The Intelligence Squared Economic Outlook with Martin Wolf (2025)

Young people in the UK are disillusioned by slow growth and rising housing costs; they have lower fertility, delayed family formation, and declining belief in democracy; similar patterns appear in America, where disillusionment has contributed to support for authoritarian figures like Trump

“a lot of the victims who who are not enjoying what they thought their parents did for example are younger people so we've got an awful lot of disillusioned people um in their 20s and 30s uh I think that shows up in many different ways and family formation and so forth fertility and so forth and well if you start depressing young people younger people well young relative to me um they start getting completely disillusioned with politics and we've seen this in America too basically a lot of polls I've been looking at them show that quite a large part of the younger generation broadly defined don't think democracy works and we quite like to have a strong man who sort it all out what you or I would call a dictator”

Building the housing and infrastructure required to support UK growth will be politically dynmite because it requires construction in places where people (established homeowners) don't want it; this creates a choice between disappointing young people (no housing) or established property owners (views spoiled)

“being able to build stuff is probably a necessary condition but of course it's also politically dynamite and we'll see how this goes... we have decided as a country um to increase our population very substant essentially mostly through immigration over a long period uh we also have young people who want households of their own and because we are an older Society there are more households per number of people than they used to be and we are a relatively small country though there's actually plenty of land um um uh and the result is that if we want to build housing for all these people um to live the way they sort of want to live um then it's going to involved building a lot of houses in places where people would rather there weren't any houses so we have to make a choice about who gets miserable uh there will be the one group of miserable will be youngish people uh who don't have any real hope of getting on the housing ladder who live in cramped quarters and all the rest of it and but uh middle-aged and older people will have continue to have their beautiful views”

Most significant business investment decisions for the year have already been made and will take effect over the next several years, so tariff uncertainty affects investment primarily in the medium and long run rather than the immediate term.

“most of the actually most of the investment done by significant business this year has already been decided uh it will affect next year and the year after and the year after it's a it's a long run effect”

Global debt-to-GDP ratios for both public and private debt are probably at historic highs, creating fragility in the system such that significant adverse shocks (wars affecting energy, stock market volatility, or financial sector stress) could trigger cascading crises.

“if you take the whole world we are we have the highest ratios of debt to Global GDP be probably in history public and private those are fragil these are fragilities um and of course if we get further significant Wars which affect the energy sector particularly since Helen's going to talk to you here that's very much her field well we know that big energy shocks can have rather big uh consequences”

The stock market's euphoric boom in the Magnificent 7 was based on assuming exponential growth and infinite valuation of companies like Nvidia, similar to the dot-com bubble of the late 1990s, and extrapolation of this kind is often very dangerous.

“the stock market response in terms of driving up the So-Cal magnificent 7 in the US was a CL you know a classic euphoric boom uh and was based on the assumption that uh you can basically project things forward exponentially and these companies particularly Nidia will be sort of infinitely valuable and well what this show shows you is extrapolation of that kind is often very dangerous it's happened before think of the.com bubble in the late ' 90s”

Reducing the UK's corporation tax rate to Ireland's 15% level is extremely unwise because: (1) Ireland is a tiny country (4-4.5 million) while UK is 70 million, (2) the tax base effect might not compensate for lower rates, (3) the government would have to raise other taxes or cut spending, which it won't do.

“generalizing from Ireland which was where the crucial thing is the attraction to foreign investment to Britain is I think extremely unwise it's not going to have the same effect and the problem is if we lower our tax rate to that level then we are I think it's very implausible that Revenue unless we uh because we're almost Haring the tax rate uh is going to compensate for that and so they're going to have to find some other tax or cut cut spending that they're not going to cut spending”

The combination of large fiscal deficits, constrained monetary policy from Fed independence, and rising interest rates resembles the conditions of the early 1970s US, which led to a decade of inflation and the Volcker crisis of the 1980s, and this scenario is a plausible risk over the next 2-3 years.

“the combination of events that I've just described was sort of what happened in the US in the early 70s and it's what led up to the decade of inflation and the vulker crisis in 80s um there are a few of us few economists who think that sort of thing might return uh because Donald Trump will be operating under constraints that he bu in temperament won't want to recognize”

Younger generations in democracies are increasingly skeptical that democracy works and express preference for a strong man to 'sort things out' (i.e., authoritarian rule), as shown in polls, and this trend appears more pronounced in the US than the UK.

“a lot of polls I've been looking at them show that quite a large part of the younger generation broadly defined don't think democracy works and we quite like to have a strong man who sort it all out what you or I would call a dictator now I think in Britain it's not gone as far as America thank heavens but that's why Donald Trump is there”

If full set of 25% tariffs on all Canadian exports to the US had been implemented, it could have taken 4% off Canada's GDP, while the UK would be much less exposed because Europe remains its largest trading partner and even losing all US trade exports would be unlikely to exceed 1% of GDP impact.

