Is Burnham actually cutting red tape? CapX has long criticised social value rules for adding cost and complexity to public sector procurement. Now the Government is promising to pare them back, stripping away old requirements in favour of a tighter focus on higher paying jobs and routes for NEETs into work. That sounds like a step in the right direction – except that on higher-value contracts, the weighting given to social value has actually been doubled, meaning higher costs or lower quality. Either way, we’ll all end up paying. See the piece by Joe Hill below for more.

Elsewhere, the UK statistics watchdog has said Keir Starmer misled MPs over defence spending when he told a committee that Labour were going to spend ‘£270 billion more on defence than we would otherwise have done’. The actual figure is more like £20bn, and John Healey still has to spend his summer working out how on earth he’s going to pay for that.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

The UK must follow the path to prosperity

Joseph Dinnage

‘Since 2015, the UK’s ranking for economic freedom [on the Legatum Prosperity Index] has declined from 7th to 18th place.’

People in the UK used to feel confident they would be better off in the future than they are now. Unfortunately, as this year’s Legatum Prosperity Index demonstrates, the UK has fallen behind its neighbours thanks to a high-tax, low-growth economy. But the Index points to places, like Switzerland, that can teach us how to become prosperous again. Read More

Free markets are the Gulf's best defence against Iran

Juno Chowla-Song

‘The Middle East’s low productivity is self-inflicted. Restrictive labour laws and nationalistic procurement requirements have slowed down the delivery of oil pipelines across the Gulf.’

Since Iran closed the Strait of Hormuz, regional producers have been losing $1.2 billion a day. There are lots of planned pipeline projects to bypass the Strait, and these countries don’t lack the capital to fund them. The Gulf states’ own labour and procurement laws pose the biggest barrier to securing their economic security. Read More

The Capitalist: Alex Tabarrok on equal pay

Britain’s ‘equal value’ pay rules go well beyond upholding equal pay for the same work, and mean that tribunals have the power to ignore the market and decide that bin men and teaching assistants should, in fact, be paid the same. These rules bankrupted Birmingham City Council, and the big supermarkets are already facing claims worth up to £8 billion for back pay. Now the Government wants to expand the law further, adding race and disability to the list of grounds on which you can bring a claim.

This week on The Capitalist, I sat down with Alex Tabarrok, Professor of Economics at George Mason University and co-founder of the blog Marginal Revolution. He walks through the madness of trying to rule by committee on how to treat apples and oranges the same, and explains why trying to set a just price is like suing the weather.

Best of the Web

Britain has a problem with the rich

James Kanagasooriam, The Times 🔒

‘More than a third of voters (36%) say the UK would be fine, or better off, with fewer millionaires, according to polling by my firm Focaldata. That includes about a quarter of Conservative and Reform voters.’

In a rare piece of good news for Britain's super-rich, Gary Stevenson is stepping back from his weekly demands for a wealth tax. But the mood he tapped is widespread, because too many Britons cannot picture themselves ever joining the wealthy. In America, ordinary trades still make people rich. Why not here too? Read More

We have to fix maternity care

Ruby Dunn, The Critic

‘The NHS spends approximately 3% of its annual budget on maternity care, but over half of its negligence settlement budget is spent on failings there.’

Maternal deaths are at their highest in 20 years, and report after report into avoidable baby deaths reaches the same conclusions about fragmented care. This year, a Royal College of Midwives survey found that 77% of members called their units dangerously understaffed. Nothing changes on a ward, staff say, until someone dies. Read More

One step forward, two steps back

Joe Hill

Re:State

Why procurement shouldn’t be based on social value

When does a 10% change make all the difference? When it’s to the ‘social value’ measurement used in procurement decisions…

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5 hours ago · 17 likes · Joe Hill

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– What SpaceX can teach us about regulating AI (Substack)

– Is the US running out of long-range missiles? (Reuters)

– The golden age of British ice cream (Vittles)

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‘Trying to get rid of the price system is a few steps down the line towards full communism.’

Britain’s ‘equal value’ pay rules go well beyond upholding equal pay for the same work, and mean that tribunals have the power to ignore the market and decide that bin men and teaching assistants should, in fact, be paid the same. These rules bankrupted Birmingham City Council, and the big supermarkets are already facing claims worth up to £8 billion for back pay. Now the Government wants to expand the law further, adding race and disability to the list of grounds on which you can bring a claim.

This week on The Capitalist, I sat down with Alex Tabarrok, Professor of Economics at George Mason University and co-founder of the blog Marginal Revolution, who wrote a viral post in 2024 on Britain’s ‘Orwellian’ approach. He walks through the madness of trying to rule by committee on how to treat apples and oranges the same, and explains why trying to set a just price is like suing the weather.

He says we’ve somehow ended up in the worst of all worlds: instead of the old Marxist fantasy of a scientific bureaucracy making economic decisions, we have a tribunal system everyone can see is broken, spending years and generating hundreds of pages of documents to produce nonsensical outcomes. Tabarrok argues our pay rules are part of a much bigger pattern: well-intentioned rules piling up like pebbles in a stream, until the stream – the economy, innovation and growth – is dammed. And sometimes only a sharp rap on the head from reality can restore policymakers to their senses.

Below, you’ll find some short excerpts from our conversation.

Marc Sidwell
Editor, CapX

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Do politicians need economics lessons?:

‘Everyone needs to read their Adam Smith. Adam Smith literally talked about these kinds of problems. He talked about, you know, what he called compensating differentials. In the Next case, which was comparing retail workers with warehouse workers, the warehouse has got all kinds of issues. It’s very noisy. It could be a little bit dangerous. But the tribunal had said, no, these jobs are equal. But the lead plaintiff of the retail workers said, if you want me to work there, you’d have to pay me more. What more can you say?’

On tribunals for apples and oranges:

‘The fundamental problem is that trying to get rid of the price system is really a few steps down the line towards full communism. I don’t want to sound hyperbolic, but it is true when you get rid of the price system. Essentially what they're trying to do is compare apples to oranges. ... How would you do that? … If I don’t sell my apples, I can turn them into apple pie or apple juice, but there’s no orange pie. So I can’t do that. So you have to compare that. Or there’s orange juice. Okay. But do people like orange juice as much? Just trying to even think about the innumerable comparisons that you would have to make shows you that this is why we have markets.

And suppose we get to a situation where we’ve decided, okay, we’ve got the just price between apples and oranges. We have solved the apple-oranges tribunal problem. Well, suppose then that it’s announced that oranges reduce cancer. Linus Pauling was correct. Vitamin C is good. Oranges reduce cancer. Now everyone’s going to want to buy oranges. Okay. Well, how are you going to get more oranges? The price has got to go up, right? But we just said we created the just price, and presumably the labour in apples and oranges has got the just price. But now how are we going to get more labour to produce oranges now that people want more oranges? Well, we have to pay more. We compared apples and oranges and apple workers and orange workers, and we said we were at the right number. But now we need a higher price of orange juice and more orange juice workers in order to get more oranges. So what are we going to do? We’re finished. Getting rid of the price system is a very, very bad idea.’

On the idea of a just price:

‘Hayek said, look, justice is about how we treat one another. The price system, in contrast, is not created by anyone. I didn't decide the price. You didn't decide the price. Tesco didn't decide the price. Okay, you might think they did, but no, everything is decided through this decentralised market system involving millions of people, most of whom you will never, ever meet. And a lot of situations, facts and figures, none of which people ever understand. It's like evolution. It's a decentralised process. And in that sense, justice just doesn't apply because it's not something that I did or something that you did. It's like the weather. So trying to make a just price is like trying to sue the weather for raining too much.’

