claiming that he had met another of the five tests and claimed wrongly that debt was falling. What can we expect from Sunak at the beginning of January, do you think? Would he risk making another pledge card for himself in the new year scene-setter we’re all expecting?

Stephen Bush
No. There is a live debate in Downing Street about what the approach should be, given the plan A of: we’ve kept these promises now, here’s some more. Obviously, you can’t go into an election year going one out of five ain’t bad. We’ve already seen the kind of beginnings of what we’ll hear a lot more of, which is, you know, highlighting that although, yes, the Labour party has tried to be very cautious, they haven’t always succeeded. They spent their plan to abolish non-domicile tax seven times, according to CCHQ’s latest attack briefing on them. And we’ll hear a lot more about that. And I think what we’ll see over the year is because he can hardly run on his achievements, because even when he tries to mark his own homework, he’s still only saying two out of five have been met. What we will see instead will be a fear of Labour, attacks on Keir Starmer’s record as head of the Crown Prosecution Service. And that will, I think, be the backdrop of most of the first four months of the year.

Lucy Fisher
You know, I want to come on to the campaign and just how nasty it might get in a minute. George, before we look to that, where do you think Tory MPs are? Because in my experience, when you’ve got a restive party like the Conservatives certainly are, and they get to the end of a long term, they’re tired. Sometimes recess can work in one of two ways. It can either allow them a chance to go home, get some sleep, get some rest, simmer down, gain some perspective and they come back ready to pull together and move forward. Or they go home. They hear the angry feedback from constituents, and that gets them even more riled up about the party’s electoral prospects.

George Parker
Yeah, I think there’ll be a number of emotions going through the minds of Conservative MPs. Some of them plainly think that they’ve lost the next election. You speak to quite a few people now thinking beyond the next election and their jobs post politics. There are some people in marginal seats, I think, who are gonna come back and just think, we’ve got to get in behind the prime minister, it’s our only chance. And then there’s a third group who basically are already thinking about the leadership contest to come after Rishi Sunak loses the election and how that’s gonna play out. And that’s obviously a very dangerous dynamic for the prime minister, have people openly thinking about life after an election defeat. He needs to get back on the front foot straightaway. We expect a speech from him early in the new year, setting out his priorities, and Stephen says laden with attacks on Labour. He’ll hope to get that Rwanda bill through very quickly and try to get the party in behind him.

Lucy Fisher
And what about this Wellingborough by-election we’re expecting to come? I think it could be as early as early February, could be a bit later if the government tries to delay moving the writ. But that’s a moment of danger for Sunak.

George Parker
Yeah, I mean, this is Peter Bone’s seat and there’s been a recall petition. Thirteen per cent of his constituents want him out. So there will be a by-election. I would have thought the best thing for Conservative central office to do would be to hold the by-election early in 2024. You don’t want it hanging over them. We’re also expecting potentially another by-election in South Blackpool, which is Scott Benton’s seat, who is also expected to face a recall petition. They’ll want to get those out of the way as early as possible rather than have them dragging in to the election period, which I should, it’s worth stressing, I still think, and people in Downing Street, the view on this seems to be hardening, will be in the autumn of 2024 rather than this earlier speculation about doing something in May.

Lucy Fisher
Stephen, I mean, looking to Labour, looking back at this year and thinking how much we’ve learned about the policy programme for government, it’s pretty thin, isn’t it? I mean there’s still a big uphill challenge for Starmer to put some meat on the bone on policy, isn’t there? Or can he get away with trying to push ahead towards the election without telling the public terribly much about what he’d do in government?

