His accompanying piece for CapX argues that Nimbys aren’t just a brake on growth – they’re making us all less safe. You can read it in full below.

And this week’s Nimby Watch by James Ball has a classic example – in Bath, the Greens won’t even let a bike lane go through without a fight.

Elsewhere, Damian Pudner argued that it’s time we started counting up the hours the Government taxes us when it adds more red tape. In the week Reform UK announced a plan for huge welfare cuts, Joseph Dinnage applauded the party’s ambition, but asked if voters will be so keen. GCSE results also came out this week, and with Lucy Powell stepping up Labour’s attacks on Michael Gove’s schools reforms, Michael Gray called for the Tories to commit to extending their education revolution.

Wondering who to blame for hosepipe bans? Samuel Williamson defended the record of the water companies and pointed the finger for blocking reservoirs squarely at Ofwat. And Mark Brolin made the case that the Right needs a new politics of optimism to beat Andy Burnham.

Marc Sidwell
Editor, CapX

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Nimbyism is now a national security threat

Dalibor Rohac

Britain and America have spent a decade arguing about Nimbyism as if it were a housing problem. It is much bigger than that: our inability to build, in a broad sense, has grown into a source of geopolitical weakness.

The economic argument has been made already. Growth controls add anywhere from 17% to 38% to house prices in the areas that impose them. Litigation over land use has risen for decades, choking off the internal migration that used to make American incomes converge – the Bay Area and the New York tristate area are now losing people.

Britain’s version of the diagnosis, set out in the essay ‘Foundations’, identifies restricted housing supply, runaway energy costs and grotesquely overpriced infrastructure as the three legs of national stagnation.

But the accumulated architecture of veto points does more than just limit the supply of housing. The same forces are slowing down the speed with which increased defence budgets can be converted into capabilities.

After Russia’s invasion of Ukraine, the United States passed five major funding bills for Kyiv, worth some $175 billion, with European governments collectively committing even more. Yet, despite a valiant collective effort, the flow of actual munitions and weapons systems to Ukraine was slow – and replenishing Western stocks has proven even more challenging.

The naval picture is even worse, both in the UK and in the United States. The US Navy has been retiring hulls faster than it commissions them; in 2023 alone it scrapped twenty-four ships without operational replacements, against a Chinese fleet of some 360.

Around 80% of new American warships run over budget, sometimes by 100% or more. Plans for 32 Zumwalt-class destroyers have been torn up; instead, three will be built, at a reported $7bn apiece.

This is no criticism of free markets. American shipbuilding has been protected since 1920 by the Jones Act, on the explicit argument that a domestic industrial base must be preserved for wartime. The result is an industry that has atrophied under protection: General Dynamics last built a Jones Act-eligible ship in 1978, and during Operation Desert Storm just eight of the 281 vessels chartered by Military Sealift Command qualified under the Act.

In its war with Iran, the United States has depleted its stocks of Patriot missiles by 65%, to a mere 1,700, and has used ‘virtually all’ of its high precision HIMARS munitions. Notwithstanding large financial commitments (the Pentagon is planning to spend $120bn on new Patriots), rebuilding those stocks will take years. The famous Lima plant in Ohio can build at most several dozen Abrams tanks a month.

In contrast, during eleven months of 1942, American industry produced more than 8,000 M4A3 Sherman tanks – an average of 729 a month – and over the war turned out 297,000 aircraft and 86,000 tanks.

The difference between the past and the present is not technological – if anything, today’s production lines are better and more efficient than the past ones. We are much wealthier than our forefathers. Yes, the defence industrial base in the United States and the UK (and in Europe) long suffered from weak demand signals as we took advantage of the ‘peace dividend’. But the US defence budget hovered just above 1% of GDP through the late 1930s, yet the industry was somehow able to start churning out military output at scale when it was needed.

Unlike in the past, the US defence base has been consolidated into a small number of massive firms enjoying a cosy relationship with the government, which enables them to pass on costs to the customer. Because the regulatory and other costs of doing business with the Pentagon and with the federal government in general have grown into a formidable barrier to entry, incumbents face little competitive pressure and are tied up in paperwork that would prevent them from acting more nimbly even if they wanted to.

Then there are generic barriers to adding industrial capacity, infrastructure or energy, including prominently the National Environmental Policy Act (NEPA). Environmental impact statements required from projects involving the federal government add an average of five years of delay and frequently end up in litigation. Almost half of all projects undertaken under the CHIPS Act and the Inflation Reduction Act, two of President Biden’s signature pieces of legislation, were delayed by pending reviews and ‘stakeholder’ objections. TSMC’s Arizona fab only proceeded because the Biden administration explicitly exempted semiconductor plants from NEPA altogether.

To be sure, environmental review exists for a reason. But NEPA’s mutation into an instrument of vetocracy is not an isolated one – and oftentimes interacts with effects of other statutes, making it impossible to expand the supply of energy.

Given the more than twofold difference in industrial prices of electricity, Britain’s version of the same set of problems is even worse.

But Yimby campaigners on both sides of the Atlantic are missing the strategic dimension. Energy is not only an input into economic activity at large – it is vital for manufacturing weapons systems, munitions and running shipyards and data centres, on which any Western advantage in artificial intelligence will rest. A grid connection queue is a defence capability queue. A country that cannot build a substation in under a decade cannot credibly promise to surge production in a crisis, and our adversaries know it.

The reforms needed are well-known. What is absent is political will. As awareness grows that we need a step change in our defence readiness, politicians and campaigners need to leverage this to convince the public that it also means we can no longer afford a system that makes building things so hard.

Deterrence is a promise about what you could do if you had to. Britain and America have spent four decades making that promise harder to keep – one reasonable-sounding objection at a time. It is time to change that.

And if you want more…

– Why America’s socialists are winning (Mani Basharzad)

– Don’t force electric cars on drivers (Max Anderson)

– Britain’s chronic forecasting disease (Valentin Boboc)

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We also featured CPS Research Director Karl Williams this week, responding to an essay by Sam Freedman that called the recent spike in migration known as the ‘Boriswave’ a myth. While the economic consequences may be heavily disputed, the scale and speed of change were very real.

Elsewhere, Alys Denby gave an editor’s guide to spotting AI writing. John Penrose argued that rather than fudging the fiscal rules, Andy Burnham should be honest about the state of Britain’s finances and commit to releasing a national balance sheet every year. Bruce Buckland revealed how housebuilding is being held back by perverse biodiversity rules where private gardens don’t count. Limor Simhony Philpott analysed the ecosystem behind Britain’s rising tide of antisemitism, and as self-driving taxis hit the streets of the capital, James Price made the case that driverless cars can save Britain.

On The Capitalist this week, Richard Hanania and I discussed his new book ‘Kakistocracy’, why the Tech Right got swallowed by MAGA and how populism goes wrong. Listen here.

Marc Sidwell
Editor, CapX

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Farage wins Clacton – with more votes

Gawain Towler

At a few minutes past six on Friday morning, in a leisure centre on the Essex coast, the returning officer reached the bottom of a ballot paper roughly a metre long and announced a number that deserves more attention than it is likely to receive. Nigel Farage, 22,239 votes.

The commentary had settled into its groove long before the count. A fake by-election, a coronation, a man beating a bin. Kemi Badenoch declined to contest what she called Farage’s ‘fake by-election’, Labour and the Liberal Democrats stayed away, and the field was left to the comedian Jonathan Harvey (aka Count Binface), to Laurence Fox, to three separate Monster Raving Loony candidates and to a gentleman calling himself Woke Trump Carrzee. There were 34 candidates in all, a record, beating the 26 who stood against David Davis when he engineered his own by-election at Haltemprice and Howden in 2008. It took the returning officer seven minutes merely to read the thing.

So what could such a pantomime possibly tell us? More than the sniggering allows. Buried beneath the jokes is a result of a kind Britain has produced perhaps twice since the War.