On regulation as pebbles in a stream:

‘The first pebble you throw in, it’s fine – there was a good reason for it. Then you throw the second pebble, it’s okay. The third, the fourth, they all start to interact with one another. You’re building a more complicated and complex system over and over again. Each pebble might be a good idea on its own, but a lot of good ideas turn into a bad idea. And now you’ve dammed the stream. And the stream is the economy, the stream is innovation, the stream is growth, the stream is progress.’

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Lots more flights will soon be taking off as well. In a rare piece of good infrastructure news, Gatwick’s second runway is going ahead, after a legal challenge was defeated in court – see our Stat of the Day below.

Before he left, the Prime Minister penned an op-ed announcing that Labour’s early release scheme for prisoners will continue. He promised that rapists will no longer be eligible, but domestic abusers will still face less time inside. William Tittensor wrote for CapX on a better way to tackle the prisons capacity crisis.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Ceuta reveals the flaw at the EU's heart

Mani Basharzad

‘One country’s weak border control becomes every member state’s problem because of free movement.’

The Spanish border crisis in Ceuta reveals how the weakness of one member state can impose huge costs on the rest of the bloc. From fiscal policy to free movement, the EU is rife with moral hazard. To rein in bad actors, it needs to restrict the benefits of membership to those who follow the rules. Read More

More cells won't fix the prisons crisis

William Tittensor

‘Once we begin providing the building blocks for change, the relentless demand for more space might finally start to subside.’

The prison estate in England and Wales currently operates at over 96% capacity. Andy Burnham today confirmed early release will continue, with rapists and grooming offenders excluded. Building more prisons will be slow and expensive. But there is a way to ease the capacity crunch without burning a hole in taxpayers’ pockets. Read More

The AI doomers are wrong about maths

Valentin Boboc

‘There is something very lazy about thinking that a machine is magic and will replace us all.’

OpenAI has announced one of its new models cracked 10 unsolved problems in mathematics. Some academics are in despair, but a more reasonable response is to see these AI models for what they are: tools. Breakthroughs like this still only happen when frontier models are used by researchers at the top of their field. Read More

Stat of the day

Best of the Web

Our universities are feeding their own destruction

Sean Thomas, The Spectator

‘Even as our universities are gleefully trashing their reputations, they stand perilously close to an economic and intellectual abyss.’

From the Oxford Union’s descent into panto to the myth-making of Jason Arday, Britain’s universities seem to be intent on extraordinary acts of self-harm, just as every economic force in the universe threatens their survival. Universities being woke, weak or hypocritical is nothing new. The difference on this occasion is the timing. Read More

Supermarkets are heroes, not villains

Luke Johnson, The Telegraph 🔒

‘Britain’s supermarket sector is ferociously competitive, and in general the prices of groceries are lower in Britain than many comparable countries.’

The Chancellor seems to be looking for a fight with business. He has warned that he will tackle any supermarkets guilty of ‘price-gouging’. The inadvertent impression is that he has little understanding of industry or indeed economics. Far from being cartoon baddies, our supermarkets currently serve us well – unlike much of the public sector. Read More

Vocational education at 14 is not the answer

Daisy Christodoulou

No More Marking

The problem with "parity of esteem"

When I was a child, my grandmother used to make up little fairy tales for me. The characters would be loosely based on people in our family and part of the fun was working out who was who. One of them went a little bit like this…

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4 days ago · 142 likes · 37 comments · Daisy Christodoulou

The Capitalist: Who owns the Moon?

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– Arthur Brooks: will socialism make you happy? (The Free Press 🔒)

– Don’t be scared of data centres (X)

– How to escape the productivity slump (Human Progress)

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Houchen argues that handing over a share of business rates and income tax counts for little if mayors are restricted from choosing how to spend the money – or whether to offer a tax rebate instead. The proposed arrangement is more like pocket money with strings attached – devolution in name only.

Each week we bring you Despatch – an example of the best writing from CapX, read aloud. For hosted conversations, listen to The Capitalist, every Wednesday.

Meanwhile Andy Burnham’s mentor Neil Kinnock has urged him to raise capital gains tax to cover his spending commitments. See Gerard Lyons below on why new taxes can’t fix Britain’s public spending problem.

If Burnham wants a better idea to take up, he should read today’s CapX piece by Samuel Williamson. Keir Starmer left his successor a very expensive gift: a consultation expanding the scope of ‘equal value’ rules in the workplace. Williamson explains how New Zealand solved its equal pay claim problem in just three days.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

How to fix the equal value pay crisis

Samuel Williamson

‘New Zealand offers an excellent example of how a partial solution can be implemented without needing to challenge the core principle of ‘equal value’ work.’

On his way out of No 10, Keir Starmer launched a consultation on extending equal pay law to race and disability. The existing sex-based rules have already bankrupted Birmingham and could cost supermarkets £8 billion in back pay. New Zealand faced the same crisis last year – and legislated its way out of it in three days. Read More

Hendon’s last pristine wilderness?

James Ball

‘It shouldn’t come as a surprise when I tell you Barnet Council isn’t planning to operate its new football pitch 24 hours a day.’

In this week’s Nimby Watch, some Hendon residents are determined to protect ‘one of the last pristine wild life spots in London’ from being turned into ‘a 24/7 floodlit eyesore’. What they’re actually objecting to is a council proposal to build a football pitch in the middle of… an area full of football pitches. Read More

Stat of the day

Best of the Web

We can't tax our way out of this

Gerard Lyons, The Times 🔒

‘Suddenly, wealth and other new taxes are being presented as simple answers to Britain’s fiscal pressures. They are not.’

Who will pay for Andy Burnham’s agenda? With growth lacklustre and borrowing already stretched, that leaves taxes – but Labour’s manifesto rules out rises in income tax, National Insurance and VAT. New levies on wealth, property or land won’t deliver either. Instead of squeezing taxpayers harder, it’s time to admit Britain has a spending problem. Read More

Industrial nostalgia is the last thing we need

Eliot Wilson, City AM

‘Fundamentally Reynolds still believes, as does the Prime Minister and as did Keir Starmer and Rachel Reeves, that state intervention is the key to economic growth and prosperity.’

Jonathan Reynolds is back at the business department, presenting himself as a moderating force, keen to work with the private sector to deliver the government’s promises. But a succession of governments tried exactly this, sitting down with both employers and trade unions in the Sixties and Seventies. The results are nothing to be nostalgic for. Read More

The case for social care insurance

Charlotte Pickles

Re:State

Getting serious about social care

Last week it was reported that one of the options being considered by the PM to transform social care funding is our model, detailed in Beyond caring: a new funding model for later-life social care, of a Later Life Care Fund. It created quite the furore…

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3 days ago · 14 likes · 1 comment · Charlotte Pickles

The Capitalist: Who owns the Moon?

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– Samuel Hughes: ugly architecture = fewer homes (Works in Progress)

– The benefits of an unwritten constitution (UnHerd)

– Wealth taxes: the trillion-dollar illusion (American Spectator)

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Elsewhere, Tim Worstall made the case that Burnham’s proposed National Care Service repeats the NHS’s founding mistake – and that talk of shutting out private providers is the opposite of what’s needed. Mark Field, the former MP for the Cities of London and Westminster, looked at the £43 billion it would cost to nationalise Thames Water, and why the whole country would end up paying for it. And Ted Newson reported on leaked documents showing the grid came far closer to blackout during June’s heatwave than ministers admitted.

James Price imagined the Britain we could have had if politicians spent less time punishing wealth, and contrasted it to the evidence of the Adam Smith Institute’s Millionaire Tracker, which shows the country now has fewer millionaires than at any time since 2008. LFG’s Tom Willerton-Gartside attacked the second staircase rule about to come into force on tall buildings. It’s stricter than almost anywhere else in Europe, adds £22,500 to the cost of a flat and is already helping price a generation out of our cities. And Nils Knoben warned that Burnham’s enthusiasm for German-style federalism borrows a model Germany itself is now trying to escape.

