Ex-Chancellor Exposes Truth Behind UK's Downfall | Kwasi Kwarteng

If you tax people enough, they will leave.

If you could rewind the clock, Quasi, and go back just before you were UK Chancellor, what advice would you give to yourself?

The Chinese army is the largest army in the world. Their army is 2 million people. We've got twice as many on benefit. It's kind of crazy.

Okay, how do we reverse all the damage done?

They've got to deal with spending.

Do you think Rachel Reeves is qualified?

I think she's potentially a full guy. She lied about her cv. That, to me, is serious.

So we invented capitalism and we're going to go down with socialism.

If the left get in, they could do a lot of damage. The dollar in 2020 is worth 25% more than it is today. That's 5% depreciation every year. I mean, that's extraordinary.

And if Nigel got in and he called you up, he's like, quasi. I'm being my chancellor, in all candor.

How bad is the state of the UK right now compared to what you've seen?

So I think it's very similar to where we were in the 70s, the 1970s and in those days. So in some ways we're better in that the income tax in those days was top rate was 83% on earned income. On unearned income, you were paying 97.5%. Something crazy, 95%.

We're not there now, but a lot of the dynamics are the same. A lot of young people are leaving the country. You will have friends, you will have relatives in their 20s and 30s who are looking to emigrate. Many of them won't come back. And that's precisely because they just see there aren't the opportunities here. And I think the 70s was the last time that that was the case.

What would push you over the edge?

To leave. To leave the country.

Yeah.

I've said in all candor, and I know we're among friends, I've said if the left get in in 2029, whenever the election is, that is a big, you know, people have to ask serious questions because you will have had. You'll have another three years from where we are, three and a half years, and then potentially another five on top of that, where I think they could do a lot of damage.

So when we were having lunch the last time you said 15 years ago everyone was coming to London. It was the place.

It was.

It was, yeah. And now it feels like they're all going the other way.

Yeah, I mean, I think so. London has great strengths. Okay. It's got the English language. It's got restaurants, theater, whatever culture you want is here. And a lot of, you know, rich foreigners say to me, you know, I would pay more to stay in London as opposed to go to Milan or Dubai, wherever else. But there comes a limit. You know, if you increase taxes enough people will, will leave. And that's what they, that's what they're doing. And it's not just about, you know, mansion taxes or, you know, the, the income tax or anything like that, or capital tax. It's the whole culture. Yeah. You know, there's an anti wealth miss. Talk about the culture of envy, you know, that is rearing its head now. And people just, you know, who are successful don't feel welcome here. And I think that's a big problem. It's not just about the headline rates or the actual tax. It's about the environment, the atmosphere, which is not very conducive to investment and wealth creation.

Did you see the meme going around Dubai Property Real Estate Agent of the Year, Rachel?

I've heard of version of that with Milan, but you look at Milan, you look at Milan. I mean, I looked at, I look, you know, obviously I did some preparation before I came here. Not too much, but, but, but you look at, you look at Milan. I mean, the property prices since 2019 have gone up about 40% there.

Wow.

And in, in London, about 7%, 8%. So it's a massive difference. And that's because of the tax, of the tax issue, 100%. And a lot of people, you know, they like Milan, but they, they don't. You know, there's a lot of bureaucracy, they don't speak it. They're not. The culture is different and they find London a lot more congenial. But actually, if you tax people enough, they will leave.

Do you think there's things we can learn from Dubai. A lot of people tend to be going there.

Yeah. So I think what I love about Dubai and Hong Kong in the old days is they had very low taxes. And what low taxes mean is you can actually save money, you can actually build capital. You know, if the state takes 50% of your income, you don't have to be an Einstein. You've got to work so long even just to get savings. Whereas I knew people back in the day, and this is when we were growing as an economy, they go to Dubai, they work there maybe four years, and they saved a pot of money because they were being taxed at 9%, and then they could buy a flat or a house in the uk a lot of people used to do that. And that if you're young, your late 20s, early 30s, that's a great advantage in life to be able to come back to the UK age 30 or 32 and buy a house. How brilliant is that? And going to a low tax jurisdiction allows people obviously to save a lot more money more quickly. And that's a good thing. Yeah.

Do you think Rachel Reeves is qualified to be the UK Chancellor?

Well, look, I mean, who's qualified? I think Rachel. So having been there, I actually feel sorry for her. And I said that. People say, really? And I, you know, the idea that there's some magical Labour Chancellor waiting in the wings, they would do exactly what she's doing. They would do exactly what she's doing. So, you know, whether it's Rachel from accounts or whatever you want to call her, or Wes Streeting or Angela Raining or any of these people, the idea that they're going to do different things is completely for the birds. Whoever is in this labor government doing that job would have done exactly what she's done.

So she's not really pulling any strings.

I mean, I don't think she, I think she's potentially a fall guy. But if you look to the news over the summer, it was all about how number 10 had appointed Minouche Shafiq who ran the Columbia University. She's in the economic team. They put Torsten Bell, I mean he's the Mansion tax guru, he used to run a think tank, they put him in the Treasury. The labor backed ventures are cracking the whip as well. They didn't do.

The welfare reforms. You got the obr. So the idea that this lady who's sitting in number 11 has full autonomy is, is for the birds. There's a whole bunch of other interests that are driving this thing. So is she qualified? She lied about her cv, which I think is terrible. But.

But how does she keep her job then?

Yeah, so the serious thing, you know when she said she'd done 10 years in the bank of England and she'd done six and then she said she was an economist at HBOSS and wasn't she was some sort of bank official, that to me is serious because actually a lot of people in the private sector would have been fired for a lot less.

That I am worried about. There's a habit I think there. But would anyone else in that party do anything differently? I don't think so.