“there was an estimate that had the full set of Canadian tariffs which was 25% on all Canadian exports into the US had they been gone into place it could have taken 4% off Canada's uh GDP off its off its National output”

You can't beat something with nothing; there is no credible alternative reserve currency to the US dollar because the US is the world superpower and convertible currency alternatives are currencies of US allies or weakly positioned

“I've repeated this so often you can't beat something with nothing and so of course the US can destroy the dollar if it really tries but I don't think it's trying hard enough the us all the convertible currencies of any significance that aren't the US dollar are the currencies of us allies or maybe nowadays there are no us allies because the US doesn't think it has any”

Being able to build stuff is probably a necessary condition for growth, though it is not sufficient, but it is politically radioactive and the government faces risks if it pursues it.

“I would say being able to build stuff is probably a necessary condition but of course it's also politically dynamite and we'll see how this goes”

Economists' influence on policy is limited because governments must get elected and economists don't; it's perfectly understandable that politicians often ignore expert advice; additionally, public debate on complex economic policy is difficult to frame rigorously, so alternatives are rarely presented in a clear way

“I think it would be quite I've always felt that it would be quite wrong to expect uh great influence first because not that many people read the AF let's be clear some of them are relatively influential people uh but in the end governments have to get elected and my job is not to get elected so I think it's perfectly understandable that most of the time they ignore us the um what is a little depressing is and I understand that this is a serious question is that it's very difficult to get the public public debate on economic policy issues which obviously have some degree of technicality to frame the Alternatives in a reasonably clear way”

If the UK lowered corporation tax to Irish levels (15%), revenue loss would likely not be compensated by growth effects, requiring either alternative taxes or spending cuts; Wolf would prefer land value taxes, which are most neutral and avoid distortions

“the problem is if we lower our tax rate to that level then we are I think it's very implausible that Revenue unless we uh because we're almost Haring the tax rate uh is going to compensate for that and so they're going to have to find some other tax or cut cut spending that they're not going to cut spending maybe they should but they can't and I don't it's not completely obvious what the other tax revenues but I of course being a Henry georgist would go for raising land taxes right uh which are the most neutral taxes and it's not inheritance tax it's something uh something different”

Ireland's success with a 15% corporation tax rate was based on attracting foreign investment (particularly US tech and pharma) as an offshore center, but Ireland is a country of 4–4.5 million; generalizing from Ireland to Britain (population 70 million) is unwise and would not produce similar effects

“the key part of what the the Irish did and I admire them for it is uh they made Island the offshore Center within the EU for a very sizable group um crucial foreign investors namely American companies particularly in the tech business and in the Pharmaceuticals business and good for them but Ireland is a very very small country and uh you know basically what is the population of the Irish Republic four four and a half million somebody will go to and the population of Britain is getting towards 70 uh generalizing from Ireland which was where the crucial thing is the attraction to foreign investment to Britain is I think extremely unwise it's not going to have the same effect”

Trump's administration is profoundly radical and is transforming US governance, the constitutional mechanisms, rule of law, and possibly electoral processes; this transformation will have economic ramifications far into the future

“this is a profoundly radical Administration which is transforming the governance of the US and I think I think we will discover over time that it is changing the Constitutional mechanisms of the United States in quite BR profound way including the way the rule of law Works uh possibly electoral processes so this is I think quite profound but if we look at that could have ramifications well into the future”

The Chinese Renminbi (RMB) cannot serve as an alternative to the dollar because it lacks sufficient financial asset depth and liquidity; China deliberately does not want to create an alternative because it does not want to run an economy with the characteristics of the US (capital account openness, reserve currency liability)

“China is not trying to create uh an alternative to the dollar because it doesn't want to run an economy which has the characteristics of the US so the R&B the remb is um structurally as it were relatively a liquid that means there are a lot of purposes for which an international currency is useful that the R&B simply cannot provide and WOTE I've been arguing that for 20 years and it's not going to change it will be used as a vehicle current currency for trade trade not fin Nets with other with countries closely connected to and doing a lot of trade with China and that role will increase but it will remain relatively modest there are no huge Suite of liquid Financial assets that can really serve as Reserve assets”

The renminbi will increase in use as a trade vehicle currency for countries closely connected to and doing significant trade with China, but this role will remain relatively modest compared to the dollar's global function.

“it will be used as a vehicle current currency for trade trade not fin Nets with other with countries closely connected to and doing a lot of trade with China and that role will increase but it will remain relatively modest”

Much of the redistribution across society has occurred through asset price appreciation in property markets rather than through wages or deliberate policy, creating a situation where asset owners (typically older) have accumulated wealth while younger people unable to enter the housing market feel profound disillusionment.

“it's not complete stagnation but relatively growth that is imperceptible and um and the distrib that makes distribution difficult and so much of the redistribution is occurred essentially through our property Market uh because asset prices for whole house of reasons have gone through the roof um and that's partly inevitable and partly result of policy planning restrictions the the government is right on this and the result is clearly we have a very large proportion of the population who feel very profoundly disillusion for that reason”

The yuan will be used as a vehicle currency for trade (not financial transactions) with countries closely connected to and doing lots of trade with China, and this role will increase but remain relatively modest.

