Transcript: Who’s afraid of Nigel Farage?

This is an audio transcript of the Political Fix podcast episode: ‘Who’s afraid of Nigel Farage?’

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George Parker
Who’s afraid of Nigel Farage? Well, the prime minister was certainly worried this week because he took a day out of his busy schedule to travel up to St Helens to make a speech warning that Reform’s plans would ruin the UK economy.

Keir Starmer in audio clip
It’s Liz Truss all over again. We said that she would crash the economy and we’re once again fighting the same fantasy — this time from Farage.

George Parker
Welcome to Political Fix from the Financial Times with me, George Parker. Yes, it’s been a week of Starmer versus Farage, with the prime minister ridiculing the Reform leader about his economic manifesto.

But what about Labour’s own flip-flopping on the economy, as Starmer paved the way for policy changes on the winter fuel payment and the two-child benefit cap, piling pressure on poor old chancellor Rachel Reeves? To discuss it all, I’m joined in the studio by my colleagues, Stephen Bush. Hi, Stephen.

Stephen Bush
Hi, George.

George Parker
Chris Giles, the FT’s economics commentator. Hi, Chris.

Chris Giles
Hi, George.

George Parker
And the FT’s political correspondent, Anna Gross. Hi, Anna.

Anna Gross
Hi, George.

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George Parker
Now before we kick off, I promised you last time that we would bring you all the breaking news relating to Lucy’s maternity leave. And yes, the good news is that baby Francis has safely arrived. Francis, Lucy, dad Theo and sister Artie are all doing well — although Lucy tells me she’s still having dreams about work. I can tell you that won’t last.

So let’s get down to business: Starmer vs Farage. Starmer’s clearly worried scrapping plans this week to meet Chancellor Merz in Germany to discuss Ukraine in favour of making a speech in a St Helens glassworks to lay into Nigel Farage. Earlier in the week it was the Reform UK leader who was on the attack.

Nigel Farage in audio clip
The chancellor of the exchequer, Rachel Reeves — I don’t think I’ve ever seen anybody so hopelessly out of their depth at any point in my professional or political career.

George Parker
Starmer admitted that he now regards Nigel Farage, not Kemi Badenoch’s Conservatives, as Labour’s real opposition.

Keir Starmer in audio clip
The choice at the moment is between the choice of a Labour government that thinks that stable finances are at the heart of building better lives for working people, or Nigel Farage and Reform, who only this week said they would spend billions upon billions upon billions, tens of billions of pounds . . . 

George Parker
Stephen, before we get to Starmer’s specific fiscal critique, let’s discuss the political strategy. As several reporters travelling with the PM noted, Reform has five seats to Labour’s 403. Do you think Starmer’s overreacting?

Stephen Bush
Well, yes and no. So, I think as a basic political analysis, Downing Street are correct to go, the Conservative party are, you know, their brand is in the toilet, have an ineffective leader. In the event the election was tomorrow, it would be Nigel Farage and Reform, not Kemi Badenoch and the Conservatives.

However, the election is not tomorrow. At this point in the 1979 parliament, Jim Callaghan was still leader of the opposition. It’s, you know, four years . . . Yeah, not to depress our listeners unduly, it’s quite a large chunk of the average working-age adult’s life expectancy at any given point. (Laughter)

But it is actually just a . . . I think the diagnosis is correct, but I think it is always a mistake if you’re the prime minister to concede your strategic advantage, which is you are the prime minister; you get to set the tone and the terms of the political debate. I think it's the wrong time to be talking about . . . Particularly when everyone knows who Nigel Farage is, I do think it was ill-judged as an intervention.

George Parker
But he’s the prime minister. I mean, to make a speech devoted to attacking the leader of what is still a minority party, at least in the House of Commons, doesn’t it put Farage up in lights and aren’t in a way, Stephen, aren’t you playing into Reform UK’s hands? Aren’t you making Farage look like a potential future prime minister?

Stephen Bush
Yeah, I think it is a mistake. In the event that Kemi Badenoch leads the Conservative party into the next election, she is not going to be a particularly plausible challenge to the Labour party. But one, the Conservative leader might and probably will change, which could change the whole dynamic.

