361. Gaza, Israel, and Ceasefire

Well, Rory, we pride ourselves on doing things that other outlets don't want or don't have the time to do. But I was sort of thinking, can I read the whole of this? There's this amazing memo that a guy called Anthony Agatha, that you know, who's a big listener of the podcast, sends us lots of interesting stuff. And he sent me a declassified memo that was sent by Donald Rumsfeld to George Bush, President George W., in April 2001. So a few months before the September 11th attacks. And it's a memorandum, one page, by a guy called Lynn Wells, who is a long serving military guy, but also a Pentagon advisor. And the headline is, Thoughts for the 2001 Quadrennial Defense Review.

Goes as follows. If you'd been a security policymaker in the world's greatest power in 1900, you would have been British, looking warily at your age-old enemy, France. By 1910, you would be allied with France, your enemy would be Germany. By 1920, World War I would have been fought and won, you'd be engaged in a naval arms race

But then overnight, it just seemed to sort of emerge from all quarters that this deal was being done on Gaza. There's going to be a ceasefire. There's going to be six weeks phase release of hostages, phase release of prisoners. And I must admit, my immediate instinct was, well, yeah, we should talk about this because it might happen today. But then very, very fast alongside that is, yeah, well, will it? Because this sort of reminded me of the many, many, many times before we got to the Good Friday Agreement, where it felt like this was going to happen.

Now, what is interesting is that the Palestinians basically are out saying, we have accepted this. The Israelis are making quite positive noises. The question that you and I would have been asking, including yesterday, yeah, but what about Ben Gavir and Smotrich? Ben Gavir has said that the deal is a surrender to Hamas. Smotrich says, maybe I could live with it. And Netanyahu, meanwhile, is seemingly bringing in a few other people into his tent that may be able to get this through.

So I look, it does seem for now, given what we've been living with in the past, I think it's 400 and nearly 470 days now since that October 7th attack, it feels a lot more hopeful than it was. But we shall, I think we should still be a little bit cautious until, and even if they do do a deal and announce a deal, then it's kind of how everybody in the various firmaments involved then reacts to that.

Yeah, you're right. And we've been close to a deal on a number of occasions. There have been times where people have contacted me from Doha or Washington saying we're just two days off a deal, any number of times over the last year. The structure of the deal hasn't really changed. Basically, from the Israeli side, what they want is the release of hostages. And from the Hamas side, what they want is the end of fighting. The devil then is in the detail because of course, what Hamas wants is a permanent ceasefire, which Israel has been very reluctant to grant. And they want full Israeli withdrawal from Gaza, which Israel has been very reluctant to grant.

And on the Israeli side, they don't just want the return of hostages. They want Hamas to be totally dismantled, which is why you had this situation of Smotrych. Interesting to see that he seems to be moving, but saying very recently that he was completely opposed to the deal without the destruction of Hamas.

And then coming into the center of this after it all is what happens to Gaza if hostages are released and fighting ceases. How is Gaza then reconstructed? Do Palestinians return to northern Gaza? Will Smotrych push for settlements in Gaza? Will Israel continue to insist, as Netanyahu has, that they will continue to keep troops on the ground and be responsible for security in Gaza? Which international partners are going to be prepared to put money into rebuilding the tens of billions of dollars worth of damage? Who's going to be the government of Gaza? Is it going to be Palestinian Authority? What's Hamas going to do? Will the Saudis and UAE come in? How much money are the United States and Europe prepared to put in? And how do they have elections?

Listen, it would be great and the world will welcome it if people come out and say there is a ceasefire. People who've been displaced, the two million people who've been displaced, they can go back to their communities and see the damage and see if there's anything that can be rebuilt. Just take the hostages issue. So they're talking about releasing 33 hostages in a phased way over six weeks. Well, is that because there are 33 that are alive? The rest that they're not releasing, is that because they know that they're dead? Let's just say that some of them are released who are already dead. What then is the reaction of that in Israel? Listen, it's an amazing thing if they pulled it off.

The Qataris are involved, the Americans are involved and it does seem that both Biden's team and Trump's team have been kind of involved in this and pushing for this. So it's fantastic if it comes off, but let's not pretend that that then means that somehow everything is resolved. And the questions you were talking there about governance of Gaza, how the politics in Gaza works, what the Israelis then do say and do about settlements. This will be hopefully the start of the end, but my God, it's still going to be very, very complicated and difficult.

And to remind people that we have been here before in so many different ways, because post-conflict societies, whether you're talking about Cambodia or you're talking about Bosnia, have a lot in common. And the first thing that people will have to do is to disarm the armed groups and work out what then happens to the predominantly young men who were fighting and had weapons. You're going to reintegrate them into a military, you're going to find them other forms of jobs. There's going to be a huge push to try to get the economy off the ground, but how do you really create employment in a situation where all the basic infrastructure is shot to pieces and where Israel controls the land and sea borders, which has a real effect on your ability to import and export?

How do you get this horrible thing called legitimacy going? In other words, how do you make the government that you bring in feel credible, effective, and of the people, as opposed to feeling like it's either a puppet of Israel or a puppet of the West? And how do you keep the popularity of that government, rather than the government being blamed very, very quickly for all the things that are inevitably going to be difficult and go wrong?

