The News Agents: Why is Rishi Sunak taking the Covid inquiry to court?

This is a Global Player Original Podcast.

When we last met on Thursday, the weird battle between the Covid Inquiry, Rishi Sunak and

Boris Johnson was, little did we know it, only just warming up. The chatter then was

that the Covid Inquiry would be taking the government to court in order to get the documents

they wanted. Instead, it turns out it's the other way around. In an unprecedented move,

the government will litigate against one of its own public inquiries, perhaps the most

important public inquiry to ever take place.

So today's question is very simple. What the hell is going on? It's Lewis here. Welcome

to the newsagents.

The newsagents.

Right, that is one big question we're going to be delving into on the show today, but

we're also going to be chewing over another big meaty question on this weekend newsagents.

Never let it be said. We go easy on you. That is, are we all sleepwalking into a mighty

house price crash? That's coming up later. But first, like the proverbial flies, we are

drawn back to Boris Johnson. Two major updates. Last night, there was this. Now, fortunately,

I was doing the LBC drive show so I could break it myself.

Extraordinary breaking news in the last, what, sort of 15 minutes or so, where the

Cabinet Office confirming that they will take the COVID-19 inquiry to court over WhatsApp

messages that the inquiry is saying that the government must disclose.

So as I say, when John and I spoke about this on Thursday, we thought it might be that Lady

Hallett, the chair of the inquiry, the person the government chose to oversee this inquiry,

would be the one taking ministers to court, demanding that they hand over all of Boris

Johnson's unredacted communications and those of one of his then number 10 aides, Henry Cook.

Instead, we now know that it will be ministers, the Cabinet Office, taking the inquiry to

judicial review. In their statement, the government argues that, quotes, the request for unambiguously

irrelevant material goes beyond the powers of the inquiry. They said it represents an

unwarranted intrusion into other aspects of the work of government and a breach of staff

and ministers' legitimate expectations of privacy and protection of their personal information.

Their statement insists that individuals, junior officials, current and former ministers

and departments should not be required to provide material that is irrelevant to the

inquiry's work. But Baroness Hallett rejects this. She says it is for her to decide what

is relevant and what isn't. She says, rightly, that the terms of reference for her inquiry

are broad and therefore, so should be, her access to all the documents she wants and

then to add mud to already blackened waters on Friday morning. This happened.

In the last literally two minutes, though, we have had a letter that has been published

from Boris Johnson's team, essentially a letter going from the former prime minister

to the COVID inquiry, which I can read you part of now. It is essentially saying that

he will be sending the inquiry all of the unredacted WhatsApps that he has provided

to the cabinet office and he would do the same with any material that may be on an old phone.

So Boris Johnson decides to go around Sudak and just hand over the documents himself.

This three-way onslaught makes the Bermuda Triangle look friendly? How can it be that

the government is taking its own public inquiry to court? To repeat, this has never happened

before. There have been literally hundreds and hundreds of government inquiries. No

government has ever set one up and thought, you know what, I'll see you in court. And

remember, this wasn't supposed to be some antagonistic body. It was supposed to be the

place where we, those whose lives were shaken and sometimes shattered by the decisions the

COVID government made, got answers. History got its first draft and means of ministers

occasionally shutting down questions. When the time is right, there should be a full

and independent inquiry. The right way for these things to be looked at is the COVID

inquiry. Oh, I'm not answering now because there's going to be an inquiry when we can

go through everything properly. Government has cooperated with inquiry. Tens of thousands

of documents have been handed over. We won't have died of COVID, we'll have died of old

age before this inquiry is finished if it carries on at this rate. And public inquiries

rely on public buy-in. They rely on all sides accepting its legitimacy. The risk from the

get-go is that this is now undermined. The risk for Rishi Sunak is he's already lost

control of the politics around it. Lara Spirit is reported for the Times and Times Red Box

morning email and she stepped into newsagents HQ to help us understand what is really going

on here. Yeah, it's very interesting. I think it's correct

to describe it as that kind of triangle of different actors who are all saying that the

other has said something and the other one's saying, well, I've said X, Y, Z and Boris

Johnson is perhaps the most interesting of the three of these actors because he has maintained

over the course of this week publicly that he is unambiguously happy for this material

to be given to the Cabinet Office, that he wants to disclose it, that he wants to see

it considered by them in full. He's basically said emphatically, you know, this is the Cabinet

Office's decision, it's not mine. And he's sort of been hinting at getting towards this

latest position that we've just seen, which is that he's sent it all himself over the

course of the week when he's been saying, I'd be happy to and then I have and actually

now at this point, you know, I'm going directly to the inquiry.