Stephen Bush
I actually think that the Labour plan is quite thick, right? They’ve got a fairly large suite of changes to the labour market proposed. They have, you know, a very bold commitment on planning reform. When you talk to the minority of Conservatives who aren’t in despair or the ones who are in despair for the party nationally but are optimistic about their own seat, they talk about Labour’s planning reforms and they have, you know, I think in terms of their broad thesis of, you know, we’ll try and get more growth and when we have more growth, then we’ll be able to invest more in public services and we’ll make public services run better through our reform programme. For an opposition, it’s actually a fairly chunky set of commitments. There is quite a lot to attack there, if you’re the Conservative party. I think the question for them over both this year and the year coming is can they avoid the place that the Conservatives won’t find the next election, which is to go, come on. We all know that the Labour party, when push comes to shove, is going to find 20bn, it’s gonna find 20bn by raising your taxes.

Lucy Fisher
And Stephen, in January we’re expecting Labour to make the formal request for access talks. Those are the talks with the civil service setting out their priorities, confidential private discussions about how Labour would want to forge ahead in the first 100 days of a Starmer-led government. Are they ready to put in that request? Are they clear in their own minds about what their policy priorities are?

Stephen Bush
Yeah well, the interesting . . . I asked this question to a shadow cabinet member only yesterday and they kind of sort of swallowed and said, well, hardly any of us have been in government before, they said. So I kind of don’t think any of us can honestly say that we’re ready. And I think that is the big known unknown, is that right, is that with the exception of Keir Starmer, who’s obviously run a big public service, this is actually an even greener front bench than the one in 1997. And I think, you know, one subplot of that first 100 days if they do get into office will be someone, including possibly some shadow cabinet ministers that are currently very favoured at Westminster, you know, among the lobby, black commentators, etc, etc, may turn out to not . . . 

Lucy Fisher
And name some names. Who are you thinking about there?

Stephen Bush
Well, I’m not saying that I’ve looked at any of them until I think you’re going to struggle. But I mean, you imagine, say, someone who’s I think know very good opposition spokesperson-like, say, Wes Streeting, right, who’s impressed lots of the stakeholders by talking them very seriously about NHS reform. Is he going to be able to manage having this huge spending department with a variety of crises in his in-tray? Maybe. In the other dynamic, if they do win of course, will be that there will be many, many more new MPs than there are people in the parliamentary party now because they are, thanks to Jeremy Corbyn there are very few Labour MPs. So that will be another kind of odd dynamic, right? You have in some cases very experienced people who’ll be in on the backbenches or in the junior ministerial ranks will probably be looking up at some of the secretary of states and positioning themselves for those jobs.

Lucy Fisher
And George, before we get to Labour being in government and winning the next election, what do you identify as the major challenges facing Starmer in the first part of next year?

George Parker
I think the challenge will be to minimise the target that the Conservatives have to aim at. And there’s been a lot of talk in Labour circles about, you know, next year is the year when we’ll be a bit more specific about what we’re going to do. And we reported the other day that they’re doing a big review of financial services legislation, which regulation which our readers and listeners will be interested in. But my impression is still that they are determined to make the target small as possible.

So I think one of the things we’ll see in the first part of next year will be some kind of redefinition of this £28bn commitment on the green prosperity plan. Every single Conservative press release, even Rishi Sunak’s speech at the boozy Downing Street drinks refers to the £28bn. It’s not just a notional thing about this £28bn of borrowing. What they will try and do is weaponise this as a Labour tax bombshell. You know, how are they gonna pay for it? They can put your taxes up.

And I think Labour’s first priority in 2024 will be to find a way of neutralising that attack. And that’s difficult because if you take that I slightly disagree with Stephen about the fact that they’ve got this weighty programme for government. I think if you ask members of the public what Labour would do, I think they struggle and probably the most identifiable thing is they’re gonna spend a load of money on the green economy. Now if you start to dilute that or push it back into the long grass or tie it up in the fiscal rules, people start to ask, what is your economic policy about? But my instinct is that Labour are gonna be safety first and they will try and close down that target quite early on next year.