At the general election in July 2024, with every major party on the ballot, 21,225 people voted for Farage in Clacton. On Thursday, at an August by-election whose outcome was never in doubt, on a turnout fourteen points lower, 22,239 did. His share of the vote tells us little, since anyone can produce a spectacular percentage when the opposition declines to turn up. His actual vote is another matter. Twenty-two thousand two hundred and thirty-nine people walked to a polling station in the middle of August to vote for a man who could not lose.

Incumbents do not do this. By-election turnout has not exceeded the corresponding general election turnout since Greenwich in 1987, and a defending candidate increasing his raw poll is rarer still. Douglas Carswell could not manage it here in 2014, in the defining by-election of the UKIP years. His 21,113 votes made him UKIP’s first elected MP, and they were still fewer than the 22,867 he had polled as a Conservative in 2010. Davis’s vote at Haltemprice fell sharply. The pundits reaching for the 2014 comparison have it the wrong way round.

The company Farage has just joined is small and instructive. Winchester, November 1997. Mark Oaten had won the seat in May by two votes, a Conservative petition overturned the result and the electorate was required to vote again in the autumn. Turnout fell 10 points and Oaten’s vote rose from 26,100 to 37,006, a majority of two becoming a majority of 21,556. The other case is Fermanagh and South Tyrone in 1981, where Bobby Sands polled 30,492 on an 87% turnout and Owen Carron, five months later, exceeded even that. While the atmosphere there was grief and national conflict rather than electoral theatre, the lesson is the same. Make a by-election a test of a candidate’s legitimacy, and voters grow more determined to be heard, not less.

Opponents will focus on Farage’s 63% share of the vote, and argue it is at the lower end of expectations. But vote share means little when the serious opposition has vacated the field. The raw vote is far harder to explain away. Some 35,111 valid votes were cast, against roughly 46,000 at the general election, and the whole of that contraction, and then some, came out of the anti-Farage column, which fell from about 24,700 to 12,872. Farage kept 105% of his general election vote while the contest shrank to three quarters of its previous size.

The abstaining parties meant to demonstrate that the whole exercise was beneath serious politics. What they actually did was strip out the noise. Their absence, novelty candidates aside, left one man who was bound to win, and the people still motivated enough to vote for him just to prove a point. That does not tell us what Farage would poll against a full field. It tells us something his opponents would be unwise to ignore: that offered the easiest imaginable excuse to stay on the beach, more than 22,000 of his voters turned up regardless.

The rest of the ballot paper is a core sample of contemporary English politics. Rejoin EU finished third on 492 votes, 1.4%, in one of the heaviest Leave constituencies in the country. Handed a free run at any residual continental enthusiasm, with no Labour or Liberal Democrat candidate in the way, the cause of re-entry was beaten 19 to one by a man dressed as a bin.

Meanwhile Laurence Fox’s Reclaim managed 347, behind two unknown independents. The assorted standard-bearers of the online harder right scraped barely 600 votes between them in perhaps the most favourable seat in England. Calling Farage a sell-out might generate attention on X, but this electorate had little time for it.

In all, 32 of the 34 candidates lost their deposits. The bin did not. Jonathan Harvey’s 9,455 is the best result a satirical candidate has ever recorded at Westminster. But the protest vote has to go somewhere, and when the big parties funk the fight it will settle on whatever is standing, up to and including a bin.

There was a quieter dividend for Reform UK. For six weeks Clacton served as a live electoral exercise of the sort parties would pay handsomely to buy. Thousands of activists worked the party’s election software under battle conditions, running canvass returns, manning the telling and practising getting supporters to a polling station. The parties that stayed away learned nothing, and armies that skip manoeuvres discover what they’ve missed when the shooting starts. Reform, meanwhile, now holds a more detailed map of its support in Clacton, and of its absences, than any party holds anywhere in the country. In the long run that may be worth more than the 63%.

The Standards Commissioner has wasted no time in reopening his investigation into Farage’s donations, and will report in due course. If the committee recommends a suspension of more than 10 sitting days, a recall petition will follow – and Binface has more than enough voters to trigger another by-election. Badenoch has already promised that next time the ‘grown-up’ parties will graciously attend. Perhaps they will. But what then? Every modern instance of the political class requiring a constituency to vote again has ended with the electorate returning the same verdict more loudly. Clacton has just signalled its willingness to follow suit.

So will there be another by-election? Perhaps. Parliament’s machinery grinds on and the committee corridor has its own micro-climate. But the voters’ answer won’t change. If the parties that boycotted this contest have any sense, they will leave well enough alone.

And if you want more…

– A National Care Service would be a disaster (Eamonn Butler)

– Reversing Brexit by stealth is a fantasy (Julian Jessop)

– Britain’s defence kit has a China problem (Eliot Wilson)

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My pick of the week goes to Mani Basharzad, who argued that the Ceuta border crisis exposes a structural flaw at the heart of the EU. You can read his argument in full below.

Elsewhere, Alan Hibben revealed the hidden policy costs inflating the price of every new home. Charles Amos criticised Reform’s Deliveroo law for adding red tape to hiring, Valentin Boboc took on the AI doomers and Joseph Dinnage showed how far the UK has strayed from the path to prosperity. Juno Chowla-Song made the case for liberalising the Gulf’s labour markets as a defence against Iran, and William Tittensor wrote that more prison cells won’t fix the prisons crisis.

Sam Williamson, meanwhile, looked at how New Zealand solved its equal value pay crisis in just three days. On The Capitalist, I sat down with economist Alex Tabarrok of Marginal Revolution to discuss Britain’s own problems with equal value pay claims, and why complaining about market prices makes as much sense as suing the weather. Listen here.

Marc Sidwell
Editor, CapX

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Ceuta exposes a flaw at the EU’s heart

Mani Basharzad

The EU was born to ‘screw’ the US. That’s what Donald Trump told reporters in 2025: ‘That’s the purpose of it, and they’ve done a good job of it. But now I’m president.’ But that wasn’t always the United States’s view of the EU. As historian Andrew Roberts wrote, the American State Department ‘enthusiastically signed up for the European project thinking it the economic counterpart to NATO’. It is the current US administration that has a problem with the EU, alongside its suspicion of the World Trade Organization, international courts and the United Nations. Why? Many point to the usual suspects, namely populism and nationalism. But Trump’s attacks also gain traction because the institutions concerned have not earned the trust of the public. Labels like populism dismiss these real failings. In the case of the EU, they offer no answer to important questions, such as what just happened in Ceuta, Spain.

Starting on July 30, some 72,000 illegal migrants crossed into Ceuta from Morocco. Most left voluntarily soon afterwards, but thousands remain and dozens died in the chaos. Even the most fervent Remainer ought to view this with relief that Britain is no longer bound by the EU’s right to free movement. Italy, meanwhile, responded by suspending its Schengen free-travel arrangements with Spain for a month. The whole episode is quite a reversal for the Spanish Prime Minister Pedro Sánchez. Less than three months ago, I bought the New York Times weekend edition to read, and the front-page story was a massive appraisal of Sánchez, titled ‘Spain’s Leader Is Trump’s Nemesis, and He’s Winning’, arguing that in a world turning away from the EU, from mass migration and from progressive agendas, Sánchez offered a successful counterexample. It didn’t age well.

The EU, at its heart, has an incentive problem. Take fiscal policy, for example. Imagine you are a small member of the EU facing a huge budget deficit and a debt crisis. The EU bails you out. But what if you are a member state with fiscal discipline and low debt levels? You are expected to bail out the fiscally irresponsible ones. Why? John Cochrane explains in his book ‘Crisis Cycle’:

A monetary union without fiscal union leads to an obvious temptation: Member states might borrow and spend more than they can repay, and then call on the central bank for a bailout using newly printed money.

The system of monetary union without fiscal union creates an incentive structure for irresponsible fiscal policy, but that problem isn’t limited to money.