But also, it’s in the Labour party’s interest to create ambiguity about which one of the two threats is a threat. In 1983 — sorry, apparently I’ve got the ’79 to ’83 parliament on the brain this week — but Margaret Thatcher didn’t go around the country going, guys, the Labour party, yeah, those clowns are out of action; it’s a choice between me and the STP. Because why would that ever have been in her interest?

And, you know, also, given that a big part of Downing Street’s message they will hope is: Farage is scary, you don’t want Farage to be prime minister, Farage’s big weakness is that he trails essentially all of his would-be opponents. When you poll likeability, all the other stuff, he does better, but when you poll, do you actually want this guy in Downing Street?

And I think the more normal you make Nigel Farage, the more Keir Starmer talks about him as if he is a regular politician — like Liz Truss, for all of her shortcomings — the more you take away that fear factor, you make him just another rightwing alternative to a Labour government. So yeah, I think he does put his name up in lights.

Anna Gross
I think there’s possibly, kind of building on that, a long-term political strategy here, which is that they think the Conservatives are not gonna stay in the doldrums for four entire years. At some point, Kemi Badenoch is probably gonna go, they’re gonna bring in someone who’s a lot more charismatic and the Conservative support is going to rise considerably and probably very quickly.

If they actually enhance Reform’s support now, they might be kind of splitting the electorate in four years’ time. That core of support for Reform is not gonna go away, they’re gonna stick with Farage, a good chunk of them are gonna move back over to the Tories — they didn’t really fully trust Farage — and then you’ve got a split rightwing electorate. Perfect, you’re in government in four years.

George Parker
So basically a rerun of the 2024 election where the right vote is split. That’s the hope, unless of course you pump up Farage too much and he overtakes the Tories and your scenario doesn’t materialise, Anna, and the Tories don’t make a Lazarus-style recovery between now and 2029. Well, let’s see.

Now, Chris, at the heart of Starmer’s speech was a claim that Farage is basically Liz Truss in disguise. He’s offering the same kind of unfunded policies that saw Truss crash the economy back in 2022. Is that fair?

Chris Giles
Yep, that is pretty fair. So let me just compare the tax cuts that Farage and Reform are offering. Of course, they don’t have a manifesto now, but they did in 2024. And they haven’t, you know, gone back on anything they said then, are enormous. The biggest one is an increase in the personal allowance to £20,000. But there’s a whole range of other ones.

George Parker
So tens of billions.

Chris Giles
Tens of billions. The IFS are sort of saying, well, if you roughly calculate what it is, it’s £50bn to £80bn. And remember, Liz Truss’s “mini” Budget was £45bn. So we are exactly in that sort of zone. That’s a lot of money, 2 per cent of GDP, roughly, and the markets are not really wearing that at the moment. I mean, where Starmer is vulnerable is that the markets think his government is a little bit like Liz Truss’s at the moment and borrowing costs for the Labour party are high.

It’s a higher-interest-rate world we’re in now. We’re not in any sort of crisis. But we haven’t seen a sudden realisation of the markets that the ironclad fiscal rules can’t be breached and therefore you can charge the UK much lower interest rates. And this is one of the problems that clearly this government is facing.

George Parker
Yeah. Now, Anna, you did a great piece this week about whether the sums add up for Nigel Farage. Can you just run through some of the spending commitments, some of the burdens on the public purse that he’s proposing?

Anna Gross
So, yeah, in terms of the really big spending commitment is the one that Chris already mentioned. So that’s increasing the personal allowance for income tax — £50bn to £80bn is what the IFS says that will cost. Then there’s abolishing inheritance tax. That would cost by the time of the next election around £14bn a year. Then there’s increasing the transferable marriage tax allowance.

George Parker
This to encourage people to have more children, apparently.

Anna Gross
Exactly. Make it easier to have children. We calculated at the FT that would cost about £1.5bn. And then there’s these spending commitments. So obviously he’s tacking to the left. He’s trying to challenge Labour on its own turf and saying that he would remove the two-child benefit cap. That would cost about £3.5bn by 2029. Reinstate winter fuel payments, that would be about £1.5bn. And then they’ve all talked about the government taking a . . . that they would take a stake in British utilities.

