Liz Truss on the 'Doom Loop' Engulfing the UK Economy

These days, everyone is talking about high interest rates across the rich, developed world, while warning of eventual fiscal disaster. But we may have gotten an early glimpse of this anxiety in October 2022, when then-UK Prime Minister Liz Truss unveiled her mini-budget that spooked the gilt market. Well today, rates at the long end of the British yield curve are even higher. So what's going on? Why all this angst now about UK fiscal sustainability and the economy itself? In this episode, we speak with Liz Truss about what she learned during her brief time as the PM. She talks about the political reality of fiscal consolidation, and how difficult it is on both the tax and spending side. And we also discuss what her economic vision was really all about, had she not been forced from the position so quickly. In addition, we talk about the general state of politics, the media, and free speech in the UK. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Speaker 00

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• 2:48Joe Weisenthal?

  Bloomberg Audio Studios, podcasts, radio, news.

• 3:04Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 3:09Tracy Alloway?

  And I'm Tracy Alockway.

• 3:10Joe Weisenthal?

  Tracy, we're recording this August 26, 2025. There is a lot going on right now, particularly in, I guess, many big questions about macro and governance and all kinds of things in some of the richest countries in the world.

• 3:24Tracy Alloway?

  That is certainly one way to put it. So just overnight, we had headlines saying that Trump was going to fire Lisa Cook from the Fed. And this obviously fits into the whole debate around central bank independence and how much influence governments should actually have on central banks. And it turns out, this is a debate that we've had before in other countries.

• 3:44Joe Weisenthal?

  Totally. And part of the reason I think Trump is focused on the Fed is the high level of interest payments and he'd like to see them come down. Speaking of interest payments, this morning, I saw the headline that the UK 30-year gilt is like at the highest since 1989. It continues to elevate. So for all the stress that we have here, all the fiscal pressure, inflationary pressure, it actually seems potentially worse elsewhere.

• 4:08Tracy Alloway?

  Although, I will say, the pound is up against the dollar, right? So from a currency perspective, we're kind of doing worse.

• 4:16Joe Weisenthal?

  From a currency perspective, but there's a lot. These things are global is, I think, the point. And all of these anxieties and stresses, it's not just a US story.

• 4:25Tracy Alloway?

  No, and obviously it's feeding into bond markets. And I cannot tell you how many notes we get on a daily basis about how governments can reduce the debt, how they deal with deficits and things like that.

• 4:35Joe Weisenthal?

  Right. Now, everyone's talking about this these days here in 2025. It got a lot of interest, of course, in 2022, after there was a famous spike in yields in UK gilts. And maybe this sort of premonition of what a lot of rich countries would be dealing with. So I'm very excited to say we really do have the perfect guest to speak about all of this today, to understand some of the pressures facing rich, developed economies. We're speaking with the right honourable Liz Truss, former Prime Minister of the UK, author of the recent book 10 Years to Save the West. Liz Truss, thank you so much for coming on Odd Lots. Thrilled to have you here.

• 5:11Speaker 05

  Good to be on.

• 5:12Joe Weisenthal?

  I have a question. You know, when you see like 30 year gilt yields higher substantially than when you were the Prime Minister and when everyone attacked you over the mini budget, do you feel some sense of like sort of vindication or happiness? Or is it all like despair for the state of your country?

• 5:29Speaker 05

  Well, I do feel despair for the state of my country. And it's in fact, why I tried to do what I tried to do in 2022, because I could see the way things were going. I could see our economy was stagnant, that the tax revenue being generated wasn't enough to cover the amount of money the state was spending. And we needed to do something different in order to get out of a negative spiral. And what I see now is we're further down that negative spiral, and we are heading for a very, very serious crisis. I said last year, I thought we were headed for an IMF bailout, as Britain experienced in 1970s.

• 6:11Speaker 05

  I think that's even truer now than it was a year ago. And we're in an economic doom loop of higher taxes, lower growth.

• 6:21Speaker 05

  Higher debt and it's very difficult now to see the political way out of that.

• 6:29Tracy Alloway?

  So how should governments actually announce or unveil large scale policy shifts? Because there does seem to be, A, some institutional constraint and then, B, the market reaction, we saw that this year in the US after Trump's Liberation Day announcement. You know, a lot of people were saying this was Trump's trust moment. How should governments actually go about, I guess, balancing the views of the market with, you know, big scale change in terms of policy?

• 7:01Speaker 05

  I think the issue that I faced, and it is also the issue that Donald Trump faces in the United States, is a lot of the mainstream economic establishment do not agree with the policies that I was pursuing, and they don't agree with the policies that Donald Trump is pursuing. So you're operating in a hostile environment. In the UK's case, we have institutions that have become very divorced from government policy. In 1998, the Bank of England was made independent by Gordon Brown. Since then, I believe it has been pretty much unaccountable. So politicians have very little control over monetary policy.

• 7:45Speaker 05

  And what has happened is monetary policy has driven fiscal policy. It's very hard to coordinate between those two policies as a government because you don't have control of the levers. Even more so back in 2010, George Osborne established the Office of Budget Responsibility, which handed over huge powers to another unelected authority. It's a bit like the Congressional Budget Office, but it has more power within the British system. So what I was facing back in 2022 was

• 8:19Speaker 05

  Powerful institutions that didn't share my policy objectives. Now, I believed as the democratically selected leader of the country that I should be able to pursue those policies. It was what I was elected on. In fact, it was what the Conservative Party elected on. But what I faced was resistance. So when you're talking about timing of policy announcements, it's not like you're operating on a clear sea. You're operating in a stormy sea where there are people out there who want you to fail. Not just your political opponents, but also the institutional opponents. And that is what Donald Trump faced with his tariff policies that he announced on Liberation Day. A lot of economists said they wouldn't work.

• 9:04Speaker 05

  A lot of people say, said it would make the budget deficits in the US worse. And those policymakers are very influential with the markets. So in the case of the Bank of England, or the case of the people sitting on the Federal Reserve, or civil servants within the Treasury, these people are out there creating their own wave. So I think that's the context you have to see what I was trying to do.

