TRIGGERnometry - The State of the World Economy with Liam Halligan

00:00:00.560 What is going on with the British economy, the global economy, et cetera?

00:00:04.440 What should people know?

00:00:05.320 Well, the world has not actually managed to get out of second gear since lockdown.

00:00:10.060 The long kind of lingering tale of the pandemic is still with us.

00:00:16.260 China is not, at the moment anyway, the global growth locomotive that it has been

00:00:22.280 for most of the last two or even three decades.

00:00:24.940 But people don't like to hear it, but UK exports to the EU, right, have never been higher.

00:00:33.240 At least we can now have a discussion and raise issues about net zero, not about the ultimate

00:00:38.720 direction of travel, but the speed and the cost and the distribution of those costs.

00:00:42.900 We have to have those discussions, because if we don't have those discussions, this isn't

00:00:47.620 a democracy.

00:00:48.200 Obviously, the war in Ukraine has accelerated and accentuated a process that was already

00:00:54.580 happening, a process that's shifting power away from the West and towards the East.

00:01:00.060 Because we don't like to talk about it very much in the West, because it's awkward and

00:01:03.820 it has a sense of the end of history about it.

00:01:06.520 But that doesn't mean it's not true.

00:01:07.560 Hello and welcome to Trigonometry.

00:01:20.280 I'm Francis Foster.

00:01:21.500 I'm Constantine Kissin.

00:01:22.480 And this is a show for you if you want honest conversations with fascinating people.

00:01:27.520 Our terrific and returning guest today is an economist, writer and broadcaster, Liam Halligan.

00:01:32.640 Welcome back for the third time.

00:01:34.100 It's great to have you back.

00:01:34.860 Good to be with you guys.

00:01:35.600 And we always invite you on whenever we want an update on what's actually going on.

00:01:40.200 We talk a lot about culture on the show and politics, but you are someone who's got real

00:01:44.180 substance and a real economic, you know, strong background and analysis.

00:01:48.740 So let's get straight into it.

00:01:50.720 What is going on with the British economy, the global economy, et cetera?

00:01:54.220 What should people know?

00:01:55.800 Well, the world has not actually managed to get out of second gear since lockdown.

00:02:00.280 The long kind of lingering tale of the pandemic is still with us.

00:02:06.080 The UK economy is just about growing, avoiding recession.

00:02:09.700 Germany, Europe's biggest economy, is in recession.

00:02:12.620 The US is doing OK.

00:02:14.240 But China, which has been the engine of global growth, the locomotive, if you like, for at least the last 20 years, contributing a lot more to the global economy in terms of raw numbers and GDP than the US even.

00:02:27.600 And China has stalled.

00:02:29.640 Now, that doesn't mean China's going into reverse.

00:02:32.400 It doesn't even mean it's growing at 1% or 2%.

00:02:34.220 It means instead of growing at 8%, 9%, 10%, as it has been from basically, you know, 1980 all the way through to a few years ago, China's now growing at 4% or 5%.

00:02:46.020 And it's not just that China's growing quite slowly, which means there's less growth elsewhere.

00:02:50.660 It's also the Chinese property sector, the Chinese shadow banking sector.

00:02:55.580 It's now big enough, systemic enough, ugly enough, if you like, that it could cause another kind of layman moment.

00:03:04.020 There's a lot of people in the market, there's a lot of research notes going around saying things along the lines of these big Chinese property conglomerates that have been massively bloated over many years.

00:03:15.580 A huge amount of the country's wealth is in residential property.

00:03:19.060 It's very difficult for middle class Chinese people to save any other way.

00:03:23.120 Sounds familiar, to be honest.

00:03:24.720 These big property companies, could they be on the verge of collapse?

00:03:28.540 Could there be some kind of systemic layman-style moment coming out of China?

00:03:34.900 And that's a big fear that in recent months has been stalking global markets and the broader global economy.

00:03:41.260 And I don't want to jump in because there's lots more for you to cover in terms of everything that's going on.

00:03:45.100 But on this particular issue, if that were to happen, you say layman-style event, would it have a global impact of that sort of significance?

00:03:54.860 Of course it would.

00:03:55.760 China's the second biggest economy in the world.

00:03:57.360 It's the biggest economy in the world on some definitions, on what we call a purchasing power parity basis when you adjust for currencies.

00:04:06.280 But it is a big economy.

00:04:08.860 But I don't actually think it's going to happen.

00:04:10.400 I think this is sort of overdone.

00:04:12.300 I think a lot of people in the markets are putting scare stories out there, as they always do, when they want to get the Fed to stop raising rates or even to start cutting rates.

00:04:22.520 The main reason I think that is because, unlike layman, in the run-up to layman in 2008, you had people buying houses with sort of 5% deposits, no deposits, you know, negative deposits, where the mortgage company actually gives you money for furniture and stuff when you buy a house.

00:04:39.560 But in China, for years and years and years, the rules have been very strict, certainly in the big cities.

00:04:44.900 You need a 30%, 40%, 50% deposit.

00:04:47.240 So there's a lot less chance of these big companies going into negative equity, of ordinary people going into negative equity.

00:04:56.120 But look, be in no doubt, this is a major moment in the evolution, the astonishing evolution of the Chinese economy.

00:05:03.440 There is a scare over the property market.

00:05:06.360 But I, for one, don't think we're going to see a big systemic lurch coming out of the Chinese property market.

00:05:12.040 I think we're much more likely to see a big systemic lurch, by the way, on Western markets, government debt markets, as we unwind QE.

00:05:20.180 And that's a big sort of theme in my thinking at the moment.

00:05:22.960 Well, we'll talk about that for sure.

00:05:23.960 The Western world are the emerging markets now, and the emerging markets are the West. 0.96

00:05:28.180 Well, we'll talk about that, Francis, before you take over.

00:05:30.240 But I just want to finish with China, because there's a guy we've had on called Peter Zehan.

00:05:34.520 I don't know if you're familiar with him, whose central argument is China is in a demographic collapse.

00:05:39.520 This is why you're starting to see everything.

00:05:41.880 And it's just that's going to continue, going to get worse, et cetera.

00:05:44.980 Do you buy that argument?

00:05:46.620 Yeah, I mean, look, that's been going around the markets for years.

00:05:48.760 Will China get rich before it gets old, right?

00:05:51.480 And the question is, will China get to a sort of GDP per head, a purchasing power per head,

00:05:56.940 that can sustain the economy and get it out of what we call the middle income trap

00:06:00.960 that emerging markets go through as they become advanced industrialized economies?

00:06:05.820 I think China can do that.

00:06:07.520 I think China's got tremendous firepower.

00:06:10.640 I think China is, you know, through its closeness with the other emerging markets.

00:06:16.560 Since the war in Ukraine, we've seen a massive consolidation of the BRIC concept.

00:06:20.780 It's very fashionable to dismiss that as a nonsense.

00:06:24.300 No, don't dismiss it as a nonsense.

00:06:25.920 It's a very, very important grouping.

00:06:27.440 Just like people dismiss OPEC sometimes as a nonsense.

00:06:30.580 It shows that they don't actually know anything about geopolitics.

00:06:34.140 So I don't see China as the main source of global systemic danger in the world at the moment,

00:06:40.960 though absolutely China is not, at the moment anyway,

00:06:44.460 the global growth locomotive that it has been for most of the last two or even three decades.

00:06:51.460 What about India?

00:06:52.280 Because they're doing supremely well, aren't they?

00:06:54.960 India are doing well.

00:06:56.020 Obviously, the world's biggest democracy.

00:06:58.060 India is doing very, very nicely out of the war in Ukraine.

00:07:00.240 Thank you.

00:07:00.700 It's importing a lot of Russian oil and then turning it around, refining it,

00:07:05.160 re-exporting it as Indian oil, making a lot of money.

00:07:08.980 I think, though, there are, these are very big countries and there are tensions, you know.

00:07:13.000 So you'll know, Constantine, about the close relations between Russia and India over many years.

00:07:17.580 India was part of the non-aligned group in the 60s.

00:07:20.700 You know, when I lived in Russia, constantly kept coming across very sophisticated Indian people

00:07:25.940 who spoke great Russian.

00:07:27.620 They'd been there for a generation.

00:07:29.640 They'd often been to the top Russian universities.

00:07:31.760 Obviously, Russia sells India most of its arms.

00:07:35.700 So there's a closeness there, but there's also a tension because India, of all the bricks,

00:07:40.500 is probably the one that's closest to the West, certainly closest to America politically,

00:07:45.280 given the massive Indian diaspora in America.

00:07:47.420 And, of course, there's tensions between China and India.

00:07:49.600 You know, China and India are technically at war over parts of the Himalayas,

00:07:54.900 literally troops standing off against each other.

00:07:57.680 So this bricks conglomerate, it's not entirely plain sailing.

00:08:01.560 It doesn't make complete coherent sense.

00:08:03.600 But, you know, NATO doesn't make complete coherent sense.

00:08:06.240 The Allies in the First and Second World War didn't make complete coherent sense.

00:08:10.260 But they were very, very powerful forces in the affairs of men.

00:08:15.220 So I do think India is pretty soon going to overtake China officially as the most populous country in the world.

00:08:22.840 And, of course, despite all the bureaucracy, it is a more attractive place to invest for the West.

00:08:28.880 It's got – I wouldn't call it open, but it's a lot less closed than China.

00:08:34.960 And I think culturally it's a lot more attuned to the West.

00:08:38.080 And I think very, very importantly, without mentioning the B word, Brexit – oh, I just did –

00:08:44.320 if the UK, right, manages to sign a trade deal with India, that will be noticed, not just here in the UK,

00:08:51.260 that will be noticed around the world because India does not sign trade deals very, very often.

00:08:55.220 And if it manages at the height of this kind of brick mania, when it's, you know, not on the West side in the war in Ukraine,

00:09:02.420 very much riding two horses, very much realigning itself with the fast-growing economies of the East, as it must,

00:09:08.820 finally getting out from under the sort of colonial yoke of Europe and the Brits in particular.

00:09:13.600 If, despite all that, Modi greenlights a comprehensive trade deal with the UK,

00:09:20.320 that will be a major moment, not just for the British economy, not just for the debate on Brexit,

00:09:23.980 because, of course, you couldn't do that within the EU, that would be a big moment geopolitically for the world

00:09:28.940 because it would say to the world, India is open for business.

00:09:32.920 And Liam, let's talk a little bit about Brexit because things are not good economically here, to put it mildly.

00:09:40.840 And there's a lot of people in certain publications and news stations screaming and shouting and saying,

00:09:46.560 this is the fault of Brexit. What did you expect?

00:09:49.120 We've now left the customs union. We've done all of these things.

00:09:52.380 We're now in economic freefall.

00:09:54.080 This is your fault.

00:09:55.220 Or is the picture somewhat more complex than that?

00:09:57.740 I'd say it's a bit more complex.

00:09:59.180 For one thing, we're not in economic freefall.

00:10:01.000 The UK economy is growing.

00:10:02.560 It's very much in the middle of the pack when it comes to the G7,

00:10:06.700 both in terms of how it's grown since 2016 and how it's grown since the end of the pandemic.

00:10:12.300 Germany is in recession.

00:10:13.560 Germany was in the EU last time I checked.

00:10:18.920 And people don't like to hear it, but UK exports to the EU, right, have never been higher.

00:10:27.960 Or, you know, thanks Anna Soubry saying on Question Time, our exports to Europe,

00:10:32.000 she literally said we'll go absolutely almost to zero.

00:10:36.300 Completely incoherent.

00:10:37.660 But she was basically saying we wouldn't export to the EU.

00:10:40.100 Now, utter rubbish, we have never exported more in value terms to the EU than we currently are.

00:10:47.480 Now, part of that is because America is shipping huge amounts of liquefied natural gas across the Atlantic. 0.74

00:10:55.580 America has become, since the war in Ukraine, by the way, the largest exporter of LNG in the world.

00:11:01.280 It's good business.

00:11:02.140 They're making a lot of money.