Assuming this does go ahead and we can sort of say, well, after an awful lot of bad news, that is pretty good news. The other piece of, I think, good news in the Middle East, which didn't get much attention as far as I saw here, was the appointment of a new president in Lebanon. They've had almost three years in Lebanon without a president. The previous guy, President Aoun, went. Nothing happened since. They've had, I think, 12 attempts to replace him. It's the parliament, the legislative body that elects the president, as it were. And this guy now, General Joseph Aoun, same surname, but no relation, head of the army for the last six or seven years, Aaronite Christian, which he has to be on the sort of religious power sharing that goes on, now has to assemble a cabinet.

But what was interesting, I mean, I can't remember the last sort of event that happened that was kind of broadly welcomed in almost the same terms by both Iran and Israel and America and the Saudis and France and Europe. So there's a lot riding on this guy. But I think that after all that Lebanon's gone through, and also he said something very interesting. This relates to what you were just saying there about the role of Hamas within Gaza. He basically said that the Lebanese state, under his rule, he would work towards the Lebanese state having the exclusive right to bear arms. Now, that strikes me as basically saying to Hezbollah, you can't operate as a kind of military force within Lebanon.

Now, given where their backing comes from, is that him overstating the weakness of Hezbollah and the weakness of Iran since October 7? I don't know. But it's a big, big, big statement to make.

Yeah, I was talking to somebody who just got back from Beirut yesterday. And her sense was that there is real optimism. And she'd been speaking to many different people from all the different communities in Beirut, that they did feel that unlike in Gaza, the Israeli attacks in Lebanon had been very targeted on Hezbollah. There were many people who were very grateful that Hezbollah's stranglehold on Lebanon had been so significantly weakened.

And there's real hope that, as you say, that Joseph Allen can return to the basic conditions of the peace deal that was struck nearly 20 years ago, which is that the Lebanese military is supposed to be responsible for security and Hezbollah don't go south. There's something called the Litani River, which is the kind of buffer zone between central Lebanon and Israel. It's also interesting. I mean, Lebanese politics has always been very dominated by big clans, often big corrupt families. Joseph Allen and the new prime minister who he's just appointed, who's a Sunni Muslim called Nawaf Salam, who's a former ICJ judge, International Court of Justice judge, are not from these old political machine families. One of them, as you say, is a soldier. Another one's more of a technocrat. But my goodness, there's a task because Lebanon has been through not just billions of dollars of damage through the Israeli attacks and bombardments, but actually its economy has been in pieces since the financial crisis. Then since this massive explosion, which you remember in the harbour in Beirut, it's had no function in government for a very long time.

And it's also true that Lebanon is always very, very influenced by Syria. Syria is the kind of big brother which has shaped Lebanese politics for 20 years. So what's happening in Syria is going to really matter to Lebanon. But yes, optimism for the time being. This is one of those systems where you have to, you know, various names are put forward, the parliament votes, and then eventually you get eliminated one by one. And then eventually you end up with the winner. And this guy ended up pretty convincingly. But he ended up with the backing of this guy, Suleiman Frangie, who was Hezbollah's man. He was their candidate. And he came out and basically withdrew from the race. And he said that Aoun has got the right qualifications. He's the guy for the job, etc.

Do you think that is them saying, we've just got to go with the numbers, we've got to go with the flow, Syria has been changed, we have been weakened, Iran maybe isn't as strong as it was, and they're going with the politics of this? Or is that them saying, okay, we'll back you, but in backing you, you know, we're not part of your coalition, you're going to have to listen to us. Because if that's the case, it's going to be very, very hard for him to do what he said in saying that only the state can, as it were, bear arms.

Yeah, very hard, because the Shia population and Hezbollah don't represent all the Shia population, they represent a big chunk of Shia in Lebanon, are big and matter. And he is going to have to get into this business, which traditionally is real horse trading between all the different sectarian political groups in terms of forming a government under Nawaf Salam.

There's also the question of external players. So he isn't seen, Joseph Aoun is not seen as the Hezbollah candidate, as you say, they had their own alternative candidate. But on the other hand, it is noticeable that two and a half years ago, Qatar was floating his name as a possible president. And it may be that Qatar has put pressure on people. There were jokes being made yesterday about how the real question is whether the Syrians come in with bags of cash, or the Iranians come in with bags of cash, or the Saudis come in with bags of cash. The general view at the moment is this is the Saudis coming in with bags of cash. This is a Saudi settlement in Lebanon.

But all of that is going to put a huge pressure because if things go wrong, he will find himself being accused of being a puppet of outside powers. If things go wrong, he's going to find it almost impossible to resolve how to deal with Israel. So Hezbollah, I think, is still demanding that in the language of the first statement from the Prime Minister, they talk about Hezbollah as a legitimate resistance force to the state of Israel. Yeah, it's a lot of navigation to be done, a lot of navigation to be done.

But I think the big change, regardless of what you think about the morality of it, there's no doubt that Israel's attacks on Hezbollah have completely changed the situation in Lebanon, weakened Hezbollah beyond imagining and provided an opportunity for this new government to emerge. And everybody who's involved in these talks does seem to be saying that the mechanics of change in the American presidential election have been one of the factors here. Trump sent out this guy who's his kind of special envoy. Biden's team made sure that Trump's team were completely involved in the process. So I think it does seem like that that has had a kind of some kind of galvanizing impact, possibly on both sides. I mean, the Palestinians are basically saying that Trump has put some screws on Netanyahu and the Israelis are saying that Trump has come on and put some screws on Hamas. Don't know. But it's interesting that they're all recognizing that as a factor.