“it will be used as a vehicle current currency for trade trade not fin Nets with other with countries closely connected to and doing a lot of trade with China and that role will increase but it will remain relatively modest”

If the UK wants to invest significantly more in the future while maintaining fiscal sustainability, it must raise taxes proportionally to spending, as spending cuts are politically unrealistic and were not achieved by either the current or previous government.

“if we're going to spend at this level uh we're going to have to tax at this level so there are two questions that that raises can we cut spending significantly and how well this government is not going to it was never likely and the previous government interestedly never did either um and it would certainly be very very difficult”

Wolf has been arguing for 20 years that the yuan will not become a reserve currency comparable to the dollar, and this position has not changed.

“WOTE I've been arguing that for 20 years and it's not going to change”

Stamp duty and transaction taxes are bad economics because they discourage market transactions and reduce liquidity; land value taxes are more neutral and should replace transaction taxes, but face political opposition.

“there's a general principle it seems to me in economics which is unambiguous that is transaction taxes are really bad taxes so because we want transactions to happen we don't want them to stop them uh because that's what makes markets reasonably liquid so uh the we've gone for stamp Duty because we aren't prepared to raise land value taxes”

If Trump maintains or increases the Trump-era tax cuts set to expire, and does not cut spending enough to stabilize the fiscal position, the federal budget deficit could grow from its current ~6% of GDP to 7-8% over the medium term, pushing federal debt ratios to 130-150% of GDP over the next 10 years.

“they're going to reconfirm and probably increase the Trump tariff tax cuts of his first term which are coming up for Renewal uh it looks as though I think it's as certain as anything could be in the end they won't cut spending enough to stabilize the fiscal position if that happens the budget deficit which is the federal budget deficit which is already round about a little bit over 6% of GDP could go over the medium term to seven or eight this an economy with full employment on that sort of trajectory according to the Congressional budget office the debt public debt ratio the Federal debt ratio to GDP can go move up to 130 140 150% of G the next 10 or so”

Canada would face a 4% GDP loss from 25% US tariffs (as estimated), while the UK would face less than 1% direct export impact because Europe (not the US) is its largest trading partner; however, confidence effects could be much larger if the US-UK relationship deteriorates

“there was an estimate that had the full set of Canadian tariffs which was 25% on all Canadian exports into the US had they been gone into place it could have taken 4% off Canada's uh GDP off its off its National output what about the impact on the UK um it is said to be slightly less exposed because of its trading conditions with the it will be much less exposed for Canada the us is overwhelmingly its dominant trading partner and it uh has quite a high trade ratio because it's a medium-sized economy so the impact on on for us uh we don't have no trading partner as big as Canada is to the as us is to Canada our biggest trading partner by quite a long way still is Europe yeah so if we get into detail figures but I think even if we lost all of us trade exports which I think it's very very unlikely I'd be very surprised it would exceed 1% of GDP as an impact effect”

US debt-to-GDP trajectory, if Trump renews tax cuts and does not cut spending, will move federal debt from approximately 6% of GDP budget deficit into a 7–8% deficit over the medium term, driving public debt-to-GDP to 130–150% within the next 10 years according to Congressional Budget Office projections

“it looks as though I think it's as certain as anything could be in the end they won't cut spending enough to stabilize the fiscal position if that happens the budget deficit which is the federal budget deficit which is already round about a little bit over 6% of GDP could go over the medium term to seven or eight this an economy with full employment on that sort of trajectory according to the Congressional budget office the debt public debt ratio the Federal debt ratio to GDP can go move up to 130 140 150% of G the next 10 or so”

Global GDP growth is currently forecast at slightly north of 3%, considerably slower than the 3.7–3.8% when Asia was growing 5–6% annually, primarily due to China's significant slowdown from those rates to approximately 4% growth

“the World economy if you look at latest forecast it seem plausible is going to grow somewhat north of 3%... the fastest growth will be in Asia um but considerably slower than it used to be uh that's one of the reasons growth has slowed it expected to be a little north of 3% and and it when it was really going was about 3.7 3.8 and a lot of that was because Asia was growing about 5 6% a year and it's now probably closer in all to about four the biggest reason for that of course by far is the slowdown in China”

US growth is expected to be 2% or slightly higher, Europe as a whole around half of that (approximately 1%), with the difference explained by profound demographic and other structural forces

“in the developed world uh unless something very big happens we can expect I think us growth at 2% or a little bit more and Europe as a whole around half of that and probably possibly a little bit less um there are profound demographic and other forces explaining some of these differences”

For UK base rates (central bank rates) to reach 2%, the economy would have to collapse significantly; given neutral rates are now positive and inflation 2% target is not far below, even major recession would only get rates to ~2%; so 2% base rates in the next 3–4 years is very low probability (one in three or one in four) unless external crisis occurs