00:11:02.920 And as Western Europe has weaned itself off Russian oil and gas in particular,

00:11:09.220 America has filled that gap.

00:11:10.560 And a lot of that LNG comes through British LNG terminals, not least at Milford Haven.

00:11:15.720 And then we re-export a lot of that to mainland Europe.

00:11:19.140 But be that as it may, there are many other categories under which exports to Europe are actually doing really well.

00:11:24.880 And the UK has just overtaken France to become the eighth biggest manufacturer in the world. 0.89

00:11:31.500 So, you know, the so-called journalists who say we don't make anything, everything's crap, 0.92

00:11:37.140 the UK's in economic freefall. 0.97

00:11:40.040 You know, Orwell warned us about these people.

00:11:41.920 There's a whole class of people in Britain and they will always diss their country. 0.90

00:11:47.760 And, you know, when Orwell was writing, you know, I wasn't even British.

00:11:52.960 I was, you know, my people were picking spuds in the west of Ireland, right, living in stone huts. 0.94

00:11:57.300 And yet I would say that there's an awful lot of ingratitude in the UK towards the UK,

00:12:02.860 particularly among families who know that in their past, a few generations back,

00:12:06.740 they were the nasty colonial masters. 0.71

00:12:08.980 They're the people who, you know, whose wealth is built off the back of that kind of behaviour.

00:12:14.980 And so a lot of them make it into the top of the mainstream media.

00:12:18.840 It's not a meritocracy, my business.

00:12:20.680 And then they get there and they think they have to diss the country

00:12:23.240 in order to keep their conscience at bay.

00:12:25.560 Well, a lot of ordinary hardworking people, the alarm clock classes of Britain, 1.00

00:12:29.720 the people who make things actually happen and work,

00:12:33.380 the people that drive our economy forward, they're actually quite like the UK,

00:12:37.140 whether they were born here, whether they came here.

00:12:39.900 You know, and I have the sort of gratitude of an immigrant, if you like.

00:12:43.520 Like, when my father arrived here from the west of Ireland in the 1950s, 0.93

00:12:48.160 England was a properly racist country and it was no blacks, no dogs and no Irish.

00:12:52.680 And we got the photos to prove it, so let's not deny it. 0.96

00:12:55.580 We're a world away from that now.

00:12:57.260 And of course there's still bad stuff going on.

00:12:59.220 Of course there are nasty people out there.

00:13:01.660 But I actually think the UK, for all the negative publicity we get,

00:13:06.840 economically we're doing OK.

00:13:08.700 And I think in terms of integration and multiculturalism we're doing OK.

00:13:13.800 People will say, I'm being really complacent.

00:13:15.560 I'm not.

00:13:16.340 I just don't think it's nearly as bad as certain broadcasters always tell us that it is.

00:13:21.380 Well, as you say, there are a lot of people whose whole world view is invested in that being true.

00:13:26.360 And so they spread that idea.

00:13:28.340 But coming back to economics, Liam, you've mentioned,

00:13:30.660 we've talked about one controversial word, Brexit.

00:13:32.940 There is another thing that you've mentioned about four or five times already,

00:13:36.380 which is, of course, the war in Ukraine.

00:13:38.200 We don't want to relitigate the whole conflict and everything.

00:13:41.000 But what I'd be interested to know is what you think are some of the key impacts of that conflict

00:13:47.540 on the world economy, on the rebalancing and restructuring of the world,

00:13:52.440 and for people here at home, what has been the impact

00:13:55.640 and what will be the impact of the war in Ukraine?

00:13:57.940 Well, once the war in Ukraine began in earnest,

00:14:00.220 because, of course, there was a sort of low-level war, as you and I discussed a lot,

00:14:04.020 Constantine, from Medan onwards, from 2014 onwards.

00:14:07.220 There's lots of bombing going on in Donetsk and Luhansk and so on.

00:14:10.900 But once Russia actually invaded in February 2022,

00:14:14.480 I think a lot of the world suddenly realised what's obvious to those of us

00:14:18.840 who've lived and worked in the region a lot,

00:14:20.700 that, you know, these countries produce a lot of food.

00:14:23.600 And they, you know, Ukraine isn't the breadbasket of Europe for no reason.

00:14:27.500 You know, the historic importance of ports like Odessa,

00:14:30.720 the grain funnel of the former Soviet Union.

00:14:33.660 And so a lot of people have realised that if you blockade Russia,

00:14:39.240 if Russian ships blockade Ukrainian ports,

00:14:42.560 then food prices are going to spike, and that's what happened.

00:14:45.020 And you've got countries in North Africa, around the Horn of Africa,

00:14:48.560 who are very, very heavily dependent on Russian and Ukrainian grain,

00:14:52.220 but also here in the UK, you know,

00:14:53.960 all those staple foods that come out of that part of the world.

00:14:57.140 So we've certainly seen a food price spike,

00:15:00.200 but we've seen a spike in inflation more generally.

00:15:02.960 And you can't attribute it solely to the war in Ukraine,

00:15:05.640 though I know the Bank of England likes to,

00:15:07.500 because even in January 2022,

00:15:09.640 when almost no one thought Putin was going to invade,

00:15:12.020 including most of the people around him,

00:15:14.100 inflation in the UK was already at a 30-year high.

00:15:17.160 It was already at a 30-year high.

00:15:18.920 The war in Ukraine knocked inflation up to a 40-year high.

00:15:23.040 And we're still living with the implications of that.

00:15:26.160 And it may get worse.

00:15:27.720 At the moment, of course, in the UK, the latest numbers,

00:15:30.680 inflation has come down to 6.7% in August, from 6.8% in July.

00:15:35.100 And that means that the Bank of England, after these falls,

00:15:37.860 has been able to keep interest rates where they are for now,

00:15:39.960 at 5.25%.

00:15:41.580 And the UK is in a similar pace to the Federal Reserve in America,

00:15:46.400 European Central Bank in the Eurozone.

00:15:48.480 You know, there may be one or two more rate rises to come.

00:15:51.800 But for the most part, we think we've got our arms

00:15:53.760 mostly around inflation.

00:15:55.500 And possibly we have.

00:15:57.980 But it may be that there's another twist this autumn.

00:16:00.700 This is my concern.

00:16:02.220 Last autumn and winter was relatively mild.

00:16:04.620 That meant we were able to spend less money

00:16:06.700 than we thought we were going to spend

00:16:07.900 subsidising households and firms' energy bills.

00:16:10.360 We still spent tens of billions of pounds,

00:16:12.420 but it was less than we thought we were going to spend.

00:16:14.620 America, of course, hasn't got that energy problem 0.73

00:16:16.540 because it's been fracking.

00:16:18.040 That's why retail electricity prices in America

00:16:21.940 are a third of what they are in the UK.

00:16:25.160 The UK is the most expensive in Europe,

00:16:27.780 partly because of the way we do marginal cost pricing

00:16:30.460 and use renewables.

00:16:31.300 You can ask me about that in another question, if you like.

00:16:34.280 But for now, at least, we've got, you know,

00:16:36.680 still got quite high energy prices,

00:16:38.880 but an expectation that they're going to keep coming down, right?

00:16:42.080 But, but, but, if this war in Ukraine continues,

00:16:45.420 and it's probably going to continue,

00:16:47.000 because why would Putin want to stop it

00:16:48.720 until he knows what's happening in the White House, right?

00:16:51.260 So that's all the way through to November 24.

00:16:53.340 So I think it's going to go on until then.

00:16:55.360 But if he decides to turn the screw this autumn and winter,

00:17:00.940 what's emerged is an axis that no one in the West

00:17:03.680 wants to talk about.

00:17:04.580 And that is the Riyadh-Moscow axis.

00:17:08.280 The Saudis, of course, the absolutely pivotal US ally

00:17:11.860 after the Second World War, you know,

00:17:14.200 security in return for the black stuff.

00:17:17.840 That's now breaking down because oil has spiked enormously

00:17:22.560 over the last few months.

00:17:24.320 No one, again, wants to talk about it.

00:17:25.580 Give us some figures, Liam.

00:17:26.060 We've gone from just over 70 bucks a barrel in June

00:17:29.520 to 95 plus bucks a barrel now.

00:17:33.660 And that's, you know, a 35% increase.

00:17:36.580 That's huge.

00:17:37.820 In August, we saw the sharpest spike in the UK

00:17:42.180 in petrol and diesel prices on the forecourt

00:17:44.180 that we've seen in 23 years in percentage terms.

00:17:48.780 And Riyadh and Moscow are now working together.

00:17:51.420 Look, OPEC controls a half of all global oil production,

00:17:55.640 the exporters cartel, and four-fifths of all known oil reserves, right?

00:18:00.740 If you add in Russia, not an OPEC member,

00:18:03.200 but very much working with OPEC in this grouping called OPEC+,

00:18:06.300 then OPEC plus controls two-thirds of all global production

00:18:12.460 and 90% of all reserves, right?

00:18:15.480 And the reason oil is high now

00:18:19.340 isn't because the global economy is growing fast

00:18:22.140 and so people are demanding more oil, which bids the price up.

00:18:25.000 Because as we have established,

00:18:26.560 the global economy is not really out of second gear post-lockdown, right?

00:18:31.500 Yet still, oil is surging

00:18:33.260 because the Saudis and the Russians

00:18:35.140 are deliberately taking oil out of the market now

00:18:37.840 and have been for months.

00:18:39.380 And we're not talking about it, but it's completely true. 0.72

00:18:42.340 Ask any oil trader.

00:18:43.720 The only reason oil is pushing 100 bucks

00:18:46.060 and it's probably going to hit 100 bucks

00:18:47.360 is because of OPEC.

00:18:49.260 And that is a geopolitical wake-up call

00:18:51.820 and that could very easily complicate the West's ability

00:18:55.940 to finally escape from this cost-of-living crisis,

00:18:59.040 which of course would then have knock-on effects

00:19:01.280 in terms of public support

00:19:03.620 for the West's entire approach to the war in Ukraine.

00:19:07.000 So when you say they're taking oil out of the market,

00:19:10.460 for a layman, what does that mean?

00:19:11.680 Does it mean they're just not releasing it?

00:19:13.280 They're keeping it?

00:19:14.200 Yeah, it means instead of producing, you know,

00:19:17.460 like 10 million barrels a day, right?

00:19:20.000 The world uses about 100 million barrels of oil a day, right?

00:19:23.420 Instead of producing about 10 million barrels a day,

00:19:25.240 the Saudis will say, oh, we'll produce nine for now 0.91

00:19:27.260 and we might go to eight.

00:19:29.600 Because they can get as much money

00:19:30.640 because if the price goes up,

00:19:31.780 they can make the same amount of money selling less oil, right?

00:19:33.440 And is that the motivation, Liam,

00:19:35.100 or is there something more sinister going on

00:19:36.860 in terms of they are trying to flex their muscles

00:19:39.840 geopolitically as well?

00:19:40.960 Look, go back to the Yom Kippur War, right, 0.72

00:19:43.760 and OPEC's response to that.

00:19:44.940 Go back to the early 70s.

00:19:47.020 Go back to the oil price shock

00:19:48.460 after the Iranian Revolution of 1979.

00:19:51.380 OPEC is not a benign organisation, right?

00:19:54.120 OPEC is there, they say, to stabilise oil prices.

00:19:57.020 No.

00:19:57.600 OPEC is there to maximise the revenue for its members.

00:20:01.460 And that will often mean pumping less oil

00:20:03.740 than the world needs in order to push the price up

00:20:06.640 to make more money from selling less oil.

00:20:09.460 And within that, that is obviously a hugely powerful tool

00:20:12.340 and Saudi is the linchpin of that.

00:20:14.220 But you've also got other very, very powerful economies.

00:20:16.200 You've got the Iraqis in there, you've got the Mexicans, 0.99

00:20:18.060 you've got the Venezuelans, you've got the Iranians, 1.00

00:20:20.260 you've got the Nigerians. 0.91

00:20:21.580 These are powerful players, right?