In immigration, one country’s weak border control becomes every member state’s problem because of free movement. Members which follow strict fiscal discipline and want to implement strong border controls are not immune to countries following another path, like Spain’s scheme to regularise the status of more than one million undocumented migrants.

This incentive structure risks one of Niall Ferguson’s ‘Killer Apps’ of the West: competition among states. One of the main reasons for the rise of Europe was small nation states competing with one another. If taxes went up in one country, people could move to another. That system created an incentive structure for better governance, unlike the EU, where your bad policy becomes every other member’s problem.

To regain that system of competition, there are two options. The first is creating one body of policymaking for the whole of Europe, combining fiscal and monetary union. But that would create a bigger problem: there would be no policy trial and error, and no competition among member states.

The alternative is for the EU to impose responsibility on bad actors. Otherwise, as Cochrane writes, ‘The incentives for governments to tax and spend wisely, reduce debts and reform is much reduced.’ Why should you reform your policies when someone else is paying the bill?

This second solution requires conditionality. Free movement, a single currency and the free movement of capital all have benefits, but you should benefit from them only on the condition of following the rules. For example, if a country faces a debt crisis, a bailout should be considered on the condition of economic reforms in that country. On immigration, free movement should be conditioned on a sufficient level of border control. This is a plan for reforming the EU which creates both competition among member states and gives them the benefits of belonging to a bigger bloc, on the condition that they do not free-ride on others’ resources.

The founders of the European Central Bank gave it one mandate, and that was price stability. At the start it worked: it wasn’t involved in bailouts or buying countries’ sovereign debt. It didn’t have these problems because ‘Nobody in the 1990s foresaw advanced-country sovereign debt problems or a financial crisis.’ After the crisis, the flaw became clear. The EU had no crisis mechanism, and it still doesn’t have one.

On a matter of principle, the EU is a liberal project on the side of ‘freedoms’. But freedom comes with responsibility, and the moral hazard created by the EU limits the potential of the bloc for serious reforms.

And if you want more…

– Nimby Watch: Hendon’s last pristine wilderness? (James Ball)

– Are linkers a good deal for taxpayers? (Damian Pudner)

– Britain’s pharma policy is a gift to Ireland (Marc Goldfinger)

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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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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 also featured Shanker Singham, who imagined the free-market speech Burnham should give on day one as PM, drawing on the tradition of Paul Keating and Roger Douglas, and prioritising competition, property rights and free speech.

Of course, he won’t say a word of it.

Ben Ramanauskas set out why fixing the tax system – not devolution, not nationalisation – should be Burnham’s first job, and says it’s time for stamp duty and National Insurance to hit the scrapheap. Lawrence Newport and Looking for Growth launched Kickstart, a 30-day plan for the new PM that calls for Parliament to sit through the summer and axe energy levies. Alys Denby asked why a Labour minister just blocked £1.2bn in new City of London office space to protect a sightline to the Tower. And Jack Rankin MP took on Ofcom and the CMA, warning that plans to rig prominence rules on YouTube and smart TVs in favour of established broadcasters would strangle small creators.

Elsewhere this week: Valentin Boboc on why JD Vance is wrong about GDP. Plus, ahead of Burnham's first days in office, Andrew Lilico joined the podcast to explain the fiscal trap awaiting the new Prime Minister – and why the bare minimum in cuts, £180bn, is itself politically impossible. Listen here.

Marc Sidwell
Editor, CapX

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Forget Manchesterism – try Adam Smith

James Price

In Gordium, the capital of Phrygia, stood an oxcart, its yoke connected to the pole by a knot of cornel bark so intricate that no one could find where it began or ended. An oracle promised that whoever undid it would rule all Asia. For generations, clever men picked at it, theorised, and organised what we might now call ‘working groups’.

Then Alexander the Great arrived, and provided us with one of the great clichés of history. He looked at this infamous Gordian knot. He drew his sword. And just cut it in half.

I’m not about to compare our own ‘King in the North’, Andy Burnham, to one of the great leaders in human history. I don’t expect to have to revise my dismissive attitude towards him, either. But on Friday, Burnham was crowned Labour leader, and the premiership follows on Monday. He is inheriting a Gordian knot of his own. The pages of CapX show just how many strands of failed policy have gone into creating this knot. The one that Burnham and Labour seem biologically incapable of even understanding, of course, is growth.

The de facto interregnum between two hapless Labour leaders has at least concentrated minds. So-called ‘growth manifestos’ are doing the rounds of the thoughtful Left, such as can be said to exist. What strikes me about them is the convolutions and intricacy of these plans: levies shuffled onto general taxation, cliff edges replaced with tapers, new bills, new bodies, new missions. This knot of its own is the inevitable symptom of being unable to say the obvious, because the obvious is ideologically unsayable.

We have been here before. Two years ago, in fact, when Starmer and Reeves came into office armed with no plans, but fashionable, hollow buzzwords. Take Reeves’s ‘securonomics’. Two years on, the tax burden sits at a postwar high, long-dated gilt yields have exceeded anything Liz Truss managed, and the Adam Smith Institute reckons something like a quarter of a million jobs have gone since Reeves’s first Budget.

That doesn’t sound very securonomicsy.

But all the evidence suggests that Burnham’s answer is to tie the Gordian knot tighter. ‘Manchesterism’ calls for public control of energy, water, housing and transport, with some more council houses and some nauseating vibes thrown in. This is going to collide with reality in a way that would almost be funny, were the consequences not so serious.

Alex Wickham at Bloomberg reports that on his first Monday as PM, officials will hand Burnham Treasury forecasts showing inflation revised to 3.2%, gilt yields rising further, at least one rate hike before Christmas and potential $150 oil if the Iran ceasefire fails. Officials have dismissed a grand autumn Budget as impossible and briefed that they can’t even properly begin to prepare the new Cabinet.

Meanwhile Burnham may still be contemplating Ed Miliband as his Chancellor, clear evidence that he doesn’t even understand the scale of the challenge facing him. This alone causes me to feel a Gordian knot in my stomach.

The heartbreaking thing about all this is that Adam Smith taught us how to cut this knot way back in 1755. Instead of listening to Mariana ‘I don’t understand economics’ Mazzucato, or Gary ‘I don’t understand economics, but angrier’ Stevenson, or any of the tinkering with complicated wheezes from Labour think tanks, Burnham could copy Alexander and cut the Gordian knot with one simple sentence:

‘Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice; all the rest being brought about by the natural course of things.’

Smith didn’t need missions, flexicurity, quiet bat people, cliff edges, Oasis quotes or even painting buses a different colour.

I have long been struck by the introduction of a book called ‘The Binding of Leviathan’ by William Waldegrave. Written when Mrs Thatcher was in opposition, it laments that no one knew how to fix the economic problems of the day. We do not have that problem. The 1980s showed, on both sides of the Atlantic, that free-market growth and deregulation are the only way to cut this knot. I shan’t hold my breath, but what Andy Burnham needs is less of the Smiths, and more of Adam Smith.

And if you want more…

– Natural England values a spider’s life more than yours (John Penrose)

– Let’s reconnect Britain without the Treasury’s help (Rebecca Smith MP)

– Youth unemployment needs growth (Dan Moynihan)

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We’ll be back on Monday.

We also featured Ben Hopkinson’s demolition of Andy Burnham’s social housing plan, drawing on Ben’s report for the Centre for Policy Studies. Burnham wants the biggest social house building programme since the war, but the cost to the taxpayer would be vast.

James Price suggested that, instead, Burnham needs to learn from Thatcher’s Right to Buy, while Harry Phibbs explained why the PM-to-be’s rumoured double death tax would also be a disaster; and Joseph Dinnage cut through Burnham’s upbeat image to reveal a man who seems to fear the future, from driverless cars to the Palantir NHS deal.