So apparently labor have now raised taxes by about 70 billion.

Yeah, about that.

So look what happened in two years. Yeah, well, barely in 18 months actually they got in. So rewind the clock and it's incredible how much has happened in a relatively short time. The election was on the 4th of July. Well yeah, it was the 4th of July, Independence Day, 4th of July 2024. That isn't that long ago. It's about what, 16 months. So they get in in July, they say, oh, the evil Tories left us with a 22 billion black hole. Half of that was the, was the trade union deal because if you remember, they whacked up train drivers pay, they did a deal with nurses, they did a deal with doctors. So half of the 22 billion black hole was the public sector deal, the pay deals that they did. So it was 22 billion. We can test the figure, but give them the 22 billion. Then in November last year they raised taxes. I remember opening up the times 35 billion increase. It wasn't 35 billion, it was 40 billion. They raised 40 billion in taxes last year and 25 billion of that 5, 8, 60% was all on national insurance for employers. People like you, Rob, you collectively paid 25 billion of that 40 billion. And she said at the time, the evil Tories left such a mess, this is a stabilizing budget, I won't come back for more. She pretty much said that this is a one off 40 billion raise. And of course yesterday, what was it? 26 billion. Some people say it's towards 30, looking at the fine print. So as you say, you're right, it's at least 66, maybe up to 70 billion in two budgets. And that's a huge amount of money and a lot of that is going to deal with welfare. So 26 billion, if you look at the thresholds, I think it's roughly about 8 billion. And the 8 breaks down beautifully. 3 billion is scrapping the cap on two child, the benefits for two children so that you can have more. If you have more children, you get benefits. That's 3 billion. And 5 billion was the welfare reform that they didn't get through. So the entire income tax increase in terms of freezing the threshold is going to welfare, essentially.

How does that make you feel?

I'm concerned because I think actually my biggest fear is that they get back in and it won't be the Labor Party, it'll be a coalition of the left, labor, the Greens, maybe a bit of Lib Dem in there. S and P might have four or five, who knows. That's my biggest fear. Cuz then you'll get a much more left wing government than if you can Imagine it you have today. That's my biggest fear. But we've got to just accept the fact they're going to be running the country for another three years. My real fear also is that in that time we've looked at their first two budgets. They've raised 40 billion the first time. They raised 26 billion in tax. This year, they've got another three years of budgets. And do I think they're suddenly going to balance the books and not raise taxes? No, I don't. I think they're going to raise taxes every single year they're in. And that frightens me.

What's the likelihood now with all the millionaires leaving of an exit tax or taxing on worldwide income?

So the exit tax, I think is definitely on the cards because they leaked it. Do you remember? It was in the paper. And so if it's in the paper, it's come from somewhere. It's not journalists just making it up. And the journalists would have been briefed by either someone within the Labour Party or someone within the Treasury. So the fact that it was even in the paper suggests to me that they're looking at that because otherwise why would that be written about? So, and I think it's an exit.

Tax, not just a desperate loss.

It's a desperate loss. So I think, and I said earlier that the way I see the dynamics of this Parliament is the fractured left will pull labor to the left because they'll realize at some point the only way they've got a chance is by appealing to the Greens, the SNP in Scotland, Palaid in Wales, the Islamic Gaza Independence Party, whoever, Corbyn. The only way they can get back is by appealing to as many of those people as possible, getting as many of those people to vote Labor. And the way you do that is you throw red meat to the crocodile. And an exit tax might be a bit of red meat. They've brought in the mansion tax. They could increase that. I didn't think they'd do that this year. I thought that would be a desperate last minute. But because they couldn't raise income tax and all the rest of it, they thought, okay, we'll do that. They can do this stuff. If they're doing badly enough in the polls and they want to rally the left, they can do all of this sort of thing.

If you own a company and you look at your management accounts.

You could probably get your costs down 10 or 15% without anything radical. I think above 20, you're going to have to do some radical things. So a saving of 10 to 15% of the economy is what, 150 plus billion?

Yeah, that's on there.

Why do they refuse to make any cuts?

I made exactly the. I remember when I became Chancellor, I thought we were spending then about a trillion pounds in the budget three years ago, four years ago.

So do you think it's probably more now?

Yeah, it's about 1.2 trillion, something like that. It's gone.

Right.

So we're spending a trillion pounds. I thought, okay, 5% of a trillion is 50 billion. Okay. And as you said, any one of you here running a business or even on your personal finances.

You could probably take 5% of your costs down without too much stress. So I made exactly the same point that you did mentally. Why can't the government do that? You should be able to save 50 billion. And actually, the reason why you can't do that, or it's hard to do that. You could if you really wanted to, is all the interest groups, every single interest group there is, rightly, they're going to say, well, where are you going to cut? No, we're not going to take a cut. We're not going to take a pay cut. We don't want our benefits cut. We don't want this cut. And of course they're going to say that. And you need a government that's strong enough and believes in itself enough and has got a mandate, which labor did. They got a majority of 160, 70 to say, actually, we've got to reduce the spending. You've got to be tough. And that is the thing that nobody, not for a very long time, has been prepared actually to do, to reduce spending, and even not reduce spending, just slow the increase of spending. Because it's just simple math. If you can grow the economy faster than your increase in spending, Happy days. But if your increase in spending is faster than you can grow the economy, that's not sustainable in the long run.

Yeah. Okay, so what can we do to grow the economy?