• 9:31Joe Weisenthal?

  First of all, I totally take your point about the sort of limitations of many mainstream economists, the bias of many mainstream economists, and we have many critics of mainstream economics regularly on the show. So that's a point well taken. When you unveiled your mini-budget, given the fiscal constraints or the perceived fiscal constraints, why tax cuts specifically and not also spending cuts? You know, there's so many different aspects of the UK spending situation, whether it's the triple lock pension, there's this thing that goes viral on Twitter a lot about like how easy it is to get a free car, et cetera. Like, why not first take aim at potentially low-hanging fruit, or at least in combination, you know, spending cuts?

• 10:15Speaker 05

  Well, that is exactly what I sought to do. The package we were putting forward was a combination. It was actually not tax cuts. It was reversing a tax rise. And I think that's a very important distinction. The biggest measure we wanted to take was keeping corporation tax at nineteen percent, not raising it to twenty five percent. And I believed, and I've since been proven right, that if you raise corporation tax to that level, you get less business activity, you get lower growth. Combined with the non-dom tax that's been put in place, or the removal of the non-dom benefits, we've seen more millionaires leave Britain than any other country in the world per capita.

• 10:59Speaker 05

  So what we were doing, just on its own account, raising taxes at that juncture back in two thousand and twenty two was a bad idea. I believe that it would lead to lower economic growth and a higher deficit in the long term. And some economists agreed with me, but the economists working for the government, the Office of Budget Responsibility of the Bank of England, did not agree with me. And they were keen on that policy, and in fact, they forced me to reverse that policy. So that's one point. Second point on spending is we did try to rein in spending.

• 11:37Speaker 05

  So a particular thing I sought to do was increase welfare by wages, not prices, because we were in a very high inflation year in two thousand and twenty two. That would have saved seven billion pounds on the government budget, which is a significant amount. What I found was that Conservative MPs were not prepared to vote for that. So even a relatively minor change, which was simply not raising welfare as much as it was going to be raised, created a massive outcry on the Conservative benches. So the answer on spending is it was politically not possible. Now, personally, I would have liked to be even tougher on spending.

• 12:21Speaker 05

  I think we could have done that over time, but I had to. Think about what was politically realistic. And so what we had is spending constraint, not raising spending as much as was previously planned. Keeping taxes low rather than raising them and choking off economic growth, which is what I thought it would do and was what actually happened. And then also supply side measures such as legalising fracking in the UK, making it easier to drill in the North Sea. So that you stimulate the economy with supply side reforms. That was the overall package. And you know what happened? And you can compare my fiscal package with

• 13:04Speaker 05

  packages that Richie Soon acted during Covid or packages that Rachel Reeves did since. My package was smaller, even according to the estimates of the Office of Budget Responsibility. And yet it got a very different reaction. And this is because the economic establishment, the key figures in the Treasury and the Bank of England have a bias towards a more Keynesian approach. So I I I think it's important to note that this this fiscal package was not any bigger than packages before or after. It just got a different reaction.

• 13:44Speaker 05

  I think the other the other important point to note about what happened in September and October twenty twenty two is the night before the mini budget, the Bank of England announced the sale of forty billion pounds worth of gilts. So I had a central bank who were making announcements that made our lives a lot more difficult the day before the mini budget. And since the gilt spike in twenty twenty two, the Bank of England have actually produced a paper saying that two thirds of that spike in gilts was down to their failure to regulate the pensions market. So there were lots of other things going on at the same time.

• 14:29Speaker 05

  But it was very, very convenient for the mini budget to be blamed.

• 14:35Speaker 05

  For what happened and as you pointed out at the beginning of the show, the guilt spike wasn't as high as it is now. So what I think is going on now is you can see the different treatment of a tax spending, high spending Labour government from a Conservative politician who's trying to pursue, in my view, Laffer curve-friendly tax freezes, supply-side reforms and spending restraint.

• 15:06Tracy Alloway?

  If there is an institutional and market bias towards economic orthodoxy or Keynesianism, as you just pointed out, why not try to adapt your budget or your economic policy to that reality? Because it did seem like, you know, you were sort of expecting the markets to adapt to your policy rather than vice versa. I guess I'm asking is just, is there a better way to try to communicate what you were doing at the time?

• 15:35Speaker 05

  Well, I'm a believer in democracy and I think it's democratically elected politicians that should decide policy, not unelected central banks. And, you know, there is a network, there's the IMF, the World Bank, the central banks meeting regularly. They are far too powerful, in my view, at deciding what countries' economic policy should be. And they have not been effective. You know, if you look at the Bank of England's record over the past 10 years on things like inflation, on economic growth, it's been extremely poor. And I fundamentally, you know, why should democratically elected politicians

• 16:20Speaker 05

  kowtow to what unelected officials want when we're the people who are held to account for the success or failures of the policy? And what is happening now is Rachel Reeves is very orthodox. She's a former Bank of England employee. She's essentially taking dictation from the Bank of England and the Treasury about what she should do. And we can see the results of that. And what is happening is we are going to reach an end point where the country runs out of money, and then we will have a major crisis, and we will have to think differently. I just think it's very sad it's got to that point. This was obvious from where we were in 2022. But as I've said, the economic

• 17:03Speaker 05

  orthodoxy proved very powerful. And frankly, what is the point of wanting to become prime minister if you're simply going to go along with the failing orthodoxy that has put your country in the problems it is already, which is where we were?

• 17:18Tracy Alloway?

  You know, you mentioned that the Bank of England wasn't really independent from HM Treasury until Gordon Brown's chancellorship in the 1990s. Do you think that arrangement still works? Or would you perhaps call for reform where maybe the Treasury regains some of its influence over the central bank?

• 17:37Speaker 05

  I think the Bank of England needs to be accountable to politicians. I think the current system doesn't work. This is why I'm very sympathetic to what Donald Trump is saying about the Fed. Monetary policy is incredibly important. It determines the allocation of assets within society. And what we've seen in Britain is we've seen people who have property, who have capital, have done very well out of the low interest rates that the Bank of England and the easy money the Bank of England has created over the past 15 years. And we're seeing young people struggle to get on the housing market.

