Daily Podcast Year In Review: What 2023 has taught us about… the Economy

Daily Podcast Year In Review: What 2023 has taught us about… the Economy

[Applause] I’m Neil paron welcome to this special edition of The Sky News Daily podcast where uh we’re going to be looking back at 2023 through the prism of Economics the numbers the data the cash in your pocket times well they are certainly tough right now indeed they have been

That way for for longer than any of us would care to remember but are we looking towards the future with optimism or are we scrabbling around down the back of the nation’s sofa looking for some spare change someone not short of the answers and indeed not short of a

Bob or two our economics and data editor Ed Conway if only nice if only nice to see you Ed look nice to see you I suppose I suppose the easiest way to start this is looking back on the year starting at the very beginning 2022 was

Pretty rough we had yeah yeah we had we had Liz truss we had quasi quaten we had the the mini budget we had all the ructions in the economy 2023 richy sunak and his Chancellor Jeremy Hunt were supposed to steady the ship did they yeah and it’s it was

Supposed to be more boring and you know from our perspective um which which I think no people would think would be no bad thing after what happened in 2022 and yeah it kind of has been more boring I mean you know the there’s certainly big economic forces going on right now

That are not boring and are very tough particularly you know cost of living and we can talk more about that because you know while it was Headline News before you know 2022 as well as being Liz trust let’s not forget one of the things she did when she was in office that wasn’t

Kind of pulled back was the energy price guarantee it was a massive issue then and we were kind of wrestling with what was happening but these things kind of don’t go away and so for a lot of people cost of living um it’s just been this squeeze that’s continued even though the

Annual rate of inflation’s gone down so not boring from that perspective but you know the stuff that Jeremy Hunt has wanted to do studying the ship you know it’s it’s fair to say in comparison with what was happening previously he certainly has done the problem though is

Just look I was just looking back at the numbers and basically you know the economy has just been flat it’s been this eerily Flat Line it hasn’t really grown much at all over the past year but yeah but we we didn’t go into recession though did we and I I don’t like to

Remind people of things that they said you know this time last year but you you were one of those who were concerned that we could be going into did I say did I say recession even perhaps not as deep as it it perhaps wouldn’t be a deep recession but we certainly concerned

About it that’s thank you for calling me up but no I no I mean like that’s that’s like it did look it looked pretty bleak after what happened last year I think particularly it wasn’t it wasn’t just the what happened with the mini budget

It was just that you know we as a nation were and are facing this massive kind of cost of living adjustment where suddenly everything you know energy kind of goes into everything suddenly everything was more expensive and so we were poorer as a result we haven’t yeah we haven’t gone

Into recession so I was wrong on that um but it has basically been kind of just just nothing it’s been you know you normally expect the economy to grow at maybe like 0.5 0.7% a quarter but over the last year it’s grown about 0.5% for the whole year so you know you’re

Talking about kind of like a quarter uh of the performance you might have normally expected and what does that mean in practice it means that you know we’re not seeing our living standards improving so while it’s not technically a recession so wrong Conway wrong um in

Like in practice in terms of like how it feels I think it has felt for a lot of people like recession it’s felt like a really a really tough period particularly and still does yeah of course and particularly when you add on top of that the inflation figures that

We’ve been seeing inflation and interest RS as well I saw on top of that you go but but have we have we perhaps turned the corner on on on both of those things well I think that’s the good question because you know yes definitely on

Inflation yes that it is now down uh and it is probably going to continue going down and the the chancellor prime minister have met their target pledge whatever it was at the start of the year of trying to Harve inflation I mean how much they had to do with that is is

Question the answer by the way is kind of nothing uh but even so or maybe like at the margin it kind of helped but it’s the bank of England’s job to try and bring inflation down they’ve done so by raising interest rates really high to five and a quarter percent I don’t think

Even at the start of that’s probably another thing I would have got wrong I didn’t expect it to go quite as high as that well precious few did um but uh it’s I think the interesting question now I mean you know we’re talking mostly about the year that’s been but now those