00:20:24.500 And it's not just about money,

00:20:25.760 it's also about control and flexing geopolitical muscles.

00:20:29.860 Because a lot of people within OPEC

00:20:31.900 and the countries they represent,

00:20:34.160 they don't look at the world

00:20:36.700 the way we in the West look at the world.

00:20:39.500 They have a different world view,

00:20:41.080 they have a different history,

00:20:42.820 they have a different understanding

00:20:44.500 of Western hegemony and its legitimacy.

00:20:48.300 In this country, in this part of the world,

00:20:50.120 we take it for granted.

00:20:51.500 But a lot of people don't take it for granted.

00:20:53.800 And I'm sure, like myself,

00:20:57.280 you've had many, many conversations,

00:20:58.560 both of you, with people from other big economies

00:21:02.100 that aren't Western economies.

00:21:03.740 And very highly educated, very clever people

00:21:05.880 think completely different things

00:21:07.740 to what you're going to read in your Economist

00:21:09.900 or your FT or your Telegraph, for that matter.

00:21:12.380 And that realisation is now coming to pass.

00:21:15.740 You know, this BRICS grouping,

00:21:16.900 it isn't just about summits and seminars.

00:21:20.180 You know, they're building their own ratings agencies,

00:21:22.100 they're building their own payment clearance system,

00:21:24.340 they're building their own version of SWIFT,

00:21:25.960 which is the kind of financial plumbing of the world

00:21:29.260 controlled by the US,

00:21:31.280 which America can turn on and off

00:21:33.140 to impose sanctions on other countries,

00:21:35.400 and they often do.

00:21:36.840 Well, a lot of these big economies are pushing back.

00:21:39.500 These economies now have the lion's share

00:21:42.040 of hard currency reserves in the world,

00:21:44.680 of gold.

00:21:45.400 They certainly have the lion's share

00:21:47.080 of the rare earths that we need

00:21:48.480 if this electric vehicle revolution

00:21:49.880 is ever going to properly get off the ground.

00:21:52.200 So an OPEC is part of that.

00:21:55.120 This BRICS and OPEC are now overlapping 0.94

00:21:57.760 to challenge sort of G7, NATO.

00:22:01.540 That process was happening anyway

00:22:03.120 through a natural growth,

00:22:06.180 you know, as they get more of the population,

00:22:08.280 as they get a bigger share of the world economy.

00:22:10.380 You know, the BRICS combined now 0.76

00:22:11.600 are bigger than the G7.

00:22:12.960 That's been the case for a number of years.

00:22:14.480 But the war in Ukraine has accelerated

00:22:19.060 and accentuated a process that was already happening,

00:22:23.320 a process that's shifting power

00:22:25.020 away from the West and towards the East.

00:22:28.040 And I'm not saying this

00:22:28.880 because I'm some kind of anti-Western person.

00:22:32.020 On the contrary,

00:22:33.500 I'm just trying to be realistic

00:22:34.900 about what's happening.

00:22:36.540 And political analysts and investors,

00:22:39.980 business leaders, you know,

00:22:41.160 any aware citizen sitting in the West

00:22:43.300 needs to understand that this is happening

00:22:45.500 because we don't like to talk about it

00:22:47.080 very much in the West

00:22:47.860 because it's awkward

00:22:49.020 and it has a sense of the end of history about it.

00:22:52.160 But that doesn't mean it's not true.

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00:24:17.680 Liam, you've been talking about OPEC and BRICS

00:24:21.120 and there'll be people who are not economists

00:24:22.800 who are not au fait with this.

00:24:24.200 Can you just break it down for us

00:24:26.260 what these two terms mean

00:24:28.120 and also what is it they represent

00:24:31.700 and what is it that they want?

00:24:33.320 So they're separate

00:24:34.220 but they're a bit overlapping.

00:24:35.620 So OPEC is the organisation

00:24:37.660 of petroleum exporting countries.

00:24:40.600 It was founded in Rabat in Morocco.

00:24:43.080 It was originally very much an Arab organisation

00:24:45.120 and it really burst onto the world stage

00:24:47.760 in the early 70s

00:24:48.820 when you had the Yom Kippur War

00:24:50.740 and in response to, as they saw it,

00:24:55.000 Israeli aggression,

00:24:56.000 the Arab countries basically said,

00:24:57.460 right, we are going to make life

00:24:58.500 really difficult for the West,

00:25:00.800 particularly for America that supports Israel

00:25:03.260 and, you know,

00:25:04.460 talk to anybody in America of a certain age

00:25:07.140 and they'll remember the huge gas queues.

00:25:09.080 It's when American cars stopped being like massive

00:25:11.640 as they are in Starsky and Hutch

00:25:13.060 and started to get small and compact in Japanese.

00:25:15.460 They went away from gas guzzlers 1.00

00:25:17.460 towards cars that were more cost effective

00:25:20.560 in terms of fuel.

00:25:21.940 So that's OPEC

00:25:22.740 and OPEC has had lulls

00:25:25.280 when it's been less powerful,

00:25:26.540 less coherent

00:25:27.140 because it relies on all the countries

00:25:29.720 agreeing that they're going to cut

00:25:31.500 at the same time.

00:25:32.940 Otherwise, you can get free rider things happening

00:25:35.420 where countries don't cut

00:25:36.860 but they benefit from the fact

00:25:38.280 that the price has gone up

00:25:39.280 because others have cut.

00:25:40.560 So that's OPEC

00:25:41.720 and it has become very fashionable

00:25:43.840 in Western capitals in recent years

00:25:45.420 to dismiss OPEC as a spent force.

00:25:47.880 The amount of sort of op-eds

00:25:48.900 I've seen in posh Western newspapers.

00:25:51.600 But you can't deny the numbers

00:25:53.040 and the numbers are, as I've said,

00:25:54.700 OPEC controls a huge share

00:25:56.560 of both production daily and global reserves.

00:25:59.140 But now what's new

00:26:00.760 is you've got a proper semi-formal linkage

00:26:05.060 between OPEC

00:26:06.940 and that other massive energy giant

00:26:09.280 in the world, Russia, right?

00:26:11.180 And that's based on the relationship

00:26:14.420 between Mohammed bin Salman

00:26:16.480 and Vladimir Putin,

00:26:18.500 which was forged, by the way,

00:26:20.300 in the Moscow World Cup.

00:26:21.700 It's no coincidence

00:26:22.960 that the first match

00:26:24.540 in the Moscow World Cup

00:26:26.120 was Saudi versus Russia,

00:26:29.800 the host nation.

00:26:30.700 And there's an incredible photo

00:26:32.040 of Putin and bin Salman

00:26:33.740 sitting next to each other

00:26:35.340 watching that match.

00:26:36.600 And they're literally sort of

00:26:37.760 hugging each other.

00:26:38.840 So that's OPEC.

00:26:42.060 And the BRICS is something different

00:26:43.800 but related.

00:26:45.180 The BRICS emerged in the early 2000s

00:26:48.400 as a sort of informal grouping.

00:26:49.940 It was originally

00:26:50.340 a kind of an investment idea.

00:26:52.420 You want to invest

00:26:53.080 in these big emerging markets

00:26:54.360 because that's where the growth is.

00:26:55.620 That's where the global balance of power

00:26:57.720 and economics is shifting.

00:26:59.360 That's where the growing middle class is. 0.74

00:27:01.060 That's where the money

00:27:02.460 is going to be in the future.

00:27:03.980 But since they were agglomerated

00:27:06.620 in that sense,

00:27:07.440 these five countries,

00:27:09.360 Brazil, Russia, India, China

00:27:10.840 and more recently South Africa

00:27:12.500 have really worked at coming up

00:27:15.600 with coherent positions

00:27:17.080 on certain things.

00:27:18.900 And they've worked at coordinating

00:27:20.640 currency swaps

00:27:21.580 between their central banks.

00:27:22.920 As I said,

00:27:23.800 setting up their own ratings agencies

00:27:25.480 that aren't dominated

00:27:26.360 by the US and the UK,

00:27:28.600 setting up their own payment systems.

00:27:32.100 There's talk about them set.

00:27:33.940 Well, they are now.

00:27:34.700 I mean, the Chinese and the Russians,

00:27:36.480 they settle their energy trade. 0.58

00:27:39.080 So this is the biggest,

00:27:40.800 one of the biggest energy exporters

00:27:42.540 in the world

00:27:43.060 and one of the biggest energy importers.

00:27:45.180 And they settle their energy trades,

00:27:47.620 not in dollars,

00:27:48.720 but in RMB and rubles, right?

00:27:51.480 Now, any student of economic history

00:27:53.900 will tell you,

00:27:54.460 crikey, that's amazing

00:27:55.540 because petro-currency status,

00:27:59.340 all oil transactions

00:28:01.040 are settled in dollars, right?

00:28:02.380 That is the bedrock of America's

00:28:05.120 and the dollar's

00:28:06.280 reserve currency status.

00:28:08.300 And reserve currency status

00:28:09.940 allows you to issue

00:28:12.620 your own currency

00:28:13.640 and the rest of the world

00:28:14.480 treats it as a hard currency, right?

00:28:16.960 So as de Gaulle said

00:28:18.080 of America's reserve currency status,

00:28:20.760 why are we all paying the interest

00:28:22.320 on Uncle Sam's debt?

00:28:24.360 It is the exorbitant privilege

00:28:26.080 of being the world's reserve currency.

00:28:27.620 It used to be the Brits 1.00

00:28:28.340 in the 19th and 18th century,

00:28:30.000 the pound as good as gold.

00:28:31.080 It was literally as good as gold.

00:28:32.960 That's where the phrase comes from.

00:28:34.740 And then it became America

00:28:35.800 in the mid to late 1930s,

00:28:37.980 consolidated at Bretton Woods.

00:28:39.800 And America's had

00:28:40.440 reserve currency status.

00:28:42.120 And a lot of people

00:28:42.800 are jealous of that.

00:28:43.540 The Europeans were jealous of that.

00:28:44.820 That's why they wanted

00:28:45.340 to set up the euro,

00:28:46.300 the single currency.

00:28:47.500 But now the Chinese, 1.00

00:28:48.920 the Indians,

00:28:49.820 the Russians are jealous of that.

00:28:51.420 Liam, may I jump in

00:28:52.480 with a layman question?

00:28:53.560 How sustainable is this?

00:28:54.780 Because once you've got

00:28:55.680 all these RMB,

00:28:56.440 you're going to have

00:28:56.860 to spend them on something

00:28:57.780 and they don't trade enough

00:28:59.100 with each other in that way,

00:29:00.100 do they?

00:29:00.820 That's absolutely true.

00:29:02.160 And that's why

00:29:02.580 the pushback argument

00:29:03.640 is that so much

00:29:05.140 of China's wealth

00:29:05.900 is in dollars.

00:29:06.600 Why would they want

00:29:07.140 to undermine the dollar?

00:29:08.520 And I would say,

00:29:09.260 yeah, but these things

00:29:09.920 don't happen overnight.

00:29:11.280 You know,

00:29:11.880 you only really know

00:29:12.900 that the world's reserve

00:29:13.660 currency has switched

00:29:14.520 when you look back

00:29:15.200 in five years' time

00:29:16.240 and you think,

00:29:16.880 oh, yeah,

00:29:17.100 that was probably the moment.

00:29:19.080 But clearly,

00:29:20.160 the dollar is on the wane.

00:29:22.560 I mean,

00:29:22.760 the dollar is going to be

00:29:23.460 probably the main

00:29:24.860 reserve currency

00:29:25.660 for the rest of my life.

00:29:26.720 These are very long-term trends.

00:29:28.580 But I do think

00:29:29.760 there's a move now,

00:29:30.980 particularly after

00:29:31.480 quantitative easing

00:29:32.520 when Western central banks

00:29:33.780 spat the dummy

00:29:34.440 and massively undermined

00:29:36.100 their own reputation

00:29:36.960 for management

00:29:38.140 by creating so much

00:29:40.020 money on the fly.