Elsewhere this week, Damian Pudner explained why student loans are now a stealth tax on work, and in Clacton, Ted Newson found a constituency far more divided than Westminster assumes. Reem Ibrahim, meanwhile, found room for hope even as Nigel Farage faces off against a man dressed as a bin.

And don’t miss this week’s episode of The Capitalist: Gawain Towler, Reform’s former director of communications, joins me to give his immediate reaction to Farage’s resignation – and whether the attacks could still end up backfiring on Reform UK’s critics.

Marc Sidwell
Editor, CapX

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Britain is going bankrupt in slow motion

Daniel Herring

The OBR’s latest Fiscal Risks and Sustainability report, published this week, gives a blunt assessment of the UK’s public finances: we can’t go on like this. If nothing changes, government debt will rise to an unsustainable 300% of GDP in 50 years’ time.

How did things get so bad? Well, there’s one big demographic challenge driving that number: the UK is an ageing society, with the median age projected to rise from 40 in 2025 to 49 in 2075. An older society is expensive; as each year passes, demands on the state by retirees gets larger, while the workforce that has to pay for it all gets smaller (first in relative terms, and eventually in absolute terms as well).

But this is a forecast, not a prophecy. The OBR’s figures show that the course we are currently on ends in economic disaster only if our politicians keep punting hard choices down the road. If they – and we – are willing to face reality, things can still be turned around.

The report highlights three big choices the next government needs to make.

1. When to cut the deficit

The OBR says that just to hold debt at around 95% of GDP over the next 50 years, the government needs to permanently cut its primary deficit by 3.8% of GDP no later than 2031-32: meaning significant spending cuts or tax rises. But debt at 95% of GDP is still high by historical standards, and leaves the economy vulnerable to external shocks. Returning it to a pre-financial-crisis level of around 40% of GDP would require an even larger permanent reduction in the primary deficit of 4.9% of GDP, again from 2031-32 onwards.

Here’s the catch: delay costs money – lots of money. Wait until 2052-53 to face the music, and the government will have to cut spending by almost 8% of GDP instead.

There’s an additional benefit to cutting earlier. A credible commitment to cut the deficit increases confidence for buyers of government debt because a future risk of default is lower. It also increases business confidence: if the finances are sound, they know future tax rises are less likely.

The OBR doesn’t give a view about whether the deficit should be reduced by cutting spending or raising taxes. However, UK taxes are already at a post-war high and the economic literature suggests that cutting spending is usually the better option. For example, ‘Austerity: When it works and when it doesn’t’, a book by leading economists Alesina, Favero and Giavazzi, looks at data around fiscal consolidations from 1980 to 2015 and finds that cutting expenditure is much better for economic growth than raising taxes to eliminate a deficit.

2. How to spend our taxes

This leads us onto the second choice – how government spends taxpayer money. In the OBR’s baseline scenario, pension spending increases from 5% to 9% of GDP, health spending from 8% to 13% and adult social care from 1.2% to 1.8%. Much of this increase is driven by demographics, but there are choices available which can reduce their impact.

The pension triple lock is partially responsible, and should be replaced with a more sensible uprating mechanism, alongside a higher age of eligibility.

On health, much of this is driven by an assumption that health productivity growth is slower than other areas of the economy, as well as by the assumption that when people’s incomes rise, they demand more healthcare. But policy choices can make a clear difference: for example, encouraging innovation and new models of healthcare could lower the cost.

Over time, policymakers and the general public may have to face up to the fact that increasing individual responsibility for health costs – through insurance and savings, like most of the rest of the world – would ensure demand is met from personal as well as state resources, and allocated more efficiently as a result.

3. What to do about productivity

The third choice is on productivity growth, which the OBR rightly states is the ‘single most important determinant of living standards in the long term’. One of the starkest charts in the report shows that for someone born in 1961, GDP per capita has grown three and a half times over their lifetime. For those born in 1991, if growth continues as it has for the last 15 years, it will only double.

The OBR remains optimistic. Despite annual growth in output per hour of just 0.4% since 2009, it assumes that it will revert to 1.4%. But if productivity growth stays at the level of recent years, the economy would be one third smaller than the baseline scenario in 2075, and to maintain debt at current levels the government would need to reduce the deficit by an eye-watering 8.6% of GDP.

On the other hand, if we can get higher growth, many problems disappear. Higher growth of 1.9% means GDP is 17% larger and means that, if the government wanted to maintain government debt at the level it is today, it would need to cut the primary deficit by just 1.8% of GDP.

We can’t know where the next wave of economic growth will come from. But we do know how government can set the preconditions for growth: smaller government, flexible labour markets, a pro-growth tax structure, liberal planning laws and cheap energy. Get this right, and the medicine is far easier to swallow.

The OBR report highlights the challenges an ageing population poses for the UK: sooner or later, taxes rise, spending falls or growth accelerates – duck all three, and we go bankrupt. How painful the correction turns out to be remains a political choice.

The UK is sick – but far from terminal. It needs medicine now: cuts to public spending, less reliance on the state and a relentless focus on growth. Prompt action will restore a healthy economy and sound public finances. Waiting will make things much worse.

And if you want more…

– America’s very British revolution (Mani Basharzad)

– Burnham’s coronation comes with a catch (Lee David Evans)

– London’s housing crisis has a strange new twist (James Ball)

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We also featured Shadow Work and Pensions Secretary Helen Whately on the truth about youth unemployment: Britain has lost 1.6 million lower-skilled jobs in twenty years, and no amount of training schemes will help if there’s nothing to train for.

Tim Knox and Nada Kakabadse counted 17 attempts to reform Whitehall since 1968, and found that not one has made a lasting change. Their piece explains why the machine always wins – and how to finally beat it.

Elsewhere this week: Ben Ramanauskas on how Buy British could kill Burnham’s EU dreams; Roger Partridge on the growth lesson from Down Under that Labour refuses to learn; Neil Garratt on why you can’t outrun the Westminster bubble on a Pendolino; and Jimmy Nicholls on why Sadiq Khan is right to take on London’s fun police.

Marc Sidwell
Editor, CapX

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Manchesterism’s first big test is the bond markets

John Penrose

Here it comes again. Whoever Andy Burnham chooses to be his Chancellor of the Exchequer will face the same challenge as all their predecessors since Gordon Brown: producing ‘fiscal rules’ to reassure the City they will be prudent holders of the nation’s credit card.

With Britain’s national debt higher than it’s been for decades, and some marmalade-droppingly-naïve recent comments from Our Andy about funding defence spending with ‘war bond’ borrowing and not being in hock to the bond markets, the new rules will be a crucial early test of Manchesterism’s credibility. If he gets it wrong, Burnham’s eyelashes will sit alongside Liz Truss’ lettuce in pub quiz ‘odd one out’ rounds for years to come.

Burnham’s team clearly recognise the danger, and have moved to calm bond market fears by bringing heavyweight former Bank of England and Goldman Sachs economists Andy Haldane and Jim O’Neill into the team, and committing to keep Rachel Reeves’s fiscal rules unchanged.

The problem is, choosing the loosest fiscal rules the bond markets will let you get away with isn’t the same as choosing the best rules to get Britain’s economy moving again. It’s the difference between scraping a pass in a few of your GCSEs, or acing them all with a string of grade 9s.

Which fiscal rules would give Britain that string of economic 9s? We should start by following the ‘golden rule’ of sustainable government finances, by only borrowing to invest in building new infrastructure which can be used by future generations, rather than to fund day-to-day spending instead. Rachel Reeves’s current rules promise to do it, but only as a ‘jam tomorrow’ pledge to be delivered in 2029, which means any hard decisions get postponed and it’s a rule with no teeth. An economically-serious Chancellor would publish a straight-line set of annual deficit cuts to bring day-to-day spending under control, so businesses and public services can plan ahead and investors know the difficult stuff won’t be ducked or put off.