“well the economy really has to collapse to get there uh and I certainly would never rule that out uh because economies do from time to time and the turbulence in the world is now large enough for such effects to occur a really big question so let's go back to the sort of basic economics here what and there's been a fascinating recent debate among econ eist which is not just UK specific which is what is the neutral rate of interest now uh for a long time it seemed to be zero which was essentially uh a negative real rate uh and that was the conditions after the financial crisis but I think we probably got past that uh that the neutral rate is a is a positive real rate um and if infl unless inflation Falls well below 2% a positive real rate is 2% plus uh and that means maybe in a really big recession we might get to 2% but we would have to well we would have to get there um you know really big recession what would cause a really big recession in this country the most obvious thing is explosion of inflation in the US leading to a massive tightening of monetary policy in the US and uh that would tend to create a global recession um that would affect us so external factors will be crucial but so let me put it this way I would say 2% interest rates in the UK short-term central bank rate in the next three or four years is very much less than even my guess would be looking at the world and all the uncertainty it may be one in three one in four probability”

Wolf is not convinced that building housing at the scale proposed (1.5 million homes / 800 per day) is actually feasible given planning constraints, suggesting the government's housing target will not be met.

“if the government succeeded in building was it 1.5 million houses which it won't”

Trump's policies will not solve the economic problems that caused his election; rather, they will likely worsen them or create new instabilities.

“he's not going to do anything to solve any of this by the way that comes back to your deregulation and the risks we I didn't discuss but I discussed a bit the Financial Risk but I think the political ramifications of prolonged economic stagnation are very profound”

The stock market euphoria around the 'magnificent 7' tech stocks was based on extrapolating exponential growth and assumed companies like Nvidia would be infinitely valuable, which is a pattern that is dangerous and has occurred before in the dot-com bubble.

“the stock market response in terms of driving up the So-Cal magnificent 7 in the US was a CL you know a classic euphoric boom uh and was based on the assumption that uh you can basically project things forward exponentially and these companies particularly Nidia will be sort of infinitely valuable and well what this show shows you is extrapolation of that kind is often very dangerous it's happened before think of the.com bubble in the late ' 90s it was different in many ways and this may have happened again”

Denmark is close to the richest economy in Europe and represents an interesting model combining flexible labor markets, superlative education, innovative dynamism (including anti-obesity drug development), and superior public services with higher taxes than the UK.

“the most interesting economy with some really smart ideas and I know who uh put this together is is uh close to the richest economy in Europe and that's Denmark and they and it has a generally flexible labor market superlative education it innovates crazily just look at these uh remarkable anti-obesity drugs which came out of it uh it is uh um relatively Dynamic and it still provides absolutely superlative public services and has higher taxes than we do”

The Euro Zone could theoretically provide reserve currency competition to the dollar, but it is a multi-currency zone without single fiscal policy, has fragile security dependence on the US, and appears fragile to most of the world; replacing the dollar with the Euro would require a revolution

“the only area that could credibly provide a reserve currency is the Euro Zone and uh it's a multicurrency Zone it doesn't have a single fiscal policy its security is ultimately still dependent on the US um and it sort of looks to most of the wealthy of the world somewhat fragile and though there is some it's possible to imagine some shift to using the Euro um but replacing the dollar I mean that's that's a really huge stress a huge stretch uh because the us is after all in the end the world superpower”

Moving from positive-sum to zero-sum economics is happening in the UK and wider West due to slow growth: younger people face housing unaffordability and labor market disappointment, creating political disillusionment and susceptibility to authoritarian messaging.

“once you move into an economy where the growth rate is as slow as this and the labor force is actually growing slower than the population too...then politics starts becoming pretty Zero Sum and in our country it's pretty obvious for reasons to do with the way housing markets things like that that that a lot of the victims who who are not enjoying what they thought their parents did for example are younger people so we've got an awful lot of disillusioned people um in their 20s and 30s”

Transaction taxes like stamp duty are economically harmful because they discourage market transactions and liquidity, and should be eliminated in favor of land value taxes, which are more neutral and don't distort behavior.

“there's a general principle it seems to me in economics which is unambiguous that is transaction taxes are really bad taxes so because we want transactions to happen we don't want them to stop them uh because that's what makes markets reasonably liquid so uh the we've gone for stamp Duty because we aren't prepared to raise land value taxes”

The UK council tax system, unchanged since 1991, is grotesquely inegalitarian because land value is taxed less on more valuable properties, effectively incentivizing concentrated property wealth.

“a council tax system which hasn't been updated since 1991 which is insane and also grotesquely inegalitarian because basically land value is less taxed the the more valuable the property”

If Trump removes millions of workers from an economy at full employment while running large fiscal deficits, the combination creates demand pressures with supply contraction, producing inflationary pressure that would force the Fed to raise rates, which Trump will oppose and which will likely cause bond yields to rise and stock market turmoil.

“if Trump in addition does manage to remove millions of millions of workers in an economy which is close to Full Employment the combination of these demand pressures with Supply contraction because of this would be inflationary y uh uh and many people have written a lot about this many American economists so uh so what would they do if inflation started to rise which would affect the FED will then start thinking about raising rates it's clear that Donald Trump will get very very upset about this so he's going to try very hard to stop them but assuming he doesn't and indeed even if he doesn't bond yields will start Rising quite considerably because and that will affect the stock market which he cares about”

Trump's current tariff announcements, including 10% tariffs on China and steel/aluminum tariffs, appear more as an irritant than a major macroeconomic factor, but could become significant if they trigger business uncertainty that depresses investment decisions in the medium to long term.

