00:00Gerard Lyons is a leading economist and senior independent director at the Bank of China in the UK.
00:05Gerard, thanks so much for joining us. Do you expect big economic change under Andy Burnham?
00:12Yes, there will be significant economic change.
00:15Although the details yet to materialise, his initial speeches, which admittedly are very political in nature, suggest this significant shift.
00:23It would be in two different ways. One in terms of more government intervention, regulation and state activism.
00:32And then in another respect, which is the concern of the markets, it's likely to include increased government spending and
00:39that might lead to higher taxes and more borrowing.
00:42So it will be far more interventionist and also likely to have some fiscal consequences as well.
00:48You know, on Thursday, the IMF actually warned Andy Burnham, essentially saying, please don't spend any more money.
00:55Focus on reducing debt. How significant is that? Do you think you'll listen?
01:00Well, it's an important message. Now, the timing of the IMF's report was coincidental.
01:06Each year they provide what's called an Article 4 on each major economy.
01:11And the timing of it happened to just be this week.
01:14But it really reinforces the pressure that Andy Burnham, the new prime minister, will be under.
01:19He's facing really two competing pressure.
01:21One is from his own supporters, his own MPs, who not only want more devolution, but increased government spending.
01:29And against that is very much the message that the IMF is conveying, which is that already UK public spending
01:35is high.
01:36UK debt and borrowing are high.
01:38And the financial markets, particularly the bond markets, are concerned.
01:41So I think the new prime minister will have to take this into account.
01:46And that might be seen in terms of who he appoints as his chancellor, his new finance minister.
01:51And that will sure be revealed next week.
01:53The UK government this week nationalized British steel away from its Chinese owners, Jingye.
01:59That move has, on Friday, been sharply criticized by Beijing.
02:04They're saying it's going to undermine the confidence of Chinese companies and investors.
02:09Do you think this could create a problem for how the world sees the UK in terms of its economic
02:15policy?
02:17Well, in terms of UK-China, the bilateral relationship has certainly improved over the last year in terms of the
02:23economic and financial dialogue and the trade cooperation.
02:27So this, I think, will be a setback.
02:29But I don't think it will fundamentally change that relationship.
02:33But coming back to your question, it very much highlights how, not just in the UK, but globally, economic nationalism,
02:40and in terms of that sort of state security, priority sectors, are coming more and more to the fore.
02:46So, in terms of economic intervention, it might be an indication of the steps that the new prime minister will
02:53take.
02:54Certainly, in the case of steel, it's seen as a strategic industry.
02:57It has led to that complaint from the Chinese government.
03:01But I think it's likely to be a foreguide to the fact that we're likely to see a far more
03:06interventionist stance from the new Labour government.
03:09Thank you so much for your time, Gerard Lanz, leading economist and senior independent director at the Bank of China
03:15in the UK.
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