Lucy Fisher
And Stephen, just finally coming back to this point about what a nasty election campaign we can see coming up, the way the Conservatives are gonna go after Starmer, we’ve already started to see a trickle of stories in the Telegraph about Starmer’s record as DPP and the kinds of bad guys he helped defend when he was a defence barrister before that. Do you think those kind of attacks are gonna have much purchase with the public? And what about Labour’s attack against Rishi Sunak that it’s gearing up regarding his wealth and his wife’s former status as a non-dom?

Stephen Bush
Obviously, Keir Starmer has a very long career. So I’m reluctant to categorically say it won’t work because it is certainly possible and there is something in it that hits all of the following asks: politically salient, relevant to the Conservatives’ strengths in office, and something that is clearly separate from the Conservative record. And it is possible that they can hit on an attack on Keir Starmer’s record that does achieve all of those things. However, I would say it is unlikely simply because he was head of the DPP during a Conservative government under the prime minister who is now back as foreign secretary. And the Conservative record on criminal justice is not good, to put it mildly.

On the Rishi Sunak attacks, well, we’ve already seen that those attacks do spook the Conservative party. They’re one of the reasons why we had a national insurance cut rather than an inheritance tax cut in the most recent fiscal event. Labour will, of course, continue to return to that theme. I mean, you know, the economic case for what they want to do on the non-doms reform is pretty thin. That is a political attack disguised as a revenue raiser. It’s a way of re-airing the Rishi Sunak had a green card until very long. It speaks to anxieties about his wealth and I to be honest, do think also does slightly harm the prime minister specifically because he is from an ethnic minority. And so I think you will see a lot more of that kind of he’s rich and that in some seats will, I think, slide into a he’s not around here kind of message. I’m not saying there are lots of votes that are moved by that. But there is a crucial 5 per cent of the country which is moved by that and in some seats, 5 per cent of the vote is gonna be very, very important.

Lucy Fisher
Just unpack that very briefly, Stephen. You think it plays into a narrative that he’s, what, a kind of a global sort of financier, or you think it is more a sort of a racist attack on him?

Stephen Bush
I don’t think it is a racist attack, right, in that it is perfectly reasonable and actually, indeed fair comment to point out that as finance minister, he retained his green card. I think that is a legitimate cause of political attack and it is a legitimate cause of disquiet among voters. But it also does particularly land well against Rishi Sunak because of his ethnic background, right? We can see that in the polling, right? He trails the Conservative party on patriotism. He trails the Conservative party on law and order. It is hard to see the policy or philosophical argument as to why Rishi Sunak would trail his party on those issues. So although these are all legitimate attacks that are always part and parcel of any election, they will land differently because, you know, Rishi Sunak is from an ethnic minority and he’s British-Indian.

Just as, you know, to take the last election as an example. I think attacks on Jeremy Corbyn’s weakness in the face of national threats landed differently in 2019 in part because Jeremy Corbyn looked older and more frail. I do really notice when I go around the country, the green card does still come up and it comes up specifically because, you know, it does feed into a particular vulnerability that this prime minister carries. And I think that in terms of this nasty election, that will be one of the kind of whether it’s a vox pop where someone says something slightly unsavoury or this year as we see in these polls, right, where he does trail the Conservative party on issues where I would say it is not obvious why he would trail them on those issues.

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Lucy Fisher
Well, let’s pivot now from politics to economics and who else to appraise the UK’s outlook but the doyen of economic commentary, the FT’s Martin Wolf. Martin, thanks for joining us today.

Martin Wolf
Great pleasure.

Lucy Fisher
So we’ve just been talking about Rishi Sunak’s five pledges he made in January. Can you just give us a quick appraisal of the three economic pledges within that charge sheet and how he’s got on?

Martin Wolf
Well, the first, if I remember correctly, was that inflation would fall and it has. Got nothing to do with the government, but fair enough, you take credit for what was likely to happen. The second is that debt would fall. So far, not really, but they promise it will in the next parliamentary term after them. Almost certainly not gonna be in power on the basis of promises on public spending, which are completely implausible. So I would have to say that’s sort of a fiction. And remind me what the third was.