What should we. So I think we've got to, as a country, I keep coming back to this. I think they've got to deal with spending, because what's happening now is that the spending tail, if you want to put it that way, is wagging the dog of national productivity in the economy. And it's all driven by spending. I don't think Rachel Reeves wanted to increase taxes. It's just that she's got these backbenchers who won't let her reduce spending. And in order to pay for it, she thinks she has to clobber the rich in inverted commas and it's madness. But that's what's driving all of this. You've got 4 million people on benefits in this country and there are no sanctions. They don't have to look for work. You've got about 9 million on benefits, but at least 5 million of them have to normally go out and look for work. 4 million, they just get the benefits willy nilly. And in a country of 70 million, which we are now adult population, I don't know, 45, 50 million. 4 million people receiving benefits is a.

Hell of a lot, isn't it? Quite a high percentage of the people who can work.

Yeah, it is. It's a very high percentage. And in terms of. I did this sort of experiment just to. I like thinking in terms of concrete examples. The Chinese army is the largest army in the world. They've got a billion and a half people. Their army is 2 million people. Okay? It's the largest army in the world. We've got twice as many on benefits with 70 million people.

It's kind of crazy. Okay? I mean, you know, so that. I think it's a real problem. But check those figures. I'm not, I'm not. The army might be two and a half million, but it's not more than that. The figures vary, but we've got almost twice as many, if not twice as many people as the Chinese army on benefits.

And a fraction like fraction of the population.

That's right. And that is the largest army in the world. The largest of any army. Anyway, just ponder that. And that's how this thing has got out of control. And it's tough, it's very hard. And unless people grapple. And to be fair to labor, I mean, I don't like being fair to them, but to be fair, I remember ministers, I mean, I do gmb, Good morning Britain every week. And I remember ministers coming on that program saying this is unsustainable. When they were trying to prepare people for the welfare reforms that were going to save the 5 billion that Darren Jones and others said this is unsustainable. Of course, they don't say that now because they've just gone with the flow. Yeah, but, but they were right to say that we can't sustain this.

So if you were given more time when you were chancellor, what would you have done?

So I think where we went wrong, and I've said this to Liz, I've said this to other people, is if they're gonna be. If you're gonna Be unpopular. You've got to try and be unpopular, doing the right thing, okay? And I think grappling with expense, it's not just about benefits, it's about the whole gamut of government, the waste, all of that. Unless you grapple with that, and it's going to be hard.

I don't see how you can reform this. Because the logic of the OBR and all of that is that you've got a lump of expenditure which you have to cover, and you've got to raise taxes. And we try to reduce taxes, but the markets were like, well, who's going to pay for all of this stuff? That's why they freaked out. And also because we rolled it out very quickly. But I think that unless you actually grapple with expenditure, it's very difficult to see how you get off this roller coaster. If you look at the net debt to GDP ratios, so the actual indebtedness, just look at the G7, most of those countries, certainly the US, certainly France, certainly Italy, certainly Japan. So that's four of them. All four of those are running debt to GDP of more than 100%. So the debt is more than the size of the economy in our country, it's about 95, 96%. And so you're living in a world where.

There'S more and more indebtedness. That indebtedness has gone up sharply. In 2005, when I first ran for parliament, the debt to GDP in this country was 36, 37%. Wow. You can't believe it. You cannot believe it. And so we've got this massive increase in debt. And ultimately, if you're very indebted, and no one will say this because they can't say it, but inflation works in your favor. So if you've got a massive debt, a little bit of inflation kind of chips away at that. So one has to always interrogate. When they say we're going to deal with inflation, you've always got to slightly interrogate that, because if you're a debtor, inflation can work in your favor. The other thing, particularly in the us, that they don't want to do, you've got massive debt, massive amounts of debt. The interest rate becomes critically important at that point. So you want to lower the interest rates as much as possible. And what the Fed has done in the past and could do again is essentially print money to buy.

Bonds. And how that works is that obviously if you buy bonds, that puts up the price of bonds and that means the interest rate goes down. It's like A seesaw.

So they're just lending money to themselves.

That's right. So when interest rates go up, bond prices fall. And that's what did for our government. That's what did for me, actually, with the ldi. When interest rates go up, bond prices fall. When bond prices rise, interest rates fall. So what they do is they buy lots of bonds to bid up the price of bonds and that lowers the interest rate that they're. So you're essentially at that point.

Printing money. QE is a version of that. Easing is a version of that. Some of the economists talk about fiscal repression. You're forcing investors in your paper to accept lower interest rates. And in that environment, look at the price of gold. It's gone up 50% this year because people are worried about all this indebtedness being paid for, financed by the printing press, essentially. So looking in the next five, 10 years, I think there is a high risk actually of paper currencies, fiat money, really losing its value. And I'm not just saying that in the future. If you look at the last five years, I was just stunned about this. The dollar in 2020, I mean, you can't remember 1978, but you can remember 2020. I think.

We could all remember 2020. That wasn't that long ago. The dollar in 2020 is worth 25% more than it is today. So, so what you could buy for a dollar in 2020, you have to pay $1.25 today. So that's, you know, in straight line terms, that's 5% depreciation every year, roughly for five years. I mean, that's extraordinary. And do I think that's going to stop? I don't know. Probably not. It could do. They could decide, right, we're going to balance the books and we're going to be very disciplined. But I wouldn't bet on it. And clearly the market and others are buying, some of them are buying cryptocurrencies, bitcoin. Many people are buying gold to protect their wealth against this depreciation.

So a lot of people then say that they think maybe this is.

The.

Beginning of the end of fiat currency and maybe a gold standard. Or even now people are talking about a bitcoin standard needing to come back. Now, you're a historian of money. I've studied the history of money. This is not abnormal. Currencies do not last thousands of years. Many of, I think the average is 65 or 70 years of currency lasts. So, you know, this can't go on forever. Where in order to Maintain something, you have to keep getting into debt. So do you think we could go back to a gold or a bitcoin standard? Would that be a good thing?

