I remember the previous session from the IMF.
It was quite something for the UK. It was a lot of criticism at the time
and the UK government questions about whether another prime minister at the
time understood basic market knowledge. And I was at the Bank of England very
surprised about the government action at the time.
Do you still do damage control here or is that chapter over?
I think the page has really turned on that.
It was obviously a very difficult period for the UK.
But talking to my fellow finance ministers, we are all thinking about the
future. I think there is a lot of confidence in
the UK. The IMF themselves say that the UK is on
the right track. We've had two big fiscal events, a
budget and an awesome statements which I think have commanded international
confidence. So I think there's a lot of positivity
towards the UK this time round. So it is in the past.
But I do have to ask you, because this trust happens to be here at to today.
And she said there are establishment forces that at times make your policy
very difficult. You do not want you to get on a policy
path that may not be conventional. But it's good for the country.
When you come here on a very honest note, do you feel you're fighting the
establishment? I've been in frontline politics for
nearly 20 years now and you are always fighting to get the policies you want
through. I mean, right now, like finance
ministers in Germany, the United States, France, Japan, we are all wrestling with
how to improve productivity, how to get our growth rates up, how to pay for
public services and shore. Sure, these are the battles we all
fight. But I think what people recognize is
that the UK economy has had a difficult period, but has also got tremendous
resilience. I give you one fun fact, Maria.
We are now the third largest tech economy in the world after the United
States and China. And that is the area where we think
we've got tremendous potential going forward.
And to be fair, people said the city was going to disappear after Brexit and
obviously has not been the case. But before we get to that point, I do
want to go into the IMF forecasts because they have upgraded the
contraction was going to be as severe this year, but they also say for next
year, 1 percent growth. Is that acceptable to you?
Is there a fundamental growth problem in the UK or actually, do you believe,
well, the IMF is wrong. We're going to do better than this?
Well, we will do better than that. Our forecasts are significantly better
than the IMF forecasts. But what I should say is that last year
we were the fastest growing economy in the G7.
Why is there this gap? Well, I think,
you know, it's not just me. I mean, the German finance minister says
he's much more optimistic about Germany's prospects.
I think Janet Yellen said the same about the United States, saying we will proof.
So we are we are very confident about the UK's medium and longer term
prospects, but we don't pretend that we're going.
We're not going through a difficult period like everyone.
We're dealing with very high inflation, which we have to bring down.
That means interest rates are higher. But you look at an economy and you say,
what are the sectors that are going to make the biggest difference that are
going to shape the 21st century and its technology, its life sciences, its
entertainment industries? Those are the industries where Europe
has the biggest, where the UK has the biggest sector in Europe.
And that gives us great hope for the future.
And if you say we will grow more than expected and we are going to beat those
projections, obviously you list a number of areas where you feel you can do
better than expected. Well, you also have a potential well, a
trade deal with the EU. There had been tensions with the EU
potential tariffs and that could come into play that we believe is not going
to happen now with the Windsor framework.
But I do wonder when is this going to be fully clarified for investors because it
still has not been fully sealed? Well, the Windsor framework has been
agreed. And I think this is northern and you
don't have still confirmation this is going through.
And we are committed to the Windsor
framework. It will go through.
What we don't have in Northern Ireland, which we are trying very hard and did
the president is also trying very hard to get back is power sharing by the
political parties in northern. But in terms of the trade relationship
with the EU, the trading that's going to happen between the rest of the UK and
Northern Ireland, that is settled with the Windsor framework and that removes
some major irritants in our relations with the EU.
And that is very important because the big lesson of the last year is that
democracies like the EU, the UK and the US have far more in common when we're
facing threats like Russian aggression in Ukraine and we need to stand
together. And I think that's been the big message
of all the finance ministers from the democracies who are meeting together
here. And what do we have to put a number on
it? How much trade you talk about this
framework that has been agreed. We know the president of the US is going
to the UK. There have been talks or has been about
this potential trade deal, which the UK is very big.
But in the US, it's not so much a political point.
Do you? Believe there will be this trade deal
between the UK and the US and also quantify what is a number of it, how
much trade are you talking about as a potential growth component for the
economy essentially? Well, we welcome trade deals with with
any friends and allies, but there is much more to our relationship with the
United States than the free trade agreement.
I mean, we have very, very close security partnership.
We are not given up on it. Well, we would welcome discussions when
the time is right. But this is not something that we think
is imminent, and nor are we particularly worried.
If it if the time isn't right, we'll wait until the time is right.
But what we what I would say is the discussions that I'm having with Janet
Yellen and other democracies are about economic security, because what we've
learned from Ukraine is that energy dependency on Russia was a very
dangerous thing. Russia tried to use that to hobble our
response to their aggression in Ukraine. And we need to avoid that economic
dependency on on anyone. So when it comes to energy, when it
comes to technology, we are all having this discussion now.
We're just trying to feed into this. Well, you know, China as Russia has
done. The question is now what happens with
countries like China? She'll learn the lesson.
And we want to have a positive relationship with China.
But we also recognize that we have to avoid economic dependencies in areas
like semiconductors, artificial intelligence.
The areas that are going to define the 21st century.
And so we are having discussions about how do you maintain a positive trading
relationship with China? Because there's an enormous amount of
trade that is beneficial to them, beneficial to us, but avoid those
economic dependencies that we've learned can be a very bad thing.
And will there be a communique at the end of the G?
Well, that the IMF meetings excuse me today, obviously, there had been debate
that Russia's going to once again block this communique.
China is also sitting on the sidelines in those meetings.
Are you hopeful that there will be some kind of consensus coming out of this?
Well, I'd say Maria is you're always hopeful there'll be a consensus.
But if there isn't a consensus, it's better to be honest about that, not to
have a communique than to try and have a communique that's pretty meaningless.
And obviously, you've had a difficult job to inherit.
And then, as you say, it has been a difficult year for the UK.
But I wonder if you believe all this has come together, you're going to see this
economy grow. To me, what it sounds as though you want
to be in a good shape for next year. And obviously the timing is around the
election. Do you want to see an early election or
do you want to see a leaked election in the year when perhaps all of this will
come into fruition? If you believe your right.
Well, it's too soon to answer that question.
Don't want to put a season in the autumn.
You know, what I would say is that if you look at the projections, not just by
the IMF, but by the official forecasters in the UK, by the Bank of England, they
are that in a year's time the UK economy will really have turned a corner.
And the single reason for that is that we are predicted to get inflation down
to 3 percent or below. And that is the single.
Do you believe you can hit that number? Because the IMF also says on the fiscal
side, they have they have questions about some of your targets, but they
also believe we can hit that number and I believe we can get inflation under
control. But I don't underestimate the challenge,
because just as in the United States and the EU, core inflation, underlying
inflation is still between 4 and 6 percent.
So there's still a lot of work to do.