So he's showing them up in a sense, right, which I'm sure is not something that he will

be especially displeased about, but he's basically showing them up because they are fighting

on the surface, they're kind of fighting this battle for him and for the government.

And yet he has said, perhaps because he's concluded that this was a battle that ultimately

was not going to be won. He just said, no, no, no, I've got nothing to hide. Here you

have it anyway.

It's very interesting, this question of whether Boris Johnson or how Boris Johnson is being

self-interested in this particular case, because he says when he's handed over this

information that he doesn't want his case to become a kind of test case. And actually,

when you look at what the government has said about this and you look at what government

lawyers have said about this, they sort of admit in a coded way that this is not likely

to be a successful judicial review. This challenge that they're making is pretty unlikely to

be successful, but they're doing it anyway because they want to test in a court this

question of whether officials and they're specific about it being officials have a right

to privacy. And you saw last night, the science minister, George Freeman, basically being quite

open about the fact that he expects Baroness Hallett to succeed in her search for this

material. And I think one of the things that Boris Johnson is concerned about is that he

is at the centre and he is the kind of first and kind of precedent setting example of what

happens in the COVID inquiry when you request WhatsApps. Are they private? Are they public?

And he's not comfortable with that role because we're not going to see the inquiry conclude

until 2026. So that's a huge amount of time with many more witnesses and a lot more evidence

gathering that will be taking place. And I think that's one of the reasons why he's

been so emphatic in trying to hand it over today.

Do you think he feels he's being used by people he doesn't like?

I think there's certainly the politics. This is very interesting. Oliver Dowden, of course,

Deputy Prime Minister, kind of Chief of the Cabinet Office that is running this. Throughout

this, you've seen allies of Boris Johnson accuse the general inquiry and the action

of the Cabinet Office as being a stitch up towards him and his examples. You definitely

saw that earlier on when Boris Johnson was referred to the police for possible breaches

of COVID regulations during the pandemics when lawyers in the Cabinet Office had looked

through his diaries and found those possible breaches. So there's a lot of animosity for

all team Boris. I think it's fair to say about the way the Cabinet Office have handled

this so far. And I think you're right that he sort of wants to get ahead of that and

hand it over himself.

But there is a caveat to all that, right? Which is, as we now know from these documents

which have already been released, which is that he's handed them over up to a point.

And that point is a point in time, i.e. the middle of 2021.

Yes. So I think the most important thing to note as we sit here today is that the period

of time where these messages have been requested from, the vast majority of that, 16 months

of that, isn't included in the information that Boris Johnson has handed over in his

words. So nothing from January 2020 through to April 2021 on Boris.

It's quite an important period as the pandemic goes, right?

Three national lockdowns. Most of the restrictions by this point have been eased. So very important

that those are emissions. Of course, the response from Team Johnson would be that we all remember

at that point, he was forced to change his phone in May 2021 when it was revealed that

his phone number had been publicly available for, I think it was 15 years. So he had to

change that.

You know what? That was one of those Boris Johnson things I'd just forgotten about, you

know, my sort of Rolodex of sort of mini Johnson scandals. That one, I have to say, the sort

of numbskull in my brain had just decided to shred.

I think at the bottom of a think tank document since 2006 or something. So that had been available.

They'd been a security concern around that. And Team Johnson's defence of this is that

he is not able to access his phone. He's been told he can't turn it on. He wants the security

services to do a full look through it to make sure it's okay for him to be able to use it.

But I think one of the most interesting things in that letter that we saw today from him

was that he says, the order of sequence is quite important in this. He says, I want them

to make sure that my phone is okay to look through and then I will look through and select

the relevant information and hand it over.