This week on The Capitalist, I sat down with historian and sociologist Rainer Zitelmann, to discuss how SpaceX cut launch costs by 95%, why the space shuttle was such a fiasco – and if anyone actually owns the Moon. Listen here.

Marc Sidwell
Editor, CapX

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I want power, not pocket money

Ben Houchen

Let me give Andy Burnham his due. For the best part of a decade he was the most persuasive voice in the country for letting go – for the plain truth that a decision taken in Whitehall about a town no official has ever visited tends to be worse than the one the people who live there would make for themselves. He said it in opposition, as Mayor of Greater Manchester and to anyone who’d sit still long enough to listen. I agreed with him then and I agree with him now. Which is exactly what makes his first fortnight in Number 10 so dispiriting.

The man who spent 10 years telling Whitehall to loosen its grip has walked into Downing Street and gripped tighter than any minister I ever dealt with.

Here’s what he’s offered. From 2027, mayors keep a share of the business rates raised in their areas. From 2028, a share of the locally generated income tax too. The ring-fenced grants that fund our work today fall away, and this retained revenue takes their place. On paper, it’s a serious shift – more of the money raised in a place staying in that place, exactly as he always argued it should.

But read the small print. We’re allowed to keep a slice of the money. We’re not allowed to touch the rate, and we’re not allowed to hand any of it back to the people who earned it. Westminster still sets the conditions and still reconciles the lot through an equalisation formula drawn up in the Treasury. We need power, not an allowance. Hand a teenager pocket money and a list of approved purchases and you haven’t trusted him with anything.

Devolution exists to move decisions closer to the people they affect. That’s the case Burnham has made for a decade. But he doesn’t go far enough. A tax cut isn’t a betrayal of devolution: there is no smaller unit to devolve to than a household deciding how to spend its own money.

So here is what I’d do. If a share of the income tax and business rates raised on Teesside lands in my budget, I’ll use it to launch a rebate scheme: business-rates relief for the small firms holding our high streets together, and help for families struggling with the cost of living. The hairdresser in Redcar and the steel fabricator in Hartlepool understand their own lives better than any growth board ever will. Thousands of people spending freely will grow a place faster than one mayor spending cleverly, every time.

If I’m honest, I’d rather ministers skipped the apparatus altogether and simply lowered taxes on a national level – no growth boards, equalisation formulas, sign-off processes or a new tier of officials to run them. Every structure you build to redistribute money is a structure that skims it and slows it first. But if Burnham is set on doing it his way, he has to accept the logic that follows. If the receipts land in my budget, handing them back is a choice I’m entitled to make on my constituents’ behalf.

And if local people want to elect a mayor on the promise of a tax cut, that is their right. That is the entire idea. Take it away and the whole thing is just theatre: I open the envelope from the Exchequer and pass the contents to the payees Whitehall has already chosen. You could abolish my office, wire the money directly and Teesside would notice no difference beyond the saving on my salary. A mayor who can only spend money the Treasury’s way isn’t a mayor to begin with.

Give me the money and you give me nowhere to hide. Suppose I’m wrong and Teesside, Darlington and Hartlepool would rather I built something than give their money back. Then they can find a candidate who promises exactly that and vote me out. I lose my job; someone with a better read on this place takes it. That’s real devolution. Everything else is pocket money with strings attached.

And if you want more…

– Nimby Watch: Belgravia’s water pressure revolt (James Ball)

– Splitting track and train wasn’t a Tory idea (Joshua Bowden & Len Shackleton)

– Property rights can save British fishing (James Hodgkinson)

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We’ll be back on Monday.

Andy Burnham launched his devolution plan today (though much of it was already in motion under Rachel Reeves), promising to give regional mayors a share of income tax and business rates to spend. As long as they spend it in ways Burnham wants.

Ben Houchen, Conservative Mayor of the Tees Valley, wants to use the money to give his voters a tax rebate – but the Government confirmed today that would be blocked. Writing for CapX, he explains why a mayor who can’t make these decisions isn’t really a mayor at all.

And mark your calendars – Budget day is set for October 28. Suitably close to Halloween.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Mayors need power – not pocket money

Ben Houchen

‘If a share of the income tax and business rates raised on Teesside lands in my budget, I’ll use it to launch a rebate scheme.’

Andy Burnham is right that Westminster’s grip on power needs breaking. But the money he is handing regional mayors comes so tied up in conditions that they can’t control how to spend it, which turns the whole thing into theatre. Ben Houchen argues he should be free to give Teesside’s share back to the people who earned it. Read More

Labour’s rail plan puts Britain on the wrong track

Joshua Bowden and Len Shackleton

‘Many fans of rail nationalisation claim that the separation of trains and track under privatisation was the fault of those awful Tories. This is twaddle.’

The Tories get blamed for the state of our rail network. But passenger numbers soared under privatisation, while the separation of trains and track began under British Railways. The network needs more competition: open-access operators have brought high-quality inter-city services to regional Britain for the first time in decades. The Railways Bill puts that at risk. Read More

Stat of the day

Best of the Web

Burnham’s levelling-up drive will backfire

Ross Clark, The Spectator

‘You simply can't have a system of distributing public funds which benefits areas of growth without it causing relative poverty to places which are not economically doing well.’

Burnham’s tax shake-up will reward the postcodes that need it least. Under his plans, mayors keep a share of the income tax and business rates raised locally – dismantling the very pooling system designed to move money from City banks to declining areas. In Manchester the centre boomed and Oldham didn’t – the country is next. Read More

A load of (red) bull

Christopher Snowdon, The Critic

‘Perhaps it is too much to ask for evidence-based policymaking from governments that are effectively run by Mumsnet and YouGov, but even the Scottish government concluded that there was insufficient evidence to justify such a ban.’

Governments love to talk about evidence-based policymaking. Yet England's ban on selling energy drinks to under-16s has been kicking around for eight years without anyone settling what the policy is supposed to deliver. You may not care about teenagers, but every adult buying one will have to prove their age if this ban comes in. Read More

Computers didn't fix Whitehall. Will AI?

Wallenstein's Camp

Will Ai Make The Public Sector More Productive, Or Less?

Lots of politicians are crossing their fingers and hoping AI will help deliver the productivity boom needed to reverse the stagnation and decline seen in public sector productivity in recent years. As an avid user of AI, there are certainly some huge opportunities…

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4 days ago · 7 likes · Stephen Webb

The Capitalist: Who owns the Moon?

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– From income world to wealth world (John Burn-Murdoch)

– Can America’s allies preserve the West? (Engelsberg Ideas)

– In defence of stupid growth (Economic Affairs)

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We'll be back on Sunday with the Weekly Briefing.

That’s where the good news stops though, as Burnham’s big defence announcement turned out to be a commitment to our nuclear deterrent already promised by Keir Starmer. Burnham’s contribution was an emphasis on ‘British money, spent on British workers, British firms and British skills’. Which sounds nice but has some serious – and costly – implications.

Meanwhile, Spanish banking giant Santander told its UK staff at TSB to come into the office at least three days a week – only to be met with a tribunal claim by a union. Embarrassing, when the inventors of the siesta are the ones telling us to turn up to work.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Burnham’s care plan can’t work without profit

Tim Worstall

‘A system of social insurance against a calamitous old age does make sense. But government running the service is contraindicated.’

Andy Burnham wants to fix social care, but a National Care Service modelled on the NHS is the wrong way to do it. Reaching old age is near certain, and should be saved for; a descent into dementia is a risk, and should be insured against. Better that the state mandates and underwrites, while private suppliers compete to deliver. Read More

Why is Britain losing its millionaires?