Lucy Fisher
Growth.

Martin Wolf
Oh, yes. Well, it’s sort of limping, really limping, but not ridiculously negative anyway.

Lucy Fisher
So let’s sort of focus on the growth issue and let’s get a sense from you of just how dire or not the outlook is for the UK economy, particularly when it comes to comparison nations like other large European countries.

Martin Wolf
Well, I think the best way actually of looking at British performance, the first place is relative to its own history. And I also think the best way is in terms of the long term. Britain has been a growing economy for an exceptionally long period. It started in the 19th century. And as far as we can see, the last 15 years in terms of productivity and output per head have really been the worst as far back as we can go. So essentially near stagnant in terms of real incomes per head and in terms of productivity. Not absolutely stagnant, the Italians have done even worse. So that is — and they’ve done it for longer, since for at least 30 years, a bit more. But we’ve joined that club and we’ve experienced also a dramatic decline in the rate of productivity growth from what appeared probably partly illusory to be an exceptionally good performance by comparison up to the financial crisis to 2007.

So this long-term stagnation is the really worrying thing, because once you get stuck in a low-growth trap like that, investment is weak, facing the weakest in any major country. And then you’re caught in this vicious circle. People don’t expect growth so they don’t invest for growth. They don’t invest for growth, we don’t grow and so forth. And now, in the short run, I would expect next year is gonna be pretty poor. How poor? I think there’s a lot of controversy and short-term forecasts I think are always pretty doubtful. But what I’m pretty confident about is that we’re not gonna break out of the low-growth trap. And that’s the thing that I think is really worrying.

Lucy Fisher
And who’s to blame for this trap we find ourselves in? Is it the past 13 years of Conservative-led administrations? Does it go back earlier than that? It sounds from your columns that I read avidly that root, this is really about low public and private investment, how we’ve got into this trap in the first place.

Martin Wolf
I think the honest answer is we don’t fully know. And in two recent columns, I’ve been writing about a fascinating book produced by the Resolution Foundation in association with the Centre for Economic Performance at the London School of Economics. It documents the weak productivity growth; in comparison it documents the low investment rate. So we know, as it were, what’s gone wrong.

I think to be honest, it’s not clear why it’s gone wrong. And I think there are, broadly speaking, two sorts of explanations. One is that actually, the British economy has been very weak for a very long time, including the period before 2007. And it was flattered in the preceding 15 years or so by the fact that the world had a huge financial bubble. The UK, having one of the two largest financial centres, profited immensely from that bubble, which was unsustainable. And the bubble, the financial bubble seeped over into other areas of our economy, for instance, like the property boom, which allowed what was really no more than the fruit of the financial bubble to be recorded as income.

In other words, we were never as strong as we thought we were. And — this is a retrospective look, not a view I had at the time — that means that the post-Thatcher boom, which essentially was what began after we left the ERM in the early ’90s, we didn’t have a boom while Thatcher was in power but the post-Thatcher boom period from let’s say ‘92 to 2007 was a bit of an illusion and we just returned to reality. And that’s really depressing because it means that we are fundamentally a very weak economy and I think that’s quite plausible.

The second view is that something did happen then, and I think this is also part of the story, which is after the crisis, we pursued for essentially political, not economic reasons an austerity policy that knocked the stuffing out of public investment, gave us a really big long period of weakness, very big economic weakness, which discouraged animal spirits in the private sector. And that then created a sort of vicious, the beginning of the vicious circle. And then we did Brexit, which was another huge blow to confidence. So if you take this as the central view, then the important lesson is we’ve just got to stop doing stupid things. (Lucy laughs) We’ve got to raise public investment. We’ve got to reach the best possible deal we can on Brexit. We’ve got to provide real incentives for private investment. And that the chancellor did with the proposal, which I’ve supported for years, the case for full expensing of investment, reform of pensions and a few other things, and maybe growth will restart.