• 18:18Speaker 05

  We are seeing it real effects in the economy of the Bank of England's policies. And as a Democrat, somebody who believes in democracy, I just think it's wrong that people should be making those decisions and not accountable to the electorate. And

• 18:34Speaker 05

  It's also very difficult, as I found as Prime Minister, to combine fiscal and monetary policy if you don't hold one of the levers. So yes, I think it's got to change. And I think there is a reckoning coming for the central banks, not just in Britain, but also in the United States, also the ECB. The current system does not work. And I think one of the reasons that the Bank of England, I would say sabotaged what I was trying to do, is I was a critic of central banks before I became Prime Minister. I'd been very clear that I thought the Bank of England's record was not good, that the Treasury should have much more of a role

• 19:14Speaker 05

  in setting the mandate for the Bank of England. And they didn't like their power being challenged.

• 19:36Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 19:52Speaker 06

  We're seeing a lot of insocial players come in, digital asset dedicated hedge funds, high frequency traders and that sort of thing, and folks who service insocial clients.

• 20:01Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Rees, America Ripple says.

• 20:09Speaker 05

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again,

• 20:26Speaker 00

  It's very different in Dubai. Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 20:38Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs. And hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 21:21Speaker 01

  But according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

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• 22:43Joe Weisenthal?

  One partner powering how business gets done for companies of every size all around the globe. When you add it all up, no one does business like Comcast business. First of all, I want to say, I think your point about the sort of the political impossibility of, or the political, at least difficulty of spending cuts is really important. And the fact that you had the Tory majority, obviously, and even what you describe as sort of modest cuts to the rate of growth, this spending couldn't get the votes. Like, I think this is a very telling issue and raises a stress about the ability of any democracies to do difficult things. Setting aside maybe what's politically capable, in the next parliament, should the next parliament revisit questions such as either the triple

• 23:27Joe Weisenthal?

  lock pensions or free point of use at the NHS?

• 23:31Speaker 05

  So just on your point about political possibility, I think the only thing that is politically possible at present, or certainly was in 2022, was to try and restrain the growth of spending and to grow the economy faster than that. And I think that is what that is what the Trumpite strategy is in the US. You've got to outpace the growth of public spending.

• 23:55Joe Weisenthal?

  Sure.

• 23:55Speaker 05

  With economic growth. I think that is only possible, what you've just said about actually spending cuts.

• 24:02Joe Weisenthal?

  Yeah.

• 24:02Speaker 05

  Is when there is some kind of crisis.

• 24:04Joe Weisenthal?

  Well, so this is what I'm saying. So you mentioned, you said last year that you were worried that the UK could need another IMF bailout. There were headlines, I think, in the news just in the last week of some economists talking about that. Again, okay, like if this is what we're talking about, I mean, if this is real and we're talking about the UK essentially being at the point of needing an IMF bailout, is it time to look at these sort of core pillars of existing spending levels?

• 24:30Speaker 05

  Well, you can see what's been going on in parliament, which is. The Labour Party tried to put through some modest welfare cuts. And there was a massive rebellion by Labour MPs. Even though they have a huge majority in Parliament, they could not get through some pretty minor changes. Smaller, by the way, than the amount I was proposing in 2022. I think it was only worth about four billion pounds. They could not get that through their current parliamentary party. And all of the evidence, what happened in Greece, what happened in Ireland. Where spending cut programmes have been achieved, or Argentina is another good example, have come after a crisis.

• 25:10Speaker 05

  I think that's deeply regrettable, but I can't see, certainly with the current Parliament, serious spending cuts happening until, until Britain runs out of money.

• 25:22Tracy Alloway?

  I'm going to ask Jo's question, just in a slightly different way. But if you were back in government today and gilt yields are where they are, what specific trade offs between spending and taxes, tax cuts, would you be willing to make? And what trade offs do you think are actually politically realistic?

• 25:43Speaker 05

  Well, the issue now is that taxes have got so high that they're choking off economic growth. And we're seeing millionaires leaving the country, we're seeing businesses closing down.

• 25:55Speaker 05

  I think the easiest thing and the most sensible thing to do straight away is all the supply side stuff. Abolishing planning regulations, taking on the environmental NGOs, getting on with fracking, using North Sea oil, maybe using our coal reserves. I think those are the types of things that can be done relatively quickly and would have an impact. In terms of spending, of course, our welfare state needs to be reformed. I think something like over 60% of Britain's budget is a combination of the National Health Service and welfare. And those are the two areas that need to be fixed. But I don't think there's any room for manoeuvre now on taxes.

• 26:36Speaker 05

  I think that raising taxes has proved already to be counterproductive. Doing it even more will simply make the UK even more unattractive for investors. So you've got to focus on supply side, make it much easier to build things, make it much easier to frac, make it much easier to hire people, all of those kind of things. And you have to have spending cuts where you can. But as I've said, I've tried myself to get spending cuts through Parliament. It's it's not easy.

• 27:08Joe Weisenthal?

  I'm going to ask the really ignorant American question that sometimes, so forgive me if this comes off as blunt. I just, so I'm just getting it out there, but is there a cult of the NHS in the UK?

• 27:21Speaker 05

  There has been. I think the cult is wearing thin. But, you know, there has been a cult. I think people are recognizing though, that the outcomes are not good. Now, if you compare British health outcomes with other countries, I don't think the American system is anything to aspire to. But if you look at countries like Germany.

• 27:41Joe Weisenthal?

  No one disagrees with you there.

• 27:44Speaker 05

  If you look at countries like Germany, France, Japan, you know, they managed to achieve better outcomes with similar levels of funding. So I think everybody in Britain recognizes that it's not working as it's currently constituted. But it is such it's such a big and deep issue to resolve. It really is.

• 28:04Tracy Alloway?

  Joe, remind me to tell you my NHS horror story later on.