James Price

‘Instead of a boom, we have fewer millionaires, with all that comes with that – less tax revenue, less investment and less entrepreneurship.’

Millionaires pay a huge amount of tax, more than any other group in the UK. So why does the government continue to levy punitive taxes on one of the most mobile groups in the world? With Dubai’s attractive tax regime, the ultra-rich are going there in droves. A world where Britain keeps and attracts millionaires is better for everyone. Read More

Stat of the day

Best of the Web

Burnham's DIY economics will end in a mess

Ryan Bourne, The Times 🔒

‘DIY economics substitutes intuition for analysis … policies get judged by their visible first effect, with little thought given to the broader consequences.’

Governing the country requires more than a competent media strategy. You also need sound economics. So far, Andy Burnham and his cabinet seem to be adopting a dangerously DIY approach. Trying to pick winners and ignore all trade-offs involved won’t end well. Read More

Taxing the banks repeats the North Sea mistake

Matthew Lynn, The Spectator

‘In a free market economy, companies and shareholders own the losses, and they own the profits as well.’

In Burnham’s Britain, success tends to come with a bill attached. Lloyds and Barclays posted bumper half-year profits this week – the sort of result a growing country would want more of. If the instinct is a windfall tax, the country will foot the bill in the long run. Read More

Matt Ridley: the miracle of spontaneous order

Economic Affairs

The battle between top-down and bottom-up

Matt Ridley is a science writer and a former Member of the House of Lords…

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7 days ago · 16 likes · Institute of Economic Affairs and Matt Ridley

The Capitalist: Who owns the Moon?

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– Who gets rich from innovation? (The Daily Economy)

– How to fix property taxes (ConservativeHome)

– The everyday miracles in your living room (Jordan Dworkin)

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Andy Burnham’s big speech on social care today was light on policy detail, as he said he would wait for an accelerated version of the Casey review next summer before making any decisions. There was a worrying sign, though, as reports came in that he is planning to shut profit-making firms out of the sector. Does business-friendly socialism have a problem with private enterprise?

Meanwhile, the banks are getting nervous that they may be in the firing line to help pay for the new Government’s promises. See Gerard Lyons below on why Burnham needs to think hard about second-order consequences before raising tax rates any higher.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Net Zero could collapse the grid

Ted Newson

‘The sheer cost of balancing the grid should convince even sceptics that we must invest more in firm power.’

On June 23 Britain’s grid came close to collapse. Despite an energy minister calling the claims ‘scaremongering’, new whistleblower information shows the grid had indeed been pushed past safe operating limits. As Britain’s Net Zero goals bring more renewable power online, new risks are being introduced when wind and solar fail to deliver. To maintain trust in the grid, politicians and grid operators must be transparent with the public. Read More

Nationalising Thames Water would sink Burnham

Mark Field

‘Welsh Water is touted by proponents as the model for mutualisation … but Welsh customers are tipped to have the highest water bills across England and Wales by 2030.’

Andy Burnham has already spent over £1.3 billion on policies that do nothing to stimulate economic growth. He cannot afford to stick taxpayers across the country with the bill for nationalising Thames Water as well. As for talk of a mutual model, the firm’s debt pile makes it a complete non-starter. Read More

The Capitalist: Who owns the Moon?

In June, SpaceX went public in the largest IPO in history. Three days earlier, a German historian published a book explaining why that moment had been 60 years in the making.

I sat down with Rainer Zitelmann to discuss ‘New Space Capitalism’, his account of how private enterprise took over the final frontier. We talked about how SpaceX cut launch costs by 95%, why the Space Shuttle was a fiasco, what cost-plus contracting does to a defence budget – and who will own the land beneath the first city on Mars.

Best of the Web

A warning to Burnham on tax

Gerard Lyons, The Telegraph

‘As the Scottish Government has discovered, raising new tax revenues is rarely straightforward.’

Scotland’s 48p top rate of income tax has raised less money, not more, as canny taxpayers changed their behaviour. Andy Burnham should absorb the lesson before the autumn Budget, especially if he is eyeing capital gains or property taxes. Modern tax systems were built around incentives and ability to pay, and there’s a reason for that. Read More

No, minister – lower growth isn't good news

Arthur Reynolds, City AM

‘The vast majority of Brits, myself included, do not want to consume less. We want more holidays, more pleasure in our lives, greater financial security.’

Katie White, newly promoted at the Energy department, once chaired the Mindfulness Initiative, which welcomed slower growth and wanted GPs trained to treat ‘eco-anxiety’ – not the prescription you’d expect after 15 years of stagnant incomes. If Burnham wants growth in every postcode, he’ll need ministers who believe in it. Read More

Policy is not pizza 🍕

Tim Knox

The Effective State

Deliver us from politicians who promise 'delivery'

Only three kinds of people should be allowed to use the word “deliver”: postmen, pizza couriers and obstetricians. A letter is delivered, a margherita arrives, a baby is born. In each case there is a thing that already exists before the delivery, and a clear moment when the job is done. The recipient signs, the rider departs and the transaction is compl…

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7 days ago · 1 comment · Effective Governance Forum

Stat of the day

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And if you want more...

– The rise of the deserving rich (The Economist 🔒)

– Nuclear war is thinkable again (New Statesman)

– What happens to your data when you click delete? (The Conversation)

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‘Socialism didn’t work anywhere on Earth in the last hundred years. Why should it work on Mars?’

In June, SpaceX went public in the largest IPO in history. Three days earlier, a German historian published a book explaining why that moment had been 60 years in the making.

This week on The Capitalist, I sat down with Rainer Zitelmann to discuss ‘New Space Capitalism’, his account of how private enterprise took over the final frontier. We also discussed how SpaceX cut launch costs by 95%, why the space shuttle was a fiasco, what cost-plus contracting does to a defence budget and who will own the land beneath the first city on Mars.

Zitelmann argues that space is the one industry where the world has moved decisively towards markets rather than away from them – which makes it the clearest available demonstration of what capitalism can do. Of 324 rocket launches worldwide last year, 165 were SpaceX’s; if the company were a country it would rank first, well ahead of China. But he also warns that the next stage will stall unless someone settles the question the Outer Space Treaty left open in 1967: whether private companies and individuals can own property beyond Earth.

Below, you’ll find some short excerpts from our conversation.

Marc Sidwell
Editor, CapX

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How SpaceX cut launch costs by 95%:

‘If you compare the launch costs of the space shuttle with SpaceX’s internal cost today for the Falcon 9, they have reduced it by 95%. There are a lot of reasons, but one is that they were the first to build a genuinely reusable rocket. It makes a difference whether you use a rocket once and throw it away, or whether you can use it several times – Musk has now used one Falcon 9 booster 36 times, and he will use it more. Think about aircraft. If I fly to London next time, it would cost seven or eight hundred thousand euros if they threw the plane away afterwards. No one else can do this today, with one exception: Jeff Bezos and Blue Origin. No government-led space agency – not in Russia, not in China, not in Europe, not in the United States – is able to do it. This year’s Artemis II rocket cost $4 billion, for a single use.’

On cost-plus contracts:

‘Even at the time of the first Moon landing, NASA didn’t build the rockets itself – private companies did. But the basis of the co-operation was completely different. It was so-called cost-plus contracts: the company had to show its costs, say $1 billion, and then add a profit of, say, 10%. Which means more cost, more profit. With $1 billion of costs you make $100 million; with $3 billion of costs you make $300 million. It was an incentive to increase costs. I spoke to one senior figure who worked for a contractor in those years and he told me: our best product was our overhead. Musk works on a totally different basis. He doesn’t sell NASA his rockets – they belong to him. He sells a service, like FedEx or UPS: I bring you something from A to B and I charge you this much. So if he reduces his costs, he increases his profit. It is exactly the opposite of what came before, so it comes as no surprise that costs are lower.’