We could, we could, we could do a blended version of it. And what people don't. When we talk about history and dates, what people don't realize is that this paper money, fiat currency standard, for the better phrase, has only really been around since 1971, which is a bit before I was born, I take it. But if you look at gold, that was two and a half thousand years, for two and a half thousand years, the Persian Empire, the Athenian Empire, the Roman Empire, they all had gold. The British Empire, they all used gold. And then we've had this 54 year, 55 year period where everything's on paper. So do I think paper currency is going to last 2000 years? They're not going to.

No way.

There's no way that's going to happen. So what the transition is, it might be a version of some sort of gold and bitcoin standard could be a blended version of it. And this was discussed in the 40s because Bretton woods, people like Keynes said, why don't we have a blended currency? But they went back to gold. But there's always been talk about some kind of monetary standard that can hold its value better, frankly, than paper money, which is what we have now.

But then the downside of that, a lot of people don't understand that you need a bit of inflation to have economic growth, don't you?

Well, so there's a great book.

Otherwise people don't. Because the problem with a bitcoin. Sorry to interrupt. The problem with a bitcoin standard, if bitcoin is deflationary, is no one's going to spend the money, they're just going to hoard it.

I don't think so. I mean, a lot of things. So a lot of the things that we buy are actually in a cycle of deflation. So a flat screen TV relatively is cheap.

People just buy the bigger one.

Yeah, yeah, they can do that. But actually, for a lot of the things that we buy, we see deflation. And deflation is good because it means that you're spending less money to buy exactly what you did before. I mean, the classic example of this is a computer. If you wanted to buy a computer in 1960, you know, that would have cost you maybe $10 million, something like that. Crazy. But of course, over time, through innovation and technology, the cost of a computer with far more capacity has gone down. So deflation, yes. And no, it's not. It's not universally a bad thing. It can actually presage innovation and all the rest of it.

But in terms of money, money needs to have some inflation, surely, for people to be encouraged to spend it.

No. So I don't agree with that. I mean, I think that's very much a post war mentality. If you look at the classical gold standard, which between about 17. 17. 1715, something like that, 1717 prices were actually very stable. Very stable. And there's a great broadcast, I think it might even be on YouTube. But John Maynard Keynes in 1930, talking about the Depression, and he said, a bushel of wheat in Liverpool sold last week for a price lower than any time since the reign of Charles II. Okay, so this is 1930, and he's saying that for the last, a bushel of wheat sold in Liverpool for a price lower than it had done for 200 and whatever years. That's the sort of world they were living in. And you just need to read or look at period adaptations of Trollope and Dickens and all those writers, and you don't have to read them very much to see that their view of money was basically that it was a standard value. I'll tell you one anecdote. There's Cadogan Square. There's not Cadogan Sloane Square. The Cadogan family. There's a. What is it? Is that Peter Jones? Does anyone know the Peter Jones there at the top? I had a friend who was the manager there 25 years ago, and the thing was that every year she was in negotiation with Lord Cadogan about the ground rent. And I'm like, why is he. Because. Yeah, because his great grandfather, whoever it was, did a deal where we could get the whole shop for £8,000 a year, which in 1900 was amazing. And we just kept. And he just kept it the same. But of course, in 1900, they didn't realize inflation was going to completely rip up those values. And of course this guy is saying, well, we got to renegotiate this. He goes, no, we're getting it for eight grand a year. That's what your granddaddy agreed to.

So this idea that inflation is inevitable and is always going to. It's a relatively modern one.

They could grow the economy with a solid price, a stable price.

But with all this increased debt, surely they're not going to be able to control inflation.

So you're right. The world we're in now because we've got paper currencies, fiat money is one where we print more Money and the value of the currency goes down. And that, that ratchet seems pretty unavoidable to me, particularly at the level of indebtedness. But all I was questioning was this idea that you can have economic growth, you can't have economic growth without inflation, which is clearly wrong because they grew the economy in the 19th century. It's just that the standard of value was the same. So you're looking at productivity, you're not looking at.

Right, I see, yeah.

Do you see what I mean? Yeah.

Because I suppose on the other side of the argument, if you earn a pound, you feel like it's your right that that pound is still worth a pound next year, in the year after. In the year after.

That's right.

And the year after.

That's right. And that was the, that was the, that was the understanding. I mean, you look at interest rates, for example, you know, for, for the old bank rate was 5%. And for most of the 19th century, it was around that. And that was. That was a stable money standard for about 75 years. It was, it was. The bank rate was 5% and that. And they lived. They lived in that world. They could still make money, they could still invest, they could innovate, they could do all those things. They invented things. They invented steam, they invented a whole bunch of stuff. But they didn't need inflation to grow their economy. They innovated and were more productive.

Other middle classes now, the new working class under labor.

100%. 100%. Because actually, you look at the. Again, history. I mean, that's my bread and butter. The whole concept of working class was people who were working because in those days they didn't have a welfare state. It was tough. And people worked and they worked until they dropped there pretty much. It was only when we brought in the old age pension in 1909. And a trivia question. What was the age at which we brought in the old age pension in 1909, 110 years ago. What.

I'm going to go younger than 55?

It was 70. It was 70.

The life expectancy wasn't 70 exactly.

Because those Edwardian parliamentarians, they weren't thick. No, they said, okay, we're gonna bring in a. We're gonna bring in a pension. It was at 70, and that's how.

Mark would do it.

And your life expectancy at 70 was about 18 months. Yeah, it's like a pat on the back. Here's a turkey for Christmas. Well done, mate. And you know, you see your way and what people like me did over the last, over 100 years was. We lowered it. So it went 65 in, I think 1928. And then in 48, the labor government said, okay, we'll have 60 for women, because it was the same. And also in those days it wasn't, you know, women in the workplace was not so common, but they, they brought it down and we've basically lowered that, that pension age. And now it's going up again. But, but it's not as high as it was 110 years ago.