And meanwhile, as we say, we're a few days away from the Trump inauguration. We were going to leave the podcast until this with discussion about the Californian wildfires and climate change. I must admit, I found it unbelievable that I think virtually his first comment was to go to Truth Social and launch this vicious attack on, he didn't even call him Gavin Newsom, he called him Governor New Scum. Now, I mean, you're laughing, Rory, but it's sort of, this is what he wants. He wants us to laugh. It's like, don't you think that you just thought anyone who's, you know, we all know Donald Trump watches a lot of television. You're seeing these pictures of this horrific spread of wildfires across different parts of California. And his first instinct is to, is to attack in really personal terms, the governor of California, where you would have thought that every political leader would want to say, right, what can I do in this circumstance to help?

Yeah, no, it is something. Well, you're right, you're right to pull me up. And it's part of this general sense, isn't it, that he just lowers everything and one forgets very quickly how it would have been kind of unimaginable for any previous US president to refer to the governor of a state which was up in flames in that kind of way. My good friend Percy and his wife are both from California and his wife's family has been evacuated along with 180,000 other people with flames licking around their houses.

It reminds me a little bit of some of the challenges we were beginning to feel in Britain on floods. And one of the most interesting ones, I think, is around this question of insurance. So we found when I was the floods minister in Britain, as we started to have communities in Cumbria flooded three times in 10 years, the insurance companies started to say they'd no longer insure these properties. And already in California, the fire insurance is sort of five times more than any other insurance you get on your house. And it looks like the insurance company is pretty soon going to stop insuring people.

I read or I heard that 70% of the people affected, they reckon have no insurance at all. I saw an interview with one guy who was an Olympic gold medal winning swimmer, Gary Hall, and he had lost all his medals. He said, I had to choose whether to get my dog or my medals and I got my dog. You know, he looked like a kind of pretty affluent kind of guy in a pretty affluent kind of area. He said he had no insurance. He said, I'm going to have to just rebuild. And then when you went to some of the poor areas, there was lots of focus on all kind of Hollywood stars, filmmakers and so forth. He went to the poor areas and they just said, you know, got no insurance at all.

What we did, which may be an interesting model as more and more countries hit extreme weather events because of climate change is Oliver Letwin drove through something called flood re, which was a way of us, the British government putting hundreds of millions of pounds behind the insurance companies in exchange for the insurance companies agreeing that they would insure everybody in flood affected areas in Britain. And it was a pretty good model. And I think this is going to be the big question going forward because some of these big insurance companies have been saying since the 1970s that one of the biggest impacts of climate change is that it's going to bankrupt them all. They're just not going to be able to deal with the wildfires, the floods and the rest of it.

Yeah. I mean, it'd be nice if we could get through a whole podcast without mentioning Musk, but he just was straight out kind of using Twitter to inflame this as well. He was attacking you, saying that this was all because of the kind of woke agenda of the DEI agenda in the California fire services. Again, it's that sort of that instinct to take everything towards what your already stated beliefs and views are. And so Trump was directly asked at some point, you know, does this change your view on climate change? And he's no, we're going to have a great climate.

You know, I think the other thing, I think we have to sort of have a discussion about this, Roy. I sent you a piece that Peter Hyman's written and he's written a very long piece, several thousand words about how blaming progressives really for giving the opening to people like Trump, people like Farage, Brexit, so forth. And basically saying that we haven't sort of properly thought through a way of dealing with them. One of the things he said, he's got a horrible, very powerful image about we feed them because we, when they drop a turd, we don't just sort of, you know, clear it up. We basically, we examine it, we prod it, we think why has he dropped that particular turd at this particular time?

I mean, I've, I am spending so much less time on social media now. I'm still using it. I'm still posting links for the podcast and things, but I'm just not reading it because I don't want to read something where the first 17 things I see are from Elon Musk. But how are we going to get, we know what this four years is going to look like. It's going to be every day. So last week we had Greenland, we had Panama Canal, we've, this week we have Gavin Newscome, you know, next week we'll have God knows what. So I think we've got to be, we've got to sort of have an agreed rest is politics strategy for how we deal with this.

Also for our whole culture, there's this sense that we are frogs in boiling water, that Musk and Trump are making normal, very, very offensive things. And that it's becoming fashionable for journalists to say, well, maybe they're not so bad after all. And you know, maybe Trump's going to make a lot of difference. And people will point to things like the Gaza Peace Accords and say, look, see, you know, Trump came in, sorted that out. And by the way, they'll say, and he did the Abraham Accords in his first term. And he's going to sort out Russia, Ukraine and all this kind of stuff. I think where he does do good things, we should say so. But I don't think we should underestimate how, what you call that there, the normalization of this stuff amplified by Musk doing what he does.

We talked recently about the whole, the German election. So I watched Alice Weidel, the AF, the alternative, the Deutschland leader. I watched her big speech at the weekend. And I mean, she started off with this great tribute to Elon Musk. He's kind of made X great again. She spelt it out.

This was really so she could get at people like you and me and, you know, and if we have to call it a remigration, we will call it remigration, you know, remigration, the whole thing that you talked about last week, the great replacement theory and all that stuff. So I think for him to, to be able to watch these fires and his instinct be to defend his views that climate change is all a bit overblown and basically just to go after Gavin, the Gavin Newsom, I think is pretty horrific.