The space shuttle’s record:

‘The space shuttle was a total disaster. They based their calculations on 140 flights every year; in the end it was 135 flights in 30 years. They calculated costs of about $10 million per flight; in the end it was more than $1 billion. Then there were two accidents, 14 astronauts died, and it was ended in 2011. The chapter heading in my book is “The end of the future”, because from that point the United States was no longer able to send its own astronauts from American soil on American rockets to the International Space Station. They had to rely on the Russians and old-fashioned Soyuz rockets.’

On NASA’s ‘Hail Mary’ bet on SpaceX:

‘Some people inside NASA called it the Hail Mary move – you know it from football: when nothing else is working, you try something that fails almost every time. They gave a little money to SpaceX. By a little I mean half a billion dollars, which sounds like a lot, but set against a Moon landing that cost around $300 billion in today’s money it was not so much. Most politicians, and plenty of people inside NASA, didn’t believe in it. The woman in charge of the co-operation with SpaceX reported that every week a colleague would come into her office and say: “I’m so sad for you that you have to work with this idiot. I don’t want to be in your shoes.” They didn’t believe in it. But it worked.’

Why Mars needs private property:

‘According to the Outer Space Treaty of 1967, countries are prohibited from claiming ownership of celestial bodies or of land on them. I have no problem with that where states are concerned – I think it’s not a bad idea. But how does it stand with private companies, with private individuals? There is nothing in the treaty, because in the 1960s almost nobody could imagine that some decades later there would be people like Elon Musk or Jeff Bezos. Now there is a legal dispute among space lawyers about whether private ownership is allowed. It has to be allowed. You cannot settle a million people – not even thousands – without private property, because that means socialism. Socialism didn’t work anywhere on Earth in the last hundred years. Why should it work on Mars? Why should it work on the Moon?’

Can space make the case for markets?:

‘The problem with people who are pro-capitalism is that their arguments are sometimes too abstract. It’s theory – here is a Hayek quote, here is a Mises quote, imagine an island and voluntary exchange. If you make it more concrete and ask why the government failed and why private enterprise was so much more successful, and you have a real example like space, that is a better way to convince people. We have so many left-leaning teenagers today. As a teenager I was fascinated by space – I was 12 at the time of the Moon landing, and I even produced my own newspaper. If children are fascinated by space and then by capitalism, that can make a huge difference.’

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Meanwhile Chris Philp accused the French military of trying to intimidate him after one of its ships carried out a ‘training exercise’ nearby as he monitored illegal crossings in the Channel.

Another kind of warning shot was fired by Labour’s backbenchers, who are promising to end the Burnham honeymoon and rebel if he cuts welfare for young people. The only surprise is it took this long.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

The second staircase rule is pricing out a generation

Tom Willerton-Gartside

‘Italy and Austria have some of Europe’s lowest fire death rates, yet they don’t mandate a dual staircase until the building is above 80 metres.’

From September, Britain will require new residential buildings of 18 metres or more to have a second staircase. In France, it’s 50 metres; in Italy, it’s 80. This is yet another rule making it harder for the young to live and work in our cities – and Angela Rayner could fix it tomorrow. Read More

Don’t copy Germany

Nils Knoben

‘Andy Burnham has taken an interest in the German model just when Germany itself is increasingly questioning it.’

Andy Burnham is right that Britain is too centralised. But his proposed solution is inspired by Germany’s decades-long commitment to ‘equivalent living conditions’. That is a recipe for managed decline and bureaucratic bloat – not economic renaissance. Read More

Stat of the day

Best of the Web

There's a limit to tax rises

Paul Ormerod, City AM

‘Decades of no gains in public services’ overall efficiency is hardly an inducement to taxpayers to hand over yet more money.’

A slew of potential tax increases are being floated in the media to pay for the new Government’s plans. Andy Burnham can raise tax rates, but the public’s willingness to pay is another matter. If he wants us to cough up more tax, he needs to make improving public sector productivity a priority first. Read More

Nationalising the railways is already off track

Tony Lodge, The Telegraph 🔒

‘The new plan to nationalise train services contains no passenger growth target or cost control safeguards.’

These are early days for Labour’s much-vaunted Great British Railways, but the signs are not good. John Major’s rail privatisation wasn’t perfect, but extracting civil servants from running loss-making, subsidy-drunk services brought real benefits – not least growing passenger numbers. If nationalisation is to deliver, the state-run operator needs to learn from what works, and accept the discipline of competition. Read More

Best of CapX 🎧: Does Healey have the guts to cut welfare?

The Capitalist: Griffith takes on Burnham

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– What should Burnham do for social care? (Damian Green)

– The subsea network that keeps the world connected (Arena)

– Why don’t Gen Z buy rounds? (Ben Zaranko)

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Shadow Work and Pensions Secretary Helen Whately says the path to a stronger economy runs through work, not welfare – and the country cannot afford a government too timid to make that case.

Each week we bring you Despatch – an example of the best writing from CapX, read aloud. For hosted conversations, listen to The Capitalist, every Wednesday.

It’s been a rollercoaster ride, and it’s only Monday. A story late last night that Andy Burnham was ‘actively looking to scrap council tax and stamp duty’ set Westminster scrambling – and threatened to bring the housing market to a standstill. In a bid for calm, No 10 shot the idea down, at least until the Budget.

But don’t get comfortable. We can expect a flurry of policy announcements this week: on youth unemployment tomorrow; social care on Wednesday; defence on Thursday; and devolution on Friday. That last one will be delivered from No 10 North, natch.

Burnham also used his first big interview to say that Britain needs to ‘get really serious’ about reducing the welfare bill. That’s unlikely to be popular with his backbenchers, but if Burnham’s in the mood for gripping Britain’s big problems, he’s got to get spending under control somehow. Albert Edwards of SocGen coined a particularly… disgusting term today for the state of our public finances. It’s not the kind of global reputation you want.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Property rights could save British fishing

James Hodgkinson

‘Britain must grant fishermen a stake in the resources they help to conserve.’

British fishermen were promised a ‘sea of opportunity’ after Brexit. Instead, they were sold out by politicians eager to grease the wheels for an EU reset. But it’s not too late to use our Brexit freedoms to throw the industry a lifeline. Read More

Belgravia’s self-defeating war on hotel rooms

James Ball

‘Sometimes, it’s not just selfish people who don’t want their views ruining. It’s people taking out legitimate frustrations on the wrong target.’

In the latest Nimby Watch, Belgravia’s locals, frustrated at the level of service provided by Thames Water, are trying to prevent the expansion of a hotel – even though its development may be the best way to resolve the very problem they’re worried about. Read More

Stat of the day

Best of the Web

Can democracy deliver?

Fareed Zakaria, Washington Post

‘Democracies must once again prove that they can build housing and infrastructure, modernise public services, manage technological change … and do so with urgency and effectiveness.’

Across the world, democracies are facing furious voters. Economics explains some of it, but the deeper cause is the fear and anxiety that comes with the technological revolution we’re living through. In an age where technology moves at warp speed, democracy’s safeguards can look like paralysis. Free societies can still deliver, but now they need to prove it. Read More

It's time for a new Conservative revolution

Matthew Jeffery, ConservativeHome

‘The first privatisation revolution changed who owned Britain’s industries. The second is about ensuring Britain becomes the best place in the democratic world to build the industries of the future.’

Privatisation was one of the great achievements of modern Conservatism. But after the 1980s, too many Tories lost their reforming zeal. Now Andy Burnham believes the state can run major services better than markets. Conservatives should challenge that argument directly, and build the foundations for the next ownership revolution. Read More

Will Burnham lose the south?

