00:00Rachel Reeves is being faced with very, very difficult choices.
00:03Through our own reporting, what do you think will happen at the budget?
00:08Yes, I give you an option in the book to levy a wealth tax.
00:10I think that's the kind of discussion that is happening in the quarters of government at the moment.
00:14I mean, Rachel Reeves has said that she wants those of the broadest shoulders to bear the burden of these tax rises that are necessary, as you have just described.
00:22She has this black hole largely driven by a downgrade in productivity estimates for the economy from the Office of Budget Responsibility.
00:30And so she has to find the money somewhere.
00:31She has this manifesto pledge not to increase taxes on working people, especially income tax, VAT, national insurance.
00:37So that's why we are talking about things like an exit charge when you leave the country, paying perhaps 20% tax on your holdings.
00:44We are talking about things like larger properties, pay more in council tax, perhaps.
00:49But her problem is that there's a large sum of money to be raised.
00:53And it's not clear how much these kind of narrow taxes on the wealthy would raise.
00:57Indeed, there's always the capital flight question.
01:00Will this push wealthy people away ahead of the budget?
01:03That's a concern.
01:04So, yeah, she's got a lot of money to make up.
01:08Yeah, it feels, Joe, that these are much bolder and more progressive tax changes than maybe a lot of investors were expecting.
01:14Yes, I think that what Reeves is going to do is use the backdrop of this big OBR downgrade, which she's going to blame on the Conservative Party, the austerity years, Brexit, and use that as political cover, really, to raise tax in a pretty significant way.
01:30There will be some spending cuts as well, I expect, but tax will likely do the heavy lifting.
01:35And, yes, she'll use that as a pretext for a pretty bold budget.
01:39We're expecting to be her saying making the tax system fairer.
01:42And for me, that's code for making the rich really pay more.
01:45That's kind of a labour value she wants to see happen.
01:49And that's where we're heading, a pretty big budget, largely driven by tax rises to fill that black hole.
01:53So, I know you touched on it, Joe, and it's the impossible question, but we have definitely seen a number of high-profile investors and entrepreneurs quitting the UK after the non-DOM rules changed.
02:04I mean, how difficult is it to map out what these tax changes mean for a wealth exodus?
02:11It is difficult, often because there is a lag in the data.
02:14So, you can't see immediately with official statistics what is happening.
02:18You have this anecdotal evidence, which we at Bloomberg have been compiling extensively, of the wealthy going.
02:23I mean, when I speak to the Chancellor, when I speak to the Treasury, they are pretty confident about where it stands.
02:29They think that the data isn't actually that bad and that the wealth exodus is not as severe as you might expect, given the press coverage.
02:36But it is the big question, right?
02:38Rachel Reeves has this tension between wanting to get the public finances in order, which means raising taxes, but that bumping up against her mission to grow the economy, make Britain an attractive place to invest.
02:48She's constantly trying to manage this tension.
02:50And we'll see it in the budget again when we see these tax rises.
02:53It'll be a wait and see.
02:54Does the wealth exodus exacerbate?
02:56Does it get worse?
02:57We'll have to wait and see.
03:00Meanwhile, reform and Nigel Farage, who's definitely leading in the polls.
03:04I mean, can he stick to his promise of cutting taxes if he comes into power in four years?
03:07We're expecting Nigel Farage to make a big speech today where it seems like the message will be they're drawing a line under their 2024 manifesto and pivoting their message to one of saying we can't necessarily promise big tax cuts immediately.
03:22And what matters is the state of the public finances at the time.
03:25So that is a shift from reform.
03:26I think they see a vulnerability in their position and not being seen to be too credible in economics.
03:32And that's why Labour keep attacking them and indeed the Tories.
03:35So I think where Farage is trying to put them in a more reasonable position on the economy.
03:39And they hope that that will continue to bolster their support, which is already very high that riding high in the polls.
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