George Parker
Oh yeah, and renationalise the steel industry, of course.

Anna Gross
Renationalise the steel industry, renationalise Thames Water — all of that would cost billions and billions.

George Parker
Yeah, and you can see how those policies appeal to the left and right of the political spectrum — you know, renationalising steel industry, great, you know, inheritance tax. Now, what has he said about how he would fund the commitments you’ve just described?

Anna Gross
So one of the things that’s interesting is he actually kind of pre-empted the Liz Truss attack. He actually mentioned Liz Truss in his speech and he didn’t try and walk back from his earlier support of her disastrous Budget. He actually said the mistake that she made is that she didn’t say what she was gonna cut in terms of spending. And so what he said, the bulk of his supposed spending cuts were gonna come from scrapping net zero. He said at one point in the speech that would save £45bn. We said that that’s what the cost of those policies were. At another point he said £40bn.

George Parker
And of course there’s a distinction there between whether how much of that was gonna be paid for by the government and how much was gonna be paid for by the private sector. He’s mixed the two up, correct?

Anna Gross
Exactly. So he actually cited the source of that statistic, which was from an Institute for Government report, which is five years old. And that report really explicitly said that the bulk of that funding was not gonna come from the government, it was gonna come from the private sector. They haven’t explained or responded to any of those critiques. A couple of other things. He said that he was . . . That they would cut spending on quangos — arm’s-length bodies — by about 5 per cent. So that would be about £13bn a year. And . . . 

George Parker
That’s enough to be getting on with. Does it matter, Stephen, that the sums don’t add up for Nigel Farage?

Stephen Bush
It’s really hard to say because we’re so far away from the next election and the media ecosystem keeps changing, right? And then I think the lesson of what we just saw in Canada and in Australia, where you had a populist rightwing challenger who had very bad favourability, but who was leading in the polls until the . . . basically until the final moment of the election.

I don’t think that was actually a Trump effect. I think that was a much older effect that when you get to an election, people stop solely seeing the election as a referendum on the incumbent. Just as in 2015 they went, Ed Miliband, not sure about that. I think at the moment it would be a problem for him because people go, you’re promising everything to everyone. We don’t believe this. It would be a bit like the sort of ridicule that you would encounter in parts of the country in 2019 about Labour’s free broadband policy.

But the reason why I say it depends on the media ecosystem is the reason the free broadband policy was so damaging is it was a BBC push notification. It went out to at least 9mn people. So it cut through because people saw it. It’s possible, and one of the things which is very impressive from a machine perspective about Reform is Reform are the party who at the moment have put the most thought into the fact that we are in this world where the media is continually fracturing, you no longer have to play on the same pitch as your opponents, you can get away with going, we’ll cut this for you and raise this for you, and have different audiences see different things.

So it’s possible we’re gonna enter an era in which you can get away with having a manifesto solely on funny money. I mean, at the last election, both the Conservatives and the Labour party, not anywhere near as funny money as Reform but some pretty optimistic spending counts. So maybe you can get away with it now.

George Parker
So, Chris, you mentioned earlier on that the bond markets are a bit jittery regarding the UK, but also internationally as well, about the amount of debt that’s out there. And if you look into your crystal ball as we get closer to the 2029 election, how do you think the markets might start to react to the possibility of a Nigel Farage government?

Chris Giles
Well, I mean, if you take what Stephen just says, that you can say different things to different people. Well, the trouble with the bond market is they do actually look at what you’re saying to different people, and if they don’t think you’ve got any credibility, you’re in trouble.

Now, of course, Labour would be in power at this stage, so if the bond markets started to react to the possibility of a Farage government, it’s quite difficult to distinguish that from the bond market has no faith in the current government. And so you would have to do things like we were looking in September, October at, you know, how Trump was doing in the polls and what was happening to the US bond market when his polling went up or down. I think you’ll get all of those sorts of things.

But those are difficult arguments to run. If you simply had the markets don’t really like the situation at the moment, I don’t think Labour can, you know, just be there saying, oh, look, when Farage gets a little bit bump in his popularity, the bond market goes a bit crazy. That’s a very, very difficult, you know, you have to take them on properly and you have to take them on, you know, on your terms, not trying to have the bond market do your job for you. But I think the bond market would be very, very concerned, unless the policies were quite significantly different to where they are today.