Next, Andy Burnham’s new Chancellor should start controlling the red tape costs of any new laws and quango-imposed regulations by including them in the fiscal rules, treating them as seriously as traditional government spending for the first time ever. Every pound of red tape costs Britain’s economy the same as a pound of tax, so finding cheaper, more digital and less bureaucratic ways to deliver unchanged quality standards for our housing, businesses, workplaces and countryside would mean faster economic growth at zero cost to taxpayers.

Last but not least, any economically-serious new Chancellor must grip the huge and currently-hidden long term IOUs we’re handing future generations of taxpayers to look after our ageing population, by including the costs in the fiscal rules for the first time too. That means publishing annual government balance sheets of Taxpayer Net Worth, with a commitment to cut the net liabilities by a minimum amount each year until they are gone.

Finally, Manchesterism should lock in these new rules by embedding them in an Act of Parliament so they become legally binding and can only be changed with Parliament’s consent. There would be built-in stabilisers to cope with recessions or emergencies like pandemics or wars, but otherwise these much stronger and permanently-stable controls would cut the costs and risky uncertainties of investing in Britain. In a single stroke, they’d hugely improve our reputation as a safe, stable, commercially-attractive place for jobs, investment, wealth-creation and business growth.

These fiscal rules would put our economy on the best possible track, so Britain’s jobs, investment and exports all grow faster. But it’s a politically-steep and rugged pathway, instead of the wide, smooth, easier road to long-term mediocrity of doing the bare minimum the bond markets demand. Does Manchesterism have enough Northern grit and ambition to deliver what’s best for Britain? We’re about to find out.

And if you want more…

– The kind of entrepreneur Britons love to hate

– Pay up – or we’ll blow you out of the water

– Is Burnham just Blair in a T-shirt?

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Max Young took a detailed look at the team behind Andy Burnham, Starmer’s putative successor. His conclusion of what they will offer is discouraging:

If Brits weren't sweating about what a Burnham premiership could be, they definitely were about the weather - especially if they had to catch an overheated and overcrowded train. Tony Lodge argues that more competition is needed on the railways. He highlights statistics which show that is the way to boost ridership, deliver value for money fares, create more services and get more trains built isn't Labour's nationalisation agenda, but competition and private investment.

Elsewhere this week: Jamie Whyte on why Labour’s misguided egalitarianism is about to get worse; Dalibor Rohac explains that to compete with the US on AI, the British need to cut energy bills; Matthew Elliott declares that the economic case for Brexit still stands but there is clearly more to do; Peter Young warns that Labour’s new insourcing policy is a capitulation to the public sector unions; and Ted Newson reflects that true Manchesterism was everything Burnham opposes.

CapX

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We will miss Keir Starmer

Maxwell Marlow

The Greek poets understood that the cruellest fate is not the one a man brings upon himself, but the one that was waiting for him before he arrived. Oedipus did not choose his fate, indeed he walked into it with the very best of intentions. So too, in his quieter and more lawyerly fashion, did Sir Keir Starmer.

Since last November, it has been common at dining tables, amongst friends hanging outside of ever-dearer pubs, and amongst the political class to list off the charge sheet against our departing Prime Minister. The dozens of U-turns, the adenoidal communications strategy and over-insistence on either breakfast clubs or having ‘full confidence’ when you have nothing of the sort, the chopping and changing of civil servants (from the disgraced Peter Mandelson to the Mandarins who Starmer accused of covering up universally known truths). Even his right-hand woman, his sentient flak jacket Rachel Reeves, has received the same ridicule. One of my less politically engaged friends only knows her as ‘the crying one’; it is the misery of the forlorn fate hanging over this government which has been so tragic to watch. And yet it feels inevitable.

But to dwell on these charges is to mistake the symptom for the disease, and to flatter ourselves that some bolder, luckier, less tin-eared man might have slipped the noose. The office Starmer accepted in July 2024 was, on any honest reading, close to ungovernable given the options at the last election of a full suite of establishment, derivative career politicians. We owe Starmer at least the decency of admitting it.

We can best see this in the lack of planning in the run-up to the election, and the essential belief that Whitehall would snap into order because ‘the good people will be in charge’. He promised to make Britain the fastest-growing economy in the G7; the IMF has since cut our 2026 growth forecast to 0.8 per cent, which is the steepest downgrade of any G7 nation. The tax burden is at its highest level on record. Some £75 billion of new taxes have been loaded onto businesses and households, the largest such raid in the G7. He promised that ‘politics would tread lightly on our lives’, only to shepherd through a new smoking ban, a social media ban, a free speech crisis, higher taxes on gambling and hospitality. The list goes on.

This Road to Serfdom is felt amongst almost all political quarters – nobody is happy, other than the central political class, which has come to be a synonym for Starmer’s government. The ideas that have come to make Starmer so derided are not those of the trade unions or the result of overly woke academics or activists. The march of insanity that was the Chagos debacle, the Assisted Dying debate which was so divorced from expert testimony, and now the popularity of those politicians and ideas which are defined for their non-Whitehall origins (of Andy Burnham and Nigel Farage), are all defined by the centrality of the Whitehall mindset losing its effectiveness. Starmer and co are entirely signed up to this habit of thinking.

Here, if anywhere, is Starmer’s true flaw — and it is not the one his critics name. He believed that competence and ‘stability’ could substitute for a theory of growth. You do not manage your way out of a structural crisis. He arrived with a temperament where better concepts of economics should have been. The bond markets, the OBR, a manifesto vow not to tax ‘working people’, and a parliamentary party with the collective survival instinct of a lemming saw to the rest.

In May, Labour shed more than 1,100 council seats whilst the heterodox Reform took some 1,450. More than eighty of his own MPs called for him to go immediately and Wes Streeting walked out of the Cabinet in protest. Now, Andy Burnham, the great hope of the Labour left despite his neoliberal governing record in Manchester, takes his seat in the Commons, and in all likelihood the keys to a house that is already ablaze. His party has concluded that the remedy for failing at growth is to install a man who will fail at it faster, and with far greater conviction.

We do not yet know what Burnham would bring to the table – we have an idea of what his Cabinet will look like, with Wes Streeting touted to be Chancellor of the Exchequer in order to placate the Labour Right, and Ed Miliband moved into MHCLG in order to kick-off a nationalised housebuilder by purchasing the troubled Vistry, whilst DESNZ plumbs Rosebank away from ‘Red Ed’s’ gaze. But on the big structural questions, which have doomed Prime Ministers from Theresa May to Starmer, we are left clueless.

We will miss Keir Starmer. He was misguided from the beginning, and commanded a disaffected majority in the Commons and in the country. He, nonetheless, did his best within the structures that his training in governance allowed him, and was held hostage by his backbenchers. For the chaos that comes next, let’s hope the Bond Vigilantes take mercy on us all.

And if you want more…

– Who will be the next Chancellor? (Damian Pudner)

– What the Left doesn’t get about investment (Mani Basharzad)

– A step forward for free speech in our universities (Freddie Attenborough )

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We also featured former Chief Secretary to the Treasury Steve Barclay with an insider’s perspective on how Keir Starmer could choose to fill the gap in defence spending without raising taxes – if he had the political will.

John Wills offered a bold plan to fix social housing that would go further than the Thatcher-era Right To Buy programme and literally give council homes away. It would still end up costing us less than the current system.

Elsewhere this week: Alan Hibben on the tribunal trap; Tom Willerton-Gartside from Looking for Growth on their new Bill to stop Net Zero costing you a fortune; John Penrose on devolution’s dirty secret; James Price channels Stalin on drone warfare; and Stephen Pollard on the real reason the Left don’t want Palantir to save the NHS.

Marc Sidwell
Editor, CapX

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Andy Burnham is coming for Downing Street. Be afraid

Gawain Towler

The numbers are not in dispute, whatever the spin. Andy Burnham took Makerfield with 54.8% of the vote and a majority of 9,231, on a turnout of 58.7%, the highest at any parliamentary by-election in almost seven years. Labour’s lead over Reform UK, 13 points at the general election, widened to 20. A seat Reform had swept only weeks before, taking all eight of its wards in the May locals on close to half the vote, delivered a thumping Labour win. So what happened?