Yeah. Well, let me just come in on the Hyman thing. So I think this is the Hyman article. He says that there are seven offenses that we have, our seven deadly sins. And it's, it's the fault of people like you and me that Trump have won because we are number one, patronizing, number two, complacent, number three, abstract, number four, censorious, gullible, conservative, and bland. So presumably what he's saying is that we need to be less bland, more entertaining, less patronizing, et cetera, develop this a bit more.

And then I want to have a bit of a go at poor old Peter Hyman, because I think there's some dangers in the way that he's reading this. I'm going to predict that your assessment of the danger is that his analysis, because these guys keep winning, and we've had another one this week in Croatia, presidential election, not as powerful as a prime minister, but you know, an absolute landslide win for the guy that's defined as, in this case, kind of leftist center populist.

So I think you're going to say that Peter's analysis is that we have to be like them. We have to lie. We have to, you know, exaggerate. We have to bully. And I don't think he is saying that. I think he's taking it to policy. I think on the patron, I don't think you and I are patronizing necessarily, but I think there is a lot of patronizing. I think there is a lot of, you know, people are stupid if they vote for Trump, people are stupid if the vote breaks, et cetera. I've never thought of that. I think you've got to give respect to people's decisions.

I think we are unbelievably complacent. I think we do sometimes on the progressive side, I think we do sometimes allow ourselves to speak in very abstract terms. I think we can be very censorious. The gullible point is the point I was making about the turd. We crowd around the turd, we pick it up, we sniff it, we debate it, we lose focus, we get diverted, we stop connecting to the people we want to serve. We meander away from the mainstream.

I think there's something in that. And conservative, I think his big point is that in the modern age where people are looking for blame, where we're being divided and so forth, the disruptors are the ones who win. And the question I think we have to start thinking about and the Labour government have to start thinking about, how are you able to be a disruptor in government to disrupt the status quo that is being rejected? And I buy that.

So what do you not like about his analysis? Peter Hyman's brilliant piece is an attack on progressive, liberal, centre politicians. And I guess that is everything from the legacy ultimately of Tony Blair, David Cameron, Bill Clinton, Gerhard Schroder in Germany, even Angela Merkel. The general idea that politics is in the centre ground and the fact that it's been replaced by populists and the way in which that emergence of populists is partly the fault of the fact that the people from the centre, I suppose the modern equivalents would be the Olaf Schultz's, the Trudeau's, the Macron's, didn't manage to take back the initiative, didn't manage to hold them off. Or didn't want to understand or failed to see why there might be an appeal that they had to challenge. I always felt Bill Clinton had a sense of this, but because he was such a good politician, I think he could always work out how to keep it at bay.

I think partly what Peter's saying is that this stuff was building like over decades and we just got a bit complacent about the potential for it to become even more powerful than it was back then. I also sometimes worry that, I mean, I went through a very, very dark moment after I came out of the leadership and Boris Johnson became Prime Minister of thinking the whole world is going towards populist mayhem. And then I sort of cheered myself up through a lot of wishful thinking into thinking maybe Biden had turned this around and Kamala Harris was going to win.

The problem also for all of us is that we tend to slot in whatever our pet projects are as the solution for stopping populism. So if you're Peter Hyman, it'll be a list of three or four policy prescriptions, which he thinks the kind of things the Labour government doing. If it's me, I will be saying, you know, we need more citizens assemblies. We need more devolution. We need to think about decentralized industrial policy, this kind of stuff. The truth is that in a world that is so much about social media, so much about weird insults and name flinging and often lies, it may be that just coming up with a slightly smarter technocratic policy solution is almost irrelevant that somebody like Trump can outmaneuver you every time.

Well, that's why I've been saying since the American election, I think one of the lessons of the American election is delivery is not enough. Although I was talking to Tom Baldwin the other day, who's written this biography of Keir Starmer. I see the economist picked up on something he'd said. He said to me this thing, he says that maybe this is what people are not getting about Keir Starmer. We'll talk about Labour more after the break, is that he's like the prime minister for the 80% of the population who are not calling each other genocidal rape apologists on social media. And there's something in that, there's something about a leader who could come along and sort of lower the temperature. But you can only do that successfully if you are also being seen to deliver on the things that people want from their government.

Look, there's no doubt that we, the liberal centre, are partly responsible for the mess that we're in. So a lot of the criticisms that Trump and others make of the 2008 financial crisis was a massive screw up. Iraq and Afghanistan, massive screw ups. So their criticisms of the way the elites behave is correct. Their solutions are in the end becoming more and more nationalists and as we talked about in the last podcast, more and more anti-Muslim. That's what's going on with re-migration, AFD, Austria. And we shouldn't stop saying that. We should not stop saying that.

And I think three main things. They're challenging the old ideas of liberal democracy and human rights, which they think are protecting criminals, protecting rapists, not allowing them to get rid of immigrants. They're attacking the old ideas of free trade and trying to move to more protection. And they're attacking the idea of a world with rules and the United Nations and countries like the US and the UK getting involved in trying to build peace, bring development. And the problem with it is that those three things, democracy, prosperous open borders, and these international rules, were very hard-worn lessons from the end of the Second World War about what prevented war, what brought peace. And we're losing our moral compass because we're allowing populists to basically say, and journalists to feed this, oh well, the fact is that we're boring and we're not manly. I mean, I'm noticing a lot of the abuse I'm getting on Twitter at the moment is increasingly about saying I'm not a real man. So the attacks will be, he's a man-child, he's Gollum, he's got a rubber face, and it's incessant. I get people saying to me, how's your little wimp, Rory Stewart? There we are, you see? But what it's worth, listeners and viewers, I think you've got it wrong.