• 28:08Joe Weisenthal?

  Hey, everyone has one.

• 28:09Tracy Alloway?

  Everyone has one. On the plus side, it's free.

• 28:12Joe Weisenthal?

  Right, right.

• 28:13Tracy Alloway?

  All right. You know, I want to go back to something.

• 28:15Speaker 05

  It costs you in other ways, is what I would say.

• 28:18Tracy Alloway?

  True. I want to go back to something you said about the economic orthodoxy leaning towards Keynesianism. Why do you think that is? Like, why is that the dominant economic policy framework at the moment? Given that, as you keep pointing out, you know, a lot of people would argue that it hasn't actually yielded good outcomes for the developed world.

• 28:39Speaker 05

  In the eighties, we had some very successful supply side policies. Both Thatcher and Reagan increased economic growth, increased the strength of our respective economies. And when the Soviet Union collapsed, I think we all thought free market capitalism had won. Low taxes, restrained spending, supply side economics.

• 29:03Speaker 05

  And I think people in favour of those policies took their foot off the pedal. And that allowed more left wing economics to gain traction. And since then, I think we've seen it in universities, in the Treasury, in the Bank of England. But the Keynesian economics has become much more prevalent. And whether it's the Office of Budget Responsibility or the CBO, they're looking at economics through a Keynesian lens. And I think it is a big question about how on earth, after seeing the success of those policies,

• 29:48Speaker 05

  and now seeing the failure of Keynesian policies, anyone could possibly think these policies are right, but they've proved very hard to shift. And I think the left of politics have been very successful at capturing institutions. I think they've captured large parts of the bureaucracy, the universities, large parts of the media. There was, in Britain, there has not, you know, just talking about these, the events of 2022. There's not been real analysis of what happened and what the Bank of England did, and how the institutions behaved. It's something that is not talked about.

• 30:28Speaker 05

  And I think the level of economic literacy in the media has also got lower. And certainly, British politics just gets reported as a pantomime, rather than an analysis of the issues.

• 30:42Joe Weisenthal?

  There's much you say about the media and the way reporting is done that I probably am quite sympathetic with, actually. Would you ever join Reform if the Conservatives can't pass modest slowdowns in the pace of welfare increases? If, you know, Labour obviously has its issues, would you join Reform?

• 31:01Speaker 05

  I'm not really thinking about party politics at the moment, because my whole experience of being in government, and I was a government minister for 10 years before I became Prime Minister, was that the power was not in the hands of the politicians, the power was in the hands of the bureaucrats. So even if Nigel Farage gets elected in 2029, and currently he's the bookie's favourite to get elected.

• 31:26Speaker 05

  If the bureaucracy isn't changed, if there isn't fundamental change to the way Britain is run, nothing will alter. I mean, a lot of the policies-

• 31:35Joe Weisenthal?

  But presumably, presumably a breakup of the, I mean, right, like, that's the idea, right? There's no prospect of breaking up the bureaucracy unless there's like genuinely something new that happens politically. Like, that would be their argument, right? That a brand-new party taking power is the only way that there could be some sort of deep institutional shakeup.

• 31:53Speaker 05

  Yes, in some ways, that's true, or could be true. There's no reason why the Conservative Party couldn't do a deep institutional shakeup. But the Conservative Party has to acknowledge what went wrong for 14 years. You know, why didn't we solve the immigration problem? Why didn't we solve the growth problem? Why didn't we solve things like the free speech problem? The answer is, we didn't reverse the institutional changes Tony Blair made. And I talked about how he made the Bank of England unaccountable. He also made the judiciary unaccountable with things like the Human Rights Act and the Constitutional Reform Act. So until the Conservatives acknowledge that that is why we failed to deliver an office,

• 32:36Speaker 05

  that is true about the Conservative Party. But if you look at the two Trump administrations, Trump I and Trump II, in Trump I, there was less recognition of the institutional change that was required in the US. And we're now seeing more of that from Trump. So my point is whoever is in office in 2029 needs to understand that the British state needs to be fundamentally shaken up. Otherwise, nothing is going to happen. And I make that argument to all parties. Interestingly, there are even people in the Labour Party, backbench MPs, who are saying the Bank of England's independence needs to be removed. They're

• 33:19Speaker 05

  saying, get rid of the Office of Budget Responsibility, because they can see the types of policies they want pursued are not possible with the current setup.

• 33:29Tracy Alloway?

  Since we're talking political parties and on this note, you know, there maybe there is some consensus on specific economic policies, as you point out, but we've had this back and forth between conservatives and labor for many, many years now. How do you actually go about building consensus around economic policy, especially at a time when, you know, people would describe our current environment as relatively turbulent and guilt yields are where they are?

• 33:56Speaker 05

  I would say there's a bad economic consensus between labor and the conservatives at present, which is, nobody is saying, apart from me and a few others, nobody is saying that the institutions need to change. The Conservative Party are also wrapping themselves in, we need to respect the Independent Bank of England, we need to listen to the Office of Budget Responsibility. They're not prepared to take on the economic establishment, neither are the Labour Party. And we're in a situation where the policies these institutions believe

• 34:34Speaker 05

  in are failing. And they're manifestly failing. Guilt rates are now much higher than they were back in 2022. Unemployment is up. Our energy prices are the highest in the world and the industry is closing down. These policies are manifestly failing, yet nobody is challenging the fundamentals of the economic institutions.

• 35:01Joe Weisenthal?

  You know, I'm glad you brought up free speech because I'm interested in that as well. And of course, you know, again, in the West, I think free speech, liberal speech norms are good. And so I worry about when I see them failing in various countries or friends and neighbors. Palestinian action seems like a bunch of like crusty old hippies. And I know they defaced a plane, but they're listed as a terrorist group in your country. People can get arrested even just for saying support them. And I think they're like a terrorist group, basically like on the same level of as like ISIS, which I think most people would say, yes, that is a genuine terrorist group. Like, what is going on there?

• 35:37Speaker 05

  Well, they did attack a military base and they are advocating for terrorism in the UK.