The first answer is the simplest, and the one Reform will least want to hear. It was Andy. Not Labour, Andy. He fought the seat as a Christian name, ‘Andy, For Us’, complete with cartoon, Oasis track and the now-celebrated running shorts, and his canvassers were perfectly open on the doorstep that a vote for him was a vote to be rid of Keir Starmer. That is a remarkable thing for a Labour candidate to say about a Labour prime minister. It worked, because Burnham holds the one asset almost nobody else on his side still owns: he is a Labour man untainted. He spent the wreckage of the last two years in Manchester rather than the Cabinet, and the failures of a decade of opposition belong to other people. He is the King of the North precisely because he has never had to run the country.

Which gives the campaign its central irony. Burnham’s explicit pitch was to remove the Prime Minister; Reform’s entire effort went into stopping Burnham; and so Reform, a month after winning every ward in the seat by promising to throw the Government out, spent June implicitly working to keep Starmer in. The appetite for change had not faded. It had simply found a more plausible vehicle. That is the messenger problem in its purest form. The same message that carried Reform in May carried Burnham in June, because in a straight fight for the anti-Westminster vote, the King of the North will beat a local plumber with a difficult social media history every time.

And this is the part that should trouble Reform more than the scoreline. They did not lose for want of effort; by every account the ground game was relentless. They lost for want of preparation and data. Simons’s resignation was choreographed weeks in advance, which meant Burnham entered the short campaign with his voter identification done, his targets mapped and his machine already warm. Reform arrived with all the enthusiasm of the council sweep and none of the infrastructure beneath it. Enthusiasm wins wards. It does not, by itself, win a parliamentary seat against a professional operation with a head start.

Two things finished the job. The first was a disciplined social-media operation by Labour and the wider Left aimed squarely at women, and it told: Reform-leaning female voters peeled away, scarcely helped by a Reform candidate whose unearthed posts about women had become a national story. The second was the now-familiar sight of the Left coalescing, exactly as it did in Gorton and Denton. The Greens quietly scaled back to give Burnham clear water, the Liberal Democrats were crushed to 163 votes. The Conservatives, too, all but disappeared, every tactical instinct in the seat pointing the same way.

Then there was Restore. Rupert Lowe’s new outfit, slick on Musk’s X and cheered on by the owner himself, took 6.8% and, more damagingly, took Reform’s eye off the ball. Much of Reform’s closing energy went not on Burnham but on a war on its own flank, leafleting that Restore ‘can’t win here’ and briefing against it in public. Reform and Restore between them polled 41.3%. Divided, it bought them nothing. The Right did not lose Makerfield for lack of votes. Well it did, but it also lost because it spent the final week shooting at itself.

What should worry CapX readers, though, is less the autopsy than the prospectus. Burnham now has his seat and, with it, a live run at Number 10. Look at what he is actually offering. He insists he will keep Rachel Reeves’s fiscal rules, which means the arithmetic does not move. Burnham may, like a certain kind of politician, profess not to care about the bond market. The bond market, unfortunately, cares a great deal about him. Denied the room to buy off the Left with money, he will buy it off with culture instead.

Expect, then, two years of red meat hurled to the hard-left benches: partly to placate MPs spoiling for a fight, partly to recover the Green defectors at a moment when the Greens look to be busily eating themselves. The tells are already there. A Government in this position supports assisted dying. It reaches for ever-tighter control of the internet in the name of safety. It hunts the cheap and divisive win because the expensive and unifying one, growth, is off the table. The danger of a Burnham premiership is not that it would be radical on the economy. It is that, barred from being radical on the economy, it would be radical on everything else.

Reform will tell itself Makerfield was a candidate problem. In part, it was. But the deeper lesson is the one the Right keeps declining to learn: enthusiasm is not organisation, and a movement that cannot count its own voters, or stop fighting itself, will go on handing seats to the best-prepared man in the room. On Thursday that man was Andy Burnham. We may all live to regret how good he is at this.

And if you want more…

– What Clarkson’s Farm reveals about rural Britain (Arthur Reynolds)

– Labour fail the defence test (Eliot Wilson)

– AI could fix policing. Politicians won’t let it (Ian Acheson)

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It makes a good counterpoint to the week’s domestic politics, in which Andy ‘business-friendly socialism’ Burnham and his campaign in the Makerfield by-election continued to loom large. In this week’s Nimby Watch, James Ball catches the Labour leadership frontrunner running against his own pro-housebuilding record.

This week we also said goodbye to deputy editor Joseph Dinnage, who signed off with a column on why our politicians are still refusing to make the hard choices that would get Britain growing. Joe will continue to write for us, so you can look forward to more lines like this:

Elsewhere this week: Glyn Morgan on what America’s predatory mercantilism means for Europe; Mani Basharzad on defending economic liberalism against the new market authoritarianism; Maxwell Marlow on the epidemic of illicit cigarettes killing Britain’s high streets; Shimeon Lee on a benefits system spiralling out of control; and Nima Sanandaji on why Sweden was never the high-tax poster child the Left claimed.

Marc Sidwell
Editor, CapX

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SpaceX is capitalism’s greatest vindication

Reem Ibrahim

Elon Musk’s SpaceX has launched the largest ever public offering of stock today, selling $75 billion worth of shares.

SpaceX emphasised its remarkable achievements in its IPO filing: ‘We are the primary launch provider for the US government. In 2025, we launched 11 of 12 National Security Space Launch (‘NSSL’) medium and heavy lift missions and all five U.S. crew and cargo missions to the International Space Station for NASA.’

The company is best known for building reusable rockets, and for dramatically reducing the cost of satellite production and rocket launches. Since 2023, SpaceX says it has launched more than 80% of the world’s mass to orbit each year, with an over 99% mission success rate on its Falcon rockets. Certainly an extraordinary achievement for a private company in a sector once dominated by government space agencies.

However, its business activities extend far beyond launching satellites and cargo into orbit. Through Starlink, its low-Earth-orbit satellite internet network, the company has become a leading provider of telecommunications infrastructure. SpaceX has over 9,600 Starlink broadband and mobile satellites in low-Earth orbit, providing internet connectivity to approximately 10.3 million Starlink subscribers across 164 countries, territories, and other markets.

This technology has proven to be invaluable in moments of crisis. When authoritarian crackdowns or internet shutdowns occur, satellite broadband can offer one of the few remaining ways for civilians, journalists, dissidents, and aid workers to communicate with one another and the rest of the world. As Al Jazeera reported, when the Iranian government briefly cut off internet access last year, Starlink was used by citizens to tell the world what was happening.

SpaceX is a company sitting at the intersection of defense, communications, and extraterrestrial exploration. It is no wonder investors are excited.

The largest IPO of the year ahead of SpaceX was chip maker Cerebras, which has created a Wafer-Scale Engine that contains 900,000 AI-optimised cores and has revolutionised the speed at which artificial intelligence models can be trained and run. Its shares were priced at $185 and closed their May 14 debut at $311.07, a roughly 68% jump that gave the company a market capitalization of about $66.95 billion. Certainly a sign of the kind of investor appetite SpaceX is hoping to tap into.

Musk has indicated that he hopes to allocate a larger portion to individual investors, and so far, individual investors alone have requested more than $70bn worth of SpaceX shares. Over $1bn has been requested from a single family office investor, and requests have come from sovereign-wealth funds. Large asset managers have also shown interest, with BlackRock placing an order to buy at least $5bn.

That level of demand is striking not just because SpaceX is large, but because of what SpaceX represents: the triumph of private enterprise in an industry once dominated by the state. For decades, space exploration has been treated as government territory. Rockets were built through sprawling procurement systems, launches were ruinously expensive, and progress moved at a slow pace.