I've seen Rory in various situations. I'd back him in a fight against a lot of people. I'm just going to put that out there. Thank you, Alistair. But it's revealing, isn't it? Because when journalists get on side of this and say, you know, what fun the right are, how lively they are, what they're not taking into account is that there is an unbelievably unpleasant undercurrent here, which goes well beyond, you know, their views on wokery into a very dark conservative vision of how the world should be.

And the key is to find out how you fight back and win without losing your moral standards. How do you fight back and win and still say, actually, we do believe humans are equal in rights and dignity. We're not going to support the idea that British nationals who are Muslims or Austrian nationals who are Muslims are going to be expelled from these countries and that actually understand that these people may begin by sounding like they're just grumbling about Muslims, but their views on women will be unprintable.

Their views on gay people will be unprintable. Their views on anyone who disagrees with them will be unprintable, which is why the challenge is, and this is where I agree with Peter. I'll finish on this, right? We need communication. We need charm. We could do with a sense of humor. Obviously, part of the point is that the populace are much funnier than the centrists are, and we're just not funny. Keir Starmer's not funny. Boris Johnson's quite funny. Beppe Griot was funny, right? Even Millet, in some mad way, is kind of funny in Argentina, right?

So we need to communicate. We also need ideas, really clear ideas. We'll get onto that in the second half. We do need a plan for growth. We need to explain how we're going to sort out the economy, sort out society, and not just sound like we're apologizing for the fact that nothing can be done. But the one thing that we can't lose is the moral integrity. We cannot lose sight of the values and why they matter.

I don't think Peter would disagree with that. But I think what he would say is that the way that we discuss that, the way that the progressives project that, does play into this idea that we're slightly superior. And that's what feeds this sense of elite. Whereas actually, most people feel that there should be a moral compass. Most people feel that there is right and wrong. But if they feel in their own lives that government over a generation has let them down, then don't be surprised if they're prepared to overlook some of the tendencies in the leaders that they do elect.

Because whatever you say about Trump, he's a disruptor. Farage is a disruptor. Johnson is a disruptor. Millet is a disruptor. And Millet is really interesting. I mean, I've been, sadly, I don't speak Spanish. I'm sort of a bit limited in this. But I've been following as closely as I can what's going on in Argentina. And, you know, it's interesting. What he's doing is genuinely interesting and not as catastrophic, necessarily. I mean, massive rise in poverty, that's catastrophic. But in terms of how he set himself, what he was going to do, I think he's got more steam in his engine. He's got more kind of, you know, legs that he's running on because he came in as a disruptor and he is disrupting.

And the other point that Peter made that I think is really important, this is about kind of intellectual underpinning. He said, so Trump's the kind of the main guy and Musk alongside him, and it's all about Twitter and its abuse and what have you. But Peter makes the point that we may have railed at it when we read it, but they did produce this Project 2025. They do have these really powerful, well thought through, well funded think tanks, America First, Heritage Foundation, this National Conservatism Movement, etc. And what is the equivalent?

I think that's the point he's making is that we're just sort of thinking, well, eventually they'll get found out because populism always fails.

Now, history suggests that's true. But the damage that can be done while we're sort of sitting there thinking, you just watch, you just watch this go wrong. And I think on Brexit, I feel that that's what we do. You know, we do, frankly, just sit there saying, look, I told you it was going wrong and it's going wrong. Right. But then what are you going to do about it?

Yeah, well, here's another one where I think I slightly disagree. Hyman dismisses immigration in one sentence, says, you know, we need an orderly approach to immigration. I think the one area which is non-negotiable is we need to absolutely demonstrate that we can control borders and that we can set targets on immigration and that we can hold to it. Otherwise, I think the centre liberals are dead. I think it's very dangerous for liberals to sound as though they're in favour of open borders and that they're not serious about controlling the numbers. We have to accept that bringing nearly a million people into the United Kingdom in a year is grotesque. And we need to be able to reassure the public that that isn't going to continue because otherwise all the other stuff, I think, comes to pieces.

I think Hyman's not giving enough credit to how central immigration is to the message. Does that mean the end of the European Union? Because when I watched Alice Vidal's speech, she kept talking about we've got to bring our borders back, have strong borders. We decide who comes into Germany, which is, you know, pretty obvious nationalist position to take. But does that then mean, but then when you say to her, does that mean you want to get out of the European Union? Oh no, no, no, no. Well, of course they think, the Austrians and the Germans think they can behave like Orban. They can just flout all the rules of the European Union and they're too big for the European Union ever to expel them. So I think it's probably the European Union may well come unstuck, not formally through a formal decision, but just through more and more countries refusing to obey its rules.

Okay. Should we take a break and then come back and talk about labor in Britain?

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Welcome back to the restless politics with me, Rory Stewart and me, Alistair Campbell. And before we hooked up to do this chat, Rory, I was watching Rachel Reeves in parliament. She was doing a statement on her visit to China. Obviously, recent events and the turbulence in the markets was brought up at various points. I thought she stood up to it pretty well. I mean, she's definitely got a bit of perseverance there. She was not being pushed around.