James Kanagasooriam

The Political Whiteboard

Southern Discomfort

Below is a longer version of a Sunday Times Column from last week. https://www.thetimes.com/uk/politics/article/andy-burnham-rebuild-labour-coalition-v7dhtmw73…

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10 days ago · 3 likes · 2 comments · James Kanagasooriam

The Capitalist: Griffith on winning the young

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– Could you pass this 1878 Civil service exam? (Pieter Garicano)

– The shoe that beat the US government (Ed Conway)

– A Cabinet minister for anti-capitalist ideas? (Michael Mosbacher 🔒)

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We'll be back tomorrow.

As for the new Government’s plans, Ben Ramanauskas counted eight things wrong with Burnham’s decision to take VAT off household energy bills. Gerard Lyons focused on the bigger picture, and pointed to the record of postwar Labour governments that also came in promising new economic models. It’s not good.

So what should Burnham’s new Chancellor, John Healey, do instead? Slash £57 billion a year off the welfare bill by the end of the Parliament, says Damian Pudner. Shadow Work and Pensions Secretary Helen Whately also called on Healey to say what Burnham won’t: that the benefits bill has to come down.

Elsewhere, Ben Hopkinson read Sadiq Khan’s new draft London Plan and found a document that concedes defeat over housebuilding on page one. And Adam Thierer wrote on doom-laden predictions of an AI jobs apocalypse – and why they keep being proved wrong.

On The Capitalist this week I spoke to Shadow Business Secretary Andrew Griffith about what’s wrong with nationalising British Steel – and why the one reliable growth industry left in Britain is lawfare. Listen here.

And since the holidays are upon us, we asked CapX’s writers and contributors – including our Editor-in-Chief Robert Colvile, Liam Halligan (who takes over as Director of the Centre for Policy Studies in September), Daniel Hannan, Karl Williams, John Penrose, Gawain Towler and many more – what they’re packing to read on the beach. John Hoskyns on how to fix Britain, space opera, the origin story of party politics, Dan Wang on China, unmissable novels and an impossible bomb. Clicking through could be a costly exercise.

Marc Sidwell
Editor, CapX

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Andy Burnham is fighting the wrong enemy

Mani Basharzad

‘I’m personally convinced that our civilisation is approaching its end,’ wrote the British journalist Malcolm Muggeridge in 1980. ‘I think of St Augustine when, in AD 410, the news was brought to him in Carthage that Rome had been sacked by the Barbarians.’ Jim Callaghan was equally gloomy. In 1974, he remarked: ‘When I am shaving in the morning I say to myself, if I were a young man I would emigrate.’

Looking back, it is easy to see why. Inflation reached 25% in 1975. Britain was suffering a brain drain, with highly skilled engineers and academics leaving the country. Why would they stay when the top rate of income tax stood at 83%? Then there was the 1976 IMF bailout, followed by the Winter of Discontent. In 1979 alone, 29.5 million working days were lost to strikes. Unemployment reached 2 million. The dead went unburied, and hospitals were reduced to emergency treatment only.

When the new Prime Minister, Andy Burnham, says he wants to ‘undo Thatcher’s economic legacy’, is that the Britain he wants to return to?

It is easy to criticise Margaret Thatcher when we forget the country she inherited and the one she left behind. Thatcher’s greatest achievement was not economic growth, although GDP rose by 29.4% during her premiership. Nor was it cutting public spending, although it fell from 45% of GDP to 39%. Nor was it tax reform, although she reduced the top rate of income tax from 83% to 40% and the basic rate from 33% to 25%. Her greatest achievement was refusing to accept decline.

‘I can’t bear Britain in decline,’ Thatcher once said. Decline was not destiny. It was not something to be managed or accommodated. She criticised the Treasury for seeing its role as the ‘orderly management of decline’. Thatcher rejected that mindset altogether. She also brought conviction and intellectual debate back into British politics. As Roger Scruton observed, there was finally someone to ‘hate’. Niall Ferguson has recalled that, as an Oxford student, while the Left had Marx and Sartre, conservatives once again had Hayek and Friedman – with Thatcher in power.

The Thatcher years were a counter-revolution against the post-war idea of the ‘end of ideology’, as Raymond Aron described it. Politics once again became a battle of ideas rather than a debate over marginal policy adjustments. That shift in direction helped transform Britain from the ‘sick man of Europe’ into one of the fastest-growing major European economies.

Nor was Thatcher’s impact confined to economics. She restored Britain’s confidence and influence abroad. At the beginning of the 1980s, when Ronald Reagan declared that he intended to win the Cold War, many dismissed him as an extremist detached from reality. Jimmy Carter feared such rhetoric risked a catastrophic conflict. Paul Samuelson’s bestselling economics textbook predicted that the Soviet economy would eventually overtake that of the United States.

But Britain, no longer paralysed by the domestic crises of the 1970s, was able to stand alongside Reagan under Thatcher. Rather than merely managing coexistence or accepting the Berlin Wall as a permanent feature of European life, the two leaders together helped create the conditions that eventually brought it down.

Thatcher made Britain believe in itself again. She made Britain matter again on the world stage. Even Tony Blair acknowledged as much: ‘Even if you are on the Labour side of politics, you have got to say this was a big figure, a towering figure, who made an impact not just on our country but worldwide, and was rightly admired.’

That is not the rhetoric coming from Burnham. From refusing to wear ties to wanting to remove lecterns from speeches, he is eager to signal that he is different. His attacks on Thatcher are intended to show that he rejects the direction Britain has taken over the past 40 years. Yet if Britain needs anything today, it is more Thatcherism, not less. Had the UK achieved Thatcher-era rates of economic growth over the past decade, the economy would today be around £740 billion larger than it is.

Burnham is fighting the wrong enemy. The defining trend of the past two decades is not Thatcherism but the rise of state capitalism. Since 2000, the number of state-owned enterprises among the world’s 2,000 largest firms has doubled. These state-linked giants now control around $45 trillion in assets – more than thirteen times the size of the UK’s GDP and close to half of global GDP. There are now more than 900 development banks worldwide, managing over $49 trillion in assets. Sovereign wealth funds have increased sixfold over the past two decades, and 176 countries now operate some form of sovereign wealth fund.

Across the world, the state is becoming increasingly involved in the economy. Concerns about national security are replacing concerns about economic efficiency. That is the hidden trend suppressing growth, expanding the size of the state and crowding out entrepreneurs and wealth creators. If Andy Burnham is serious about reviving Britain’s economy, Thatcherism is not the obstacle. The growing reach of the state is.

And if you want more…

– The AI jobs apocalypse that wasn’t (Adam Thierer)

– Crash, bang Burnham? He’s just Starmer with charm (Joseph Dinnage)

– Pay transparency could cost you a job (Len Shackleton)

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We’ll be back on Monday.

Not such good news for the Prime Minister’s plans to supercharge council house building. The Resolution Foundation has concluded that because of the extra expense compared to affordable housing, Burnham’s plan ‘means spending more or delivering less’. Good to find them in agreement with the Centre for Policy Studies for once.

Elsewhere, Donald Trump’s tariffs have returned (see our Stat of the Day), and this time the UK has a worse deal than the EU. Maybe Burnham can charm the Americans with the help of some of the influencers he’s hiring for the new No 10.

And if you need a break from all of the above, our annual summer reading list is now live, full of fascinating recommendations from our team and regular contributors. From Hoskyns to Wodehouse, there’s something for everyone.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

What CapX is reading this summer

Robert Colvile, Liam Halligan, Daniel Hannan and more…

‘“Just in Time” is a no-holds-barred account of how a think tank’s ideas can successfully transform an entire nation’s political economy, with huge national and international implications.’