00:29:41.960 I do think

00:29:42.740 countries are now

00:29:44.000 looking at different ways

00:29:45.020 of storing their currencies

00:29:46.140 in synthetic currencies,

00:29:48.200 in crypto currencies,

00:29:50.160 in agglomerated currencies

00:29:51.580 where you have

00:29:52.080 a basket of currencies

00:29:53.200 and then you create

00:29:54.260 a new currency out of that

00:29:55.540 and store your wealth

00:29:56.400 in that.

00:29:57.080 And these are the kind

00:29:57.760 of things that

00:29:58.400 the BRIC leadership

00:30:00.460 and the intelligentsia

00:30:01.580 around this grouping

00:30:02.480 are exploring.

00:30:03.740 And it's impossible

00:30:04.440 to ignore them

00:30:05.240 because they're actually

00:30:06.200 doing really interesting work

00:30:07.540 that a lot of people

00:30:08.420 in the West

00:30:08.820 are thinking of as well.

00:30:10.220 Liam,

00:30:10.740 I want to ask you something

00:30:12.120 because the undertone

00:30:14.340 to everything

00:30:15.040 that we're talking about here

00:30:16.440 is essentially

00:30:17.500 what Vladimir Putin

00:30:18.320 has been talking about,

00:30:19.280 which is the move away

00:30:20.340 from a mono-unipolar world

00:30:22.640 in which America

00:30:23.360 is dominant

00:30:23.940 and absolutely

00:30:24.620 in control of everything

00:30:25.740 and the West

00:30:26.340 sort of works with it,

00:30:28.120 to a multipolar world.

00:30:29.760 That's the undertone

00:30:30.860 to all of this.

00:30:31.500 And the question for me

00:30:32.400 is how much of this

00:30:34.080 is self-inflicted

00:30:34.860 because you mentioned already

00:30:37.640 the fact that we're

00:30:38.880 debasing our currency

00:30:39.920 on a daily basis,

00:30:41.680 basically print

00:30:42.320 a crap ton of money

00:30:43.740 irresponsibly,

00:30:45.020 in my opinion,

00:30:45.740 saddle our own grandchildren

00:30:46.900 with debts

00:30:47.520 so that we can spend money

00:30:49.360 that we don't have today.

00:30:51.060 You're nodding along to this.

00:30:52.480 How much of it also,

00:30:53.880 this is less the case

00:30:54.820 in the US

00:30:55.240 where they're still

00:30:55.740 producing energy,

00:30:56.720 but in this country

00:30:57.920 where we've got 1.00

00:30:58.780 all these lunatics 1.00

00:30:59.460 running around 0.99

00:31:00.160 shutting down traffic

00:31:01.180 and whatever,

00:31:01.780 screaming just stop oil, 1.00

00:31:03.680 when we need to produce

00:31:04.720 our own energy

00:31:05.320 because ultimately

00:31:07.320 we're going to have to

00:31:07.960 buy it from the Saudis

00:31:08.980 or from the Russians

00:31:09.660 or from the whoever's

00:31:10.780 if we don't produce it ourselves.

00:31:12.880 I think part of it

00:31:13.880 isn't self-inflicted

00:31:14.640 because in the West

00:31:15.740 we've all acquired

00:31:17.480 what seem now

00:31:18.720 to be compulsory luxury views.

00:31:20.920 You have to think

00:31:22.300 certain things

00:31:22.900 or you're a bad person.

00:31:24.440 Yes.

00:31:24.700 I mean,

00:31:25.060 the three of us

00:31:25.780 involved in this conversation

00:31:26.960 and I'm sure many

00:31:27.880 trigonometry viewers

00:31:29.260 and listeners,

00:31:30.380 they have views

00:31:31.780 that upset other people

00:31:33.140 at dinner parties

00:31:34.180 but that doesn't mean

00:31:35.160 that they're wrong

00:31:35.840 and I think the media

00:31:37.720 has a lot of blame

00:31:39.480 to share here.

00:31:40.800 Our media in the UK,

00:31:42.700 it's meant to be

00:31:43.040 a very vibrant media,

00:31:44.260 a very sophisticated media.

00:31:45.600 It is both those things

00:31:46.500 to a degree

00:31:47.060 but it's suffering

00:31:48.340 in my view,

00:31:49.520 certainly in the mainstream,

00:31:50.340 from an absolutely

00:31:51.680 chronic lack of diversity.

00:31:53.720 Now,

00:31:53.840 I don't mean

00:31:54.340 that there aren't enough

00:31:55.040 women or brown people

00:31:56.440 on the screen.

00:31:57.680 There are lots more women 1.00

00:31:58.880 and lots more brown people

00:32:00.020 than they were

00:32:00.620 and that's absolutely fantastic.

00:32:02.620 I have full support

00:32:04.240 and admiration

00:32:04.860 for that trend

00:32:05.780 but as that's happened

00:32:07.400 at the same time,

00:32:08.720 unrelated

00:32:09.040 but at the same time,

00:32:11.040 we have had

00:32:11.860 an absolutely

00:32:12.780 cataclysmic drop-off

00:32:14.440 in genuine

00:32:15.540 cognitive diversity.

00:32:17.180 The range of views

00:32:19.100 that you're allowed

00:32:19.720 to have,

00:32:20.640 the Overton window

00:32:21.660 has shifted left

00:32:23.060 and tightened

00:32:24.000 to a tiny little porthole

00:32:25.800 and if you haven't got

00:32:26.780 your face

00:32:27.740 in that porthole

00:32:28.660 then you're 0.57

00:32:29.200 a bad person 0.83

00:32:30.400 and a lot of it

00:32:31.320 is around this

00:32:32.000 issue of luxury views.

00:32:34.520 So,

00:32:34.920 for instance,

00:32:36.320 Rishi Sunak

00:32:36.880 has just been

00:32:37.280 absolutely walloped

00:32:38.240 by a lot of his own party

00:32:40.300 but certainly by

00:32:41.200 most newspapers

00:32:42.720 and most broadcasters

00:32:43.920 because Rose Bank

00:32:46.220 has been given

00:32:46.840 the go-ahead.

00:32:47.840 That's the biggest

00:32:48.540 untapped field

00:32:51.080 in the North Sea

00:32:52.240 that we know of

00:32:53.260 and Rose Bank

00:32:54.760 is about 80 miles

00:32:55.480 off of Shetland.

00:32:57.080 It's relatively accessible

00:32:58.080 by North Sea standards

00:32:59.120 and now finally

00:33:00.980 a UK-listed company,

00:33:03.500 Ithaca

00:33:03.820 and the Norwegian

00:33:05.480 state energy giant

00:33:06.700 Equinor

00:33:07.480 are going to develop

00:33:08.260 that field

00:33:08.820 and it's got 300 million

00:33:09.960 barrels of oil

00:33:10.600 at least,

00:33:11.680 right?

00:33:11.960 So that's enough

00:33:13.020 to keep the whole world

00:33:14.240 going for three days

00:33:15.760 which doesn't sound

00:33:16.400 a lot of good

00:33:16.860 but it is.

00:33:18.300 By British standards

00:33:19.120 it is.

00:33:19.500 But it's absolutely huge

00:33:20.540 and it's 8 billion

00:33:21.500 quid's worth of investment

00:33:22.360 it's 2,500 jobs

00:33:23.820 as the GMB union

00:33:24.980 one of our main unions

00:33:26.020 keeps reminding

00:33:26.920 the Labour Party.

00:33:28.280 Labour,

00:33:28.780 in the typical fashion

00:33:30.400 they don't agree

00:33:31.800 with what the Tories

00:33:32.500 are doing on Rose Bank

00:33:33.720 because that will upset

00:33:34.620 their environmental lobby

00:33:35.800 but they're not going

00:33:36.980 to reverse it

00:33:38.080 because that would upset

00:33:39.780 their blue collar

00:33:40.580 GMB union lobby

00:33:42.640 who want those jobs

00:33:44.120 for their members.

00:33:46.240 But it makes complete sense

00:33:47.560 to me that we should be

00:33:48.400 using our own energy

00:33:49.700 from the North Sea.

00:33:51.160 I mean,

00:33:51.540 why?

00:33:52.400 Because there's something

00:33:53.800 within the British

00:33:54.680 establishment now

00:33:56.100 called the Climate Change Committee

00:33:57.400 that's the government's

00:33:58.900 own in-house

00:33:59.960 green watchdog

00:34:01.880 that has statutory powers

00:34:03.460 to sort of push

00:34:04.780 and goad

00:34:05.620 and chide ministers

00:34:06.780 if they're not doing

00:34:07.960 everything that they

00:34:08.600 should be doing

00:34:09.200 to get us to net zero

00:34:10.360 in 2050.

00:34:11.560 Even the Climate Change Committee

00:34:13.300 admits

00:34:14.140 that

00:34:14.980 we will be using

00:34:16.660 oil and gas

00:34:17.460 by the mid-2030s

00:34:18.900 for 50%

00:34:20.380 of all our energy,

00:34:21.560 right?

00:34:22.080 Even if we're new

00:34:22.860 and it's currently 70%

00:34:23.880 by the way.

00:34:25.720 The Climate Change Committee

00:34:26.860 says it will still be

00:34:27.780 50% of all our energy

00:34:29.160 by mid-2030.

00:34:30.520 And that's if

00:34:31.140 the Climate Change Committee's

00:34:32.380 own estimates

00:34:33.260 for the take-up

00:34:34.320 and efficiency

00:34:34.880 of renewables,

00:34:36.440 the improvements therein,

00:34:38.340 are met.

00:34:38.980 And a lot of people

00:34:39.500 think they won't be met.

00:34:40.280 A lot of people think

00:34:40.920 they're far too rosy

00:34:42.140 and too optimistic.

00:34:43.040 So we'll be lucky

00:34:44.200 to be at only 50%

00:34:45.680 oil and gas

00:34:46.260 by the mid-2030s.

00:34:47.860 It'll probably be higher.

00:34:49.620 And even the Climate Change Committee,

00:34:51.340 they say that

00:34:53.140 when we are at net zero

00:34:54.380 in 2050,

00:34:55.860 then we'll still be using

00:34:56.860 oil and gas

00:34:57.440 for around 25%

00:34:58.800 of all our energy.

00:34:59.740 So if we're going to use

00:35:00.680 oil and gas,

00:35:02.220 use our own

00:35:03.040 because it's cheaper.

00:35:04.860 It means we get the jobs,

00:35:06.240 the tax revenue

00:35:06.880 and the prosperity.

00:35:09.360 And it's far less

00:35:10.640 carbon intensive.

00:35:11.760 What's the alternative?

00:35:13.080 The alternative

00:35:13.660 is you drill gas

00:35:14.680 in Dakota,

00:35:16.160 you put it through

00:35:16.900 a pipeline

00:35:17.440 to an LNG terminal

00:35:18.960 in the States,

00:35:19.740 you liquefy it,

00:35:21.540 which is massively

00:35:22.100 carbon and energy intensive.

00:35:23.540 You put it in a tanker

00:35:24.580 that goes 3,200 miles

00:35:26.520 across the Atlantic,

00:35:28.360 diesel powered,

00:35:29.140 by the way,

00:35:29.560 and then you re-gasify it

00:35:30.840 at Milford Haven

00:35:31.500 or somewhere else

00:35:32.260 in mainland Europe,

00:35:33.900 all massively

00:35:34.700 energy intensive.

00:35:35.760 But at least we can

00:35:36.480 then tell ourselves,

00:35:37.320 oh, this isn't

00:35:37.860 our carbon footprint.

00:35:39.160 But it is.

00:35:39.920 We have to be smarter

00:35:40.960 about this.

00:35:41.920 It makes huge sense

00:35:43.160 to use our own

00:35:44.040 North Sea oil and gas

00:35:45.480 given that

00:35:46.580 even under the most

00:35:47.540 Panglossian,

00:35:48.520 the most rosy

00:35:50.820 assumptions

00:35:51.400 about our pathway

00:35:52.820 towards net zero

00:35:53.840 by the Climate Change

00:35:54.860 Committee itself,

00:35:55.940 we'll still be using

00:35:57.000 an awful lot of oil

00:35:58.320 and gas

00:35:58.800 for the rest of my life.