Wow.

I knew people would go lower, but actually it's, it's, it's extraordinary.

Yeah.

And Victorian, Edwardian Britain, you know, they were, they were, they were very, I imagine that people like my friend Jacob Rees Moore, very tough financiers and they weren't going to give much away. And that was what, that was the pension age.

So why are the middle class now being brought into the work?

So essentially. So you've got a welfare state that we talked about with its issues. You've got a culture where not just one person doesn't work ever. You've got two or three generations of people who are living on the welfare state and they're not working class people, they're not working. I mean, they might, socioeconomic thesis, be described as working class, but they're not actually working class. They're not working. And the people who are working and paying tax are the middle strata of society. The really rich can go off and do whatever they want, but that whole, I'd say between about 40 grand and half a million, something like that, that's where most of the taxes are earned and extracted. And all of those people.

Work, essentially.

And is it things like fiscal drag and inflation that pulls people down into working class as well?

Yeah, so I think fiscal drag is huge. So if you're earning my old constituency just outside London, people earning 70, 80 grand a year, good wage, but they're not rich. But they were paying easily, paying the top rate, 40%. And, you know, they're commuting, their commuting costs are very high, you know, trap using the train. And those are working people, you know, they're the middle class working people. So that's a very interesting question and I think there's a lot to be said for that. Lot to be said for that. The 4 million people on benefits who don't have to look for a job, they're not working class, they're not working.

No silver has crashed. It's back to its price in 1974. And I'm going to buy more. And if you'd like to learn how to invest and build multiple streams of recurring income, I recommend you join Money School. Money School is my global financial education platform to help as many people on this planet get better financial knowledge. For less than four Starbucks coffees a month, there are hundreds of hours of courses, resources and masterclasses going back a decade to teach how to make, manage and multiply money and gain financial freedom. So join thousands of other money and freedom seekers on the link Money School and start today, your journey to financial freedom and more money. This is slightly off topic, but I think it's a relevant point. Media in the uk, you know, for example, the BBC and obviously this thing with Donald Trump suing them for, for quite an outrageous.

Yeah.

Piece of propaganda almost, I think, what is the media like? And has the media lost the country? Do we not believe in the media?

So look, I think with the, I mean, Andrew Ma said it. He didn't, you, he didn't hide the fact. He believes, and you can look at the quote, the BBC should be a progressive, you know, socially progressive, enlightened social democrat organization. I don't think he used the word social democrat, but if you read what he says, that's exactly, you know, he didn't even hide it. He says, you know, we should be for the underdog. We should be for, you know, ethnic minorities. We should be. And that's a view that, you know, that's fine if he has that, but it's not the job of the, that's not what the charter says. And I think a lot of people in the BBC and also actually in the civil service do think that their job is to, is to act as kind of watchdogs against people like me trying to cut benefits. They genuinely think I am a civil servant and my job is to protect the most vulnerable against right wing governments. But that isn't the job prescription. But a lot of them take on a moral, a moral purpose. And the other thing you ought to remember, many of you, I suspect, aren't civil servants in this room. But the way it's structured, the way the civil servants is structured is that you might, let's say you, you hire in the Treasury a thousand graduates or 500, whatever, a proportion of them, maybe half after three years are going to, are going to leave. So it's a very sharp pyramid. And the ones that leave tend to get jobs either in the bank of England or the private sector. The ones that go to the bank of England after three or four years might go into JP Morgan or whoever. The point is that graduating class 10 years down the line is probably a third of what it was. And who do you think stays there? The people who stay are probably people who haven't got the opportunity to get another job for whatever reason because they're not performing or they're not ambitious and all. They're ideologically committed to the public service, which is great, but that comes with its own biases and interests. So a lot of the time they're regulating things that they don't really have an interest in. So when I look at treasury saying, oh, we're going to, we're going to get rid of inheritance tax loopholes and we're going to put inheritance tax on farms, I guarantee none of those people have ever worked on a farm or other kids are farmers. They're legislating about stuff they don't understand fundamentally and that's because of the culture in which they subscribe to. It's not their fault. But that's just the environment of the Civil Service. So my view is, and I remember when I was Secretary of state, I was 45 when I was Secretary of State, I remember thinking, my equivalent, a 45 year old who's been here 20, 25 years since leaving school or university is probably got a certain worldview that won't necessarily be shared by people in this room, let me put it that way.

I. E. Marxist.

They could be Marxists, they can be eco warrior zealots, they could be, you know, really have a social, which is good, you know, social conscience. They're driven by things that, you know, a lot of business people are motivated by, but not to the point that they're going to devote their whole life to being in the Transport Department. Okay. I had a school friend and I went up to the Transport Department and I said, Angus. I hadn't seen him for about 20 years. 25 years. I said, angus, what are you doing? He said, oh, I work in the, in the Department of Transport. I thought that's amazing. And how long have you been doing this job? Oh, 22 years. I'm like, what, you've been here? No, quasi. Not at this desk. I was over there.

For 19.

And that, you know, and he's a good guy and he's smart, but that's what, that's, he's an official to his fingertips. And all I'm saying is that the way they think, what they think of their responsibilities is completely different to someone in the private sector. And it's the job of the Minister to Try and mold them and shape them to drive what the government's doing. And I don't think we do enough of that as a political culture. We let them just run it.

So what I can't get my head around is I try and be open minded, but I can't understand how any government can say things like government money or government funded. And it seems to be a Marxist view or a left view that the government generates money.

That's what they do. Yeah.

How, how do they generate money? They take it off producers, they take it off the private sector.

