(Bloomberg) -- The following is a transcript of the conversation with Bloomberg’s Head of Economics and Government Stephanie Flanders at the International Investment Summit in London on Monday.
Confidence
SF: Thank you so much, and we are delighted to have the Prime Minister, Sir Keir Starmer, with us at the International Investment Summit here in the UK. Prime Minister, in your speech earlier today to the summit, you vowed to do everything in your power to galvanize growth in the UK. But if you look at the sharp decline in business and consumer confidence since you were elected, since you started talking about the tough times ahead, the tax rises ahead, you would be forgiven for thinking you had done the opposite to growth. So I guess I am wondering, are you feeling you might have overdone all of that a bit?
KS: Today was very much a statement of intent, to say very clearly that economic growth is the number one mission of this government and that means we are open for business as a country. We want to drive that investment into our economy and we want to see that in secure jobs in different parts and all around the United Kingdom. That’s very much the message from today. There’s been a drumbeat of inward investment over recent weeks, which I think demonstrates that although yes, of course, we’ve had to signal that there are tough decisions to make because of the damage that’s been done to our economy, we’ve just got to be straight with people about that. We do have amazing assets in this country in terms of our skills, our people, our universities, our cutting edge when it comes to technologies like AI, for example. And that’s why making that really clear statement of intent today was very important. And I think quite a lot of the inward investment decisions we’ve seen running into tens of billions are of indication, if you like, of the approach that we’re taking in partnership with the investors and the businesses many, many of whom are here today.
Tax Hikes
SF: One of the things that you’ve been clear about, that the Chancellor’s been clear about, is that difficult decisions will be needed. Tax increases will be needed to pay for that investment in public services that people are expecting and given all the taxes that you’ve ruled out, there’s a lot of concern here in the business community about increases in capital gains tax and in wealth tax. Now I know you’re not going to want to go into the details of the budget, but are you reassuring the investors here that they have nothing to worry about on that score?
KS: Well, I’m not going to get into the details of the budget. You wouldn’t expect me to. But neither I’m going to shy away from the fact that we’ve got difficult decisions to make. The last government left a £22 billion black hole, and we’re not going to walk past that. We’re going to have to deal with it. So that’ll be tough. But what I’ve been able to be very clear with investors and businesses is, because growth is the number one mission, the decisions, whether it’s on the budget or anything else, will be determined by whether they help growth or not. So that’s the lens through which we’re seeing this. But I have to say, the discussion here, we’ve had intense discussions all day long, last night as well, with a number of people in the room, that we’ve got to know over the last two years, so this is the first time we’re meeting. All of the discussion today has not actually been about tax. It’s been about planning. It’s been about the regulatory environment. It’s been about getting infrastructure moving much more quickly, the sort of apparatus of government working to that common end. That’s the real discussion that’s going on here. That’s the real focus. And actually, contrary to perhaps what people might think, tax is not the first thing that businesses and investors are raising with me. First thing they’re raising with me is, is it really your number one mission? Is it going to be stable and strategic and for the long term, to which the answer is yes. And are you prepared to do the tough things on execution for deliverables, which is about, you know, the length of time it takes from investment decision to actually seeing a project materialized. That’s where I think we’ve been able to do a lot of reassurance that, yes, we understand that, and we’re determined to do the follow-through on growth that is desperately needed for investors, for our country and for the jobs of the future.
Capital Gains Tax
SF: Forgive me, Prime Minister, but I think a lot of people, they may not be talking about it to you, but a lot of people are worried, in this sort of vacuum that we’ve had quite a long wait for the budget, there’s quite a lot of what might be just crazy speculation around where capital gains tax might go, for example, so something like a 39% rate. Can you reassure people that whatever the change is, it won’t be anything that significant?
KS: A lot of speculation is getting pretty wide of the mark.
SF: So you say that 39 is wide off the mark?
KS: It’s getting to the area which is wide off the mark. But I’m not going to fuel the speculation, because we can go on like this for a very long time until Budget Day. Everybody knows, until Budget Day, none of it is going to be revealed. It was important that when we came into office, into government, we looked at the books, we assessed the state of the economy, we needed to understand the damage that’s been done and that 22 billion black hole is a real problem that we’ve got to deal with and make sure that we go through all the processes necessary for a properly thought-through budget. So that’s why we put the timing as it is, it’s the right timing. But equally, it’s been really fantastic to have this Investment Summit just a few weeks before the budget where the mood music here is very upbeat. People are talking about a real opportunity now to invest in the UK, comparing it as a relative advantage across the world. We want to seize that opportunity and take it forward with many of the investors that are here.
National Insurance
SF: You are looking at the books, but obviously people are also just checking when they think about, I know you’re not going to reveal what’s in the budget, but when they’re thinking about what you’ve committed to and what you’ve not committed to. For example, the pledge not to increase national insurance contributions. Most people I talk to think that if you increase the employer side of that, the employer contribution, that would be breaking that pledge. Without getting into the budget, can I just check that? Is your understanding that that would be breaking that pledge?