00:36:00.560 So rather than just say,

00:36:02.360 as the Green Party does,

00:36:03.400 this is morally obscene,

00:36:05.660 get real.

00:36:06.880 You're going to need

00:36:07.520 oil and gas

00:36:08.220 at least until 2050,

00:36:10.080 probably for a lot longer.

00:36:11.360 It's cheaper

00:36:12.020 and it's more

00:36:12.880 environmentally friendly

00:36:13.860 to use our own.

00:36:15.580 But that's the thing,

00:36:16.660 is you're putting forward

00:36:17.460 a pragmatic argument.

00:36:20.260 And we don't do that anymore

00:36:21.840 because we just like

00:36:23.360 nice little soundbites

00:36:24.580 that make us feel good.

00:36:25.880 Yeah, that's true.

00:36:27.740 That's true.

00:36:28.260 I mean, it's,

00:36:29.540 you know,

00:36:30.680 economists have been 0.87

00:36:31.900 the dismal scientists 0.90

00:36:32.800 for years, right?

00:36:33.980 I mean, that was

00:36:34.560 originally a quote

00:36:35.960 because economists

00:36:36.720 used to warn

00:36:37.640 that

00:36:38.900 because populations

00:36:41.780 grow geometrically

00:36:43.380 but crops grow

00:36:44.700 arithmetically

00:36:45.560 that would be

00:36:46.240 subject to starvation.

00:36:48.080 Of course,

00:36:48.520 it never happened

00:36:49.000 because technology

00:36:49.740 came in

00:36:50.300 and so crops

00:36:52.140 could also grow

00:36:52.880 geometrically,

00:36:53.900 not least with

00:36:54.460 the Green Revolution

00:36:55.820 and pesticides,

00:36:57.080 fertiliser

00:36:57.560 and all the rest of it.

00:36:58.180 So man will find a way.

00:36:59.640 And I do think

00:37:00.240 we will find a way.

00:37:01.580 I'm not against

00:37:02.620 for any moment

00:37:04.540 the transition away

00:37:06.300 from fossil fuels, right?

00:37:07.940 I want a cleaner 0.99

00:37:08.640 country,

00:37:09.920 a cleaner world

00:37:10.560 for my kids

00:37:11.380 and my grandkids.

00:37:12.140 It makes sense

00:37:12.880 to move away

00:37:13.500 from fossil fuels.

00:37:14.760 You know,

00:37:14.900 I'm a huge advocate

00:37:15.720 of hydrogen.

00:37:17.360 I think hydrogen

00:37:18.040 is a sort of Cinderella.

00:37:20.760 But we're now

00:37:21.760 in a point

00:37:22.220 and this is one

00:37:23.240 of the upsides

00:37:23.840 of the ghastly war

00:37:25.460 in Ukraine

00:37:25.960 that you and I

00:37:26.600 have talked about

00:37:27.080 in the past

00:37:27.500 quite a lot,

00:37:28.000 Constantine.

00:37:28.460 One of the upsides

00:37:29.340 is that energy security

00:37:31.440 is no longer something

00:37:33.400 that only sort of

00:37:34.600 spectrum-y nerds

00:37:35.960 like me go on about,

00:37:37.080 right?

00:37:37.360 It's actually,

00:37:38.380 people come up to me

00:37:39.260 in the pub,

00:37:40.220 right?

00:37:41.080 And ask me

00:37:41.660 about energy security.

00:37:42.880 People come up to me

00:37:43.640 in the pub

00:37:44.240 and ask me

00:37:45.640 about OPEC

00:37:47.160 these days

00:37:48.000 and that would never

00:37:48.800 have happened

00:37:49.240 two or three years ago.

00:37:50.800 And I think what's emerged

00:37:51.980 from this war in Ukraine,

00:37:53.080 the impact on energy prices,

00:37:54.500 the impact on the cost of living,

00:37:56.340 the fact that,

00:37:56.920 you know,

00:37:57.140 people's house prices

00:37:58.060 have fallen

00:37:58.500 and they're feeling

00:37:59.040 a lot less financially secure

00:38:00.760 than they were.

00:38:01.340 They're a lot more worried

00:38:02.080 about their own future

00:38:03.500 and their children's future.

00:38:05.740 What it has done,

00:38:07.120 it has allowed

00:38:07.880 to burst through

00:38:09.160 these kind of luxury views

00:38:11.940 and these lazy

00:38:13.380 end-of-empire assumptions

00:38:15.180 that what matters is,

00:38:17.740 you know,

00:38:17.900 your feelings

00:38:18.600 and, you know,

00:38:20.560 your position

00:38:21.600 in a kind of social hierarchy

00:38:23.280 of do-goodery.

00:38:24.760 What's happening now?

00:38:26.380 Those things are being

00:38:27.180 shifted away

00:38:27.860 and we are suddenly

00:38:28.840 having a real conversation

00:38:31.140 about net zero

00:38:32.860 how much,

00:38:35.960 when,

00:38:37.220 for how long

00:38:38.000 and who pays.

00:38:39.820 Right.

00:38:40.120 Who pays.

00:38:41.040 Now,

00:38:41.420 it was always madness

00:38:43.120 to think you could possibly

00:38:44.280 implement these massive changes

00:38:45.800 without taking the population

00:38:47.060 with you.

00:38:48.100 Now,

00:38:48.260 there's a sort of

00:38:48.940 de-o-en-ba view

00:38:49.920 in the UK,

00:38:50.680 not least from a lot of our

00:38:51.800 senior broadcasters,

00:38:53.960 that

00:38:54.260 if they say something,

00:38:56.200 it must be right.

00:38:57.160 And my God,

00:38:57.880 why did you vote for Brexit, 1.00

00:38:59.160 you stupid plebs, 1.00

00:39:00.480 you should be dead? 1.00

00:39:02.020 You know, 1.00

00:39:02.260 we've told you

00:39:03.240 what to do

00:39:04.160 and we get our own way

00:39:05.600 because we are the ruling class.

00:39:06.980 There's still a lot of that

00:39:07.840 in the UK,

00:39:08.600 but now there's pushback,

00:39:10.600 pushback from below 0.99

00:39:11.740 and politicians

00:39:12.900 who understand

00:39:13.700 that there's pushback

00:39:14.500 from below,

00:39:15.480 not because people

00:39:16.460 don't want to clean a planet,

00:39:17.880 but because their white van

00:39:19.260 on their driveway

00:39:20.240 is their living.

00:39:23.120 It's their ability

00:39:24.000 to pay their kids

00:39:25.160 lunch money,

00:39:25.860 to pay their bills,

00:39:26.860 to keep a roof

00:39:27.500 over their family's head

00:39:28.620 and if you're telling them

00:39:29.900 that they've just got

00:39:30.640 to junk that van

00:39:31.560 and buy a massively

00:39:32.700 overpriced electric van

00:39:34.280 which will instantly

00:39:35.760 fall in value

00:39:36.420 because the second-hand market

00:39:37.640 for them is terrible

00:39:38.460 and, you know,

00:39:39.240 if it goes wrong

00:39:40.280 you might as well

00:39:40.680 buy a new van

00:39:41.340 because it's all about

00:39:41.960 the battery,

00:39:42.540 you can't fix it yourself,

00:39:44.120 then there is going

00:39:44.860 to be pushback

00:39:45.640 against that

00:39:46.360 and we are now

00:39:47.200 seeing that pushback

00:39:48.360 but it's taken

00:39:49.240 a war in Ukraine

00:39:50.440 and some ghastly geopolitics

00:39:52.300 in order to kickstart

00:39:54.700 and bring that debate about

00:39:56.260 but at least it's now

00:39:57.460 happening, Francis.

00:39:58.620 At least we can now

00:39:59.600 have a discussion

00:40:00.980 and raise issues

00:40:01.980 about net zero

00:40:02.820 not about the ultimate

00:40:04.120 direction of travel

00:40:05.060 but the speed

00:40:05.780 and the cost

00:40:06.400 and the distribution

00:40:07.160 of those costs.

00:40:08.280 We have to have

00:40:09.360 those discussions

00:40:10.180 because if we don't

00:40:11.340 have those discussions

00:40:12.120 this isn't a democracy

00:40:13.580 and if we don't have

00:40:14.920 these discussions

00:40:15.500 we're never going

00:40:16.280 to get there anyway.

00:40:17.100 The whole cause

00:40:17.960 will be sullied

00:40:18.840 because it will just

00:40:20.280 end up in acrimony

00:40:21.700 and rancor.

00:40:22.640 Because,

00:40:23.360 and it's such a great point

00:40:24.500 because no one's

00:40:25.240 voted for this,

00:40:26.140 no one's agreed to this

00:40:27.240 out of the ordinary populace,

00:40:28.620 it's been foisted

00:40:29.820 upon us

00:40:30.520 and then you go,

00:40:32.040 right,

00:40:32.520 well,

00:40:32.820 it would be

00:40:33.640 a controversial policy

00:40:35.880 to introduce

00:40:36.680 if the economy

00:40:37.500 was booming.

00:40:38.360 The fact that

00:40:39.200 everybody's struggling

00:40:40.700 now

00:40:41.140 and now you're going

00:40:42.180 to place this

00:40:42.800 on top of everyone?

00:40:44.980 I mean,

00:40:45.460 it's pretty much,

00:40:47.440 that's a recipe

00:40:48.680 for civil unrest

00:40:49.740 if you think about

00:40:50.500 the poll tax.

00:40:51.000 Now you know that

00:40:51.720 and Constance knows that

00:40:52.860 and I know that

00:40:53.700 but in the aftermath

00:40:54.780 of Rishi Sunak

00:40:55.700 pushing the ban

00:40:57.500 on petrol

00:40:58.000 and diesel cars

00:40:58.940 back from 2030

00:41:00.460 to 2035,

00:41:02.020 which is where it is

00:41:02.740 across practically

00:41:03.700 the whole of the

00:41:04.240 European Union,

00:41:05.420 in the aftermath

00:41:05.980 of that

00:41:06.480 and in the aftermath

00:41:07.620 of Sunak saying,

00:41:08.680 you know what,

00:41:09.500 we really do need

00:41:10.520 to do a bit of drilling

00:41:11.380 in the North Sea

00:41:12.240 even though there's

00:41:13.460 still a 75%

00:41:14.480 windfall tax

00:41:15.200 on North Sea profits.

00:41:16.840 You try doing

00:41:18.520 a complex

00:41:19.260 capital intensive

00:41:20.380 project in a hostile

00:41:21.400 environment where

00:41:22.140 suddenly your profit,

00:41:23.860 the tax on your profit

00:41:24.780 goes from 30%

00:41:25.740 to 75%

00:41:26.800 in a few months.

00:41:27.860 It's very,

00:41:28.160 very difficult.

00:41:29.280 But you and I

00:41:30.500 and Constantine,

00:41:31.140 we know instinctively

00:41:32.260 that while there'll be

00:41:34.000 very vociferous,

00:41:36.080 loud,

00:41:36.680 gobby critics

00:41:37.660 of these

00:41:38.620 slight retreats

00:41:40.460 away from net zero,

00:41:41.940 we know instinctively

00:41:43.000 that an awful lot

00:41:43.740 of silent people

00:41:44.600 in the UK

00:41:45.080 are going to go,

00:41:46.220 yeah,

00:41:46.420 it sounds about

00:41:46.780 right to me.

00:41:47.740 I'm glad he's done that.

00:41:49.480 And so what's happening now

00:41:50.840 is that Rishi Sunak

00:41:52.200 after a year in office

00:41:53.380 where he's just been

00:41:54.460 fighting events,

00:41:56.100 he is now suddenly,

00:41:57.820 belatedly,

00:41:59.020 finally,

00:42:00.180 starting to do

00:42:00.820 some politics.