• 35:46Joe Weisenthal?

  They defaced a plane, but and then also people get arrested or in trouble for saying that they support them.

• 35:51Speaker 05

  They are clearly a problematic organisation and there are lots of organisations in Britain that are allowed in the UK that aren't actually allowed in many Arab countries. So I think it's right that we crack down on these organisations. I do think when people, you know, I am a pro free speech person, I'd love to have the First Amendment here in Britain. I support both people I agree with and people I don't agree with having a lot more free speech. And it is a travesty that we've just seen Lucy Connelly released from jail, who put out a tweet, deleted it four hours later and was sentenced to 31 months in prison. You

• 36:32Speaker 05

  know, that is absolutely ludicrous. And I think we've become an international laughing stock. And it is an attempt, and Keir Starmer was very clear about this, it is an attempt by the authorities to suppress what people are talking about. And I think that's a very dangerous thing for a society, for a society to go down.

• 36:53Joe Weisenthal?

  All of these things really worry worry me. In the Lucy Connelly example, so she she tweeted, and I understand that she deleted it, but she tweeted about setting a hotel on fire. I mean, that is arguably a call to violent action. Like, how would that be different? Would you feel the same way if someone said, like, you know, we should set a synagogue on fire? Is that free speech?

• 37:12Speaker 05

  Well, I think what she said would not have been deemed a violation in the US because it wasn't, I don't believe she was talking about a specific, you know, go out and do this now. It was a general statement. It was obviously a terrible thing to say and she has said sorry for that. I think there's a question about whether or not in the US that would have even been a crime at all. And even if it is a crime, whether it merits a 31 month prison sentence, when we have people caught with child pornography, being let off with no jail time at all. I mean, you've probably heard the expression two-tier Britain. But what is happening is people are being let out very early for crimes like child rape, and yet put in prison for

• 37:58Speaker 05

  Things that they write on Twitter and those are two different categories, in my opinion.

• 38:03Tracy Alloway?

  You mentioned the First Amendment just then. How would you reform, I guess, speech rights in the UK if you were in power again?

• 38:11Speaker 05

  Yeah, we came up with free speech, freedom of the press back in 1695. And it was a historic British liberty. We had the Bill of Rights, of course, 1689, which then the United States, you know, built on that with your Bill of Rights and so on. So these liberties are there in the British Constitution. The problem is all of the laws that have been passed since, most notably the Online Safety Act. So what we need to do is restore Britain's historic liberties with a Great Restoration Bill that sweeps away all of this legislation that has tied the country in knots. And I've talked about, you

• 38:53Speaker 05

  know, our problematic institutions, the problems with the judiciary, the problems with free speech. This is all down to very poor quality legislation that has essentially handed power that used to sit in the hands of the individual British citizen or the British Parliament. It's handed those power to unelected bureaucrats.

• 39:30Speaker 01

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• 42:42Joe Weisenthal?

  Basically, my entire professional career, your party, has been in power, except for, you know, the last 10 minutes or so, when Labour and Keir Starmer- It doesn't feel like 10 minutes here, I can tell you. Maybe it just feels like it over here, because it feels like a lot of the rot you describe, the rot that you perceive in your country, almost so much of it seems to have taken place under Conservative government. Why is that? And why would anyone, you know, and they're thinking about the next election, why would anyone think that if so much rot was allowed to happen under the Tories, that the Tories should be given another chance in power?

• 43:18Speaker 05

  So I think the rot has sort of built up over time. So I talked about the development of the permanent bureaucracy. You had the Atlee government, which socialized land, which created the NHS, which created the welfare state. A lot of our problems go back to that government. But what was very important about the Blair government is this taking power that was in the hands of parliament, and putting it in the hands of unelected bodies, bureaucracies, the Bank of England, the Judicial Appointments Commission, all of this plethora of people, Ofcom, who are now making the decisions about free speech. These plethora

• 44:01Speaker 05

  of people have not been elected, now de facto run our country. And the big mistake the Conservative Party made was not reversing that.

• 44:10Speaker 05

  And this was because at the time David Cameron said he wanted to be the heir to Blair, you know, he wanted to be fashionable, the Conservatives wanted to be modern. But I think it was a huge error and the Conservative Party lost its soul. That's what happened. In the pursuit of power, in the pursuit of trying to be modern, the Conservative Party lost its soul. And I think it's an open question about whether or not the Conservative Party can get its soul back or be replaced. But certainly, you know, where we are now, not enough people are saying what really went wrong over those 14 years. But the Conservative

• 44:51Speaker 05

  Party failed to take on the bureaucracy. These were not the Conservative Party's policies. They were just policies that we didn't object to.

• 45:01Tracy Alloway?

  Related to Jo's point, when you think back to certain moments in Britain's economic history, so for instance Brexit, the argument then was that if we get rid of all this EU regulation, the UK economy will be free to flourish and prosper. And I think in the 1970s, you know, Anthony Barber instituted some tax cuts as well, right before inflation hit, I think 25% or something like that. Why should the UK population have confidence that a growth focused economic policy, one that features, you know, big tax cuts and deregulation will actually drive economic growth?

• 45:43Speaker 05

  Well, I think the important thing to note about Brexit is we haven't got rid of any of those European laws. They're still on the British statute books. So laws that protect bats and youths, still on the statute books. Laws that tell you how your can opener should work are still on the statute books. We still have the Working Time Directive. We've still got all of those laws. So this goes back to the problem you were talking about, the Conservative Party. The Conservative Party is fundamentally split. Between people who want Britain to be, you know, Singapore on Thames, you know, a free trading, you know, go getting country, and people who want it to be part of Europe

• 46:27Speaker 05

  and want to be part of the, you know, European, lots of labour laws protecting people, you know, environmental red tape, all of that stuff. And that issue was never resolved within the Conservative Party, which is why, you know, you saw prime ministers being deposed, why you have the debate within the Conservative Party. And I think if you look at the Brexit vote in Britain, fifty-two percent voted for Brexit, forty-eight percent didn't. So Brexit was not delivered as the public intended. I mean, the biggest case in point is, of course, immigration, where the Boris Johnson government failed to, in fact, allowed immigration to increase huge amounts, which has had a very negative effect.