Now the chief complaint that Baroness Hallett has in this entire inquiry is that she and

she alone is the only person who can determine what relevance is. And this is going to be

the focus of the judicial review, whether Baroness Hallett can define what relevance

is, whether the cabinet office can define what relevance is, because you remember they

say that most of the stuff that's been asked for is unambiguously irrelevant. A lot of

it. That's why they don't want to unredact a lot of that information.

Now, Boris Johnson thinks that he can decide what's relevant. I think that he is going

to be the subject of much the same criticism that Baroness Hallett in the inquiry have

leveled at the cabinet office.

So that is basically, I mean, that is the nub of this whole story, right? It is about

who gets to decide what is relevant. In their own way, both Sunak and Johnson are trying

to establish the parameters and Hallett are trying to establish those parameters.

Relevance is the key thing. So under the 2005 act that is governing this inquiry, relevance

is actually, if you look at it, not necessarily that clearly defined. So while you have former

justices like Lord Sumption, who says that, you know, it's very, very likely the government

will lose this case. While you have government lawyers who seem to be indicating that they're

expecting to lose it, while you have a minister last night, all but admitting that they think

the government is betting on losing this case, but thinks that its testing value is more

valuable. Actually, you do have some legal experts out there saying that it's not necessarily

clear when it comes to public inquiries who defines what relevance is. And I think in

the absence of total clarity on that, you can see why the government wants to push

this point.

What I can't quite get my head around with this is in terms of what Sunak is thinking

around the politics of it. Because suddenly this is, until probably yesterday, it feels

to me, I don't know what you think, but till then, it still felt basically like a kind

of internal Tory party thing, connection with COVID, the Sunak, Johnson's tension. There

wasn't much politics in it. But now there is some politics in it. I mean, when I was

doing LBC show last night, as soon as this story broke, sort of tech, let's see if we

can get Labour on to see, you know, what they think about it, they came on straight away.

Peter Carr was on within 30 minutes. And the first lie entirely predictably is, what has

Rishi Sunak got to hide? And what has that government got to hide? And we, if we get

into office, we'll hand over all of the documents completely wholesale, straight away. And that

does allow Labour to try and start weaving that narrative now.

It does. And I think the concerns that the government has around the privacy of not just

ministers and politicians, many of those that were very active and senior during the pandemic,

Rishi Sunak's Chancellor, of course, included notably, are included in this request. But

with a lot of this inquiry stretching ahead, and with the inevitability that more people

will be subject to these requests, the government is worried. And I'm not sure that it's without

good reason about whether or not officials are going to be totally protected by this

process. And I'm sure that there will be a lot of nervousness among some of them, that

this idea that all of their messages are handed over is an envision of privacy that when, if

they're a diary manager in a department of government, they didn't necessarily expect

to be happening. I think that's where a lot of the nervousness might be coming from.

And some nervousness, though, as well, perhaps about setting the precedent for Sunak and

that Sunak's messages could end up being handed over as Chancellor at the time.

That's definitely an interesting political point. And I think the government said last

night that they really do want to find a solution before this court case kicks off, that they

are looking for a kind of pragmatic way through. I think that if they can feel that they have

faith in the Cabinet Office with these documents, that there might be some sort of landing zone

where it's possible to do that. But I think the politics of this, as you say with Boris Johnson

that it's hot this week in that triangle, has made it very difficult for the Cabinet

Office to be able to ascertain exactly if they're safe to do that.

In a way, though, we've already started to see the contours, right, the glimmers of how this

inquiry is going to colour the debate and our politics when it does start, because, you know,

this is a pause, but it will start and it will begin in the sense that we saw from the

documents released last night, we saw all of the questions that Hallit has already asked

Johnson. And already, there's just a treasure trove of stuff, right, which you can imagine

just how difficult or embarrassing some of the answers might be. So, you know, to take one of

them that was published yesterday, please confirm whether in March 2020 or around that period,

you suggested to senior civil servants and advisers that you be injected with COVID-19 on

live television to demonstrate to the public that it did not pose a threat. Now, that is a

story that we already knew about from Dominic Cummings. But the very fact that Johnson is going

to have to formulate an official answer to that, you can just imagine, and there will be

other stuff as well that we don't know about, I'm sure that emerges, but you can just imagine

the way that, again, the kind of embers of COVID are reignited in the coming months in

the lead-up to the next general election.