However, this was not always the case. As Rainer Zitelmann argues, in the early 19th and 20th centuries, early forms of space exploration (namely, the building of space observatories) were typically privately financed. ‘In a sense, the state-dominated Space Economy of the mid-to-late 20th century was the exception, and the recent rise of private space entrepreneurs can be seen as a return to the historic norm.’

SpaceX has embraced private capital and relentless experimentation. It has revolutionised the entire industry in ways that the state has not.

That is the real significance of this IPO. SpaceX is not just selling shares, but it is offering public markets a stake in one of the greatest capitalist success stories of the 21st century. The company’s rise is proof that free markets are not merely good at producing things people consume directly. Free enterprise can transform civilisation-defining industries.

SpaceX now launches national security missions, carries astronauts, connects remote communities to the internet, helps people communicate during crises and pushes humanity closer to exploring the universe.

Whether SpaceX can justify its extraordinary valuation remains to be seen. What is already clear, however, is that activities once assumed to be the natural domain of government can often be done better, faster, and more ambitiously through the dynamism of capitalism and the brilliance of entrepreneurs.

SpaceX is a lesson not only in what markets can achieve, but a reason to ask where else the government should get out of the way.

And if you want more…

– Reeves is closer to an IMF bailout than she thinks (Damian Pudner)

– What the World Cup tells us about free trade (Ben Ramanauskas)

– The £1,000 rule killing Britain’s cake sheds (James Hodgkinson)

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Later in the week, John Penrose wrote his column on Burnham’s comments on the unfairness of Britain’s tax system. Burnham’s right – our tax code does need an overhaul – but he’s right for all the wrong reasons.

And now for something completely different. Speaking at London’s SXSW festival earlier this week, former First Lady Michelle Obama told young people to toughen up and accept the fact they might not enjoy their first job. I agree, and in my column I argued that by basing its employment rights legislation on the demands of teenagers, the Government has discouraged businesses from hiring them.

CapX also covered a number of other stories this week. Free speech campaigner Freddie Attenborough argued against the Government’s decision to ban US left-wing commentators Cenk Uyghur and Hasan Piker from the UK; Matthew Bowles wrote about Labour’s cowardly approach to planning reform; and Anne Strickland discussed the financial questions that need to be asked about the Government’s counter-terrorism programme, Prevent.

My favourite piece of the week was by Erik Lidström, who wrote about the evolutionary reasons behind the Left’s antipathy to free markets. You can read it in full below.

It is also with a heavy heart that I announce that this will be my final Weekly Briefing, as I am leaving CapX next week. It’s been a pleasure, and whatever you do, be sure to keep reading Westminster’s finest opinion site.

You’ll also find some of our other favourite pieces from the week.

Joseph Dinnage
Deputy Editor, CapX

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Why the Left can’t stand free markets

Erik Lidström

At its heart, the reason is a fundamental mismatch between our hunter-gatherer brain and the market economy. Up until a relative blink of an eye, humans lived as hunter-gatherers for close to 2 million years, some 70,000–80,000 generations, successions of mothers and fathers, sons and daughters. For at least 150,000 years, our ancestors were exactly like us and lived in groups of 20–70, within tribes, whole countries, of about 500.

There was a strict division of labour, where men hunted, while women mainly gathered, looked after children and cooked. Big-game hunting and gathering not only provided different sources of food, but they were also subject to two different rules for sharing. Big-game hunting is hit and miss in the most literal sense. Big games are large, high-variability resources, and in all hunter-gatherer tribes, they are shared equally, according to strict rules. Woe betides the successful hunter who keeps more than his predetermined share. He faces ostracism or worse. Gathered food is not subject to such variability, and no one, except certain kin, has any right to what a woman gathers.

In countries of some 500 people, there existed two kinds of social coordination. First, the intuitive ones between people who know each other. Secondly, in smaller and larger groups, we can also deliberately organise ourselves, using bureaucratic rules. Both modes of organisation, and particularly the first one, constitute our human micro-cosmos.

We no longer live as hunter-gatherers, and our societies now consist of tens of millions in a world with over 8 billion inhabitants. Within a market economy, there is a third kind of coordination, based on three rules that David Hume pointed out: secure property rights, that we may freely buy and sell products and services and that contracts are respected. With these three rules in place, we may interact with people whom we have never met, or even know exist, on the other side of the planet.

These three rules hold sway in our macro-cosmos and create what Adam Smith called a Great Society. Friedrich Hayek gave the self-organisation of the market and beyond the name the extended order.

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The market is an example of a Complex Adaptive System (CAS), a complex system that can learn and adapt. Other examples of CASs are flocks of birds, schools of fish and anthills. There are no ant CEOs, ant managers or ant accountants. Nor is there an ant ‘hive mind’. There are just ants, walking about doing ‘ant things’, and the result is the ant hill.

This is where the hunter-gatherer brain and the workings of a free society collide. First, the Great Society ‘does not compute’ to the hunter-gatherer brain. Second, we have this innate rule that external high-variability resources should be shared equally. For such resources, as for big-game hunting, there is no causal link that can be identified between effort and reward. You may work 80 hours per week for years to start a business and fail, or you may work equally hard and have a runaway success. Or you may not work that hard, but even so, ‘strike oil’ and make it big, because you had some idea or noticed some opportunity. No one can determine ‘the merit’ of anyone in the Great Society.

Through cultural learning, we may learn and accept the appropriate behaviour in the market, and the way the economic game is played and acknowledge that the outcomes are based on a combination of skill and luck. Experience, as well as insight from authors such as Adam Smith, will also tell us that if we leave this chaotic thing, which is the market economy, to its own devices, incredible prosperity will be generated for society as a whole, but without anyone being able to predict individual outcomes. We may, therefore, mainly through culture, move away from our innate hunter-gatherer gut feelings towards that bourgeois culture that created our flourishing societies.

Others, such as students, journalists, politicians and academics, who are not participants in the market economy and who, as a result, lack the appropriate culture and insights, will instead obsess about Gini coefficients, high salaries, bonuses, windfall profits and the like, just like a group of hunter-gatherers obsesses about the equal sharing of a newly felled gnu.

And if you want more…

– Why Thatcher still matters today (Robert Colvile)

– Britain needs to build better (John Myers)

– The trillion-dollar opportunity in outer space (Rainer Zitelmann)

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Benjamin Elks of the Taxpayers’ Alliance wrote about how we measure the size of the state. He argued that current metrics only tell part of the story. Sitting outside the official figures are a swathe of groups that rely on the public purse for a significant portion, and sometimes all, of their income – charities.

Is banking reform Rachel Reeves’s greatest achievement yet? Writer Graeme Orchard thinks so, who argued that the Chancellor is absolutely right to pursue serious, common-sense reform of ring-fenced banks in order to free up capital for investment in British businesses.

The economist Samuel Gregg – who appeared on this week’s episode of The Capitalist – wrote about the British Right’s embrace of industrial policy. He argued that this is a mistake, and that industrial policy would embed cronyism and malinvestment into our economy.

And finally, my favourite piece this week was written by CapX columnist Damian Pudner, who wrote about the British public’s impatience with our political status quo. You can read the piece in full below.

You’ll also find some of our other favourite pieces from the week.

Joseph Dinnage
Deputy Editor, CapX

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The status quo is dead

Damian Pudner

This week I was fortunate enough to sit down with the Rt Hon Liz Truss. We discussed the usual things you expect. The state of the UK economy, the Bank of England, the Civil Service, and to quote Truss, how ‘Power was taken from the elected and given to progressive bureaucrats and judges’. I must admit I found our conversation refreshing.

So let me be just as direct. British politics has reached a point where the old arguments no longer work and the old settlement is visibly falling apart.