George Parker
And Stephen, Chris mentioned they’re taking Farage on on his own terms. If you were in Number 10 advising Keir Starmer, would you advise him to be taking on Farage on the economy, as he has done this week, rather than taking him on his preferred terrain, which would be things like migration, for example?

Stephen Bush
Well, to continue my Thatcherite theme this week, I think he’s right to want to attack him where Labour are, well, not strong, but they are more trusted than Reform on the issue of the economy. Norman Tebbit said in ’87 that their aim was to finish where we were strong and they — in that case, Labour — were weak. And that was always where winning campaigns want to be, right? If you’re the government, your centre of your re-elect ought to be your record in office. And if you’ve messed up, then the centre of your re-elect becomes, you know, don’t trust that guy, they’re a change you can’t afford.

I would hope if I were advising Keir Starmer that I would back myself and the person I worked for enough to believe that we were going to be re-elected on a platform of, things are great, don’t let the other lot ruin it, rather than don’t trust the other guy. But what you want to do is neutralise your opponent’s strengths here, so if you’re David Cameron in 2010, you go, well, we won’t have cuts to the NHS because you don’t think you’re gonna win an election against Labour on health, you just want it to be neutralised.

So I think that in terms of the choreography of what Labour are doing, the we’ve done something on immigration and now we want to move to our home turf is the correct choreography. It’s just a slightly eccentric choreography given that it is 2025, and the election will happen in the spring or the summer of 2029.

George Parker
This is what makes the whole thing so odd. So we’re four years away from an election, we’re not even in the middle of a local election campaign, it’s a very odd thing that . . . 

Stephen Bush
There is a by-election in Holyrood to a safe SNP seat. What I do genuinely think is, I spoke to a civil servant the other day who did say that this had been discussed in Downing Street, the Hamilton by-election, which I think is partly because there’s . . . Because there’s no big-picture project from the prime minister and all organisations are healthiest when they can work to the boss. Well, if you can’t work to a prime minister’s project, what can you work to? Well, you work to the electorate, which is obviously dysfunctional when the electorate is, you know, not thinking about how it’s gonna vote yet.

Anna Gross
Speaking to advisers this week, I did get a sense of kind of excitement. They did feel as though this is an argument we can win. This is great. Like, let’s definitely take the battle to Farage.

And when he was making his speech this week, when he was being questioned on the numbers, there was just, I think, a flicker of discomfort there. He was aware that there was, you know, that the numbers weren’t perfect. And he was brandishing a piece of paper that he was looking at, but none of the reporters got to see the figures that he was talking about. I do think it’s a bit of an issue though, that, you know, all publicity is really very good publicity for him.

Chris Giles
Yeah, I think the most nervous I got about anything that Reform have said on the economy was when in their manifesto they quoted me and they said that the Financial Times article had said that their idea of taxing banks effectively was really good. They put a £45bn tax raising revenue on it.

George Parker
What was your model?

Chris Giles
About five.

George Parker
That’s typical FT — tax the banks, honestly. (Laughter) Now, one final thing on this, Stephen. Keir Starmer in his speech in St Helens was mocking Nigel Farage to a certain extent, saying how can he possibly pose as a champion of the working classes. We all know his background: City trader, privately educated. And Keir Starmer was reminding people, as if they needed reminding, his dad used to work in a factory; didn’t mention the fact he was a toolmaker, I’m glad to say this time.

Does that make any difference at all when you’re courting the working class vote, especially when you look at people like Donald Trump or indeed Boris Johnson, who have a hotline to working-class voters, despite the fact they come from a completely different planet in socio-economic terms?

Stephen Bush
I don’t think it does make any difference. I think that loads of politicians in the Labour party have tended to be obsessed with is, you know, this deep-seated sense of unfairness they feel when they go like, oh, I’m actually not that posh, I was the first in my family to go to university. It’s an argument they desperately want to litigate.