• 47:13Joe Weisenthal?

  You know, since you mentioned party politics in the UK and the split within the Conservative Party, again, ignorant question here, I do get the impression that the Conservatives just like all seem to hate each other more than the members of the Labour Party and the nineteen twenty-two committee, which I still like have to Wikipedia every once in a while to remember what that is, and they're always like scheming against each other. Is there like a deeper culture of just internal hate in the Conservative Party than the Labour Party?

• 47:39Speaker 05

  I would say, I would say the problems of the Conservative Party go back to where Margaret Thatcher was defenestrated and the sort of Tory wets and the, you know, the Thatcherites. But if you compare it to American politics, you know, if you look at the split between people like Trump and people like Dick Cheney or the sort of Bush Republicans, it's a very similar ideological divide. But what is different in America is that Trump has basically taken over the Republican Party, whereas in Britain, the kind of the left of the Conservative Party are still in control of it. That's the difference. But there is going to be a political realignment and you can see it in America.

• 48:25Joe Weisenthal?

  Yeah.

• 48:25Speaker 05

  Republicans are now getting votes from low income people, people in rural areas. The Democrats are dominating in the sort of liberal cities. That's exactly what's going to happen in Britain at the next election. It's just the Conservative Party hasn't really got its head around which of those two things it is.

• 48:45Tracy Alloway?

  So one of the things that seems to be happening in many developed countries at the moment is everyone wants to boost their own domestic manufacturing sector. And I believe you've spoken about the need for this in the UK before. When I think about the British economy, I usually think there's a pretty big monopoly when it comes to, let's call it intellectual jobs.

• 49:07Joe Weisenthal?

  Services, finance, office jobs.

• 49:10Tracy Alloway?

  Journalism.

• 49:10Joe Weisenthal?

  Journalism, yeah.

• 49:12Tracy Alloway?

  That kind of thing. But when I think about British manufacturing, you know, it's, it's an island with a relatively small population compared to some other places in the world and high taxes, as you've been pointing out. What would make Britain actually competitive when it comes to manufacturing at a time when everyone seems out to compete in the same field?

• 49:35Speaker 05

  Well, the number one thing is energy prices need to come down. They're the highest in the world, they're four times the United States. If you are a car manufacturer, a steel manufacturer, it's incredibly hard to compete. So that's, that has to change. We have to make it much easier to build things in Britain. If you want to build a new factory, it takes far too long. So there are all of those sort of supply side policies that need to change. I think Britain, we deindustrialized pretty much earlier than any other country. You can see the same thing now happening in Germany and continental Europe. I think it's important to do all you can to maintain a manufacturing base because

• 50:17Speaker 05

  a lot of industries like AI, for example, requires high levels of energy. It requires other industries that it can sort of feed off, if you like. So if you just become, I talked about Singapore on Thames earlier, but Singapore's a relatively small country, so it can afford to be a trading hub. Britain is a country of seventy million people. I think you can't rely on services alone. I think you have to produce the full gamut. I'm very worried that we're losing our last steel blast furnace.

• 50:47Joe Weisenthal?

  Yeah.

• 50:47Speaker 05

  What we learned during Covid is you are seriously up against it if you are relying on China for pharmaceuticals. These are the types of industry that Britain can excel in and does excel in. I mean, our biggest manufactured export to the United States is cars. We do produce good, high-end cars that people want to buy. So there are opportunities for British manufacturing. It's just been made very, very hard by high energy prices and our planning rules.

• 51:19Joe Weisenthal?

  I take your point about certainly about energy prices and planning rules. Many people are having the same discussions here. To my mind, and Tracy mentioned the fairly small population, scale is incredibly.

• 51:30Speaker 05

  It's not that small. I mean, seventy million people.

• 51:33Joe Weisenthal?

  Okay, okay, okay. Well, you know, China has hundreds of millions just in the manufacturing. But yes, I take your point, not that small. But did Brexit harm scale capacity? Because to my mind, if we're thinking about, okay, mass production at efficient level, so that it's genuinely competitive, so that it's not some sort of, you know, government subsidized albatross that just exists as a make-work industry. It strikes me that sheer scale of market is very important. And it feels to me like Brexit has shrunk the scale of that market for the.

• 52:04Speaker 05

  I mean, there's no, there's no evidence that exports to Europe have gone down after Brexit. And in fact, you know, the different trade deal we got from the EU presents the UK with some opportunities because we have lower tariffs in some areas with the United States than the EU does. But I think the other big factor in manufacturing is so much of it is becoming automated, that it makes economic sense for goods to be produced close to market because you're no longer getting the advantage of a massive labour cost differential. So I think it's it's just a natural progression of modern economies that more manufacturing is going to be done closer to home when you've got a much more automated process.

• 52:45Tracy Alloway?

  Hmm. Since we're talking trade and exports, the UK was one of the first countries, I think, to sign an agreement with the Trump administration on tariffs. Would you have signed that so quickly or would you have perhaps pushed back a little bit more given, you know, your emphasis on boosting manufacturing domestically within the UK?

• 53:05Speaker 05

  I did actually praise Keir Starmer for the deal at the time. I was one of the few people to praise it. And I said, because I've got experience of negotiating with the first Trump administration, Bob Lighthizer, so I know how difficult it is. And I thought the UK got a good deal. And so it has proven that the EU has actually got a worse deal than the UK got. So I thought he was right. He was right to do that.

• 53:30Tracy Alloway?

  Why is that a good deal?

• 53:31Speaker 05

  And I want to see, well, we are paying lower tariffs than the EU is.

• 53:35Tracy Alloway?

  So just on a relative basis compared to others?

• 53:39Speaker 05

  Correct.

• 53:39Tracy Alloway?

  On an absolute basis, you're still paying tariffs?