I’ll add one final thing. Britain has a uniquely unfavourable regional balance of economic activity. It’s really terrible. And that becomes more important when London itself isn’t doing very well and London itself hasn’t been doing that well because, well, by historical standards, because the financial sector isn’t doing what it used to do. So we have basically two possible explanations, and I think both are true. One, we’ve always had a bit of a growth illusion about how strong we were up to 2007, and then we made some pretty bad mistakes and series of mistakes afterwards which kept on knocking the stuffing out of growth.

Lucy Fisher
Well, it’s pretty alarming, the picture you paint of the economic outlook, but also slightly heartened. Do you think it’s not implausible there may be some growth further along the line? It does feel at the moment with the economy is weak, as you set out, that public services are potentially in danger. I wonder, do think long-term that the NHS will survive?

Martin Wolf
Well, I don’t see what the alternative is going to be. It depends really what you mean by the NHS. We should think about what is unique about the NHS and what is similar to everywhere else. So every continental country at all like us has universal health insurance, right? The providers are often mostly private or semi-private. They may be not-for-profit organisations, but they’re independent and the government provides, pays for universal health insurance. In some measure, there may be some top-ups, but basically, there’s universal health insurance.

What makes the NHS special is that the industry is nationalised. I could imagine, though, and I’ve written about this, deciding that actually, that centralised way of managing the provision of health would change. But I can’t imagine any way of getting rid of universal health insurance because, well, the United States, I mean that’s a system without universal health insurance. It costs almost twice as much as ours does. Giving basic healthcare to a very large part of the population is incredibly difficult. So I think we could decide to change our payment through tax to the payment through universal health insurance. But compulsory universal health insurance, in my view, is a tax. You can call it something else, but it is. And you could change the NHS structure to make the hospitals and whatever the care institutions are more independent than all the GPs already are.

So the truth is that I don’t think there’s a meaningful sense in which the NHS is going to disappear. What it can do is just get worse and worse. And if that happens, what will happen over time is people who can afford it will increasingly go for a private insurance route and the rest of society will end up with what is still a publicly provided health service, but just a very, very poor one. And the fundamental issue here is not, in my view, whether it’s publicly or privately provided; what its fundamental issue is, are we prepared to pay for what a universal health service actually costs in current circumstances, which is more than we are currently paying for it?

Lucy Fisher
Well, that is a debate that will rage on. Another element of the political debate about the economy that is going to gear up ahead of the election is around taxes. And, Martin, I wanted to ask you, where do you stand on the debate about whether high taxes stifle economic growth?

Martin Wolf
I’m somewhat sceptical. The UK is not a high-tax country. It’s very, very important. It’s higher than it used to be. That’s not surprising, given the change in our demography. It was bound to happen. I’ve been writing about this for 20 years. It was bound to happen because we’re gonna have more old people. Health will become more expensive. We need more education in the modern world than we used to. We couldn’t have children leave school at 15 as we used to. I mean, this is all obvious.

So we are going to spend more on public services like this. We’re clearly gonna end up paying more on defence. So it seems to me obvious that our tax burden will go up. And that’s particularly true if growth is very slow because the services still get more expensive to a lesser degree, but still do so. Now, if you compare us with continental countries, which are, you can throw in Australia and Canada, we’re not particularly high tax and we’re not particularly prosperous. So . . . and indeed I’ve done this analysis. There really isn’t any correlation between the tax burden countries pay and their standard of living, which . . . and their growth rates, for that matter.

France and Britain are roughly equally prosperous, their growth rates have been roughly equally poor in the last 15 years, and the French tax burden of about 15 percentage points of GDP, higher than ours. So I think the argument that if we cut taxes, growth will just explode, which is sort of the Liz Truss argument, is just wrong. People will point to the US, which has a somewhat lower tax burden than ours, as no doubt about it. But I think if you’re trying to analyse why does America grow so well, grow relatively well, it’s a complicated story. There are so many other things America has going for it, but just focusing on the tax burden is, I think, pretty misleading.