Okay, well, so just to quickly interrupt and do a bit of an explainer and then maybe come to you on what options she has. The problem she faces is that she set herself a fiscal rule, which is that debt was supposed to be reducing as a proportion of GDP by the end of the parliament.

And in her budget, where she borrowed another 30 billion and raised another 40 billion worth of taxes, she left herself a pretty small headroom, about 10 billion pounds worth of headroom. And the headroom, in other words, is the gap between what she thought her borrowing and spending pressures would be and the amount of money she had. So she didn't, as it were, leave enough money in the virtual bank account. And she's been, in a sense, unlucky. I say unlucky because a lot of the debt burden she's inherited from the Tories, a lot of it was to do with massive spending around COVID and not just massive spending around COVID, a very strange type of borrowing you did around COVID. So traditionally, until COVID, the UK tended to borrow very, very long at fixed interest rates, like getting a fixed interest rate 30-year mortgage. Because of complications about quantitative easing in the Bank of England and other things, during COVID, we began borrowing shorter money on more flexible interest rates.

So big debt. Then we found ourselves, she's faced the second problem, which has been Trump. So because Trump has come in and started talking about massively cutting taxes and splurging economic growth and putting up tariffs, America is very worried about inflation. And therefore, there's an expectation that interest rates are going to go up in the US and the cost of borrowing is going to go up in the US. And the cost of borrowing in the UK basically follows the cost of borrowing in the US. So suddenly now in the UK, she's having to spend much more money to borrow. In fact, on the 10-year borrowing, the highest rate since 2008, on her 30-year borrowing, it hit 5.44%, which is the highest since 1998. So almost 30 years. And that means that she is blowing through that 10 billion buffer in her bank account. She's going to find herself potentially getting up to spending nearly 100 billion on debt interest. And she's just not going to be able to stay within her margins.

Over to you on what her options might be if she finds herself breaking her own set fiscal rules.

Well, just on the numbers, by the way, I think you said 100 billion there. According to the Office of Budget Responsibility, by 2029-30, even before this, they were talking about spending more than 122 billion on debt interest payment. I mean, that is a massive sum of money.

Look, in terms of the options, and it's all very well for people to say, well, you and I both said, and we could be right about this, we could be wrong about this. Nobody knows because the election happened on the basis that it did. But the fact is that she did rule out certain tax rises and that boxed her into some extent. She and Kirstein ruled out other measures to do with Europe, customs union, single market. She ruled those out as well.

So she's now got essentially the options going forward to the spring statement, which is on March the 26th. And don't ask me why I know this, Rory, but that happens to be Diana Ross's birthday. I just happen to know that, okay? It's just one of those things that I know because I used to send Diana Ross a birthday card every year.

Anyway, so her options then, she could change the fiscal rule, okay? And just to explain that, that's basically giving herself a little bit more headroom. So some people said that fiscal rule was always too strict. There should have been a bit more flexibility in it. It's a bit ridiculous because even if she breaks it, she's only going to break it by a small amount. So she could just ignore it, do nothing or fudge the fiscal rule and say, these are just rounding errors and we're not going to make a big fuss out of it.

Right. And Kirstein this week, when he was making a big speech about AI, we'll come on to talk about that. And Rachel Reeves in parliament today, absolutely clear, there will be no change to the fiscal rule. So that's one option that they seem to have ruled out.

The second thing they could do, she said, one of the other things she did is to say that there will only be one fiscal event per year. The Tories in recent years have got into a habit of doing more than one. So she could change that and she could say, well, actually I've had to look at things and I'm going to turn the spring statement into an event which also announces tax changes. She could do that.

Exactly. So yeah, to explain that. So your option two is spring budget and the spring statement or budget or whatever it is will involve announcing more tax rises. So that's the second option that she could have. Yeah. And again, I think politically and for the markets, very, very difficult to do that.

The third option is to announce on March the 26th, further cuts in spending. Politically, very, very difficult goes against all the things that Labour said they wanted to do. So that's pretty tricky as well.

And the fourth option essentially is the sort of keep calm and carry on, tough it out. Part of this is because of the turbulence has been brought in by, as you were saying, related to the arrival of Donald Trump. Let's see how that pans out. Very similar things going on in Germany, very similar things going on in France.

And my instinct would be at this stage to do the last of those, to not go overboard, not to do too much. So basically there are four options. Number one, she could change the fiscal rule so that she guarantees then. Number two, she can have a spring statement where she raises taxes. Number three, she can cut spending. Number four, she basically does nothing and hopes through growth or some change in the global economy that she sort of breaks the fiscal rule temporarily, but actually in the long run, she won't really break it.

She doesn't need to have to do anything, but there's a risk there of also scaring the markets more. Why would that scare the markets? I think the thing that would scare the markets is if they overreact to this.

Well, the risk is that option four, unless something very unlikely happens, she will break that non-negotiable fiscal rule. And therefore they will start to think what sort of rule was this anyway, if she's so comfortable about breaking it and she's not reacting when it breaks.

That brings us back to this question of the general question around growth and the economy. So you can look at this from so many different angles, but there's a couple of angles I wanted to raise with you. One of them is the kind of micro business end of this. And the second is to return to this question of communication and vision.