00:42:02.180 And he's starting

00:42:02.680 to do some politics

00:42:03.600 and his standings,

00:42:05.980 his ratings

00:42:06.480 have actually gone up

00:42:07.480 while he's been

00:42:08.040 doing this stuff

00:42:08.940 over the last

00:42:09.900 couple of weeks,

00:42:11.060 even though

00:42:11.680 the response

00:42:12.840 from the vast majority

00:42:13.960 of the media,

00:42:14.780 particularly the broadcast media

00:42:16.140 where most people

00:42:16.800 get most of their news

00:42:17.640 most of their time

00:42:18.420 still,

00:42:19.380 has been almost

00:42:20.100 overwhelmingly negative

00:42:21.440 to the point

00:42:22.560 of being hysterical

00:42:23.740 in some cases.

00:42:25.520 I like the move away

00:42:27.040 from fossil fuels,

00:42:27.940 right?

00:42:28.440 But I've given you,

00:42:29.340 I think,

00:42:30.180 a very coherent argument

00:42:31.400 about why even people

00:42:33.040 that want the move away

00:42:33.780 from fossil fuels

00:42:34.520 should understand

00:42:35.320 that it makes sense,

00:42:37.420 given those

00:42:38.080 Climate Change Committee

00:42:38.940 assumptions

00:42:39.480 on our use of oil

00:42:41.080 and gas going forward

00:42:41.960 for decades to come,

00:42:42.920 to use our own.

00:42:44.300 Well, look, mate,

00:42:45.000 ultimately we live

00:42:46.300 in a democracy, right?

00:42:47.860 So the people

00:42:49.220 have to be brought

00:42:49.880 along with it

00:42:50.520 and they have to be asked

00:42:51.880 and they have to give

00:42:52.480 their consent

00:42:52.980 and there's plenty

00:42:53.740 of other issues

00:42:54.260 on which that

00:42:54.820 isn't really happening.

00:42:56.160 Thanks, as you say,

00:42:57.380 to the fact that

00:42:58.080 there seems to be

00:42:58.900 a lock on certain issues

00:43:00.260 in the way that

00:43:00.860 the mainstream

00:43:01.620 has this conversation.

00:43:03.780 And so I'm glad

00:43:04.320 we're able to have

00:43:05.100 that frank conversation here,

00:43:06.380 which is one of the reasons

00:43:07.060 I love doing our show

00:43:08.020 and having you on it.

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00:44:13.580 There was one issue

00:44:14.580 that you mentioned,

00:44:15.340 which is a subject

00:44:15.980 of your last book,

00:44:17.800 which I think we should

00:44:18.760 spend a little time on

00:44:19.600 because it's an issue

00:44:20.240 that affects almost

00:44:21.080 everybody in this country,

00:44:22.080 whether they own property

00:44:23.040 or not,

00:44:23.880 which is we have seen

00:44:25.360 something which you've

00:44:26.280 actually been calling for,

00:44:27.860 at least the end result,

00:44:28.940 which is for house prices

00:44:29.920 to slow down

00:44:31.040 in terms of rise.

00:44:32.000 It's probably not happened

00:44:32.740 the way you would have wanted

00:44:33.560 because it's not happening

00:44:34.980 because we're building

00:44:35.900 more houses.

00:44:36.520 What is the future

00:44:38.460 of interest rates

00:44:39.300 and the housing market

00:44:40.340 in this country,

00:44:40.900 in your opinion?

00:44:42.340 Well, interest rates

00:44:42.960 in the UK,

00:44:43.680 the base rate's currently

00:44:44.620 at 5.25%.

00:44:46.140 I think a lot of people

00:44:48.000 assume that's now the peak

00:44:49.240 and the next move

00:44:49.900 will be down.

00:44:50.600 Certainly a lot of mortgage

00:44:51.520 companies are now

00:44:52.420 offering mortgages,

00:44:54.260 five-year fixes,

00:44:55.260 below 5%,

00:44:56.340 so below where the

00:44:57.260 Bank of England base rate is.

00:44:58.420 So that means they must think

00:44:59.540 the next move is down

00:45:01.120 and it's going to go

00:45:02.280 quite a long way further

00:45:03.200 to compensate for the fact

00:45:04.480 that they're offering

00:45:06.240 a sub-base rate

00:45:08.660 mortgage rate

00:45:09.780 at the moment.

00:45:11.840 I think that would be

00:45:12.680 my central assumption

00:45:13.560 with the caveat

00:45:14.280 that I mentioned earlier.

00:45:15.280 If OPEC Plus

00:45:17.260 wants to turn the screw

00:45:18.340 and put another

00:45:19.500 oil price spike,

00:45:20.400 energy price spike

00:45:21.240 upon us,

00:45:22.060 even though the Bank of England,

00:45:23.500 anything it does

00:45:24.120 with interest rates

00:45:24.800 wouldn't impact that at all,

00:45:26.460 the optics of the Bank of England

00:45:28.160 lowering interest rates

00:45:29.720 when inflation is going

00:45:30.540 through the roof

00:45:31.120 for whatever reason

00:45:32.040 is very, very difficult

00:45:33.580 and they'll be seen

00:45:34.760 to lose credibility.

00:45:35.880 So we might yet see

00:45:36.940 more interest rate rises

00:45:38.080 courtesy of OPEC Plus.

00:45:40.420 I'll just put that out there.

00:45:41.620 But let's assume

00:45:42.340 that's not the case

00:45:43.240 and assume that interest rates

00:45:45.520 are going to come down.

00:45:47.600 In the end,

00:45:48.480 we've still got

00:45:49.240 massive housing

00:45:50.620 unaffordability

00:45:51.520 in this country.

00:45:52.820 Yes, prices have come off

00:45:53.860 for a little bit,

00:45:54.920 but the average multiple

00:45:55.900 to buy the average home

00:45:58.360 in the UK

00:45:58.820 is still 8 to 10 times

00:46:01.600 annual income, right?

00:46:02.700 When I bought my first property

00:46:04.080 in the mid-90s,

00:46:05.040 it was 4 to 5 times

00:46:06.320 and 4 to 5 times

00:46:07.820 is the long-term

00:46:08.840 historic average

00:46:09.740 and that kind of makes sense

00:46:11.120 because if it's 4 to 5 times,

00:46:13.240 you save like mad, right?

00:46:15.220 And then you get a mortgage

00:46:16.520 on the income of one of you

00:46:18.320 for 3, 3.5 times

00:46:20.140 and then your family chips in

00:46:21.960 and maybe the other person

00:46:23.840 in a couple

00:46:24.580 is doing a bit of part-time work,

00:46:26.140 a bit of childcare.

00:46:27.200 So you can get to 4 or 5 times.

00:46:28.780 An ordinary family

00:46:29.780 can buy an ordinary house

00:46:31.300 in an ordinary situation.

00:46:33.140 But when it's 9 or 10 times,

00:46:35.340 rising to sort of 15 times

00:46:37.120 in London and the South East

00:46:38.340 and even more

00:46:39.060 in some even not particularly

00:46:40.500 swanky areas,

00:46:41.800 then it's completely prohibitive.

00:46:43.920 How can you possibly,

00:46:45.000 how can a professional couple

00:46:47.380 working full-time

00:46:48.360 even before childcare,

00:46:49.920 they can only borrow

00:46:50.640 six or seven times

00:46:52.020 their combined salary?

00:46:53.100 I mean, it's mad.

00:46:54.520 And that isn't going to change

00:46:56.060 just because we've seen

00:46:56.980 house prices come off

00:46:57.900 a little bit

00:46:58.460 because of interest rate rises.

00:47:00.580 We need to build more homes.

00:47:02.540 Now, you kindly mentioned

00:47:03.420 my book Home Truths.

00:47:05.440 The point of that book

00:47:06.500 was to highlight the fact

00:47:08.700 that big oligopolistic house builders,

00:47:12.460 massively important house builders,

00:47:14.800 the top 10 house builders

00:47:15.780 building about 70%

00:47:16.800 of our homes now,

00:47:18.380 they control what gets built

00:47:21.440 where and at what pace.

00:47:23.200 they hoover up

00:47:24.400 most of the planning permissions.

00:47:25.860 The problem isn't

00:47:26.440 that there isn't enough

00:47:27.040 planning permission

00:47:27.600 because there are over

00:47:28.240 a million planning permissions

00:47:29.360 outstanding held by these

00:47:31.040 big companies that don't use them

00:47:32.500 because they want to

00:47:33.480 deliberately not use them

00:47:34.680 because they want to stop

00:47:35.680 the little builders

00:47:36.380 that build quickly

00:47:37.200 for cash flow

00:47:37.960 from getting those.

00:47:40.060 They're like OPEC basically

00:47:41.080 is what you're saying.

00:47:42.060 Massive restrictive practices.

00:47:43.540 They would deny it.

00:47:44.720 I mean, that's why,

00:47:45.820 you know, I've talked to

00:47:46.320 Michael Gove a lot about this

00:47:47.580 and he's read my book

00:47:49.060 very closely.

00:47:49.780 I've spent a lot of time

00:47:50.580 with him.

00:47:51.520 He ended up in a speech

00:47:53.680 calling the big house builders

00:47:55.480 quotes a cartel.

00:47:57.900 Now, this is a public forum.

00:47:59.940 They deny that.

00:48:01.040 There's no a priori evidence

00:48:02.980 that they are that

00:48:04.000 because of course

00:48:04.640 a cartel is illegal.

00:48:06.180 But they are definitely

00:48:06.980 an oligopoly

00:48:07.600 which is a small number

00:48:09.020 of producers

00:48:09.800 deliberately restricting supply.

00:48:11.320 The House of Lords

00:48:11.960 said that after an extensive

00:48:13.440 investigation back in 2016.

00:48:16.480 And I think partly

00:48:17.580 as a result of the book

00:48:18.620 and the speeches

00:48:19.240 that Gove has given

00:48:20.160 the Competition

00:48:21.320 and Markets Authority

00:48:22.240 is now conducting

00:48:23.420 an investigation

00:48:24.020 into big UK house builders

00:48:26.040 to see if there are

00:48:26.980 restrictive practices.

00:48:28.920 Now, who knows

00:48:30.220 what they'll come up with.

00:48:31.700 Our regulators in the UK,

00:48:33.080 you know,

00:48:33.640 they could be quite

00:48:34.820 quite herbivorous at times,

00:48:37.140 a bit flabby.

00:48:38.660 I'm sure they'll come up

00:48:39.780 with a kind of

00:48:40.320 oh, it's the system.

00:48:41.360 It's no particular

00:48:42.060 oh, very unfortunate

00:48:43.300 lessons will need

00:48:45.000 to be learned.

00:48:46.080 I'm sure they won't

00:48:46.660 get a slap across the wrist

00:48:47.780 but I think they should

00:48:48.620 because our house building

00:48:50.580 industry is very good

00:48:53.440 at drip feeding the market,

00:48:55.440 generating contrived scarcity

00:48:57.180 to keep prices high,

00:48:59.360 to make more money

00:49:00.380 building fewer houses

00:49:01.840 on much bigger margins.

00:49:03.960 You know,

00:49:04.080 a lot of house builders

00:49:04.800 they've got margins

00:49:05.460 of 15, 20,

00:49:07.120 even 25 and 30%, right?

00:49:09.380 They're using basically

00:49:10.500 Victorian technology.

00:49:12.260 You know,

00:49:12.420 this isn't rocket science.

00:49:14.480 Look,

00:49:14.600 I come from a long line

00:49:15.460 of Irish builders, right?

00:49:16.860 There's a big difference

00:49:17.880 between a good builder

00:49:18.660 and a not good builder.

00:49:20.400 There's a lot of skill

00:49:21.100 in building a home, right?

00:49:22.140 But it's a not uncommon skill.

00:49:23.960 It's everywhere.

00:49:25.040 It's not like you're

00:49:25.700 a tech company

00:49:26.940 that's invented something.