Lucy Fisher
And just as a follow-up, I mean, it sounds from what you’re saying that there might be a bit of manoeuvre room for Labour if they get into government next year to increase taxes, to boost public services, although I doubt they’d like to say that before the election.

Martin Wolf
I think they have a terribly big problem which is starting from where they are now, OK. They would like to improve public services, which means higher taxes. So that cuts into consumption, per household consumption, inevitably. But because they also want to raise investment in the economy, both private and public. They don’t have direct levers, but let’s assume those rise. So you’ve got increased spending on public services and increased investment. And the only thing that can pay for that, ultimately, is either we borrow even more from abroad, we have an even bigger current account deficit, and we already have a very big one, or we squeeze consumption. And in a stagnant economy, the problem is squeezing consumption means people’s standard of living fall. So it’s a fundamental political nightmare. Which is why the Conservative government, in my view, isn’t even pretending to tackle these problems, they clearly aren’t. And they’re focusing instead on all sorts of identity, what the Americans call dog-whistle issues, but which are cheap, divisive, and you might win on the basis of those when you have absolutely nothing useful to say. And they don’t, nothing, about what they’re gonna do to fix these fundamental core problems.

Lucy Fisher
Just for listeners, you’re talking about issues like migration, cultural issues like the trans . . . 

Martin Wolf
Migration, sending people off to Rwanda. I mean, never in my lifetime — and I’ve been around a long time — have I watched the government suffer so much over an issue which will change so little. It is completely totemic, obviously. Some of the visa changes they’ve just introduced are again, I mean, these are very annoying for a lot of people, but basically, totemic. They have nothing to do with grappling any of the really big problems which are if we want to raise investment and we want to raise the spending on core public services like education and health, and we’ve got debt interest rising as well and we don’t want to borrow more from abroad, consumption will have to be squeezed. And consumption will be squeezed not just of the rich. It will be squeezed in the middle, at the very least. And no politician wants to say that. Labour doesn’t want to say that. So we get into all these nonsense issues.

Now, can Labour change this? Maybe they will be spectacularly lucky, arrive in office and suddenly the economy starts growing at 2 or 3 per cent and that would change everything. If that doesn’t happen, this is the dilemma they face. They’re gonna have to squeeze consumption in various different ways, raise savings, raise taxes — these are not quite the same thing — in order to get a high-investment, higher-growth, high-quality public services sort of country. That’s what they want to deliver. And they can’t get from here to there without making quite a lot of people worse off in the context of a cost of living squeeze. And I don’t know how politicians can solve that problem. So they too will probably be tempted to go off and talk about something else. I suspect they won’t find it as easy as the Conservatives have done, but I don’t know. But once you’ve got politics moving into this sort of identity dog-whistle area, of course it’s cheap. You can keep talking like that. But you have basically said we have nothing useful to say about the core problems facing the country.

Lucy Fisher
It’s an uphill challenge faced by whichever party forms the next government. At the moment, it very much looks like it is Labour. One thing Keir Starmer has suggested is he wants to retool the relationship with the EU. You wrote a great column in recent weeks, Martin, about why you think the UK won’t rejoin the EU any time soon. I’m not gonna ask you to repeat your arguments here because I’m gonna put the links to that article in the show notes. Anyone listening should go away and read it. But if Starmer does get in, what should be his priority in terms of what he should try to negotiate with the EU and what is it plausible that Brussels would agree to?

Martin Wolf
Well, I think he needs to open trade and movement of people, including workers for both sides, skilled workers, as far as he can, right? There are some relatively low-hanging fruit, which I think they were already referring to, for instance, food standards. I mean, some of the problems at the border will be ameliorated if we decide that our food standards should essentially be the same as the continents. The same applies to industrial standards. British manufacturers are not desperately looking to produce to different standards in Britain from what they would produce for the continental market. It just adds cost. So I think convergence of standards should as far as possible be achieved. In fact, generally, it seems to me the only cases where we want to diverge is where it is overwhelmingly clear that the continental standards, the EU standards are inappropriate for us and costly. And that’s not the case in many of these areas. Again, with financial services, this is a central sector, we should, as far as possible, push to get into the market. I know a lot of this will be very, very difficult. But that, I think, should be the aim. As I said, we should diverge only when it’s clearly and obviously in our interest. And there aren’t that many areas where in my view it is, even if we think that standards aren’t really perfect.