I mean, I remember in 2015 sitting in on a focus group in which someone said to general nods around the rest of the group, well, of course, Cameron and Miliband went to the same school. And the Labour person who was watching it with me sort of balled his fists up in fury. But obviously, in addition to the fact I don’t think that people accept the idea that Keir Starmer is less posh than Nigel Farage, I think it’s a weird Labour hang-up that isn’t shared by the rest of the country. This is a country which has voted for in the democratic era Harold Macmillan, Tony Blair, David Cameron. I think it was probably an asset to Labour and to Keir Starmer that when you squint, he looks a bit like the generic model, that, you know, he looks like he could be played by Hugh Grant in like a movie in which the prime minister says, now, Aquaman, you better save London.

But Labour’s obsessed with this and they will never let go of it. But broadly speaking, if the British working class were going to reject voting for posh people, then the history of the 20th century would look very, very different.

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George Parker
So Keir Starmer has been criticising Nigel Farage over his lack of fiscal credibility this week, but what about the PM himself? This week he added to the problems facing the cash-strapped Rachel Reeves by promising a U-turn on Labour’s policy of withdrawing winter fuel payments at a cost of up to £1.5bn as Anna mentioned earlier. Then he opened the door to scrapping the two-child benefit cap introduced by the Conservatives at another £3.5bn. Ka-ching, as they say. Chris, Rachel Reeves’ problems are piling up ahead of the Autumn Budget, aren’t they? Are tax rises inevitable?

Chris Giles
Well, they’re not inevitable, but they’re pretty damn likely now. And it’s the additional spending commitments you’ve just mentioned. It is the fact that the official forecaster, the Office for Budget Responsibility, is doing an examination of long-term growth rates. And the reason it’s doing that is because its assumption is higher than pretty much everyone else’s. If that comes down, that makes the long-term picture — that’s when the fiscal rules are measured, they’re measured in ’29, ’30.

George Parker
Just give us an idea of the scale of what could happen.

Chris Giles
That could be, if they went really extreme, it would be £30bn or £40bn. So it could be a very, very large number. I don’t expect it to be that big but I do expect them to revise down their long-term growth assumption because it’s out of line with other people’s. There’s a bit of a debate at the moment about the OBR seems quite a little bit reluctant to do that but they also are reluctant to nothing, so I think they’ll split the difference. But it’s not gonna be helpful to the public finances in the Budget.

And also interest rates as we’ve been already talking about are high and higher than they were at the time of the Spring Statement. High interest rates means government debt interest payments are higher and that hurts the deficit as well. So all of those, those three things roughly put together means you’re in a bit of trouble.

George Parker
There’s been some better news recently. The economy grew stronger than many economists forecast in the first quarter of 2025. How much does that help Rachel Reeves, given the fact, as you mentioned earlier, that forecasts basically go up for four or five years?

Chris Giles
Well, I mean, the truth is that one quarter’s figures don’t really help at all. And sometimes they can actually be paradoxically negative because the OBR might say, well, because we grew quite a lot, the UK economy grew quite a lot in the first quarter, it’s not likely to grow as fast. We’ve sort of used some of it up and we didn’t get the tax revenue in because we didn’t get a huge amount of tax revenue in the first quarter. It was a bit disappointing.

And so we can’t assume we’re gonna get so much later on. I mean, these are some of the funny things that happen with these forecasts. Again, I don’t think they’re necessarily gonna take that view, but I don’t think we should get too excited. I think the government has got a little bit overexcited about the first-quarter growth figures. So, you know, things can get better. Things can change around. Public finances are the difference between two very large numbers — that’s tax revenues and government spending. And so small changes in either of those can make big changes, big difference to the deficit forecast. So it’s not hopeless, it’s not desperate yet, but it’s a bit challenging.

George Parker
Anna, you wrote this week about the debacle over the winter fuel payment, which some Labour MPs describe as the original sin of Keir Starmer’s administration. And you were writing about how this whole sorry saga could end up not just costing the Labour party lots of support, but costing the government money as well. How does that work out?

Anna Gross
So basically, as Starmer said last week, that he wants to increase the number of people who are gonna get their winter fuel payments. And one of the key ways that they’re looking to do that, the kind of main option on the table, is basically giving everyone the winter fuel payment, as they did previously, but then getting high-income pensioners to fill out a tax return and basically return the payment.