KS: Well, you’re saying without getting into the budget, you’re tempting me.
SF: Well, it’s just further explaining your pledge.
KS: We’ve made very clear commitments in our manifesto and we intend to deliver on those commitments. Beyond that, I’m afraid you’ll have to wait for the budget for the details, for very obvious reasons. We’re still weeks away from the final assessment in the budget.
SF: It does feel a bit odd that for those people in the room, people who are doing deals today, you can’t promise them that the basic tax environment for entrepreneurship, for business, for wealth in a couple of weeks time won’t be completely different.
KS: Well, they’re very interested that corporation tax is capped. They know exactly where that is in the long term. They’re very interested in the fact that we’re able to say that because we’ve got a good strong majority in government, we’re able to make decisions based on years, not months with a clear strategy. They’re very, very interested when I talk to them about being a mission-driven government, a government with a real sense of purpose measured over years with one central purpose, which is wealth creation translated into jobs in different parts of the United Kingdom. That’s the sort of stability that they’re looking for and that’s the conversations we’re having. They’re very pleased to hear that from a government and very pleased about the clarity. There’s no end of people here today who said the clarity of the message is really welcome. It’s now the follow through, which is actually the execution of it. What are you prepared to do when it comes to planning? What are you prepared to do when it comes to regulation? It’s not just the number of regulations, it’s the inconsistency of regulation that we need to deal with. And when I’m able to say with real confidence and certainty and clarity, yes, we’re going to deal with that, that leads the decisions in my view to make the sort of investment that we’ve seen in recent weeks, which is very welcome. These are not just big numbers, although they are big numbers. They translate into jobs around the United Kingdom. Good, well-paid secure jobs and that’s the change we promised at the election and the change that I’m determined to deliver on .
Ethical Policy
SF: So you talked about mission led-government and ethics-led government’s obviously been a feature. You had a sort of unfortunate slip on the way to this summit involving DP World, which I’m not going to go into, you’ll be glad to note. But there is another company, Shein, which was considered to be such a rogue operator in the US that it hasn’t been able to list on the US stock market. It was too controversial, its working practices. But it seems that your government is continuing their sort of open arms policy for wanting Shein to list here. Is that right?
KS: Well, I think we’ve got to get the balance right and clearly we’ve got to have standards, high standards. We do have high standards, not least for example, in rights at work. And I address that in my speech here today to say, look, better rights and protection for people in their workplace are good for growth. So we’re clear where we stand on standards. But we’re future looking, we’re pragmatic and subject to those standards, yes, we do want investment into the United Kingdom because we desperately need growth. We haven’t had meaningful growth in the economy in the United Kingdom for 14 long years. We’re determined to turn that around.
SF: But just to be clear on that, so the government would need to be sure that Shein’s not using forced labor in Xinjiang before it could list in the UK.
KS: I’m not going to get into individual businesses. What I will say, let me be very clear about it, standards and high standards do matter to us. So of course we’ll be looking at any issue that goes to high standards with a particular feature on the rights of the workforce. We’ve been really clear that we see that as two sides of the same coin when it comes to growth, good employment rights and protections. They’re not a drag on growth. They’re fundamental for growth and I think pretty well all good businesses understand that, which is why in many cases they’ve already put in place some of the rights and protections that we are bringing forward in legislation.
China
SF: On China, and you had an interesting conversation with Eric Schmidt this morning that touched on China. I’m interested, right now we have the Chinese army holding drills around democratically governed Taiwan, which they admit are a rehearsal or a practice for a full naval blockade of this place that produces most of the high-quality advanced chips in the world. I’m just wondering, I mean we have the Foreign Secretary on his way to Beijing later in the week. Do you worry about the timing? Do you worry about the signal that sends in a week that the army is literally practising potentially an invasion or a blockade of Taiwan?
KS: Well, the approach I take is this, that national security has to come first. So that’s the number one priority. And therefore, of course we challenge where it’s necessary to do so. But we’re also pragmatic and we want our country to move forward and to succeed. So challenge where it’s necessary, but there are areas.
SF: Not necessary when they’re drilling...
KS: We have challenged, we do challenge. I myself spoke to the president. We do challenge where it’s necessary to do so, but we are pragmatic as well and we need to make sure that we get that balance right when it comes to our relation with China.
SF: I mean just to follow up on that, when you say pragmatic, it feels like you’re going to be more pragmatic than the previous government. They ceased that sort of major economic cooperation, the dialogues, the other things when China imposed the national security law on Hong Kong. Are we sort of officially saying we’re over that now?
KS: Well, I think the problem with the last government is they veered from one side of the road to the other side of the road and then back again. And that just led to a pretty chaotic approach. I think everybody understands the national security first approach that we must take and will take. Everybody understands that we do challenge where it’s necessary to do so. But equally when it comes to, I don’t know, for example, climate change, we’re going to have to work with countries like China because it’s the only way that we can all go forward.
SF: Prime Minister, we’ve run out of time, but thank you very much for joining us. Good luck with the rest of the summit.
KS: Thank you very much.
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