So there was a. And the best illustration of that kind of mindset. I remember when Obama ran for president in 2008 the first time, and he was this great shining sort of figure and he was on the left and there was a guy called Joe the Plumber. Okay, Joe the Plumber. And he became this sort of Republican icon. And Joe the Plumber was talking about tax cuts and all the rest of it. And Obama just said, well, you know, you think you're a businessman, Joe the Plumber or whoever. It's like, yeah, but who, who made the roads? Who pays for the schools that your kids go to? Who, you know, provides the infrastructure, the support for your business? He doesn't think of business people being innovators or entrepreneurs. He basically thinks that the state, the government, enables you and everyone in this room to do whatever business. I mean, it's crazy. But that was very much. When I saw him say that, I said, I totally get, I get their mindset. They think government comes first and that everything else that anyone does is almost like not a blessing, but it's almost like a gift that the government, with the government money is giving to entrepreneurs and, and innovators, which is completely insane. It's the other way around. It's the, it's. It's actual private enterprise that's providing money for the government to do whatever.

Well, the private enterprise builds. Built the roads, contracted by the government.

That's right. So, yeah, so even that. But they, but the, the reason I mentioned that is I remember watching it on television thinking, just, you know, the scales dropped from my eyes. I said, this guy genuinely believes that the government is why we have all these businesses and why we have a good private enterprise system. That's. He genuinely believes. And the other person who believed that was Gordon Brown. He was very similar. He thought the state was, was a great enabling force and allowed all these people, you, me and everybody else to do whatever it is we wanted to do.

I mean, I, I get that it's a valuable service if we're unwell. But. But how can someone either be so ignorant or so arrogant to think that it is the Creator?

Yeah, they do. They think. They think how they think. And, and I think it's because they don't know business. They don't have anyone in their family that has ever been in business. You know, they can be academics. Gordon Brown, you know, his father was a minister in the church. Obama had, you know, whatever background he had. The thinking is that they don't understand private enterprise and they think somehow that the state was always there and that private enterprise is something that just the state allows through its benevolence. But that's obviously complete nonsense because you look at it private, in the 19th century, the state barely existed. The spending to GDP was like 5% or something. There was a free enterprise system. But they don't think of it like that. And so far they do think like that. They think that was bad and they think now we're progressive, we've got more state. I remember I had a debate with, I went. I was literally like this with Tony Ben. Remember, does anyone remember Tony Ben? Yeah, everyone does. We're all old.

And I remember him saying we were in some debate, I can't remember, as a literary festival or something. You know, I was a young Tory mp, he was getting on and he basically said, well, look at the war. You know, the state. We won the war because through state planning, so why can't we win the peace through state planning? And I thought, oh, my God, I can totally see how he thinks like that because he thinks, well, you know, everything should be like on a wartime footing where the state commandeers everything and it's bonkers. But that was very much. And I think, I think we talk about history, but I think the World wars did change Britain. And a lot of people like Tony Ben coming out of World War II, suddenly thought, well, we all club together. The state run everything to defeat Hitler, so why can't the state run everything forever? And I think that's very wrong. But I can see how this thinking, to answer your question, comes about. And I think there are historic reasons in this country why we've gone left quite severely, whereas we invented capitalism, Adam Smith, trading all of that stuff that was here before anywhere else, the Industrial Revolution. But we've become very socialistic, so we're.

Going to be like Kodak, who invented digital photography and then went bust because they didn't do digital photography.

Yeah.

So we invented capitalism and we're Going to go down with socialism.

Yeah, I mean, that's a risk. I actually am more.

Is a risk.

Yeah. I think I'm more optimistic. I think. No, you're not.

We had a chat in the hallway. The first thing you shoot my head. And you said this is socialism true or true?

Yeah, I did say that, but I don't think. But I don't think the socialism is forever. I think fundament. I've said this before in these gatherings with you. I think fundamentally Britain is about risk taking and entrepreneurship. I mean, everyone in this room, you know, we've all grown up here and you've all plotted different paths in terms of entrepreneurship. There are lots of countries where that doesn't happen. They do look to the state or they do look to the military or whatever for employment. But actually, you know, we've got this individual. We still have an individualistic culture. You were mavericks. We want to try different things out. We don't want to be told what to do. I still think that that's a fundamental thing. It might be eroding, but I think in the end that will kick in and prevent mass socialism being adopted. But who knows?

Yeah. So you've said cut spending is important.

Very.

Put that to the side. What else can we do to get growth?

So once you've cut spending, then you can start thinking about cutting taxes and you've got to work out which taxes are the best ones to reduce. And I think for me, corporation tax is something that I would very much focus on. And that was why I backed Liz Truss, actually, because we were going to increase corporation tax from 19%, which was universally very competitive, to 25%. If we just stuck to that, you know, things might have been different. But that to me was a very fundamental incentive. You know, lots of you. I mean, I also construct my affairs around a company and actually it's nicer to be able to pay even 25% than 45% on income. And you know, greens will say, well, they should equalize the two, but then you're going to kill any incentive for anyone to form a company. So corporation tax is very important. I think business rates, and I think they have tinkered around with them to give them some credit. I think business rates are very important.

As in reduce them.

Yeah. And I think we've got to think about incentivizing investment. Income tax is important and I want to reduce that. But if I had to choose one or the other, I would look at capital taxes on. Well, or the corporations on investment, even dividends. That sort of thing. Investment income, investment opportunity should be encouraged.

Why in the UK do we not just tax businesses a lot? But the thresholds are so low, they're very low. Like in America and Dubai, it's hundreds of thousands before you get anywhere near any top brackets.

That's right. As I said, they introduce things very lightly. And then the threshold, for all of a sudden, the thresholds just stay forever and more and more people pay more and more. You look at inheritance tax, very low levels. I mean, in America, I think it's $12 million. So anything up to $12 million you're not paying inheritance tax on. And that kind of makes sense. I'd love to see something like that here. But no, everything's at a much lower level and more and more people get dragged into the net.