Now, they said in their Freedom of Information request that there are only 1mn pensioners that pay that higher rate of income tax. And so if those 1mn pay back the winter fuel payment, you only get to about £180mn. Now, meanwhile, the government has launched this big campaign to get more pensioners on pension credit, which . . . 

George Parker
They actually claim it.

Anna Gross
They claim it, exactly. They said, you know, don’t worry, we’re gonna try and get everyone who’s eligible, because there are lots of people who aren’t eligible to get this pension credit and that’s gonna make up for the winter fuel payment removal. That was actually super successful. I mean, more than 50,000 people, extra people, have signed up between July, when the policy was announced, and May of this year, and that will cost about £230mn.

George Parker
Good news for the pensioners, not such good news for Rachel Reeves. So the whole thing could end up actually costing the government money.

Anna Gross
Precisely, costing them money and then also costing them a fortune politically.

George Parker
Now Stephen, how worried should Rachel Reeves be that she and Keir Starmer have been forced to retreat on winter fuel payments which, after all, at £1.5bn is only a drop in the ocean compared with some of the big cuts that are coming down the track to welfare payments, particularly on sickness and disability benefits?

Stephen Bush
So I think she should be very worried, partly because, look, ultimately, this is a cut that affects all but the poorest pensioners.

Now, the thing about the poorest pensioners is they are the pensioners who vote for the Labour party. So if you can’t means test something that the other lots of voters receive without a bit of your coalition falling off, are you really going to be able to deliver these really quite painful implied budgets for the spending departments that aren’t, you know, the favoured sons of health, education and a little bit justice? Almost certainly not. Are you going to be able to see off a rebellion on sickness and disability payments? Almost certainly not.

And while you’re right and it’s a small amount of money in the grand scheme of things, let’s accept for a moment that Labour are going to have to raise taxes at some point and they’re gonna have to break their promises on at least one of those big three revenue raisers, and then hope that they can walk it off over the rest of the parliament. They would obviously also want to get to a position where their headroom was a realistic amount of headroom as opposed to this kind of like, oh dear, a number has moved and suddenly you’ve lost all of it.

So realistically, they are only going to be able to get £40bn of extra tax revenue without, you know, writing off the next election for good. So at the point you’ve had to go, oh well, £1.5bn here for winter fuel, £4.5bn for welfare reform here, etc. That is a non-trivial chunk of basically the £30bn in their shoes you’d want to spend, the £10bn you’d want to bank to double your headroom, etc.

So I think the real risk for them is that their plan, which obviously we’ve said around this table many, many times couldn’t be delivered, but then their plans sort of unravel in this uncontrolled way. So they end up not going, OK, let’s break our promises in a way that might get us re-elected or turn around the country, but they just go, oh God, who’s screaming at us this week? £1bn for you, £2bn for you, £3bn for you. And then, you know, in four years, Nigel Farage takes over.

George Parker
And this is a government with a majority of, what is it, 170 or something, last time I looked. I mean, incredible. Annie, do you think they’re gonna have to retreat on these welfare cuts, which after all, were absolutely essential, really, to bring the public finances under control?

Anna Gross
I don’t know for sure at all. The scale of the rebellion does seem to be pretty big. People who are involved, the MPs who are involved in kind of checking the numbers and talking to all of the potential rebels say that there’s about 160 people who say that they’re against the cuts to disability benefits. Whether they’ll all vote against, I mean that’s a big question mark, probably quite unlikely.

But I do know that ministers are concerned and I’m told as well that they are kind of preparing a few options that could be wheeled out that would . . . 

George Parker
Soften the impact.

Anna Gross
Exactly, soften the impact.

George Parker
Not a U-turn.

Anna Gross
No, no, no.

George Parker
Definitely not. Just softening the impact.

Anna Gross
Just softening the impact that might kind of persuade some of those rebels to change course.

George Parker
Right. Chris, we’re going to get slightly techy here and talk about Rachel Reeves’ fiscal rules because we had the IMF in town doing their annual health check, the so-called Article IV analysis of the British economy. And they suggested that Rachel Reeves’ ironclad fiscal rules could be made a little less ironclad. Can you explain what they were proposing and whether you think the Treasury will take them up on their advice?