00:49:28.800 So why are you getting

00:49:29.600 75 million quid annual bonuses

00:49:31.620 among housing executives?

00:49:33.740 Why?

00:49:34.120 Because there are

00:49:35.080 restrictive practices happening

00:49:36.280 because there isn't

00:49:36.660 any real competition happening

00:49:38.560 because the house building

00:49:39.760 industry isn't responding

00:49:40.920 to massive unmet supply

00:49:43.540 by building more

00:49:44.880 to keep prices

00:49:45.960 relatively stable.

00:49:47.300 They're deliberately

00:49:48.020 building less.

00:49:49.680 And that is a big,

00:49:51.000 big problem,

00:49:51.880 given that for the vast

00:49:52.960 majority of people,

00:49:54.820 buying a home

00:49:55.720 will be the biggest purchase

00:49:56.720 that they ever make.

00:49:57.720 Isn't that just corruption,

00:49:58.960 then?

00:50:00.080 Corruption is

00:50:01.080 a difficult word.

00:50:02.660 I, you know,

00:50:03.520 I've said

00:50:04.300 and I'll say again

00:50:05.200 and I'll say again

00:50:05.920 that they deny it.

00:50:07.160 I mean,

00:50:07.440 the whole animus

00:50:08.400 of my book,

00:50:09.580 Home Truths,

00:50:10.180 is that there are

00:50:10.880 restrictive practices

00:50:11.780 going on in the UK

00:50:13.220 building industry

00:50:14.040 and it's up to regulators

00:50:19.020 to try and eke those out.

00:50:21.760 It's very difficult.

00:50:23.500 It's very complicated.

00:50:24.780 But how else can you

00:50:26.000 explain these massive margins?

00:50:28.420 How else can you explain

00:50:29.820 the fact that we build

00:50:31.620 so few homes these days?

00:50:33.760 You know,

00:50:33.900 we haven't built a new town,

00:50:36.340 a new settlement

00:50:37.080 in the UK

00:50:38.000 in my lifetime.

00:50:39.480 And I'm in my early 50s.

00:50:40.720 The last one was Milton Keynes

00:50:42.140 and yet during that period

00:50:43.600 we've gone from 45 million

00:50:45.400 to almost 70 million people.

00:50:47.740 That's insane.

00:50:48.380 The UK now has

00:50:49.680 420 homes per thousand,

00:50:51.820 right?

00:50:52.520 In France,

00:50:53.420 it's 550.

00:50:55.080 In Germany,

00:50:55.980 it's 580.

00:50:57.360 That makes a huge difference.

00:50:59.560 And it's not even immigration.

00:51:01.020 A lot of people say

00:51:01.640 it's immigration.

00:51:02.400 France has had more immigration 0.99

00:51:03.620 per head than we've had,

00:51:04.740 right?

00:51:05.740 But they've just built

00:51:06.640 a lot more homes

00:51:07.440 and it's not even

00:51:08.320 because France is bigger than us.

00:51:09.540 We use 2% of our entire land

00:51:12.200 at the moment

00:51:12.620 for residential housing

00:51:14.020 plus gardens.

00:51:15.500 2%.

00:51:16.100 The Greenbelt,

00:51:17.200 the Sacred Greenbelt,

00:51:18.420 13%.

00:51:19.440 And far from getting

00:51:20.760 concreted over

00:51:22.160 as endless

00:51:23.240 Lib Dems

00:51:24.620 keep telling us,

00:51:26.180 the Greenbelt

00:51:26.620 is actually now

00:51:27.440 more than twice the size

00:51:29.060 in terms of acreage

00:51:30.060 as it was

00:51:30.980 in the late 1970s

00:51:32.260 because councils

00:51:33.380 keep adding

00:51:34.700 to it.

00:51:36.080 But in the end,

00:51:36.800 we have to give

00:51:37.520 young people

00:51:38.120 the chance,

00:51:39.260 the chance

00:51:39.700 that my generation

00:51:41.060 have,

00:51:41.660 the dignity

00:51:42.340 of owning their own home,

00:51:44.280 buying their own home.

00:51:45.980 This is now seriously

00:51:47.380 messing with our demography.

00:51:49.340 Oh, massively.

00:51:49.800 People are not having kids 0.99

00:51:51.240 because they're still

00:51:51.860 living in shared houses

00:51:53.040 into their early 30s,

00:51:54.900 right?

00:51:55.860 Pass that now.

00:51:56.940 Pass that now.

00:51:57.960 And Liam,

00:51:58.300 so reading between the lines there,

00:51:59.680 if I'm an ordinary person

00:52:00.740 looking to buy

00:52:01.420 or sell a house

00:52:02.080 or whatever,

00:52:03.240 interest rates

00:52:03.960 are likely to perhaps,

00:52:05.380 you know,

00:52:06.360 with the OPEC exception,

00:52:08.080 likely to drift down.

00:52:09.260 I would wait.

00:52:09.880 I would wait.

00:52:10.540 They're likely to drift down.

00:52:12.580 At the same time,

00:52:13.460 we're not going to,

00:52:14.280 due to this oligopoly,

00:52:15.480 be building way more houses

00:52:17.040 than we have been consistently.

00:52:18.500 So that tells me

00:52:19.520 that house prices

00:52:20.240 are going to go back up.

00:52:21.600 Well,

00:52:21.940 I think house prices,

00:52:23.340 they won't go back up a lot

00:52:24.700 until interest rates

00:52:25.440 come down a lot.

00:52:26.380 Because what really drives

00:52:27.760 the house price

00:52:28.760 is the purchasing power

00:52:29.920 of people

00:52:30.480 on the demand side.

00:52:32.220 I mean,

00:52:32.420 maybe the government

00:52:33.360 will do something 1.00

00:52:33.800 really stupid 1.00

00:52:34.720 like another raft 1.00

00:52:35.640 of help to buy,

00:52:36.500 which has been

00:52:36.860 an absolutely terrible scheme.

00:52:38.420 It's been good

00:52:39.500 for some of the people

00:52:40.380 who are on it,

00:52:41.300 but for the rest of the people,

00:52:42.440 the vast majority

00:52:43.080 who can't access it,

00:52:44.300 it's just pushed up prices

00:52:45.540 given that it hasn't

00:52:46.460 really led to more supply.

00:52:48.120 A lot of houses

00:52:48.860 built under help to buy,

00:52:50.360 you could only get it

00:52:51.000 for new builds initially,

00:52:52.440 were substandard.

00:52:54.020 A lot of them

00:52:54.600 didn't have,

00:52:55.180 you know,

00:52:55.680 fire protection

00:52:57.540 in the cavity walls

00:52:59.040 and so on.

00:52:59.900 It basically consolidated

00:53:01.160 even more

00:53:01.820 the position

00:53:02.280 of the big builders

00:53:03.020 because the big builders

00:53:04.160 hoovered up most

00:53:04.940 help to buy.

00:53:05.600 The government

00:53:06.060 might do some more

00:53:06.860 help to buy 1.00

00:53:07.340 if they're particularly stupid 1.00

00:53:08.420 because it's a nice, 1.00

00:53:09.160 cheap, easy, quick headline.

00:53:11.400 But aside from that,

00:53:13.060 I don't think house prices

00:53:14.720 are going to spike up

00:53:15.820 quickly

00:53:16.480 because there is

00:53:18.040 a nervousness

00:53:18.700 about interest rates

00:53:19.520 and inflation

00:53:20.040 and I think that nervousness

00:53:21.340 will be with us

00:53:22.320 for a number of years

00:53:23.120 even if the headline numbers

00:53:24.600 start to improve.

00:53:26.220 But if you are going

00:53:27.040 to fix your home loan,

00:53:28.160 as of now,

00:53:30.560 late September 2023,

00:53:33.340 I would wait

00:53:34.020 because I do think

00:53:35.600 aside from the OPEC whiz-bang

00:53:37.680 which I mentioned earlier,

00:53:38.580 I do think the high probability

00:53:39.720 is that interest rates

00:53:41.100 will come down.

00:53:41.740 I don't think we're going

00:53:42.260 to see ultra low,

00:53:43.680 you know,

00:53:44.180 half a percent,

00:53:45.000 one percent,

00:53:45.560 one and a half percent

00:53:46.360 as we did after

00:53:47.220 the Lehman crisis

00:53:48.660 and then all those

00:53:49.440 endless years

00:53:49.940 of quantitative easing.

00:53:51.420 But I don't see any reason

00:53:52.620 why we can't get back down

00:53:53.820 to sort of three,

00:53:55.200 four percent.

00:53:55.800 And if you can fix a loan

00:53:57.340 for five years

00:53:57.940 at three or four percent

00:53:59.020 rather than four and a half

00:54:01.040 or five percent,

00:54:02.240 it makes an enormous difference

00:54:03.860 to your family's finances.

00:54:05.940 Liam, moving on now

00:54:07.480 to the last part

00:54:08.720 of the interview,

00:54:09.620 are you hopeful

00:54:10.180 for the future economically?

00:54:11.980 I am because,

00:54:13.060 and I'm hopeful for the UK

00:54:14.040 and I'm hopeful

00:54:15.040 for the global economy

00:54:16.480 even though

00:54:17.240 when I compare now

00:54:19.040 to when I sort of

00:54:20.440 came of age economically

00:54:22.480 in the fall of the Berlin Wall

00:54:24.140 and going to live

00:54:25.220 in former Soviet Union

00:54:26.860 in Eastern Europe

00:54:27.680 during the early 90s,

00:54:29.040 the sort of madness

00:54:29.760 of the France's

00:54:30.780 Fukuyama diktat,

00:54:32.400 it's the end of history

00:54:33.420 and people like me saying,

00:54:34.540 no, it's history on speed

00:54:35.940 if you've been to Eastern Europe.

00:54:37.540 They're going through

00:54:38.000 like generational changes

00:54:39.700 in four weeks, right?

00:54:41.140 But what was Fukuyama saying?

00:54:42.440 He was saying

00:54:42.800 it's a unipolar world now

00:54:44.120 and as you said earlier,

00:54:45.360 Constantine,

00:54:45.800 it isn't a unipolar world,

00:54:47.340 it's a multipolar world

00:54:48.420 because that is

00:54:49.000 the historic norm,

00:54:50.440 a multipolar world.

00:54:52.100 But Liam, hold on,

00:54:54.260 just to challenge you on that,

00:54:55.600 I think to say

00:54:57.060 that it's a historic norm

00:54:58.160 is true 0.89

00:54:58.600 but that's because

00:54:59.240 the technological level

00:55:00.440 of connection

00:55:01.020 between the world

00:55:01.760 was different.

00:55:02.420 It was much more difficult.

00:55:03.920 You know,

00:55:04.060 the Chinese Empire

00:55:05.020 in the 8th century

00:55:05.780 couldn't dominate the world.

00:55:06.860 Sure, that's true.

00:55:07.640 In a way that...

00:55:08.300 So just distance made it

00:55:09.840 by definition multipolar, right?

00:55:11.720 Yeah.

00:55:11.840 Because you couldn't challenge...

00:55:13.260 So I guess I'm saying...

00:55:14.160 But here we are

00:55:14.420 at the height of technology

00:55:15.340 and we're becoming

00:55:15.840 more multipolar, right?

00:55:17.020 We're moving away

00:55:17.760 from the unipolar world.

00:55:18.460 So it's not necessarily...

00:55:20.840 The relationship is complex, right?

00:55:22.600 Yeah.

00:55:22.740 The relationship is complex.

00:55:24.020 So am I optimistic?

00:55:25.560 I am optimistic

00:55:26.320 because I believe

00:55:28.120 in the power of technology

00:55:29.560 and innovation

00:55:30.560 and human endeavour.

00:55:33.020 And even though

00:55:34.000 being a journalist

00:55:35.020 makes you kind of

00:55:36.760 hard-nosed

00:55:38.280 and cynical,

00:55:39.920 I mean,

00:55:40.200 most people I meet

00:55:41.060 in the world

00:55:41.480 and interact with

00:55:42.180 are good people

00:55:42.880 and they want to do well.