Interest rates are at kind of five and quarter perc that’s really tough for a lot of households it’s tough it’s tough in a kind of isolated way so if you’ve got a mortgage and you’re looking to refix that’s a tough kind of shift you’re going through and we’re all

Seeing that with home owners across the country but for other people it’s it’s not that tough if you got savings actually it’s pretty it’s a pretty good time you’re seeing interest rates you’re seeing on your savings for the first time in ages the question now is how

Quickly the bank of England lets those those go down and and that again is an open question most economists think it’s going to kind of come down towards the middle of next year maybe even as soon as the spring but the bank you talk to the bank and they’re like it’s not

Coming down anytime soon so there’s a bit of expectation management going on but but what of the the concern conservatives and their claim to have you over this year you know taken some pretty dramatic action on on taxation I mean you know the the days of calling

The conservatives the party of low tax I would gently submit might be over at least for this part oh it’s gone I mean you know look at the data it’s straightforward the tax burden is now rising to the highest level that it’s been in in the postwar period I thought

They taken the biggest tax cutting measure you know in in In Living memory no it’s it’s just you know it’s kind of phraseology I mean well yeah yes technically speaking what you saw imposed in the Autumn statement were some big tax cuts but they followed some very big tax increases the previous time

Around so if you kind of even it all out in net terms taxes are much higher than they were before much much higher and partly that’s because of inflation because the nature of those tax increases we saw before it ratchets you know more and more people the it’s not

Like the rates going higher but more and more people get grabbed into those higher rates of Taxation fiscal drag they call it and the upshot is we’re all paying more taxes as a result across the country more than we have done for decades but there is I think there’s a

Kind of legitimate question as to you know would any party have been able to change that if you look across Europe to some extent the us but certainly across Europe everyone is seeing their tax burden go up so you’re seeing what they call secular demographic Trends uh there

But but I suppose the the kind of the complicating factor in this country is as well as seeing the tax take going up in the pressure on our finances the pressure being felt through our finances in that fashion we’ve also seen the biggest drop in living standard

Over the course of a well quality of life the quality of life for an awful lot of people right now because of rising energy cost Rising food cost so on and so forth it’s pretty Grim totally and and and that goes back to that point

You know that you know in a way we saw this coming kind of this time last year when energy is kind of a proportion you know maybe 40% of everything everything you know everything we do if that thing that 40% has just gone up enormously and you’re not actually producing most of

The energy cuz it’s coming in from Russia or somewhere else then we are poorer as a result now that’s not everything but it is a large part of the explanation for why everyone’s feeling so much worse off there’s other things you know we can talk about in due course

About where the UK isn’t doing very well but basically it is a massive tax on the nation and we’re all feeling it and yes it hasn’t manifested as as as a kind of technical recession but it’s manifested as a big fall in living standards and that fall in living standards was

Happening last year it’s still happening this year and it’s potentially going to happen next year as well less bad than it looked for a while but it’s still it’s it’s it’s really tough I think and I think you know people are right to feel frustrated and grieved by this

Because we haven’t seen like anything like this for you know for decades I mean I think I think everyone will have Mo will have moments that they can speak to that they kind of gives their own personal experience but I remember the first time I wandered into a shop this

Year and they ended up paying £575 I think it was for a tub of butter right we will not mention brand names that’s I mean that’s got to be a good butter so it it wasn’t quite as good as 75 I tell you that much honestly you know I know

I’m even getting more Scottish as I’m saying this here but but but if we have a situation where you know there have been uh drops in the wholesale costs that that companies have been that that that companies have been experiencing but as as Sky journalism this year has

Shown those savings have not always been passed on to the consumer particularly I think the one that that seemed most egregious to me was in terms of baby formula yeah it’s it’s it it is egregious and and there’s no a lot of the time there’s no excusing it these these

Things you see companies trying to kind of make margin now like if you take a step back across the whole piece you know there’s been loads of research about whether there’s what’s called greed flation some economists call it greed flation so our companies just trying to kind of make extra money try