Chris Giles
Well, they weren’t saying change the rules and make it easier, which is what Rachel did last October in the Budget in the autumn. What they really said is that it’s very unhealthy and the UK is the only country in the world to have this psychodrama every two or three weeks when interest rates go up a bit in financial markets. Everyone goes, you’ve missed your fiscal rules and everyone’s doing this all the time.

George Parker
This obsession with the headroom.

Chris Giles
And obsession with the headroom. So what they basically said was let’s think about ways to take the heat out of this debate so that you assess your fiscal rules once a year in a controlled way like other sensible countries do, although lots of countries have their own silliness, but they don’t have this particular silliness.

And so they were suggesting things like, well, you have two forecasts a year, but you only assess the rules once (that won’t work, I can tell you that because we’ll assess them if the Office for Budget Responsibility doesn’t), or you find a mechanism where you don’t have to rectify a miss in the fiscal rules straight away, you wait till the Budget. That’s I think a much more sensible way of going about it.

Or maybe even just doing it once a year. You’ve got one Budget a year; as long as you don’t start changing policies (as the government has been doing every two weeks), if you did it once a year and had a very sensible process, the markets are not gonna get completely blindsided or attack you if you have one big fiscal assessment a year where you say, look, this is what it looks like and these are the big decisions.

George Parker
And then you avoid the chaos that we saw around the Spring Statement back in March where Rachel Reeves was scrabbling around trying to find last-minute welfare cuts so that the headroom could be exactly £9.9bn as it was back in the Autumn Budget. I mean it’s a ludicrous way to make policy, isn’t it?

Chris Giles
Absolutely ludicrous. And although the IMF didn’t actually say it in their mission-ending statement, it was very obvious that they thought it was ludicrous.

George Parker
Well, and also they’ve been talking to the Treasury for weeks about this Article IV report. Is it fair to assume the Treasury was egging them on to say this?

Chris Giles
Oh, absolutely. You only see in these reports, generally everything is highly vetted because the government sees it and the Bank of England and all the people who are named will see it a few days in advance and the IMF will only put in criticisms of governments if they’re absolutely sure that these governments are getting it wrong; otherwise they’re very, very deferential.

George Parker
So what’s your bet? Do you think we’ll move to one assessment of the fiscal rules a year?

Chris Giles
Yeah, something like that. We won’t change the fiscal rules, but we will change the way they’re measured.

George Parker
Right. Stephen, just finally to you. If Rachel Reeves has to choose in her Autumn Budget between tax rises or spending cuts — and admittedly she may have to do both — which way do you think she’ll jump?

Stephen Bush
Well, seeing as I can’t cheat and say both, I think given that by the autumn, there will have not just gone through the political fallout of the spending review, but the difficult votes over welfare, I can imagine by that point that the joint Downing Street-Treasury apparatus will be going, yeah, let’s have another fight with the PLP over spending cuts. (Laughter) Yeah, I’ve still got one tooth left that hasn’t been punched out of my head.

And so I just think at that point, I think autumn will have to be tax raises because otherwise, you know, it’s tax rises, or it’s I suspect a bigger change in terms of personnel.

George Parker
And as you mentioned earlier, you think therefore she’ll probably have to go for one of the three big revenue raisers — income tax, VAT or employee national insurance.

Stephen Bush
Yeah, not least because as we’ve already seen with employers’ NICs, the joy of the big three revenue raisers is they are A, reliable, and also, unless you do something crazy like, you know, make out like you’re Denis Healy in the 1970s, you know that you can do them without a bit of the economy going, oh God, I don’t feel so good.

And it clearly has not been helpful what the government has done on employers’ NICs, so I assume it will be one of the big three, or maybe they’ll try and do a kind of Rishi Sunak-style. It’s actually, you know, I guess they could do a defence levy of . . . that could be the sequel to the health and social care.

George Parker
But as you say, the less joyful aspect of that is that they promised not to do it in the manifesto. So I imagine we’ll be hearing a lot more about how the world has changed before our very eyes from Rachel Reeves between now and the autumn.

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OK, we’ve just got time for our political stock picks. Start with you, Chris. Who are you buying or selling this week?