I think that's definitely correct. And in those 150 questions that we saw yesterday.

Just the 150.

Just the 150.

There were a lot of points at which eyebrows will have been raised and people would have

thought that this is potentially politically quite risky for Johnson.

And he can't lie about it.

Exactly. The one thing that I would say really the conservatives political risk in this is that

the timeline having been released a few days ago probably is in their favor. I'm sure Tory MPs

will have been heaving somewhat a sigh of relief at the fact that actually some of the more

problematic hearings we'll see around COVID contracts aren't expected to be until after

the next election in 2025 or so. And so it's likely that the Conservative Party can go into

the next election having not necessarily had the very most damaging revelations, if there are to

be the most damaging revelations kind of hanging over them and people seeking to defend.

I mean, there is a case that some conservative MPs make when you talk to them, which is that

they think that people want to move on. And also they think that Rishi Sunak isn't going to be

necessarily blamed for this. But there is also an awareness played out, I think over the last few

months, especially in the last year, that they don't think that having changed leaders multiple

times that looking like the Conservative Party is in a state of bitter division is going to be

helpful for absolutely anybody. Just looking ahead to leaving COVID to one side and looking ahead

just thinking about where we are with politics. Now, more generally, from your concept with

Conservative MPs and so on, we are really sort of starting to run down the clock now. We are just

over a year away from a general election at most, maybe 15, 16 months. Polls aren't moving. What

do you think their mood music is with regards to Sunak now and his political strategy and where

we are? There's definitely a sense of resignation among some of them, which isn't entirely

unhelpful for Rishi Sunak because there is an acceptance, I think, apart from among a very

select few with definitely diminishing influence, that you cannot change leaders again. And to

give Rishi Sunak your full support is the best chance that you have of holding on to your seat.

I mean, you will have read lots, but you talked to Conservative MPs who say they're sort of

openly auditioning for particular jobs when they are certain questions in Parliament, thinking

about what they might want to do next and the issues that they're interested in. I think you'd

be hard pressed to find that many Conservative MPs that would confidently say they're going to

win the next election. But I think many of them have given their support to Rishi Sunak's five

priorities and do feel that Downing Street is contacting them, making contact with them, trying

to reach out to them, that it's been in listening mode, a lot of them regularly going in to talk

to Rishi Sunak and others in Downing Street. And I do think that having had a lot of predictions

when Rishi Sunak first came in that it was going to be a very, very bitterly divided party. We

haven't actually at the main pressure point necessarily seen that. The Windsor framework is

a good example for this. It was meant to be this kind of great period of great unrest in the

Conservative Party. You had two former Prime Ministers, Boris Johnson and Liz Truss, voting

against that flagship deal on Northern Ireland, and yet he kept the party together.

And it doesn't feel, for all of these conversations, despite the fact that Johnson is back in the

headlines constantly, it doesn't feel as if any of this is a prelude to a return by any stretch of

the imagination, in a way that actually even just a few months ago, when everyone was talking

about the immediate period after the local elections, there was this sense that it could be a

danger point. It doesn't feel like anything like that.

I don't think so. And also, I think Conservative MPs look at the details of the polling and they

see that it's not Rishi Sunak's popularity that is necessarily holding the Conservative Party

back. Typically, he polls better than the party. And actually, among we saw this week, younger

voters at the party needs to win over, he polls much, much better. So I think there's that question

of actually translating Rishi Sunak's own popularity into the Conservative Party probably

wouldn't be enough under the current polling figures that we've seen. But I don't necessarily

think that Rishi Sunak is the reason why Conservative MPs think they're going to lose the next

election.

Lara, Lara Spirit, it's been a pleasure. Thank you so much for joining us in the New

Agents HQ. Oh, she's laughing. It's no pleasure for you.

Thank you so much for having me.

That's how we like to end things, whoever's into you. Lara, thank you so much.

Thank you.

Right, when we come back, we're going to be asking whether we are missing an economic

time bomb that might be about to go off. That's next.

This is The News Agents.