“it has to be pretty big it has to be rather more considerably more than he's done so far including his announcements of Steel and aluminum tariffs today it's 10% tariffs on China uh a long way from the 60% we were expecting uh uh but we may still get there um at the moment this this looks to me more irritant than major factor but of course if we move into an environment and to the last point in which uncertainty associated with what the hell is he going to do next SS really affecting business M decision making and particularly investment then we are in a different world”

If markets begin to think that macroeconomic instability cannot be controlled, they might suddenly go haywire, and there is genuine uncertainty about how this would play out.

“if they think this is not going to be controlled they might suddenly start going um uh going haywire and uh and I really don't know how they're going I don't think anybody knows how they're going to play that”

Deep-set political and structural constraints prevent the British government from implementing economically sensible policies like income tax increases, land value taxes, or planning reform, creating a political economy trap.

“by meticulously ruling out because of the nature of the political debate in our country all the sensible ways of raising revenue an income tax Corporation TA in tax corporation tax is already quite high but income tax council tax property taxes which are fantastically low on relatively valuable properties anything that uh uh uh sales tax exemptions taxing employers contributions which is a straight employment tax uh was bound to create the effects it has”

The Labour government's choice to raise taxes on employers (National Insurance contributions) rather than income tax, council tax, or land taxes was foreseeable as bad for employment and corporate confidence because it directly bashes business; alternative tax bases (income tax, corporation tax, property taxes, sales taxes, or employer contribution taxes) would have been less costly and more defensible

“by meticulously ruling out because of the nature of the political debate in our country all the sensible ways of raising revenue an income tax Corporation TA in tax corporation tax is already quite high but income tax council tax property taxes which are fantastically low on relatively valuable properties anything that uh uh uh sales tax exemptions taxing employers contributions which is a straight employment tax uh was bound to create the effects it has which it will be bad for employment and it will be very bad for for uh corporate confidence because it will bash them directly whatever the ultimate incidence is and it was foreseeable that that would happen and it has I think pretty clearly depressed confidence”

UK trend growth of GDP per capita between 2008 and 2023 was 0.7% per year, which is certainly the lowest for 100 years, reflecting a deep structural growth problem not obviously reversible by current policy.

“if you take the trend growth of GDP perhe head in the UK between 2008 and 2023 it's 7% and that's certainly the lowest for 100 years”

Public investment in the UK has been 'ludicrously low' since the 2008 financial crisis, and the government is right to propose increased investment, though it has failed to persuade anyone (including Wolf) that it will be growth-creating.

“public investment has been ludicrously low for since the crisis um so if we are going to uh invest and spend more we can perhaps borrow a little more if somewhat more if it's plausible that our investment is really growth creating which they clearly haven't persuaded anybody of and they haven't persuaded me”

Wolf predicts that the next prime minister of Britain will be Nigel Farage, based on trend of public disillusionment visible in polls.

“I tend to think the next prime minister of this country will be Nigel farage on that note”

DeepSeek's reported achievement of similar large language model capability at much lower cost than US AI investments suggests technological innovation is at early stages with more excitement to come; however, this also shows that extrapolative boom logic (assuming companies like Nvidia will be infinitely valuable) is dangerous and echoes the dot-com bubble, though AI may ultimately be cheaper and less energy-intensive than expected—which would be unambiguously good

“if it's true that they found a way and experts seem to think it's plausible that to do the same sort of thing as the large language models which were so expensive far more cheaply that seems to be a good thing M and maybe the Americans will work out how they did it and imitate it it doesn't seem to me at all implausible uh the um but it has told us that the processes which this particular set of technological revolutions we're at a very early stage and there's a lot more I think excitement to come... the stock market response in terms of driving up the So-Cal magnificent 7 in the US was a CL you know a classic euphoric boom uh and was based on the assumption that uh you can basically project things forward exponentially... but it might mean that some of the Euphoria about the tech sector in the US was exaggerated but it may also mean it all end up much cheaper and much less energy intensive than we thought and that seems to be unambiguously a good thing”

Inheritance tax on working farm assets forces disposal of land and makes farming families poorer; however, this does not necessarily end farming as an activity—land will be sold and others can buy and farm it; the question is whether continuity of family farming is necessarily more productive than alternative ownership, which Wolf doubts

“taxing the the working asset of a farm in inheritance tax will trigger the disposal of this land and or it's likely to trigger the disposal of this land and it will therefore make the farming family considerably poorer and the children will find it very difficult to continue as Farmers that seems to me correct and if that's really important then uh then um uh we shouldn't do it but I don't really understand why that's the end of farming cuz the land will still be there the the land will be sold and somebody can buy it and farm it so you have to convince me that the continuity of farming families generation after generation after generation is enormously much more productive than the alternative of land being sold and bought and I'm not I'm just not convinced that that's necessarily the case”