Chris Giles
I’m gonna sell Darren Jones, who is the chief secretary to the Treasury. He’s in the last stages of putting together the spending review, although as we really know, it’s over his head now. He’s not any longer taking the decisions. It will have gone up to Rachel Reeves and the prime minister and the big spending ministers, yet he’ll get the blame. It’s a miserable job to have at this time. (Anna laughs)

George Parker
Do you think there’s been slightly (inaudible) slightly less of what the Treasury calls shroud-waving than you normally get during a spending period? This is the idea or sometimes called bleeding stumps, the idea of people coming along and saying it’s all going to be terrible if you cut this, as the police did this week. But they were kind of the lone voice.

Chris Giles
There has been a little bit less but the Treasury were boasting to me at the time of the Spring Statement how it was all pretty much done and dusted already. And I think we’re now seeing in the final stages where those bleeding stumps are and there does sound to be quite a little of unhappiness around.

George Parker
Home Office and local government in places like that. Stephen, who are you buying or selling?

Stephen Bush
I am going to buy John Swinney, simply because I don’t think I have very much of the SNP in my portfolio. I think they’ll get a bit of a fright in the Hamilton by-election, which is a constituency they hold at Holyrood, but I think they’ll have enough in them to see off Reform.

And I think, you know, broadly speaking, that will confirm what we all kind of know and have accepted, which is that he has successfully turned around — I mean, obviously, he’s had quite a bit help from the Labour government down south — but he’s turned around this sense of, oh, you know, the SNP government is decaying, it’s useless, it’s run out of steam, it needs a rest.

He’s managed to do that without stepping on the fissure in the SNP’s coalition, which is broadly speaking, it is a party of people who want independence but also don’t want to have to argue with their partners about independence anymore, and people who want to get independence and don’t care how much they have to argue with their partners to get it. He has managed to navigate that and I think we’ll start to see people kind of starting to go, oh, actually, yeah, he has, like, played this pretty well.

George Parker
Great. Anna.

Anna Gross
I am going to go for quite a niche one. Some Lord Ian Austin, who is trade envoy to Israel. So it’s just a week after the foreign secretary David Lammy said that he was breaking off trade talks with Israel in response to what he described as the abominable situation in Gaza. And then there were really strong words in parliament last week about how terrible the situation was there and how the government couldn’t continue talks with Israel. Meanwhile, this week, Lord Austin . . . 

George Parker
The prime minister’s trade envoy to Israel.

Anna Gross
Yes, exactly. Travels to Israel, then boasts about it, posting pictures on social media. And he’s kind of going there to visit various businesses, high-tech customs ports and things like that, ostensibly, I guess, for trade. So yeah, bizarre story and incredibly misjudged.

George Parker
And at the time of recording, still in the job, surprisingly.

Anna Gross
Yeah, exactly.

George Parker
From my point of view.

Anna Gross
How about you, George?

George Parker
I’m gonna be super predictive, I’m afraid to say. I think it’s been a bad week for Rachel Reeves on lots of different levels and she’s gonna try and get some good publicity over the next few weeks, make the best out of the spending review. It’s gonna be painful, there are gonna be cuts all over the place.

So there’ll be a competing narrative between the good news — the programmes they are going to fund — against the ones that have been cut. But nevertheless, you know, I guess that’s very poor fiscal backdrop to have to find extra money to fund U-turns on welfare retreats, which are the prelude to further retreats in the future. It’s gonna be tough there.

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So that’s it for this episode of the FT’s Political Fix. Stephen, Anna, Chris, thanks very much.

Anna Gross
Thanks, George.

Chris Giles
Thanks, George.

George Parker
I’ve put links to subjects discussed in this episode in the show notes. Check them out, they’re articles we’ve made free for Political Fix listeners.

There’s also a link there to Stephen Bush’s award-winning Inside Politics newsletter, and you’ll get 30 days free. And don’t forget to subscribe to the show and please do leave a review or a star rating. It really helps to spread the word.

Political Fix was presented by me, George Parker, and produced by Ethan Plotkin. Original music and sound engineering by Breen Turner. The broadcast engineers are Andrew Georgiades and Rod Fitzgerald. Manuela Saragosa is the FT’s co-head of audio. We’ll meet again here next time.

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