Right, welcome back. As you know, politics is, of course, our bread and butter and Westminster

is often a psychodrama that absorbs all of our energies. But we wanted to point you to

a big story this week, a set of big stories, really, and a bigger one over this last month,

which hasn't got as much attention as they should. The structural economic story, which

is, in fact, shaping and encases the only politics, which really matters. Now, when

I say economic turmoil, you probably think of this.

At that rate that we're seeing right now in the marketplace, you are seeing the highest

level of repayments that we've seen since a period when the UK was about to face the

biggest housing crash it ever faced before. That's the big concern, both politically

and economically, for the Conservative Party, that this cost of living crisis is also going

to become potentially a mortgage crisis.

The 50 days of trust, 50 days of catastrophe, the violent breath before soon acts rise. But

if we break it down, what characterised that disaster? What was it made of? Well, two things

really, a maelstrom in the mortgage markets and rapidly rising government borrowing costs.

And here's the thing, to a lesser and then greater extent, on those two things, that's

exactly what we have now. It's just getting far less attention. To take mortgages first,

this week, we saw 10% of mortgage products withdrawn from the market. Buyers suddenly

found themselves having to rethink purchases. After a widespread expectation that mortgage

costs would slowly begin to come down, they've started to rise again. It's already affecting

many, including some of you and news agents listeners.

My name is Tully Davenport. I'm from Essex. I have contacted my mortgage provider to find

out about a decision in principle. I've given them my financial details. And it's clear

that the, because of my financial position being relatively stable, the threshold for

decisions in principle has been raised markedly. I'm stable. I have a stable income. And yet

I've been declined on the grounds of financial affordability, even though my mortgage will

only be two and a half times or less than two and a half times of my income per year.

I earn over three and a half thousand a month before stoppages. So I take home just under

two and a half thousand a month and I'm still declined on the grounds of financial affordability.

That's the position I'm in.

And then there are those having to remortgage hundreds of thousands a month, remortgaging

from fixed rates of like one or 2% or less, with huge extra spending as a result. Another

news agent here.

Hi, I'm Yvonne McEvoy. I live in Highgate, London, and I'm self-employed. My current

mortgage fix ends on the 2nd of September. That rate is currently 1.54%. Now, since new

rates have been made available to me on the 2nd of May, those rates have been steadily

going up. With my current provider, I've been offered a two-year fix at 4.77% or a one-year

fix at 5.19%. I have been offered longer deals, but they're not suitable. To make the monthly

payments more affordable, I've had to use a chunk of my life savings to reduce the capital

amount. And to add insult to injury, my mortgage provider is insisting that the money is paid

when the new deal is signed, therefore costing me three months of interest.

This is the backdrop to the financial lives of millions in the run-up to the next general

election. It used to be a staple of political parties' rhetoric that they would pledge

to or boast of their record in keeping interest rates low. In the last 15 years of post-2008

near zero rates, that disappeared. But now, we remember why they did it. It was a fixture

of politics for a reason.

Nina Boudia is a mortgage broker for Night Frank Finance.

The market at the moment is obviously very uncertain. Again, I've done this for 20 years

now and I've been through the banking crash, COVID, Brexit. The market at the moment now

is more complicated in the sense that we've come out of the pandemic where we've had interest

rates at an all-time low. The market was very familiar with that. It was pretty simple

to understand. We then went through COVID. Interest rates tumbled. Everybody was very

excited. It meant people had more disposable income. And since COVID, interest rates have

risen and it's left people in a situation where they didn't expect it. And even us as

brokers, whilst we expected rates to not stay at the level that they were, it was difficult

for us to foresee what actually was going to happen and how quickly it was going to happen.

So clients that I'm speaking to now, this is the only time in my career where I feel

like when I'm advising a client on whether they should be taking something like a two-year

fix or a five-year fix, it's almost like you're damned if you do and you're damned if you

don't.

So why are rates climbing again? Because inflation isn't going away as people and the government

thought it would. Core inflation in the UK is among the highest in Europe. So far from

the Bank of England base interest rate, having reached a peak, markets now think it's going

to climb. And this week, we saw the biggest monthly house price fall since 2009. The question

then, are we heading for a major house price correction? A crash. Liz Martins is a UK economist

for HSBC.