Trying to make the most of this inflationary Spike and get a bit of extra margin out of it it doesn’t look actually across the economy like that as a massive problem okay so so maybe you’re seeing isolated cases where people are trying to make have an

Opportunity uh and make the most of it uh and in some cases it is kind of egregious but broadly speaking you know everyone’s costs have gone up we’re kind of still adjusting to this world where some of their costs are kind of evening out the the the tricky thing about

Inflation okay is that when we talk about inflation it’s a rate okay so it’s the rate at which prices are going up each year that’s what we typically look at the rate has gone down the overall level is still much higher than it was a year ago the overall level of gas prices

Much higher than it was a couple years ago and so it’s that shift from a couple of years ago to now we are still in this other world you know the the kind of Putin Ukraine world we’re in this other world where everything is more expensive

And as a result of that it’s all feeding through into our pockets and some unfair stuff is happening along the way but unfortunately you know we’re kind of taking this miserable medicine just just in terms of of international comparisons though how has the UK been performing

Because you can pick and choose your set of data and the reason I asked this you know look across the Atlantic at the United States Joe Biden’s chances of having a second term are diminishing because of the way the economy is going the there going there 2023 we saw China

Going into deflation as well by comparison though actually so so the US is doing better than the UK uh the UK is maybe doing a little bit better than much of Mainland Europe so so look look at what we’re going through at the moment in Germany it’s it’s worse you

Know they’ve had a recession in Germany they’re de-industrializing in Germany faster than we have they their economic model was far more reliant on cheap Russian gas than our ours was so you’re seeing some of the same things but multiplied uh in Germany and and a similar story across much of Europe um

China as well I mean you know it’s postco no one people thought that China might bounce back far faster than it has and and it hasn’t really and that’s the concern is no one’s quite sure kind of where the engine room for the global economy is right now it used to be that

You could rely on China when things went wrong and that’s what happened in 2008 doesn’t seem like that anymore and that’s making a bit nervy what what what what’s been the effect on the global economy of what we’ve been seeing most recently of course the Ukraine conflict

Now predates you know even 2023 but but but the the more the violence that we’ve been seeing in own the Middle East so far I mean it it’s been much less marked than we’ve saw in Russia in and Ukraine just because Russia is one of the world’s biggest producers of natural gas

You know Israel produces a bit of a bit of gas uh there there’s gas actually off the coast of Gaza as well not all that much but nonetheless some but it’s not like these are areas that produce provide a lot of our energy and it because it’s not yet clear whether

Iran’s going to kind of like tip into this in the way that some people feared you’re not seeing those Energy prices going up so much of course it doesn’t negate you know the severity of what’s happening there but also it’s a reminder you know what’s happening right now in

Ukraine still now you know kind of years on Ultimate almost uh is is a massive deal for ukrainians for Russians obviously as well but but for the global economy with still we are still seeing the effects of that right now and and those effects are greater for the time

Being you know touchwood than what we’re seeing in Israel leaving aside the human consequences a question that that that that I have struggled with over the course of this year maybe you have an answer to it does this government still want the United Kingdom to be as they

Have stated on on many occasions to be a high skill High wage economy and the reason I ask and you you’ll already know this of course is that you know relatively recently you know in 2023 we discovered the net migration figure to this country was 3/4 of a million yeah

It’s an extraordinary number and actually I I kind of looked at that number to try and get some historical context on it just because you know is this is this unusual when you adjust for population that is the highest that we have ever seen you know even going back

Hundreds of years it is higher than anything we’ve seen in any previous period peace or War so PE people are right to be kind of you know kind of disturbed by I guess because this is unprecedented and whether it kind of prefigures a big change in Social or

Economic outcomes I just don’t think we know yet because a lot of these numbers this a lot of these numbers are students so these are people which who theoretically might go back to to where they where they originated from after they they’ve done their studies but we