00:55:44.520 I think this country

00:55:45.500 in particular

00:55:46.040 has not just the germ,

00:55:48.500 it has the kind of...

00:55:49.720 In its bloodstream,

00:55:50.700 it has real entrepreneurial genius

00:55:52.720 and vim in this country

00:55:54.260 and it's partly, I think,

00:55:55.200 because of the big influx

00:55:56.800 of immigrants

00:55:57.300 that we've had over many years.

00:55:58.540 I know your family

00:55:59.120 are Latin American,

00:56:00.660 got Slavic guy here,

00:56:02.880 you know,

00:56:03.260 some Paddy from way back.

00:56:04.940 But we all feel

00:56:06.440 that we're Brits, right?

00:56:07.400 And a lot of Brits

00:56:08.120 have these different identities

00:56:09.920 and that gives them

00:56:10.980 that kind of entrepreneurial edge.

00:56:12.900 We create lots

00:56:13.580 and lots of businesses.

00:56:14.860 The world still wants

00:56:15.660 to invest in us.

00:56:16.880 We still get a huge lion's share

00:56:18.620 of all the foreign direct investment

00:56:19.900 coming into Europe.

00:56:21.440 You know,

00:56:21.660 we've still got

00:56:22.340 the vast bulk

00:56:23.580 of the world-class universities

00:56:25.000 in Europe,

00:56:26.120 in this country.

00:56:27.440 It's easy to carp

00:56:28.640 and it's easy to say

00:56:29.440 things are wrong.

00:56:30.560 And it's for people like us

00:56:31.580 with platforms

00:56:32.240 to constantly,

00:56:33.360 you know,

00:56:33.960 criticise

00:56:34.740 and to prod

00:56:36.000 and to poke

00:56:36.680 and to test

00:56:37.360 and to question, right?

00:56:38.320 This is what we do.

00:56:39.540 That's why people want to hear

00:56:40.280 what we've got to say.

00:56:42.200 Because that leads to progress.

00:56:43.580 But you also have to

00:56:44.840 occasionally step back

00:56:46.020 and say in the face

00:56:47.700 of people who are

00:56:48.620 constantly negative

00:56:49.800 the whole time

00:56:50.520 in order to make themselves

00:56:51.380 sound good

00:56:52.240 in their own eyes,

00:56:53.740 you have to push back

00:56:54.600 and say,

00:56:54.980 well, look where the UK

00:56:55.720 is compared to

00:56:56.600 other countries

00:56:57.740 at this point

00:56:58.280 and look where the UK

00:56:59.060 is compared to

00:57:00.120 20 or 30 years ago.

00:57:01.400 And on most fronts,

00:57:02.880 even in the middle

00:57:03.400 of a cost-of-living crisis,

00:57:04.760 there's never been

00:57:05.580 a better time

00:57:06.200 to be alive.

00:57:07.760 Now, I know,

00:57:08.640 you know,

00:57:08.820 we've been through

00:57:09.280 a lot in this country.

00:57:10.260 We've been through

00:57:10.700 all the political turmoil

00:57:12.280 of the independence referendum

00:57:13.660 and Brexit

00:57:14.420 and, you know,

00:57:16.260 the fiasco

00:57:17.140 that was locked down

00:57:18.280 and then this war

00:57:19.560 in Ukraine,

00:57:20.020 which has obviously

00:57:20.720 been really, really stressful.

00:57:22.420 And we're, you know,

00:57:23.320 thousands of miles

00:57:23.980 from Ukraine. 0.77

00:57:24.660 It sounds ridiculous

00:57:25.420 given that there are people

00:57:26.460 actually dying

00:57:27.440 and genuinely suffering.

00:57:29.820 But economically,

00:57:31.020 the war in Ukraine

00:57:31.980 has been very testing

00:57:32.880 for us.

00:57:33.420 And I think it could

00:57:34.060 easily get more so.

00:57:35.540 But I still remain optimistic

00:57:37.540 because I think

00:57:38.700 we are an entrepreneurial country.

00:57:41.300 I think there's a lot

00:57:42.000 of vim and vigour here.

00:57:43.720 And in the end,

00:57:45.560 you know,

00:57:45.900 unless you're optimistic,

00:57:47.200 you might as well

00:57:47.580 not get out of bed.

00:57:49.200 Yeah.

00:57:49.820 Liam,

00:57:50.620 we've talked purely

00:57:51.940 about economics,

00:57:52.720 which is fascinating

00:57:54.000 as always.

00:57:54.920 Just before we let you go,

00:57:56.540 a quick political question,

00:57:58.120 which is we obviously

00:57:58.980 have an election

00:57:59.640 coming up next year.

00:58:01.900 How do you see things

00:58:03.120 going as they are

00:58:04.060 at the moment?

00:58:04.900 Well,

00:58:05.380 as they are at the moment,

00:58:06.660 you have to be a brave man

00:58:07.600 to bet against

00:58:08.500 certainly Labour

00:58:10.600 as the biggest party,

00:58:12.220 if not with a full majority.

00:58:14.960 I think that's

00:58:15.560 a much bigger assumption.

00:58:17.100 But a week's a long time

00:58:18.140 in politics

00:58:18.640 and we're still months away

00:58:19.740 from this election.

00:58:20.840 And so,

00:58:22.020 you know,

00:58:22.460 the Tories could yet

00:58:23.680 turn it round

00:58:24.480 and surprise people.

00:58:26.280 I mean,

00:58:26.460 I'm not saying

00:58:26.900 that's the most likely outcome,

00:58:28.480 but I don't think

00:58:29.240 it's a very unlikely outcome.

00:58:31.680 It could happen.

00:58:33.400 I think the SNP

00:58:34.400 are going to get whacked.

00:58:35.520 I think they've really 0.95

00:58:36.400 suffered as a result

00:58:38.240 of the way

00:58:39.320 Nicola Sturgeon

00:58:40.180 left office

00:58:41.300 in a very kind of

00:58:42.080 disorderly manner.

00:58:43.280 I don't think

00:58:43.860 their current leader

00:58:44.780 is particularly impressive

00:58:45.860 with all respect to him.

00:58:46.820 On the contrary,

00:58:47.360 I think Labour's leader

00:58:48.320 in Scotland,

00:58:50.460 Anas Sawa,

00:58:51.240 is a pretty impressive guy

00:58:52.940 and he's certainly

00:58:53.520 making headway.

00:58:55.640 But I think

00:58:56.560 the Tories

00:58:57.100 could yet

00:58:58.100 salvage

00:58:59.780 some kind of comeback,

00:59:00.980 enough at least

00:59:02.040 to make Labour

00:59:03.440 not the biggest party.

00:59:04.980 Or even

00:59:05.580 we could have

00:59:06.120 a 1974 situation

00:59:07.660 where you have

00:59:08.320 two elections

00:59:09.000 in succession.

00:59:10.200 I think it genuinely

00:59:10.900 could be that close.

00:59:12.280 But as always

00:59:13.040 with politics,

00:59:14.860 it depends on

00:59:15.440 the economy, 1.00

00:59:16.600 stupid, 1.00

00:59:17.180 as, 1.00

00:59:17.320 you know,

00:59:18.300 Clinton's right-hand man

00:59:19.400 James Carville

00:59:20.160 said back in the day.

00:59:22.480 If they can turn

00:59:23.520 the economy around,

00:59:24.440 if they can get

00:59:25.040 inflation down,

00:59:25.900 if they can get

00:59:26.400 a feel-good factor going,

00:59:27.900 if they can get

00:59:28.540 some young people

00:59:29.200 on the housing ladder,

00:59:30.080 if they can start

00:59:30.780 building some social housing,

00:59:32.220 something that we haven't said,

00:59:33.620 that's the way

00:59:34.180 to unlock the red wall.

00:59:35.280 Start building

00:59:35.820 some social housing

00:59:36.920 so people can be

00:59:38.240 more assured

00:59:39.360 that their kids

00:59:40.000 are going to have

00:59:40.320 a roof over their head

00:59:41.360 if they're from

00:59:43.120 a low-income background.

00:59:44.940 Then I think

00:59:45.360 the Tories

00:59:45.860 could yet pull off

00:59:46.740 a surprise.

00:59:47.420 That's an outside bet.

00:59:48.540 The odds are long,

00:59:49.820 but I'm just putting it

00:59:50.600 out there as a possibility.

00:59:52.240 Well, Liam,

00:59:52.740 it's such a pleasure

00:59:53.800 having you back on,

00:59:54.640 which is why I'm

00:59:55.020 really looking forward

00:59:55.800 to what our audience

00:59:56.640 want to ask of you

00:59:57.520 on our local sections.

00:59:58.940 Before we head over

00:59:59.800 to locals, though,

01:00:00.920 as you know,

01:00:01.440 our last question

01:00:02.040 is always the same,

01:00:02.760 which is what's

01:00:03.260 the one thing

01:00:03.740 we're not talking about

01:00:04.840 that really should be?

01:00:06.200 I think we should be

01:00:06.880 talking a lot more

01:00:07.720 economically about

01:00:08.500 the Pacific Rim.

01:00:10.020 The Pacific Rim

01:00:10.760 is the fastest growing

01:00:11.880 area of the economy

01:00:13.660 in the world.

01:00:15.220 The UK, as you know,

01:00:16.180 has just joined

01:00:16.820 the CPTPP.

01:00:18.380 That's the Comprehensive

01:00:19.300 and Progressive

01:00:20.000 Trans-Pacific Partnership,

01:00:21.680 a big trading block.

01:00:23.460 I think it's a great

01:00:24.340 achievement

01:00:24.800 that we've joined

01:00:26.100 that block.

01:00:27.080 And yet people

01:00:29.060 don't really understand

01:00:30.120 the economic power

01:00:31.520 of that block.

01:00:32.840 I think the government

01:00:33.480 should be talking

01:00:34.040 more about that.

01:00:35.040 We should be encouraging

01:00:35.840 more of our people

01:00:36.660 to export out there,

01:00:38.220 work out there,

01:00:39.360 live out there.

01:00:40.360 The Brits have got

01:00:40.960 a great track record

01:00:42.200 in different historic

01:00:43.660 circumstances

01:00:44.380 of living and working

01:00:46.000 and driving economies

01:00:47.800 in different parts

01:00:48.780 of the world.

01:00:49.220 And we should continue

01:00:49.900 to do that

01:00:50.440 because we're good at that.

01:00:51.320 because, you know,

01:00:52.300 you've got the language

01:00:53.300 that's spoken everywhere,

01:00:54.720 the rule of law,

01:00:55.820 the way we structure

01:00:57.000 contracts,

01:00:58.160 the reputation

01:00:58.800 of our universities,

01:01:00.440 the extent to which

01:01:01.140 our sort of popular

01:01:02.120 culture is loved,

01:01:03.640 you know,

01:01:03.980 the Premier League,

01:01:05.040 comedy,

01:01:05.520 all the rest of it.

01:01:06.220 We should be making

01:01:06.960 use of that

01:01:07.660 and we should be trying

01:01:08.420 to encourage

01:01:08.980 our young people

01:01:09.880 to make their way

01:01:11.360 overseas,

01:01:14.200 building their own futures,

01:01:16.100 particularly around

01:01:17.000 that Pacific Rim

01:01:17.860 because that is now

01:01:18.940 the economic centre

01:01:19.940 of gravity of the world,

01:01:22.060 not the States.

01:01:23.520 Liam Halligan,

01:01:24.140 thank you so much.

01:01:24.920 Follow us over to Locals

01:01:26.220 where we ask Liam

01:01:27.060 your question

01:01:27.720 and also chip in

01:01:29.080 a few of our own.

01:01:30.120 See you there.

01:01:31.920 What should the UK

01:01:32.960 be doing to take advantage

01:01:34.440 of the opportunities

01:01:35.960 presented by leaving the EU?

TRIGGERnometry - October 08, 2023

The State of the World Economy with Liam Halligan

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