How do you think Donald Trump's doing in America?

I think he's doing pretty well. I mean, I'll say.

I mean, I don't agree with tariffs. Okay. I never ever would agree with that.

We have to have some though, surely.

Yeah. So the argument for tariffs is reciprocal trade. So if you're a total free trader, the other country puts a 20% tariff on your goods. A classical free trader would say, we're not going to retaliate, but I think that's unrealistic. So you retaliate. And when he came in and he said, look, China is a big problem, he said that from 2015. And you will remember in 2015, I was there 2015, on 14, President Xi came to England and pretended to like bitter with David Cameron in that pub in Oxfordshire. I mean, we were like this with China. And Trump, to be fair to him, was one of the first Western leaders to say, no, China is a problem. And you know, I've been to China, I've seen factories in China. They use, they didn't have health and safety like we have. They use what could only be described almost as slave labor, prisoners, all sorts of things. You know, my kids, I've got a four year old and a one year old, they have these little ducks, you know, in the bath. Any parents, you know, with young kids, you've got these ducks. They're all made in China, those ducks, all of them. And the people making them are. A lot of them are prisoners, they're people who aren't being paid. So, yes, slap trade tariffs on China to equalize it. I get that. But then, you know, he's doing it all around the board, I think about 140 countries that he slapped tariffs on. And I think that's regressive. Having said that, they raise a ton of money and I don't think they're going to get rid of them. I think even if the Democrats came in, they wouldn't get rid of them because a lot of American business is helped by tariffs, are defensive, they keep other competition out of your country. So a lot of productive interests, production interests, are going to support keeping the tariffs. And this is an example of one guy reaching the highest office and totally bringing a sea change in global trade. I think if it wasn't for Trump, nobody was going to put these tariffs. He's been banging on about tariffs for 40 years. But even your bog standard Republicans, they're like me, they don't like tariffs and the Democrats don't like tariffs. So it's just an example of one person totally changing the dynamics. And so, in his own terms doing what he says he wants to do, I think he's quite effective.

I mean, more and more people are saying to me now that they feel, even people in politics, by the way, not just entrepreneurs, that maybe the people that run our country need to be business people with business experience, need to be entrepreneurial.

Yeah.

What do you think?

I think that's true, but I think, I mean, I was in the House of commons for 14 years and even in those years it was less and less attractive. You could go into the House of Commons 15 years ago and you could keep up your business interests. It was much easier to do that. Now, yes, you can have them, but you've got to declare everything. People frown on it. You're a greedy so and so for doing this or that, that's just wrong. You go back to 50, 60 years. It was good to have MPs who had lots of different interests. They could bring something to the debate. They knew about logistics, they knew about agriculture because they were farmers, a lot of them, they knew about the law because they were lawyers. Whereas now you've got a large section of professional politicians who know nothing other than politics and policy and scheming in an abstract way. They don't really have experience of the economy, of the life of the country. And I think it could get worse. And that's why you get these student politicians, essentially, you know, who all they've done is be a president of a, of a student union and then become a special advisor and then become a speechwriter and then become an MP and then become a minister. It's kind of crazy.

Nigel Farage and reform. Do you think they'll get in and do you Think it would be a good thing if they got in.

So I think it's 50. 50. We're still far out. Anything can happen. I feel that the.

The polls say a bit more, don't they?

Yeah, but I just, you know, things can, can, can. And they. You can see now. I mean, this absurd thing about, oh, you said such and such racist things in the 70s. He was a teenager. They're digging. I mean, that says to me, they are desperate to stop him. You know, they are desperate. You know, if you're digging up something that some Guy said in 77, you know, when he was a teenager at school, and trying to use that and weaponize that, you are desperate. You've kind of lost every argument, and you're literally just trying to tear this guy down. And that says to me that they are very, very committed, particularly the Guardian and the Left, to stopping him.

So they're worried.

They are clear. I mean, why would you say he said this in 1978? Literally? I mean, do you. I mean, you weren't alive then, but, you know.

Makes it hard. But does anyone. Does anyone. I mean, I mean, no. All sorts of crazy things, but we.

Were having a chat. You know, one remembers what they said when they were 17 or 21. And also the culture was different, completely different. The jokes, the humor, the band.

So I know people in the city, respectable lawyers, lovely people, pretty centrists, you know, they said all sorts of crazy things that I remember when they were kids, you know, people did. And so to bring that up, says to me, these people aren't serious. They will do anything to stop him. So there's that left, you know, conspiracy or agglomeration of interest to stop him. And I also think that, you know, what he's doing is very difficult. It's never happened before. Okay. If you look at what Nigel has done, he's created a new party, essentially, and he's on the point, as far as the polls are concerned, of forming a government that never happens. You know, we've had great public. Churchill, Disraeli, Gladstone, whoever you want to name Thatcher. They all worked within the party. They never created their own party and won an election. They were all part of the system, if you like. So what he's doing is pretty extraordinary. And that's why I would price it at kind of 50, 50, because it is an extraordinary thing that's happening. He could do it. Trump did it. But even Trump took over the Republican Party. He didn't create his own party and he deliberately didn't, because he had a reform party actually in 2000, but he realized that the best way to actually become president was to join one of the established parties. You just had to work out which one. Yeah, but so what Nigel is doing is, is extraordinary. And, and, you know, it's, it's. I'll believe it when I see it. I think the lot of forces who will work against him, I think the left are going to go nuts. And let's, let's see it now. Do I think it'll be a good thing? In some ways I think it'd be a very good thing because it'll, it'll, it'll throw open the system. You know, one of the. I've talked about the civil service you talk about, and I said he's got three obstacles. The House of Lords, that's all human rights lawyers, basically. I mean, broadly, that's their center of gravity. You've got the judiciary again, which has its own biases, I think. And then you've got the civil service. So he's got these big institutional challenges and at the moment, he's the only one. His party are the only ones who are going to challenge a lot of those orthodoxies. I don't think we should abolish all those things. Of course not. But we've got to try and challenge people's thinking because whatever's happening isn't working so well. So in a way, I can see why people would vote for them. I think that there are a couple of things, a few things they need to iron out.