Don’t know because the nature of our immigration system has just changed very dramatically you know post brexit new rules have come in and they have made it you know much more easy particularly for students to come in to stay for a bit longer potentially to have some of their

Dependence with them and add on to that the kind of economic stuff that’s going on at the moment so there’s concern that some of the workforce you know that basically not enough people are working in the UK so a lot of people are coming for work as well so it’s it’s partly

Students uh it’s partly people going in to work and mostly actually in the Health Service so you know were it not for this this large number in Immigration our Health Service wouldn’t necessarily be able to function but actually it’s it’s only a slice of it the thing that I was surprised about

When I kind of broke down the numbers I thought that most of it was going to be explained by Ukraine and Hong Kong because obviously you’ve had you know big immigration uh from people who needed to to come from those areas uh that only was a relatively it was

Sizable but it was compared with the rest of it it was relatively small so yeah these These are big numbers and I just don’t think um I don’t think the government was expecting them to be quite as big as they actually were in the end but but as you say I mean people

Are gen generally under these schemes that we’re talking about coming here to work I mean this is this just a natural consequence of us not being able to recruit directly from the continent well we have swapped we’ve swapped relatively high levels of European EU immigration

Uh now now when you look at EU kind of citizens they are leaving the UK and net terms we’ swapped that with immigration primarily from places like India some parts of Africa as well China as well so it’s it’s it’s a swap and also by the way UK people so what was another

Interesting kind of nuance is that it used to be that UK people there was kind of immigration in in British born people they would kind of go overseas they a lot of them going to Europe most people go into Europe because we were all part of a single Market that’s now reversed

So a lot of people who I guess pre hither to might have gone over to Europe are not going they’re staying at home but in a sense haven’t we haven’t we kind of put the cart before the horse I mean we’re turning off the TAPS in terms

Of people coming to this country to work we have an awful lot of people in this country and this goes to productivity and so on but we have an awful lot of people out of work at the moment and seemingly never a lot of them seemingly

Never coming back you know if the idea is you know British people can do these jobs well we’re not there yet we’re not going to be there for ages no but so far you know so far the evidence is that it’s proving really difficult to get people to persuade people to come back

Into work you know British born people a lot of whom left the workforce during covid a lot of people just haven’t come back some because they’re long-term sick some because they they don’t want to mostly it’s kind of long-term sick but there’s been this massive shift and this

Is you know the big problem facing Jeremy Hunt richy sunak or one of them is that trying to get the workforce back up is a big part behind trying to get the economy going again and they haven’t been able to do that yet but like more

Broadly if you take a step back I think the issue is like you know we we we voted for brexit as a country um no one was entirely agreed on what brexit meant we spent years kind of debating whether you were going to have a kind of hard

Brexit or a soft brexit but again not really fundamentally asking the question about what it actually meant does it mean more openness to immigration does it mean more closed borders in the end we have opted for more openness to immigration but again it’s not clear whether that was what people wanted when

They voted for it but we’re starting to see kind of what economists would call revealed preference so this revealed preference of the UK is openness allowing many people to come in and now you have the revealed preference of well they’re they’re trying to legislate in Parliament to try and prevent people

From coming in to me it looks like we still haven’t worked out as a nation what kind of economy what kind of society we actually want which is kind of disappointing given how long we’ve agonized over this and how much noise there’s been that we don’t know where we

Want to head right now but is there is there the opportunity for us to know that if there is not a national conversation or at least a conversation led by politicians who are open and honest about the pros and indeed yes the cons of migration to this country I

Don’t think we’ve seen it I don’t think I certainly don’t think we’ve seen it seen it since no not yet but I but but you know when you look at a lot of the polling when you talk to people uh around the UK they actually have very mature attitude towards immigration you

Know a lot of people actually understand you know some people understand be concerned about jobs being kind of taken by those from overseas and want that opportunity but many people also see that we need workers to be able to do certain jobs that uh that we have a

Shortfall in terms of uh availability of works for and people are not per se for the most part against migration in fact when you look at polling actually most people kind of in favor of it particularly if it helps the economy um the issue like you say is that we just