As Andy Burnham wastes no time rearranging the furniture – and, for part of the week, the postcode – of No 10, what better way to see out the summer than with a good book? We asked our contributors what they’re packing for the holidays. From Thatcher-era history to trade wars and Taylor Swift, we’ve got you covered. Read More

How pay transparency could cost you a job

Len Shackleton

‘The more the government tries to impose restrictions on the way in which firms recruit, the more likely it is that employers will seek ways around them.’

Companies will soon be forced to disclose pay details in job ads – in an effort to make the system fairer. But the jobs market is messier than civil servants or academics think. This is a recipe for mediocrity, low productivity and fewer jobs all round. It’s also another backdoor concession to Brussels. Read More

Stat of the day

Best of the Web

Can North Sea oil save Andy Burnham?

Ross Clark, The Spectator

‘Our new PM has spent every day this week announcing a new initiative to bring down the cost of living. But it has all been spoiled by the galloping price of oil.’

Is Andy Burnham about to back drilling at the Rosebank and Jackdaw fields in the North Sea? With Trump promising the biggest strikes yet in his war with Iran, and Brent crude hitting $100 a barrel yesterday, it may be a smart move if Burnham is to keep his promise to ease the cost of living. Read More

The 24-hour news cycle is ruining politics

Emma Revell, City AM

‘Politicians need the breathing room to develop policies and test them, rather than having half-baked ideas leaked out into the world and getting torn apart because they were rushed.’

The endless circus of rolling news plus social media isn’t doing our politics any favours. A world where any little slip becomes headline news rewards the banal, the safe and the uncontested. But whose fault is that? If we actually want politicians to think before they speak, the fix might have less to do with them than with us. Read More

Why Britain stopped growing

Tyler Goodspeed

Economic Affairs

The Never-Ending Credit Crunch

Britain’s weak recovery from the 2008-09 financial crisis was caused by post-crisis banking regulation, not fiscal austerity or an inevitable feature of deep recessions, according to a new briefing from the Institute of Economic Affairs…

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13 days ago · 19 likes · Institute of Economic Affairs

The Capitalist: Griffith talks tax cuts

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– Why we need the rich (Civitas Outlook)

– How the welfare state replaced charity (Invert 🎥)

– ‘Tsundoku’: the secret pleasure of unread books (The Conversation)

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We'll be back on Sunday with the Weekly Briefing. Have a great weekend.

Gary Lineker, meanwhile, led a gaggle of millionaires calling on HMRC to tax them more. Which is odd, since Lineker has successfully taken the taxman to court to avoid paying more than he owed. As my colleague Daniel Herring pointed out, wealth taxes are ‘unfair, unworkable and send a signal that Britain is not a place for aspiration, investment or success’. Still, no one’s stopping you from chipping in if you want to, Gary. Here’s the link.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Britain's next chancellor needs a chainsaw

Damian Pudner

‘Of course, £57 billion is a lot of money. It is supposed to be.’

What can we expect with John Healey heading the Treasury? Higher spending, higher taxes and meaningless tweaks to welfare reform. What Britain needs is a chancellor willing to take a chainsaw to the cost of government and put the savings into work, wages and investment. A good start would be slicing £57 billion a year off the welfare bill. Read More

The AI jobs apocalypse that wasn't

Adam Thierer

‘Doomsday forecasts persist because the media and academics have powerful incentives to promote tales of a coming techno-apocalypse.’

The media headlines all tell a consistent story about AI and employment: We’re doomed! But the headlines have been saying that robots will take all the jobs for a hundred years, and the sky hasn’t fallen yet. From radiologists to warehouse workers, the jobs that were supposed to vanish keep growing instead. Read More

Stat of the day

Best of the Web

Burnham's spending spree makes tax rises inevitable

Ryan Bourne, The Times 🔒

‘What we should rationally expect is tax rises. And if Burnham gets anywhere near delivering on his spending promises, these will be large.’

Andy Burnham says he’ll never take risks with the public finances, but his daily giveaways say otherwise. And with his Chancellor arriving clutching a military shopping list and an empty wallet, expecting taxes to go up is just common sense. Firms will already be freezing hiring and investment, damaging the economy long before the Autumn Budget lands. Read More

Why every MP should start a business

Tim Dier, ConservativeHome

‘The lack of small business understanding in Parliament is holding back our entrepreneurs and our nation’s prosperity.’

Too many Labour MPs have never stood in a small business owner’s shoes, and it shows. Out of touch with the daily struggle businesses face, they happily wrap firms in red tape without ever grasping the costs they impose. It’s time they found out what it’s actually like. Read More

Free markets have never been so easy to defend

Economic Affairs

The end of bitter-pill economics

Dr Kristian Niemietz is the IEA’s Editorial Director and Head of Political Economy…

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14 days ago · 12 likes · Institute of Economic Affairs and Kristian Niemietz

The Capitalist: Griffith takes on Burnham

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And if you want more...

– How Bridget Phillipson earned an F (The Critic)

– Did medieval people love their children? (Works in Progress)

– Johannes Vermeer: liberal pioneer (Conversations with Tyler)

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We'll be back tomorrow.

Burnham’s Chancellor may need to find the courage to tackle welfare reform. Shadow Work and Pensions Secretary Helen Whately wrote for CapX today about why it’s the only way out – for a politician who’s brave enough to take it on.

But perhaps the PM has a better sense of the nation’s current economic inclinations. A new survey from Ipsos found that 57% of the public favour a ‘mainly socialist’ society – up from 47% in 1989. Advocates for capitalism have work to do, if we don’t want voters to discover the hard way where socialist policies lead.

For those of us in the 30% who still favour free enterprise, my conversation with Shadow Business Secretary Andrew Griffith on The Capitalist is out today. We covered the future of steel, the return of free-market Conservatism and whether Burnham’s team understand business. As he put it: ‘it would be helpful if the Labour front bench had more work experience than someone who interned in the House of Commons gift shop.’

In other news, Donald Trump is embarking on a new wave of tariffs, as his temporary levies expire this week. Having slapped a 50% tariff on Canada on Monday, he has also announced plans for a 200% tariff on generic medicines. Let’s hope our new Foreign Secretary Ed Miliband can work magic on the special relationship…

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Has Healey got the guts to reform welfare?

Helen Whately

‘The path to a stronger economy runs through work, not welfare – and the country cannot afford a government too timid to make that case.’

Our new Chancellor has a problem: paying for Andy Burnham’s plans. Raising taxes will damage the economy, and won’t raise enough. Lower bus fares and VAT off energy bills are scarce consolation when people can’t get jobs. There is no other way. John Healey needs to find the courage to reform welfare. Read More

Burnham has charm – but he needs new ideas

Joseph Dinnage

‘Starmer was uniquely wooden in his approach, and doubtless that turned many voters off him. But his fundamental failing was not one of presentation, but policy.’

Burnham talks about a new start, but beneath the Northern trimmings, his administration shows signs of being a PR makeover for Starmerism. That won’t be enough. Andy Burnham is relatable in a way that Keir Starmer never was. But the last government’s fundamental failing was bad policies that left people worse off. Read More

The Capitalist: Andrew Griffith talks business

I sat down with Shadow Business Secretary Andrew Griffith to ask whether Andy Burnham is about to double down on a bigger state or finally embrace growth. We also discussed why Westminster needs more people who have actually run a company, Labour’s ‘insane’ plan to expand equal value pay claims and why putting up taxes was toxic for the Conservative Party’s brand.

Griffith argues that nationalising British Steel is a mistake – reindustrialising Britain doesn’t require more subsidies or state ownership, but cheaper energy, lower taxes, welfare reform and a ruthless assault on red tape. He also explains why business confidence depends as much on certainty as on policy itself.