Now, we won’t go into the customs union, which would, of course, eliminate some of the trade barriers we have because we are in a free trade area, which means we have rules of origin which are complicated. And we’re certainly not going to the single market, it seems to me, in the near term, but maybe in the longer term, we could be thinking of being more like Norway, which is in the single market, they’re not in the customs union. And now that means we lose more of our precious autonomy. But I think we’ve now had a pretty good experience with how much that precious autonomy has given us. And I don’t think anybody can really argue it has given us very much. In fact, I think it’s impossible to say that it’s given us anything but negative things overall. So go as far as they can and do it in technical, detailed ways as actually, Sunak’s one real achievement, the Windsor Agreement, did. It’s not very controversial because most people, I mean, I would say 95 per cent of the British public don’t care, don’t know, rightly, and the precise details with which Northern-Irish trade works with the rest of the UK is a matter of no importance. They should do similar things in all the other areas and do it quietly and ignore the hysteria from the Tory press.

Lucy Fisher
Well, that’s certainly a guide to what to do for Keir Starmer. Of course, his red lines at the moment are not joining the single market or customs union.

Martin Wolf
Of course, but he can do lots before he gets there.

Lucy Fisher
Martin, just finally, can I tempt you to gaze into your crystal ball and tell our listeners just one thing they should be looking out for in 2024 regarding the UK or the world economy?

Martin Wolf
Oh, there’s so much! Well, I’ll take two things. First of all, surprises, as we know, can always happen. There are things that might happen. I have no idea. I think the most interesting thing that is obvious now is how far is inflation going to disappear and how far interest rates are going to fall. I think there is a good chance, not far from certain that inflation will, in fact, fall a long way and interest rates will start falling quite sharply towards the end of next year. And with luck, that will make government finances look better and it will make the people, public feel much better. Refinancing mortgages will look much nicer, and that might cheer people up. Maybe Labour will be lucky.

Lucy Fisher
Well, that is a very optimistic note to end on. Martin Wolf, thank you so much for that canter through so many topics. Thanks for joining us.

Martin Wolf
Pleasure.

Lucy Fisher
Well, that was the world according to Martin Wolf and a masterclass in some of the issues that are likely to dominate the election campaign next year. So we’ll certainly be returning to those in-depth on Political Fix.

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There’s just time left for our stock picks. But it’s no ordinary segment this week. Oh, no. It’s time for the end-of-year appraisal of portfolios. You should be bracing, George, Stephen. And we have a little prize-giving to do this week because it is the Political Fix Stock Pick Awards, if you will. So, George, can you guess which politician was the most bought since July when we introduced it?

George Parker
Hmm. Let me guess. Wes Streeting.

Lucy Fisher
OK. Stephen, who do you think?

Stephen Bush
James Cleverly.

Lucy Fisher
OK. Stephen is correct. It is a tie, though, between James Cleverly, Sadiq Khan, Claire Coutinho and Shabana Mahmood. What about most sold, Stephen?

Stephen Bush
Oh, it’s gonna be a Conservative with the spending department. I think I’m gonna go for Gillian Keegan. I’m worried it’s gonna be Steve Barclay.

Lucy Fisher
OK. Who do you think, George?

George Parker
Well, I mean, it’s possible that we went for James Cleverly, because having bought him, we then dumped him quite vigorously, even though he became home secretary. But I’m gonna go for his predecessor at the Home Office, Suella Braverman.