Trump's current tariff announcements (10% on China, plus steel and aluminum tariffs today) are more an irritant than a major macroeconomic factor, but if uncertainty about 'what the hell is he going to do next' seriously affects business decision-making and investment, the world enters a different scenario

“the point I would make there is it has to be pretty big it has to be rather more considerably more than he's done so far including his announcements of Steel and aluminum tariffs today it's 10% tariffs on China uh a long way from the 60% we were expecting uh uh but we may still get there um at the moment this this looks to me more irritant than major factor but of course if we move into an environment and to the last point in which uncertainty associated with what the hell is he going to do next SS really affecting business M decision making and particularly investment then we are in a different world”

The UK government has ruled out sensible revenue-raising options (income tax, corporation tax, council tax, property taxes, sales tax, employer contributions), forcing them to pursue employer national insurance contributions that depress confidence and employment directly.

“by meticulously ruling out because of the nature of the political debate in our country all the sensible ways of raising revenue an income tax Corporation TA in tax corporation tax is already quite high but income tax council tax property taxes which are fantastically low on relatively valuable properties anything that uh uh uh sales tax exemptions taxing employers contributions which is a straight employment tax uh was bound to create the effects it has which it will be bad for employment and it will be very bad for for uh corporate confidence because it will bash them directly”

Denmark and Switzerland are models the UK should study for economic success: Denmark has flexible labor markets, superlative education, dynamic innovation (e.g., anti-obesity drugs), and excellent public services with high taxes; Switzerland demonstrates successful decentralization.

“the most interesting economy with some really smart ideas...is is uh close to the richest economy in Europe and that's Denmark and they and it has a generally flexible labor market superlative education it innovates crazily just look at these uh remarkable anti-obesity drugs which came out of it uh it is uh um relatively Dynamic and it still provides absolutely superlative public services and has higher taxes than we do so and the other one which is bewilderingly successful...namely Switzerland...Switzerland is a miracle of decentralization”

The wealthy who would pay much more taxes under a land value tax system are a minority, so the policy is not distributively catastrophic from a median voter perspective, but it faces political opposition nonetheless.

“well well I'm not convinced that because actually the number of people who the people who were pay much more taxes at result are actually a minority like me I'm I am a staggering beneficiary of the ludicrous land value taxes in our country”

Ireland's 15% corporation tax rate attracted major foreign investment in tech and pharmaceuticals by making Ireland the offshore center within the EU for American companies, but this success cannot be generalized to larger economies like the UK.

“the Irish did and I admire them for it is uh they made Island the offshore Center within the EU for a very sizable group um crucial foreign investors namely American companies particularly in the tech business and in the Pharmaceuticals business and good for them but Ireland is a very very small country and uh you know basically what is the population of the Irish Republic four four four and a half million somebody will go to and the population of Britain is getting towards 70 uh generalizing from Ireland which was where the crucial thing is the attraction to foreign investment to Britain is I think extremely unwise”

If the US were to impose tariffs on the UK and sanctions on UK financial businesses, it would force Britain to reconsider its entire geopolitical position in the world, representing a crisis of the first order with consequences that are very difficult to predict.

“if Trump is prepared to do this he's going to start imposing sanctions on British Financial businesses on American Financial businesses operating in Britain uh I mean if the US really starts throwing its weight around in that way let me stress I'm not forecasting that even with him um it would be very very difficult for Britain um unquestionably so and it would have geopolitical consequences of the first order for us and we'd have to start Rec considering the whole position we have in the world”

If China's DeepSeek AI chatbot has found a way to produce the same capabilities as large language models far more cheaply, this suggests that AI technology is still early in its development cycle and there is much more excitement and technological advance to come.

“if they found a way and experts seem to think it's plausible that to do the same sort of thing as the large language models which were so expensive far more cheaply that seems to be a good thing M and maybe the Americans will work out how they did it and imitate it it doesn't seem to me at all implausible uh the um but it has told us that the processes which this particular set of technological revolutions we're at a very early stage and there's a lot more I think excitement to come”

Much of the English green belt is not of 'glorious beauty' and the designation of it is more about NIMBYism than genuine landscape protection; Wolf is 'unpersuaded' that green belt preservation justifies housing shortage.