So on the micro business sense, there's quite interesting statements from Simon Wolfson, who's the boss of Next. And he's a really impressive business person. And I think he's booked about a billion pounds of pre-tax profits and his sales are up and his profits are up. But he's pointed out that from his point of view, the problem is that Rachel Rees has brought these taxes on employing people, the employers, National Insurance, very suddenly instead of bringing it in gradually. And the result is that it's disproportionately hitting people on 16-hour contracts.

So mothers who are working from home, part-time workers, which retail shops like Next really depend on, are being hit much, much harder than full-time employees on higher incomes because they've brought down the threshold at which these taxes kick in, hitting lower paid people more. So he's predicting on the basis of being one, I guess, one of the most successful business people in Britain at the moment, that next year, his profits are going to be down. There's going to be a big £60 million raise in his wage bill. And he's predicting that we'll see this going through the rest of the economy.

And so that's going to be, I guess, something to look at the real economy. The second thing, though, maybe just to come back to is this question around communication. So what is the growth plan?

It's not that anybody, and by this, I don't mean what's the sort of brilliant policy solution, because I don't think anybody really knows what the brilliant policy solution is. As you say, the German economy is in trouble, the French economy is in trouble, British economy is in trouble. It's not as if there's a bunch of economists out there with a magic wand sitting in their back pocket. But you do need to say something to the public, which gives them an idea that there's a kind of plan and you're going somewhere. And that's what I'm not, I can't articulate yet. By the way, me saying do nothing, I'm not saying say nothing.

I said to you before Christmas, and I still stand by this, that I feel that there is still the space for them to come along with something that they'd label the growth plan. And they set it out sector by sector, region by region, theme by theme. And it doesn't have to be full of whiz-bang new stuff and new rhetoric and so forth. It's just, this is what we're doing.

Now, to be fair, I don't know if you were able to catch, you might have been on the plane when Keir Starmer did his AI speech, and it was interesting because, you know, in the end it's about choices. And he essentially was framing the choice. We can either see AI as a massive threat, or we can see AI as a massive opportunity. And he said, I am absolutely in the latter camp. And he gave some examples of where it was working already.

We should, at this stage, by the way, tell listeners who haven't already caught up with our latest leading interview, it's entirely coincidental this, but James Manicki, who's one of the kind of pioneers of this whole AI world, we interviewed him. And not least about that, where is the threat? Where is the opportunity? But what Keir Starmer was basically saying is this has the capacity to power growth. This has the capacity to bring in the improvements in public services that we need, but only if we embrace it in the way that he was setting out.

So don't get me wrong, I'm not saying do nothing. They have to do lots. But what I'm saying is that I don't believe that they should be spooked into some whiz-bang response on March the 26th that nobody's expecting, that says, this is how we're going to get through this. And I heard John McDonnell on the airwaves today, John McDonnell, who was shadow chancellor under Jeremy Corbyn. And he was echoing the point that you and I make a lot about, you know, they box themselves in too much with this, this and this. But then his solution was to bring in massive wealth taxes.

Now, I think we talked about this in relation to Australia before the election. I think you might have been able to do that right at the start. I think if you did that right now, you talk about spooking the markets, they are going to go haywire with that. So I think this is difficult. I don't think it's the crisis, what crisis that people pinned on Jim Callaghan back in the seventies. I think the mail and these papers trying to say this is like the seventies revisited is absolutely for the birds, but it's a genuine challenge born of partly of the international stuff. But also the fact is we've talked before about the budget took so long, the economy was being taught down, et cetera, et cetera, et cetera, for perfectly legitimate political reasons, trying to pin it on the Tories. But now very much people are saying, okay, we want to see this growth plan.

And I think there is a case just for, you know, somebody in the treasury, I hope he's doing it right now. Just March the 26th could be the time you do it. You just say, here it is. Here's a 500 page document that sets the whole damn thing out, gorge on it, all that you want.

So Kier's AI speech, I thought was one of the most interesting speeches he's made and really matters and really encourage people to listen to the James Manika interview. I mean, James, extraordinary Zimbabwean intellectual right at the forefront of developments in AI. Why is it interesting?

Well, Kier's fundamental vision is that AI is an opportunity and he's looking at it more as an opportunity than a risk. It's simplifying, but basically he's saying we need to wait until we understand what this thing is before we over-regulate. And in this, he's slightly echoing Reid Hoffman, who we've also interviewed on leading and Mustafa Suleiman, who I think would agree with quite a lot of what's being said here, which is the problem with what Europe's trying to do, the European Union's trying to do, which is going very heavily on risk averse regulation is twofold. First see that we don't yet know exactly what the stuff is or what it can do. And therefore, it's a bit like regulating cars at the stage where they're still traveling at 10 miles an hour with someone walking in front of them with a red flag, that the regulation is likely to be inappropriate to whatever this thing looks like in two years time.

The second problem is a little bit related to what happens in climate change. If you start trying to control your own carbon emissions while everyone else is doing it. So if Europe and the UK kill off the AI industry, but the US and China are just going full guns, you're not going to make the world a safer place. In fact, you're just going to get yourself colonized by them. And this is always the technological problem. If you think back to the days when people were having debates about, you know, railroads or nuclear weapons or any of these kinds of things, the reason in the end you push ahead with technology, even when the technology can seem pretty dangerous and disruptive to your society, is that if you don't, your neighbor does. And your neighbor then sits on you in a really big way.