Haven’t had a kind of very grownup debate about this and it’s like with everything I mean may maybe that’s just the maybe perennially economics people bemoan the fact there’s no kind of grownup debate about any of this stuff so but but it definitely feels like it with migration it definitely feels like

It with brexit you know what kind of a brexit do we want we still don’t really entirely know same thing with migration same thing with a lot of economic management well let’s let’s conclude shall we by by talking about brexit and know it’s your favorite topic Ed um it’s

My least favorite topic I find it I find it a bit boring sorry why sorry no our economics and data editor Ed Conway suggesting that brexit is boring in what sense no I’m interested I’m fascinated by this think about think about what the EU does you know fundamentally this is

Boring stuff it’s boring stuff it’s regulation it’s trade agreements no one much cares I do I do okay yes you do I care about trade agreements I care about rules of origin I care about regulation on products standards and all of these things but fundamentally it’s not massively life-changing in the way that

Most of the stuff that this government decides it’s not massively life-changing in the way that so many of the other bits of Economic Policy are and so you know the the fundamentals of what we can do now that we couldn’t do before are not massively shifted from from where

They are but I wish that we’d at least start talking about it in a mature way because at the moment you know we just we just we just haven’t so I get bored both by the nature of the debate but also by this kind of idea that brexit is respons responsible for everything

Whether it’s the end of the world or indeed kind of changing the the economic model so we’re Singapore on T is true but no no but but but again I think I think I agree with you to the extent that I think the debate such as it is is

Is reductive you will have people taking one of two positions one the brexit breaks are on we can’t recruit to this country we can’t get the growth and productivity we need because we don’t have the access that we used to on the other hand there are those who say well

Look look at the inward investment that we are still getting South Korea Nissan this investing heavily in the north why would they do that if the brexit breaks were on yeah but that’s but that’s cuz it is mostly a kind of a falce debate I think talk talk to people in business

And they will say yes there is a factor here which is that you’ve you’ve put scattered some extra sand in the friction It’s s in the wheels of of of Industry so there’s that extra friction so they will bemoan that but they’ll say in the ground scheme of things there’s

Other there’s other things on my priority list that come up a little bit higher than that uh but it’s annoying uh and wouldn’t it be better if we had a kind of arrangement that had less friction most business people particularly international trading business people would say that but it’s

Not at the top it’s never been at the top and it’s never been the most important thing and that’s why I think it’s like it is kind of boring because the stuff about the stuff that brexit actually should be able to deal with is really kind of minor in the grand scheme

Of things and I think we should kind of grow up and start talking about something else because our fundamental issues in this economy that holding our us back that’s not about brexit it’s about whether we’re able to grow it’s about whether we’re able to you know create opportunity it’s about whether

We’re able to kind of you know create businesses it’s about whe whether we’re able to sort out the Health Service like none of that stuff is going to be affected by brexit brexit to me just seems like a convenient excuse both for pro brexiteers and anti- brexiteers to

Go on about brexit so they can ignore the much more tricky kind of you know chewy things that we need to concentrate on that’s it’s my personal opinion from years of having to cover frustated but you it’s to be a to say oh it’s all brex For Better or For Worse

But it’s not it’s not true if we’re being kind of honest with ourselves I don’t think fingers crossed Ed that come 2024 you will never have to utter the word r I’m sorry to rant we enjoyed it Ed Conway great to have you back thanks very much mate thank you and that is

Your lot for this very special edition of the daily we’ll see you against It [Applause]

Sky News Daily host Niall Paterson looks back at the major economic, business, and political stories of 2023 with our economics and data editor Ed Conway.

They discuss whether Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have managed to steady the ship after Liz Truss’s disastrous Mini Budget of 2022, plus the cost of living, the impact of migration, and the global economy.

You can listen to more from this episode on the Sky News app, or by clicking here to subscribe wherever you get your podcasts: https://podfollow.com/skynewsdaily

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