“I don't know any solution um there's a famous remark which all economists know from a former prime minister of Luxembourg who said that we all know what the right thing is to do but we don't know how to get elected afterwards and well I have sympathy uh with him uh because I don't know how to get elected afterwards and I'm not brave enough to try so I'm afraid it's a bit depressing but one does One's best and hope that some of this per Ates to the debate a bit uh and policy makers in these areas do think about this a bit and what the uh alternative to the US dollar ah well my I've repeated this so often you can't beat something with nothing and so of course the US can destroy the dollar if it really tries but I don't think it's trying hard enough the us all the convertible currencies of any significance that aren't the US dollar are the currencies of us allies or maybe nowadays there are no us allies because the US doesn't think it has any but that's the reality China is not trying to create uh an alternative to the dollar because it doesn't want to run an economy which has the characteristics of the US so the R&B the remb is um structurally as it were relatively a liquid that means there are a lot of purposes for which an international currency is useful that the R&B simply cannot provide and WOTE I've been arguing that for 20 years and it's not going to change it will be used as a vehicle current currency for trade trade not fin Nets with other with countries closely connected to and doing a lot of trade with China and that role will increase but it will remain relatively modest there are no huge Suite of liquid Financial assets that can really serve as Reserve assets either for individuals and households or for governments and so I think the R&B won't be and if you look at the rest of the world the only area that could credibly provide a reserve currency is the Euro Zone and uh it's a multicurrency Zone it doesn't have a single fiscal policy its security is ultimately still dependent on the US um and it sort of looks to most of the wealthy of the world somewhat fragile and though there is some it's possible to imagine some shift to using the Euro um but replacing the dollar I mean that's that's a really huge stress a huge stretch uh because the us is after all in the end the world superpower so uh it would take a revolution and my own view is that if that Revolution ends up with revulsion from the dollar we won't have a replacement it will be much more complicated than that and by the way it's not going to be Bitcoin um and the last one um when is the base rate going to go to 2% oh was that's the question I thought it was when is inflation going to go to 2% I think it was the base rate it was the base rate wasn't it yeah oh now that's a nice question um well the economy really has to collapse to get there uh and I certainly would never rule that out uh because economies do from time to time and the turbulence in the world is now large enough for such effects to occur a really big question so let's go back to the sort of basic economics here what and there's been a fascinating recent debate among econ eist which is not just UK specific which is what is the neutral rate of interest now uh for a long time it seemed to be zero which was essentially uh a negative real rate uh and that was the conditions after the financial crisis but I think we probably got past that uh that the neutral rate is a is a positive real rate um and if infl unless inflation Falls well below 2% a positive real rate is 2% plus uh and that means maybe in a really big recession we might get to 2% but we would have to well we would have to get there um you know really big recession what would cause a really big recession in this country the most obvious thing is explosion of inflation in the US leading to a massive tightening of monetary policy in the US and uh that would tend to create a global recession um that would affect us so external factors will be crucial but so let me put it this way I would say 2% interest rates in the UK short-term central bank rate in the next three or four years is very much less than even my guess would be looking at the world and all the uncertainty it may be one in three one in four probability so I certainly wouldn't rule it out but it doesn't seem to me at the moment likely but the world is so unstable at the moment it's certainly not impossible and it will mean we are in pretty serious trouble I'm going to have to call a halt I'm sorry but our time is up a few words of thanks thanks to you and thanks to your questions in particular it was absolutely fabulous to have them I'm sorry we couldn't get through all of them thanks to Guinness Global Investors for enabling this to happen but most of all thank you Martin it's been an absolute pleasure thank you so much”

Scott Paulson is one of the few relatively orthodox people in Trump's administration and will try to avoid a macroeconomic crisis, but it is currently unclear how he would prevent one, given the conflicts between Trump's fiscal ambitions, Fed policy, and market realities.

“it's clear that Donald Trump will get very very upset about this so he's going to try very hard to stop them but assuming he doesn't and indeed even if he doesn't bond yields will start Rising quite considerably...what does Donald Trump do then um uh nobody knows uh I think Scott presentent who's clearly one of the few relatively Orthodox people in administration will try to avoid that sort of Crisis emerging uh but at the moment it's not clear how”

Wolf argues that if rapid housing construction is technically feasible and would push the country to vote for Farage, then there are many other reasons besides housing that would drive a Farage vote, so housing is not uniquely responsible for that outcome.

“I understand the question I hope I I think I understood it to say if the government succeeded in building was it 1.5 million houses which it won't uh but if it does then it will be so unpopular that Nigel farage will win there are so many reasons why the government will be so unpopular that Nigel farage will win that I'm not sure where that fits in this”

The British government has absolutely no idea how to generate a shift in business confidence at the scale necessary to change the growth trajectory, and neither did the previous government.

“the British government has absolutely no idea how to generate a shift in confidence at that scale and it was pretty clear from the predecessor that they didn't either”

The Trump Administration is 'profoundly radical' in transforming US governance, including constitutional mechanisms and the rule of law, with implications that may extend far into the future.

“this is a profoundly radical Administration which is transforming the governance of the US and I think I think we will discover over time that it is changing the Constitutional mechanisms of the United States in quite BR profound way including the way the rule of law Works uh possibly electoral processes so this is I think quite profound”

During the pre-election debate before Labour's 2024 win, no politician engaged with the question of what alternatives exist to achieve stated outcomes, making rigorous economic policy debate impossible in democratic politics.

“in the debate we had before the last election um we didn't actually no politician got engaged in the question of will if you don't do what you now going to say what are the alternatives to achieve these desirable outcomes and and I think it's very very difficult in Democratic politics to get Alternatives uh like the discussion about building houses and so forth um debated in any reasonably rigorous way”

Rachel Reeves is likely to remain Chancellor through the next election based on: (1) Labour's large parliamentary majority makes leadership change unlikely, (2) Labour is less ruthless about removing leaders than Conservatives, and (3) Keir Starmer and Rachel Reeves appear codependent.