Lucy Fisher
George, you are correct. And now that brings me on nicely to the prize for best stock tipper. George, you have exploited all your best intelligence to be very much the best tipper this year. You bought Claire Coutinho just days before she became energy secretary and Laura Trott before she landed a plum Treasury job in the latest reshuffle. So I’m transferring to you, you can hear me rustling, some lovely heap of chocolate money. That is yours.

George Parker
Lucy, you’re stuffing my mouth with gold, which is always very welcome at this time of year. Look at that. Amazing. Thank you very much indeed. It’s a true honour.

Lucy Fisher
Stephen, you had a very solid performance. You’ve sold Sunak, Steve Barclay and the SNP, but I’m afraid you are still holding Suella Braverman. Don’t know if you stand by that. Miranda is still holding Sue Gray, Pat McFadden and Kemi Badenoch as we head into January. And Robert is holding Nick Timothy and Julian Smith, although I think he probably does get some kudos for having sold Nadine Dorries early. So going into the new year, George who are you buying or selling?

George Parker
Well, let’s buy the FT’s favourite politician, Nigel Farage. I think he’s had a pretty decent year with all the debanking stuff. Did OK in the jungle, didn’t he? And I think he won’t be able to resist tweaking the Tories’ tale of terror in an election year either via the Reform party or by hinting he might one day rejoin the Tory party and take it overside. I’ll buy Farage.

Lucy Fisher
I think I’m already holding Farage. I think I tipped him just before he was announced as going into the jungle. So I’ll remind you of that and slightly leave some of my less illustrious tips. Stephen, how about you, heading into the new year?

Stephen Bush
Given the appraisal of Michael Gove this year, I’d better sell Suella Braverman. I think for a couple of reasons. One, I think, although I don’t think it’s going to be enough to turn around the Conservatives’ underlying you know, raise the global problems and the Liz Truss hangover and the partygate hangover and all of the various sort of political problems they have. I think that the thing that Suella Braverman had briefly managed to do was successfully be out of the tent, but not so out of the tent that she looked like she just was not ready for primetime. A victory speech at the Spectator Parliamentarian of the Year Awards, which are very influential in a mood of the Conservative party in particular. I think all of that has sort of dimmed her hopes of being the standard bearer of the right at the next leadership election. I’m getting, I’m selling all of my Braverman.

Lucy Fisher
Having decimated her quite extensively there.

George Parker
Lucy, yeah. Who would you be buying and selling in 2024?

Lucy Fisher
Well, George, this may be music to your ears as someone who’s always paid the Lib Dems due attention. I am buying Sir Ed Davey because I think, you know, the Lib Dems could be players in any kind of coalition talks with Labour. He’s of course the Lib Dem leader. And so I think, you know, I think he might be having a good year ahead. George, Stephen, thanks for joining and a very merry Christmas to you both.

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George Parker
Thank you, Lucy and happy Christmas to you.

Stephen Bush
Thanks, Lucy and happy New Year.

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Lucy Fisher
Well, before we end, a quick word about the FT’s annual charity auction. You can bid to have lunch with some of our top columnists and editors, including Political Fix regulars Miranda, Stephen Bush and George Parker. They’re worth every penny. And the restaurants involved are donating meals for an excellent cause. All proceeds go to the FT’s Financial Literacy and Inclusion Campaign (FLIC). Go to FT.com/appeal to see what’s on offer. I’ve put a link in the show notes along with articles linked to today’s show, which are free to read for listeners. There’s also a link to Stephen’s award-winning Inside Politics newsletter. You’ll get 30 days free. And don’t forget to subscribe to the show. Do leave a review or star rating. It really does help spread the word.

Political Fix was presented by me, Lucy Fisher, and produced by Audrey Tinline and Mischa Frankl-Duval. Manuela Saragosa is the executive producer. Original music and sound engineering by Breen Turner. Rod Fitzgerald was the broadcast engineer. Cheryl Brumley is the FT’s global head of audio. We’ll meet again in the new year.

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