Yeah, well, it's been interesting, right? Because house prices started to fall quite

sharply, particularly in the wake of the mini-budget. And then as we've come into 2023, something

quite strange happened, which is that the market kind of started to revive and actually

activity picked up a bit and then prices picked up a bit. But actually, I think some of that

related to the fact that if you remember, back in March, we had that sort of financial

turmoil and that pushed interest rates back down a bit temporarily. Now they've shot back

up. It has to mean, I think, that there's a greater chance that you do get a correction

in house prices. Weighing against that, we do have a perennial lack of supply in UK housing.

So a lot of people have been trying to buy a house for a long time, just found the property

isn't available. And also, we have relatively low unemployment. And where UK housing tends

to go awry is when you get a big rise in unemployment and that really affects the market. And we

haven't seen that yet in this cycle. So rates higher definitely will weigh on the market.

But I think there are those other factors to take into consideration as well.

So by comparison to other European markets, including other sort of big European cities

and so on, by comparison to British cities, I mean, there have been really significant

crashes in some European markets, haven't there? I mean, Sweden, I think, situation

as well in other countries in Europe. So by comparison, Britain has been robust-ish so

far.

Yeah, we have. So Sweden's interesting because 60% of outstanding mortgages in Sweden are

on floating rates. So as soon as rates go up, 60% of people with a mortgage feel it immediately,

whereas here in the UK, the average remaining fixed term on a mortgage is three and a half

years. So it comes through much more slowly. It's not to say that we won't have the same

magnitude of a correction, but it might come through much more slowly in the UK. You know,

other countries are the opposite. They fix in their interest rates for kind of 25, 30

years. In the US, that's the case. So I think, you know, we sit somewhere in the middle,

and we are starting to see those signs of stress coming through.

And it feels to me as if not just in the housing market, but in the UK economy more broadly,

it feels to me as if we haven't quite or only just waking up to what it might be like with

an economic picture, which is characterized by much higher rates than perhaps we thought

even a couple of months ago, it feels like the inflationary picture is much more sticky,

core inflation is much more sticky, and that that is going to have quite profound consequences

for the UK economy over the medium term.

Yeah, unfortunately, I think we've all been revising our expectations for both of

inflation and interest rates up and up and up. And the straw that broke the camel's back

was really that April inflation number where we were expecting it to fall a long, long way.

It did fall back. But as you say, the core inflation, the underlying pressures were still

there. And that means that the markets reassessed its perceptions of how high the Bank of England

is going to have to hike bank rates. So they're now thinking it will have to be somewhere

between kind of 525 and 550, which is so much higher than I guess any of us thought at the

beginning of this uptick in inflation. And of course, that affects all of us. It affects

us as people with mortgages, first time buyers. It also affects renters because it pushes

up rents indirectly and it affects companies borrowing as well. So you're right, there's

a readjustment to be made here.

And we should say as well that the difference sometimes people say, oh, well, it's 5%, 6%,

you know, it's not to compare with previous periods and so the 90s or the 80s when sometimes

interest rates, you know, nudged over 10%, even 15%. But because of relative house prices

and how high they are now, the effect on that, certainly for mortgage holders over the medium

term as those changes unwind and people start to feel it in their pockets, it's really

very profound.

Yeah, I think that's exactly right. So usually when I give my presentation, someone puts

their hand up and said, oh, you know, when I took out my first mortgage in 1992, it was

14%. And, you know, this is nothing. And the reality is, as you say, that people who are

borrowing at current rates are borrowing much more as a multiple of their income than people

were back in the 1990s because of house valuation. So just as an example, if you've got a £200,000

mortgage now and you fixed it two years ago, you know, just under 2%, you're probably paying

about sort of £800. And if you're refixing now at 5.5%, you're now paying £1,200. So

you're paying kind of 50% more. And that's on top of all the other things that have gone

up as well, right? So it's not like it's just your mortgage that's more expensive, actually

your weekly shop is more expensive and your broadband is and your energy is and just about

everything else. So it is going to be tough, I think, on households that are unlucky enough

to be refixing in this period in particular.