So I think Keir Starmer probably doesn't have many choices. I don't think there's much point to him trying to be pious and super risk averse if the US is going all guns blazing. I think the thing that really is missing here still is two things. Firstly, a very, very radical change in government. And this is why it's going to be great to get Peter Kyle, who's the minister responsible for this, on leading to talk to him about what they can really do to shake up the civil service, who is always never really understands technology well enough, never really understands science well enough, never really takes enough risk with new emerging technologies.

And secondly, how do you sort out our financial markets? Because we're still dealing with this problem where Britain has great ideas, we set up early stage companies, and then they schlep off to Silicon Valley to get their investment. And that's partly to do with what our pension funds are allowed to do. And it's partly to do with the general risk averse culture in Britain. And it's partly to do with the whole surrounding context.

So I'm really impressed by this. Any other thoughts on AI from you?

Well, I think, you know, you and I, when Peter Kyle was appointed, said one, very good, that he's a good appointment. That's a new post, science, innovation, technology. And I think what Peter's done, I think, you know, I've been, sometimes I sort of text from time to time, you know, why have you been so quiet? Why don't you say anything? But actually, I think he has been a way of getting under the bonnet of this. And I felt when I was watching him doing interviews, and when he was talking about this in recent days, I thought, this is a guy who's really immersing himself in detail. I remember when Musk started going off on one of his early kind of rants. And I started first, I think this guy really is a sort of, you know, menace. And I remember pinging Peter Kyle a message and saying, you know, why can't you just take away any security clearance this guy's got? And he said, yeah, well, yeah. And so is that we, you know, we sort of shoot ourselves in the other foot where we're trying to sort of build, you know, AI as the centerpiece of the economy, etc.

Now, by the way, I wouldn't underestimate, just back to the point about Rachel Reeves, we should be very wary of the potential impact that Musk has with his reach, and his volume, and so forth, even though I think eventually, he's going to kind of, you know, blow himself up. But that's just maybe wishful thinking. But he is damaging brand Britain. And we have to assume he's doing that with other people, the networks that he has access to. So, Labour has got a job, maybe this is part of Peter Mandelson's role when he steps in as ambassador, but Labour's got a job to counter some of that.

Because, you know, every country in the world has a brand. What I liked about the way that Peter Karl and Keir Starmer presented this, they were basically saying, you know, we're not starting at a kind of, you know, an even here's the starting line of a race. America and China are way ahead of everybody. But we're basically next. And that gives us massive opportunities. And we've got to exploit those opportunities.

And the thing is that, you know, when we talked about New Year's resolutions, and I said, you've got to have people who've got to know what your enemies are. In a way, they were signaling because when he talked about, you know, the available data in healthcare, and how that can lead to better outcomes for people when they're sick, part of me and part of you, I suspect is going, oh, Palantir, Peter Thiel, blah, blah, blah, blah. You know, we don't really like these people having their hands on our data. That's a fight.

And what I was getting, I think this is probably the reason why you liked it as a speech, what I was getting from Keir, the same as he did a little bit the week earlier, when he was giving a speech on healthcare, was there are going to be fights in this. And I'm telling you, kind of where I'm staking out my ground, I'm on the side of innovation, yes, safety, yes, regulation, but that is not going to be the driving force. This has got to be how do we get better public services? How do we get better economic growth by properly exploiting and harnesses the benefits of artificial intelligence?

Yeah, let's just, I think, maybe conclude just by saying that a lot of the leading figures now in AI, some of whom we know, some of whom we've interviewed, are increasingly predicting that things are going to change very, very, very quickly, indeed. Leopold Aschenbrenner has written a paper called Situational Awareness, which we can share, which is suggesting we could get to artificial general intelligence within a couple of years. Dario, who runs Anthropic, again, is talking that kind of time frame. Demis Hassabis is talking, I think, last time I saw four or five years, which means that you're going to end up with super intelligence able to generate 100 years of scientific progress in a couple of years. I mean, every single publication in nature and science will be groundbreaking. It's almost impossible to work out how humans are going to be able to read all this stuff or even just work out what's been discovered in mathematics and physics.

We can find ourselves in a world where everybody working in call centers suddenly loses their jobs. And that will then mean wiping out 10% of the economies of many low and medium income countries that are relying on call centers to emerge. All of military conflict could be turned on its head because artificial general intelligence would make almost all our armies obsolete overnight. Britain is very vulnerable because one of the things it could do is take out almost all the people working in white collar jobs, consultants, bankers, lawyers, and God forbid, even podcasters, right? And the problem is that, as usual, timelines are out of sync. Governments tend to think, well, I've got four or five years.

If these guys are right, that the entire technology of the world is changing in a two, three year period, then the job facing Keir Starmer is completely different to any job that any prime minister has ever faced in the past.

My final point, I'll just end with a question. Do you think Liz Truss was right to get lawyers to write to Keir Starmer to say he must cease and desist from saying she crashed the economy? Was that a good move for her long-term reputation? What was your view of that?

That doesn't seem like a very good move. I think saying that your previous conservative prime minister crashed the economy is absolutely part of the strong 400 year tradition of British parliamentary politics. I think on this one, he definitely, at the risk of getting a cease and desist letter from Liz Truss, I think it's very, very, very fair comment.

See you tomorrow.

See you tomorrow.