• 53:42Speaker 05

  Yes. But what Trump has done with the with all of his trade deals around the world is essentially reset the World Trade Organization. I think it was one of the biggest errors that of American foreign policy when Clinton allowed China to join the World Trade Organization on developing country terms. And that has had, in my view, it's helped boost China's economy. China is an autocratic authoritarian regime. I think that was a disastrous policy. What Trump is trying to do is reset that. And that has inevitable consequences for all of America's trading partners. But knowing what I do about the Trump administration,

• 54:26Speaker 05

  I thought the deal Keir Starmer got was a good deal.

• 54:30Joe Weisenthal?

  Potentially, one thing that could...

• 54:31Speaker 05

  And I don't praise him very often, by the way.

• 54:34Joe Weisenthal?

  I figured that's rare. One thing that theoretically could be done to lower energy prices for, in many places, would be a resolution of the war in Ukraine. And I'm curious, when you look at either Trump's pursuits or what Keir Starmer has said, do you see other paths? Were you the prime minister now? What would you be pushing for in that particular conflict?

• 54:57Speaker 05

  Well, I want, what I want out of that conflict is I want Putin not to have been rewarded for his appalling invasion of Ukraine. So what we don't want is him, or indeed Xi Jinping, to get the signal from the resolution of the Ukraine conflict that this was a, this invasion was somehow justified or worth it. I want Russia to be contained because I still believe that they have expansionist instincts.

• 55:31Tracy Alloway?

  Just going back to the mini-budget for a second, one of the components of that was government support to offset higher energy prices. And that was also one of the things that seemed to spook markets, this idea that the UK government would be fiscally on the hook to compensate for astronomical energy prices at the time that seemed to be expanding at an enormous rate. If you were going to do it all over again, would you have possibly included some sort of mechanism to maybe limit the cost or, you know, avoid the sense that the UK was basically bailing out its population in some way?

• 56:10Speaker 05

  It's important to note that the energy package was one thing that wasn't reversed. So that was not the policy. The policy that I was forced to reverse, and that was made pretty clear to me, pretty much, you know, through threats, was the corporation tax increase. The energy policy remained in place. The energy policy remained in place. And the point about the energy policy was it was not a subsidy that happened automatically. It was only when energy prices reached a certain level. And I believed it was right for the government to do that because the government had failed to ensure...

• 56:50Speaker 05

  Adequately cheap energy was supplied. But what I was doing in tandem with that policy of essentially insuring people against very high energy prices was getting on with fracking, licensing new North Sea gas reserves. So the prices would never get that high. So it was an insurance against prices going high to give consumers and businesses confidence to invest whilst we sorted out the supply that had been so badly failed by previous governments. That was the intention of the policy. And as I've said, the policy wasn't reversed by my successor. The policy that was reversed was getting on with the fracking.

• 57:35Speaker 05

  So you had the energy insurance policy, but not the fracking policy. Those policies were designed in tandem so that we could make sure that businesses in the country weren't spooked by the threats of having sky high energy prices. And by the way, if the energy prices had got that high, there would have had to be some kind of package to deal with them anyway. What I was doing is giving people notice so they had the confidence to invest. The energy package was actually announced because very sadly, Her Majesty the Queen died. It was announced a few weeks beforehand. It wasn't announced at the time of the mini budget. The thing that the economic establishment really objected to in the mini budget was the taxes.

• 58:19Speaker 05

  It was the, you know, it was not raising corporation tax. That's what they didn't like.

• 58:25Joe Weisenthal?

  I just have one last question. You know, Tracy and I work in public, though not as public as having been the Prime Minister of the UK. We live in this age where people, you know, stories go insane and people love to see someone publicly humiliated. And it just seems to me that the UK press in particular is a bunch of jackals, but that's just my impression over here, even relative to the press.

• 58:47Speaker 05

  It's always funny when Americans come over and they don't realise what they're like. And I'm like, you ain't seen nothing until you've dealt with the UK press. And they always go, Liz, you were right. You were right about these people.

• 58:58Joe Weisenthal?

  No, I just see it in the headlines. I it's, I don't know, it seems obvious to me. What's your lesson takeaway? How do you move past a period of one's life like that?

• 59:07Speaker 05

  Well, I don't really see it like that. I just see that the British press needs to change. And I'm a big supporter of independent media. I think the British press's coverage of economics is appalling. I think their coverage of politics is skin deep. I don't think they've done anything to analyze the sort of failings of the British state. And I think there won't be serious, we don't just need to change the bureaucracy in this country, we need to deal and change the press. And people are now turning off the BBC. They're turning off the mainstream media because they can see that the truth isn't being told. And there used to be a

• 59:50Speaker 05

  golden age, I guess, in journalism where people cared about the truth. I'm afraid they don't now. Friends of mine who are journalists just say their editorial conference is about how many clicks their article gets. And I just think that's pathetic.

• 1:00:04Tracy Alloway?

  Well, these are the tensions of being a journalist in modern times. But I have one more question. It's just going back to some technical aspects, I guess, of economic policy. So you've criticized the OBR for its forecasts that end up influencing or perhaps even dictating government policy. I guess my question is, when you think about a pro-growth economic agenda, that also relies on forecasts about future growth. And when we talked to Stephen Myron from the Trump administration earlier this year, that was one takeaway from our conversation, was how much the Trump administration was really betting on economic growth picking

• 1:00:47Tracy Alloway?

  up in order to offset some of the stuff it was doing.

• 1:00:50Speaker 05

  It's the only strategy. It is the only strategy.

• 1:00:53Tracy Alloway?

  But why should people have confidence in the growth forecast but not have confidence in OBR forecasts?