Plus: how Kemi Badenoch is steering her party back towards free-market principles, and what a pro-growth offer to the next generation should look like.

Best of the Web

Burnham's savings drive is doomed

Matthew Lynn, The Spectator

‘Andy Burnham wants to spend lots of money, but has no idea where to get it from.’

Days into the job, and Andy Burnham is already searching for savings. With his new announcements already carrying a price tag of £1.6 billion, there’s no surprise ministers are being asked to take a ‘hard look’ at their budgets. But Burnham could – and should – have come up with a plan for savings before now. There are ways to do it – for a leader willing to make unpopular decisions. Read More

Neoliberalism works – that why Blair embraced it

Daniel Finkelstein, The Times 🔒

‘People rejected Old Labour because its policies had failed and promised further failure – for predictable reasons.’

Burnham promises a return to the Labour we ‘once knew’. But in vowing to undo 40 years of neoliberalism, he rejects not only Margaret Thatcher but the Labour era that once revived his party. Tony Blair chose to walk the same path as Thatcher because it worked. Read More

Burnham's bleak to-do list

Neil O'Brien's Substack

Andy Burnham's in-tray

Andy Burnham inherits a lot of problems and unresolved issues from the Starmer government. Here is a quick tour through just some of them…

Read more

15 days ago · 14 likes · 6 comments · Neil O'Brien

Stat of the day

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And if you want more...

– How to rebuild a gun factory (Ed Conway)

– Will Cambridge be underwater in the year 2300? (Nature Communications)

– What e-bikes tell us about broken Britain (ConservativeHome)

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‘I don’t think the only answer is to fill Parliament with people from business – it would just be enormously helpful if the Labour front bench had more work experience than someone who interned in the House of Commons gift shop.’

Britain has a new prime minister. But will Andy Burnham’s new government reverse years of stagnation?

This week on The Capitalist, I sat down with Shadow Business Secretary Andrew Griffith to ask whether Burnham is about to double down on a bigger state or finally embrace growth. We also discussed why Westminster needs more people who have actually run a company, Labour’s ‘insane’ plan to expand equal value pay claims and why putting up taxes was toxic for the Conservative Party’s brand.

Griffith argues that nationalising British Steel is a mistake – reindustrialising Britain doesn’t require more subsidies or state ownership, but cheaper energy, lower taxes, welfare reform and a ruthless assault on red tape. He also explains why business confidence depends as much on certainty as on policy itself, how Kemi Badenoch is steering the party back towards free-market principles and what a pro-growth offer to the next generation should look like.

Below, you’ll find some short excerpts from our conversation.

Marc Sidwell
Editor, CapX

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On what John Healey should do first:

‘A new chancellor could come in and, if they set about reversing the most damaging decisions of the past two years – the National Insurance rise and the Employment Rights Act – they’d have the support of the Conservative Party. That would turn an economic headwind into, ideally, an economic tailwind.’

Why Westminster needs business experience:

‘What it brings is a shorthand understanding of the impact – sometimes the unintended consequences – of the decisions you make. If you’ve understood business, you realise with things like the family farm and family business death tax, that there aren’t piles of cash sitting around, and if you want to tax intergenerational transfer, that normally means you’ve got to lop off an arm of that business and give it to the chancellor. I don’t think the only answer is to fill Parliament with people from business – it would just be enormously helpful if the Labour front bench had more work experience than someone who interned in the House of Commons gift shop.’

On equal value pay claims:

‘The technical word for what they’re trying to do on equal value work is insane. It completely discards the market, the price signal, choice and individual agency – and they’re going to expand that beyond gender into race and disability as well. Good work for lawyers. I think the one reliable growth industry in the UK is lawfare and judicial review, lawyers seeking to expand their territory. Some court may come along in a few years’ time and tell a business it’s got a liability for billions. That sounds like scaremongering, but that is precisely what’s happening in the retail sector.’

On nationalising British Steel:

‘If your energy costs are two, three, four times higher than making the same steel bar in a different country, that is not a structurally profitable basis to compete, no matter how many tariff barriers the government has. The idea that the government should be doing more of that is a folly. The foundations of the Centre for Policy Studies were in making precisely these arguments ahead of the Thatcher government – and no doubt we’ll all be here again in a few years’ time, in government, trying to work out what to do with the relics of industry.’

One tax he’d abolish?:

‘Inheritance tax. It’s a values tax, so it speaks directly to the values – and it doesn’t raise a king’s ransom, so if you’ve got the choice, that’s one you can genuinely abolish. It’s almost universally a double or triple tax: you’ve acquired an asset out of taxed income, you try to pass it on, and then it’s taxed again.’

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Perhaps in response to that, the Prime Minister used his first meeting with his new Cabinet to say they would have to ‘show how we’re going to pay’ for any new policies – well, it would be a start – and announced that they would have to make ‘difficult decisions’ to show their commitment to the fiscal rules.

But Burnham’s top team may have their own ideas about which difficult decisions they want to take. His new Energy Secretary Miatta Fahnbulleh has previously called for Britain’s Net Zero targets to be brought forward from 2050 to the mid-2030s. She may yet make Ed Miliband look like a moderate.

Below you’ll find all the latest pieces from CapX, plus what we’re reading from around the web.

Marc Sidwell
Editor, CapX

Today’s Takes

Fresh thinking from CapX

Healey can't tax his way out of this mess

Dr Gerard Lyons

‘The UK remains a high spending, high tax and high borrowing economy… none of this will change by looking back to the 1970s rather than forward to the middle of the 21st century.’

John Healey is the eleventh chancellor since the 2008 global financial crisis. Regardless of who has occupied Number 11, the direction has been the same – modest growth, stagnant living standards and deteriorating public finances. Breaking that pattern means controlling spending, not chasing new taxes. Read More

Burnham's VAT cut is a bad idea

Ben Ramanauskas

‘Trying to tackle high inflation through price controls is a nasty habit which the Government urgently needs to break.’

Andy Burnham has announced that VAT on household energy bills will be removed from October. It’s a mistake. This piles more pressure on the public finances, adds complexity to the country’s tax system and does almost nothing to tackle the cost of living. To help households with their energy bills, the Government needs to address why prices are so high in the first place. Read More

Stat of the day

Best of the Web

Scrap stamp duty on shares

Tom Willerton-Gartside, City AM

‘Abolishing stamp duty on shares would make Britain richer, with some estimates suggesting that it could increase GDP by as much as 0.7%.’

London slumped to 23rd in the global IPO league table last year – its worst showing in 35 years. We need to make London an attractive place to list and invest once more, and the first step should be scrapping stamp duty on shares. It’s time for Burnham to prove his ‘pro-business’ promise. Read More

Who gets the bill for social care?

Ross Clark, The Spectator

‘Burnham is proposing a policy which would make little difference to the poor, would clobber many people in the middle and would amount to a significant tax break for the wealthy.’

Is Britain’s most left-wing prime minister in decades about to hand the rich a tax break? Burnham’s rumoured plan of scrapping inheritance tax and bringing in a 10% social care levy on all estates will create clear winners and losers – and could fall hardest on the squeezed middle. Read More

🎧 Ofcom wants to decide what you watch online

Jack Rankin

The Capitalist: Lilico on Burnham’s fiscal trap

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And if you want more...

– Who pays for Manchesterism? (The Critic)

– Good news for coffee lovers (American Heart Association)

– Reality always sends the bill (Daily Economy)

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Jack Rankin MP argues this will crush the competition and choice the sector needs, entrenching incumbents like the BBC at the expense of independent creators and commercial rivals.

Each week we bring you Despatch – an example of the best writing from CapX, read aloud. For hosted conversations, listen to The Capitalist, every Wednesday.