There is something else too, eerily reminiscent of the trough of truss. Arguably, what really

ejected her from office was the financial markets. They pushed up the price of UK government

debt because they didn't think the economic policy of the Prime Minister and her chancellor,

quasi-quarteng, were credible. Enter Jeremy Hunt, then Sunak and government borrowing costs

fell. And yet, almost without anyone noticing, UK government costs are at roughly the same

level as they were in Truss's dog days. This is worrying, a point I put to Liz Martens.

We should be concerned about it. Essentially, as yields rise, it's really reflecting exactly

the same thing. Markets are expecting interest rates to rise too because inflation is higher.

So they're expecting the Bank of England to take rates higher. But of course, the higher

yields go, the higher government borrowing costs go, the more the government is spending

on servicing the debt and the more we're spending on servicing the debt, the less there is left

over to service everything else. So the government will want those bonds down. They'll want interest

rates lower, but they also really will want inflation lower because a quarter of our debt

is also linked to inflation. And so is other spending, things like benefit spending, pensions,

etc. So the government will want interest rates and yields to come back down, but I think primarily

they'll want inflation lower first. Do you think there is a risk now? And it's still sort of early

days in seeing how this crisis and these indicators play out. But is there a risk that Britain

has an unusually bad core inflation situation? By comparison to other European countries,

certainly the United States, but even other European countries now, if we do have a particularly

bad core inflation problem, why is that? Well, I think it's a reality for the April numbers. UK

core inflation rose to the highest in, I think it was 31 years, 6.8%, which was higher than pretty

much anywhere else in Europe. Why that might be, I think there's a couple of things going on. One

is unit labor costs are high. So that means basically the amount a company is spending on wages

to produce one unit of whatever it produces. That is particularly high in the UK because

wage growth is high and productivity is pretty low here. And playing into that is an unusual

decline in participation in the labor force that we've had in the UK. So while participation dived

everywhere in the pandemic, in the UK our recovery has been particularly slow and a big reason for

that is changes in migration. I think that's one factor, but also we have had a big rise in the

number of long-term sick people who are signed out of the labor market because of that long-term

sickness. So that has meant acute pressure on private sector wages, which of course pushes up

company costs and in turn translates into consumer price inflation as well.

And Brexit as well as part of that. Well, Brexit's done primarily. Well, first of all,

the exchange rate is probably lower than it would have been had we not left the EU and that

obviously translates to higher import costs as well. It's meant that the shift, the mix of

immigration has changed. So we've gone from having a lot of unskilled migration from the EU to having

a lot of skilled migration from outside of the EU. Now that has been very helpful for the National

Health Service, but it doesn't help you if you're a construction business or a restaurant or a

hospitality business, those kind of things. So the migration piece, I think certainly

reflects Brexit factors. And then of course you've got that kind of non-tariff barrier that's pushed

up company kind of admin costs and importing things from the EU as well. So yes, I do think

Brexit probably plays a role here. And maybe that's the way to think about these two premierships.

One short, one a bit longer, that of Truss and Sunak. Truss, Trussonomics have become synonyms

for tumult and turbulence, an acute illness or a heart attack. It defined her premiership

and it fell. But just because what we're experiencing now is a bit quieter, is slower,

it makes it no less lethal for Sunak. The worry is that the British economy

now has a chronic disease, diseases as it has in the past. And though it doesn't get the headlines

every day, it is that which is driving everything. It really feels as if the clouds in Britain's

economic sky are darkening.

Right, that is it from all of us for this week. John and Emily, of course, couldn't be here.

Emily's still in Moscow. John is at a just stop oil march, but they both should be back

on Monday. Remember, you can catch up on all of our shows from this week on Global Player and

send us story tips and feedback to newsagents at global.com. Thanks to our fantastic production

team on the newsagents, Gabriel Radus, Laura Fitzpatrick, Ellie Clifford, Georgia Foxwell,

Will Gibson-Smith, Alex Barnett and Roy Simon. Our editor is Tom Hughes and our executive

producer is Dino Sophos. It's presented by Emily Maitlis, John Sobel and me, Lewis Goodall.

We'll see you on Monday. Have a lovely weekend.

Machine-generated transcript that may contain inaccuracies.