• 1:01:01Speaker 05

  But the point about the OBR, and this has been proven by history, is that they overestimate how much raising taxes will bring in in revenue because they don't take the full account of the depression and economic activity. And they underestimate the impact of supply-side reforms like planning or fracking or whatever else. And

• 1:01:27Speaker 05

  There are two answers to this. One is there are better economists out there. And I think the government, as was the case prior to 2010, the government should have the ability to hire the economists that they believe are right. I don't think my homework should be marked by somebody who doesn't agree with me, which was what was happening. I think that's just wrong. If people don't like what I'm saying and they don't like the policies, they can vote me out at an election. But I wasn't even allowed to try the policies because the people marking my homework said no. I mean, that's the bottom line. But the second thing is, I think we're far too reliant on forecasts. You can't predict

• 1:02:11Speaker 05

  the future. And trying to say, which is what the UK system does, that five years out, we know exactly what the debt is going to be, is rubbish. You know, we don't know, what if Donald Trump imposes huge tariffs? What if the UK strikes a trade deal with India? What if there's a discovery of a new technology that totally transforms it? You don't know what the future is going to look like. And my economics is based on first principles. I know that if you put up taxes too high, people won't go out to work anymore. I know that if you make energy prices cheaper, businesses are more likely to invest in Britain. The problem with these forecasts, and this is another criticism

• 1:02:55Speaker 05

  of British economic media, the problem with forecasts is that people become focused on whether the numbers right in the forecast, rather than the fundamental principles of what makes a successful economy.

• 1:03:08Joe Weisenthal?

  Liz Truss, so great to chat with you, someone we've wanted to have on the show for a very long time. Great that we've made it happen and I appreciate your coming on up.

• 1:03:30Joe Weisenthal?

  Tracy, I'm so glad we finally got to interview Liz Truss.

• 1:03:33Tracy Alloway?

  We finally did it. I think it was a good time to do it, actually, because

• 1:03:36Joe Weisenthal?

  Yeah.

• 1:03:37Tracy Alloway?

  you know, there's a lot of overlap with the Trump administration at the moment and what Truss experienced in 2022.

• 1:03:44Joe Weisenthal?

  Yeah, yeah. No, I mean, there was a lot that I found to be interesting there. You know what I think actually maybe the most interesting thing to me is thinking that, okay, in the US, we have these multiple branches of government, right? So the president wants something, but Congress is going to veto it or can veto it, especially if it's a different party in power. Obviously, that's not the dynamic of UK with the parliamentary system. And yet, even in the parliamentary system, to hear Liz Truss describe the fact that what she describes as even modest cuts to the increase in welfare weren't palatable to the members of her party, let alone the opposition, which of course is never going to vote for it. But in her party, I find that to be a very striking comment about the difficulty that, you know, electoral democracies have in bringing back cuts.

• 1:04:27Tracy Alloway?

  Absolutely. The other thing that kind of caught my eye or my ear was when we were talking about tariffs and, you know, Liz said that she had praised the deal that the UK struck with the Trump administration because it was less than what the EU was paying. And it's interesting to me that, like, countries seem to be competing with each other. You know, the Trump administration, in some respects, has been kind of successful in that, getting its trade partners to compete with each other for the lowest deal rather than to, you know, try to compete on an absolute basis for lower tariffs, per se. I thought that was interesting.

• 1:05:02Joe Weisenthal?

  I also think it's interesting, you know, the sort of, I find myself having a lot of sympathy with this, this sort of like anti-democratic aspects of entities like the OBR or in the US, the OMB. And these ideas that, okay, they have one set of assumptions about how policy works. And the idea that, like, they have a formal role. And, you know, there is this, there is a certain undemocratic element, I think, of these sort of institutions that either they, not necessarily with a formal veto. So et cetera, that aren't elected. I have sympathy for that opinion.

• 1:05:38Tracy Alloway?

  It certainly seems like they can act as an institutional restraint on the government. But some people would argue that maybe that's a good thing.

• 1:05:45Joe Weisenthal?

  No, right.

• 1:05:46Tracy Alloway?

  Maybe you want an independent body looking at economic policy and monetary policy, right?

• 1:05:52Joe Weisenthal?

  Yeah, I mean, that is the thing. And look, it's very striking that she said, really, she does not accept the premise that the Bank of England should be as independent as it currently is. And that, you know, the idea is to your question, folding it back in with the Treasury is very striking.

• 1:06:04Tracy Alloway?

  Well, also the line about, you know, not wanting to have her homework marked by someone who doesn't believe in it. I'm sure all of us as students would have liked to choose our own teacher who was grading our homework, but we don't get to for obvious reasons.

• 1:06:17Joe Weisenthal?

  We don't.

• 1:06:18Tracy Alloway?

  Shall we leave it there?

• 1:06:19Joe Weisenthal?

  Let's leave it there.

• 1:06:19Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 1:06:25Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stallwork. Follow our guest Liz Truss. She's at Truss Liz. Follow our producers, Carmen Rodriguez at Carmen Armandeschel Bennett at Dashbot and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots. We have the daily newsletter and all of our episodes. You can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 1:06:48Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we dive into British politics and economic policy, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 1:07:40Tracy Alloway?

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• 1:08:25Tracy Alloway?

  They're powering over 90% of the Fortune 500 and millions of small businesses. That's a lot of muscle. And behind it all, thousands of experts answering your call at 2 a.m. like it's 2 p.m. One partner powering how business gets done for companies around the globe. When you add it all up, no one does business like Comcast Business. Quick question for you. How much of your day is spent typing? Email, Slack, notes, prompts to ChatGPT? Whisperflow is a voice-to-text app. Instead of typing, you talk and it types for you in any app on your Mac, Windows, iPhone, or Android. It takes out the ums, fixes the typos, and the result sounds like you wrote it. Four times faster than typing. So the email that used to take two minutes now takes 30 seconds. Whisperflow is free.

• 1:09:10Tracy Alloway?

  Download it at whisperflow.ai. That's W-I-S-P-R-flow.ai.

• 1:09:15Speaker 07

  Congratulations, you've built a dashboard. But now comes the follow-up question, and the follow-up to the follow-up, and the dashboard for that. Meet Hex. Give everyone the power to ask their own questions, explore data, and build with AI, all in natural language. Because every answer should spark another question, limited only by your curiosity, not your data team's bandwidth. Go deeper than dashboards. Join over 2,000 leading data organizations. Visit hex.ai.