“given the majority they have in Parliament one has to assume that K STL will last I may be wrong labor isn't as ruthless as the conservatives about getting rid of dad leaders so I think he will last and as far as I can see and this is based not on personal observation but everything I'm old Kia starma and Rachel Reeves are codependent so my inclination is to think that unless there's a catastrophe or she's just had enough she's going to be here at the next election”

Switzerland is the only country in Europe richer than America and represents a miracle of decentralization, with many governance decisions made at canton (regional) level rather than centrally, offering lessons about how subsidiarity can function.

“Switzerland is a miracle of decentralization you know they have actually done decentralization because they've always had it but if you go to Switzerland you ask well why does everything have to be decided in London uh uh in a country vastly bigger the Swiss decided a lot of stuff at Canal level and the cans are tiny and by the way it's the only country in Europe that's richer than America”

Inheritance tax on working farm assets will trigger disposal of farmland and make farming families considerably poorer, but the land itself will still exist and can be bought and farmed by others, so farming continuity may not depend primarily on family perpetuation.

“taxing the the working asset of a farm in inheritance tax will trigger the disposal of this land and or it's likely to trigger the disposal of this land and it will therefore make the farming family considerably poorer and the children will find it very difficult to continue as Farmers that seems to me correct and if that's really important then uh then um uh we shouldn't do it but I don't really understand why that's the end of farming cuz the land will still be there the the land will be sold and somebody can buy it and farm it”

If the world moves away from the dollar due to its collapse, there will not be a orderly replacement currency but rather a more complicated system involving multiple competing currency arrangements.

“if that Revolution ends up with revulsion from the dollar we won't have a replacement it will be much more complicated than that”

The government must choose between either housing younger people or preserving the green belt and rural views for older people, and Wolf argues that prioritizing housing for youth over landscape protection is the right moral choice because countries preferring the old to the young are 'doomed'.

“we have to make a choice about who gets miserable uh there will be the one group of miserable will be youngish people uh who don't have any real hope of getting on the housing ladder who live in cramped quarters and all the rest of it and but uh middle-aged and older people will have continue to have their beautiful views and they won't be ruined and the other way around um which of these will have more vote produce more votes from Nigel farage I really don't know...I have a general view uh perhaps this is because I'm in a fairly comfortable position which is any country that prefers the old to the young is doomed”

Rejoining the Customs Union with the EU would make sense for the UK post-Brexit, though there are Trump-related risks: if Trump imposes prohibitive tariffs on the EU, the UK would be pulled into that trade war by Customs Union membership, so government might sensibly wait and see before joining.

“I think that's fairly straightforward I think I've already eye that we should rejoin the custom Union I think if there's a trade war in which the only issue here is I think there's going to be a trade war between the US and the EU for sure it is possible uh that Mr Trump being who he is uh will say I don't want to trade war with the UK after all that's where my mother came from who knows and uh and if we're in the Customs Union we'll be part of the trade War because we have the same external tariff uh and if we aren't we won't but other than that um short of joining the single rejoining the single Market makes sense I think rejoining the Customs Union makes uh pretty good sense but right now there are risks out there which I just mentioned the Trump risk which might make it sensible for the government to wait and see”

For UK base rates to fall to 2% in the next 3-4 years would require a really big recession, which would likely be triggered by a US inflation explosion and subsequent massive Fed tightening causing global recession—this outcome is maybe 1-in-3 or 1-in-4 probability.

“we would have to well we would have to get there um you know really big recession what would cause a really big recession in this country the most obvious thing is explosion of inflation in the US leading to a massive tightening of monetary policy in the US and uh that would tend to create a global recession um that would affect us so external factors will be crucial but so let me put it this way I would say 2% interest rates in the UK short-term central bank rate in the next three or four years is very much less than even my guess would be looking at the world and all the uncertainty it may be one in three one in four probability”

Scott Paulson (chief of staff) is one of the few relatively Orthodox people in Trump's administration and will try to avoid macroeconomic crisis, but it is unclear how he will manage the conflict between Trump's preferences (low rates, high stocks) and the inflationary pressures from fiscal-supply shocks

“I think Scott presentent who's clearly one of the few relatively Orthodox people in administration will try to avoid that sort of Crisis emerging uh but at the moment it's not clear how”

Rachel Reeves and Keir Starmer are codependent (unlike some PM-Chancellor pairs); absent catastrophe or personal choice, Reeves is likely to remain Chancellor through the next election, but Wolf offers no confidence judgment on her economic competence—he sees no obviously better alternatives in either party

“I think he will last and as far as I can see and this is based not on personal observation but everything I'm old Kia starma and Rachel Reeves are codependent so my inclination is to think that unless there's a catastrophe or she's just had enough she's going to be here at the next election there was another part of the question should we have confidence in Rachel re do you well I think um I see nobody around on either party I'm afraid who is obviously better”