Nigel until very recently was in favor of scrapping the two child camp. That was a very popular policy. And I think you've got to have individual responsibility at the center of a welfare system. You can't have a situation where people can come to this country, have 10 kids and expect the state to pay for them all. Yeah, I think that's wrong. And, and he then think he, you know, he gets to go. But then you've got to distinguish between British citizens and other citizens and it's, it's a mess. So just have a cat. And then I think he's right to say he's got to start think about spending. But then people will ask him, so what are you going to cut? And then there'll be scare stories. So it's a, it's a long road for him. But I think that's a way in which you can, you can, you can shake things up.

Yeah.

And to be honest with you, I thought Kemi did a good job yesterday. I thought I thought she really stuck it to the labor, to Rachel. And I'm very interested in. As a Tory, as a Tory, I'm very interested in what the Tories have to say because I think there's potentially some sensible stuff. But it seems to me, you know, to put it very bluntly and simply, you've got a left block, which is plied Labour, Lib Dems on and off, smp, Gaza, Independence, you've got the left Greens and then you've got a right bloc, which is just Taurian reform. And one of these blocks is going to win. I know who I want to win. I don't know what the configuration of seats will be, but I definitely would rather have them win than a coalition of the left.

And if Nigel got in and he called you up and he's like, quasi, come be my chance.

He can't afford me.

Even Nigel. But, but actually I speak to him. No, but I speak with him, I speak to him a lot. And I want to feel that I can put some input into the. Yeah, I've said to myself, look, I'm 50, I don't want to get back to the House of Commons or the Parliament, you know, immediately. And I've got other things, I'm doing other projects that I'm very engaged with that you know about. So I'm a friendly ear, if you like, in a friendly voice, but I think leave others to do the theatrics of politics.

If you could rewind the clock, Quasi, and go back just before you were UK Chancellor, what advice would you give to yourself?

So, funnily enough, it was the advice that Liz Truss says that her late Majesty gave to her, pace yourself, which was, I don't know, I knew the Queen a little bit, the late Queen, and she had incredible judgment of people, incredible experience, intuition. And she clearly saw something in Liz that said to her, just pace yourself. And actually Liz was good enough to write that in her book. That's the one thing. And then the second thing is if you're going to try and reduce taxes, you've got to try and reduce spending. I mean, I might be, I'm not a Reaganite, but even if I were a Reaganite, the markets aren't Reaganites and you've got to try and show some degree of discipline on expenditure before they give you the benefit of the doubt on tax cuts. That's, that's. Those are the two bits of advice.

If we have a more right leaning government at the next election, how do we reverse all the damage done so.

I think some of the stuff can be done quite quickly. So I would abolish the mansion tax. I think they can do that because even according to their figures, it will raise 400 million. I would get rid of that immediately. It's not a huge amount, you know, compared to the 3 billion you're spending on the 2 cap, you know, getting rid of the 2 cap child or cap on two children. So you can do that. I think some of the stuff that Nigel said about a flat rate, you know, 300 grand and you're done. You know, in Italy it's €200,000. So once you pay €200,000 a year, you're done, you've paid it. And I worked out, you don't have to be an Einstein to work it out. If the top rate is 45% and you're paying 200,000, anyone earning over half a million, which is a lot of money, but anyone earning over half a million is probably incentivized to go to Italy. Now there are other things, family, lifestyle, language, all of those things. But given the fact they're mega, mega wealthy people, the £200,000 is quite a low. And I think in London, in England, you could charge maybe 50% more than that.

And you think that would bring in more overseas and stop people leaving.

People very wealthy people I know say, if I had to pay 300,000 a year to live in it and I was done, I would do that in a heartbeat. So that's one thing you could do. I think you're going to have to get tough on things like mental disability because the welfare bill isn't. It's not just because people are more disabled, is that there's a whole raft of people who have mental illness and essentially qualify for disability benefit through their mental illness. Now I think that should be interrogated much more closely because essentially now it's like we used to have self certified mortgages. It's almost like that I'm depressed.

Mental health.

Yeah. I mean, I wouldn't, I wouldn't press the point too much, but yeah, it.

Seems to me, I mean, it's not very hard to strike yourself off work, is it?

Yeah. And also the thing with mental health is that you can't see it. When we brought in disability, we'd had wars and people didn't have arms and they didn't have legs. You could see who was disabled. And then we said, okay, there's mental health and mental issues and I get that. But the problem with that is that you can't prove anything I mean who are you to say to someone who says I've got mental health issues I can't work oh just pull your socks up that's what we would have said 30 years ago but you can't say that now so and they've tried to successive governments us included have tried to rationalize that and go through a process because otherwise it is like a self certifying thing and that can't be right.

Is there anything we can do to bring entrepreneurs here and encourage innovation and productivity and growth and business that sort.

Of thing So I think you've got to have a stable environment I think you've got to lower taxes you've got to lower regulation and I think if you did that for a whole parliamentary term I think the whole the picture will be totally different Wow I think it'd be totally different and then you'd have the momentum but otherwise everything gets stuck and it's not moving in the way that we want to see it.

Quasi thank you very much thank you.

Sa.