For 30 years, the British state has expanded on the misguided assumption that someone else would always pay. Taxpayers. Bond markets. The next generation. That growth was always just around the corner. That all we needed was more spending, more regulation, more quangos, more debt, more promises. And that the productive part of the economy – the private sector – would simply absorb it, that bond markets would keep lending to us, that the public would keep accepting the situation.

Well, they won’t. And deep down, everyone in Westminster knows it.

Tony Blair’s intervention this week is enlightening – not because Blair has suddenly become a convert to a small-state and free markets, he very much hasn’t – but because even the man who built managerial Britain can see the public is calling time on the politics of the uniparty. Even Blair now concedes welfare spending can’t keep going vertical, that the Civil Service is bloated, inefficient and too costly, that government spending generally is not sustainable.

I’ve spent enough time on trading floors, watching gilt markets price sovereign credibility in real time, to know that any politician who thinks bond markets don’t matter is making a very expensive mistake. The problem isn’t necessarily that Britain is about to run out of money. It’s not. The problem is that Britain is institutionally dishonest about what is required to put it on a sustainable debt path. The state hides trade-offs behind all kinds of fiscal illusions. Voters are told they can have everything they want – entitlements are preserved, services expanded, risks socialised – and that elusive growth or wealth taxes will somehow cover it. They won’t. We seem to have normalised bad economics. Gary Stevenson would be proud.

To cut through the misrepresentation, we need radical transparency. People need to know what welfare, pensions, debt interest and healthcare actually cost per household. What each pound of public spending delivers. Know where their hard-earned money gets wasted on process, bureaucracy, and compliance rather than reaching those who need it.

This is exactly what a new group called the Great British Think Tank, for which I am a senior research fellow, is doing – taking the political spin out of the figures and showing the public the real, no-nonsense picture. And the public, it turns out, can handle it. They’re not children, but they’ve been treated like they are for too long.

We need a reset. The state cannot subsidise every lifestyle, remove every risk, guarantee every income, underwrite every failure and still leave space for an economy that actually grows. At some point a society has to be honest about the difference between a genuine safety net and a system that has drifted into subsidising dependency.

Politicians know this. They just won’t say it, because saying it costs votes in the short term. The result is that we get stuck in stasis, in a slow, painful managed decline. One of high taxes, weak growth, rising debt, deteriorating public services and an electorate that is losing faith in institutions at a rate that should alarm everyone in SW1.

Welfare reform must re-establish the incentive to work – and not apologise for it. Planning reform must put housebuilding and infrastructure as the number one national priority. Fiscal reform must impose real discipline on a state that has lived beyond its means for decades, and at an ever-increasing rate.

The latest iteration has failed on every measure it set for itself. It promised competence. It delivered paralysis. It promised fairness. It delivered a scale of intergenerational inequality that will take decades to unwind. It promised expert management of the economy and gave us the highest inflation in 40 years followed by stagnation.

Time is running out for the political status quo. And the public, I suspect, is far ahead of Westminster on this.

And if you want more…

– How ‘distributionalism’ killed long-term policymaking (Mani Basharzad)

– The Nimbys have conquered Peckham (James Ball)

– We need a new Europe to save Ukraine (Ján Figel)

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Helen Whately, Shadow Secretary of State for Work and Pensions, wrote about the Government’s abysmal record on welfare reform, pointing out that there was no commitment in the King’s Speech to bring down this soaring bill.

Speaking at an event at the Centre for Policy Studies this week, Shadow Chancellor Mel Stride discussed Labour’s economic mismanagement and the cost of Andy Burnham’s leadership ambitions. You can read the transcript on CapX.

On Thursday, the Office for National Statistics released its latest migration data, showing a drop in net migration to 171,000 in 2025 – the lowest year on record (outside of Covid) since 2008. Karl Williams argued that Shabana Mahmood must not rest on her laurels, as the impact of recent demographic change is still there for voters to see.

And finally, has the Government finally gone totally mad? Maybe so. This week, it was reported that Rachel Reeves is considering imposing price caps on certain goods in supermarkets to compensate for so-called ‘price-gouging’. As Andrew Lilico argued, price caps never work. You can read his piece in full below.

Below you’ll find some of our other favourite pieces from the week.

Joseph Dinnage
Deputy Editor, CapX

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Price caps never work

For thousands of years, governments have been tempted to respond to inflationary pressures by imposing caps on prices. Diocletian’s AD 301 Edict on Maximum Prices is a famous early example, but there were repeats throughout the ages. By the 1970s, prices and incomes policies were being used by many governments to try to counter inflation. And this has not been solely a practice of left-wing governments. In 1982, the right-wing National Party Prime Minister of New Zealand, Robert Muldoon, announced a nationwide freeze on wages and most prices, which lasted for the next two years.

It sounds so simple. If consumers are suffering because prices are going up, then forbid that. Who could object, beyond greedy firms profiteering by pushing prices up? This notion that price rises are ‘profiteering’ or ‘price gouging’ has in recent years become particularly associated with the supermarkets sector. There were complaints of profiteering when supermarkets raised the prices of products that ran out or ran short during Covid, such as hand sanitiser. In the US, alleged ‘price gouging’ by supermarkets and how to curtail it was a significant plank of Kamala Harris’ 2024 Presidential campaign. Similarly, New York Mayor Zohran Mamdani is establishing a system of state-owned (specifically, city-owned) supermarkets in response to what he describes as ‘price gouging’.

A key SNP manifesto pledge for the 2026 Scottish Parliament elections was that it would impose a legal cap on 20-50 essential everyday items sold in large supermarkets. Now it appears the UK Government has been negotiating a similar arrangement, seeking to get supermarkets to agree to caps on the prices of 20 items in exchange for some temporary relaxation of cost-raising regulations.

The talk of ‘price gouging’ or ‘profiteering’ is rather revealing. The thought seems to be that supermarkets have raised prices in response to the shocks of recent years – Covid, the energy price shock following the Russian invasion of Ukraine and now the Iran war. These price rises have maintained supermarket profits and in some cases may even have increased those profits. This is somehow regarded as unjust.

In economic theory, ‘price gouging’ has no specific technical meaning. However, the scenario in which economists would generally be most sympathetic to restrictions being imposed on something describable as ‘price gouging’ would be roughly as follows. Imagine there has been some natural disaster such as an earthquake, and that this disaster has destroyed most of the productive capacity for an industry – e.g., suppose there were only one beer production plant left. Then the remaining producer has temporary monopoly power. Prices of beer will naturally and appropriately rise because of the shortage – economists would not accept that being legitimately criticised as ‘price gouging’. But in addition to this natural shortage-driven rise, there is also the potential for a further rise associated with the newly-obtained significant market power of the one remaining beer producer.

Let us be clear here: most economists – perhaps even the overwhelming majority – would argue that price controls would be a mistake even in this case. Allowing the monopoly pricing would provide very powerful incentives for new production to be set up, speeding the process of recovery and getting production back to normal. Capping prices would reduce incentives to restore production and perhaps mean recovery was much slower. Nonetheless, even many economists that felt price caps were a mistake in this situation would at least concede that they had a meaningful rationale: the curtailing of temporary market power.

But what conceivable rationale could there be for capping supermarket prices in the UK today? The groceries sector has been subjected to multiple reviews – frequently on the basis of claims that its prices are too low (because supermarkets exploit monopsony (big buyer) power to squeeze prices to their suppliers such as farmers. No monopoly power has ever been identified. Supermarkets are highly competitive.

Indeed, large supermarkets are a marvel of the modern age, on a par with wonders such as the Internet. We have a cornucopia of goods available, allowing us to buy almost anything we could want in multiple variants, from around the world. These are provided to us via the automatic responses of thousands of economic agents to thousands upon thousands of prices, in a web of interactions far beyond the ability of any human mind or machine to duplicate. Tampering with that process is so obviously potentially harmful that only a fool, or a desperate politician, would contemplate it.

Andrew Lilico

And if you want more…

– Nimbys are holding back British tech (James Price)

– How Big Consulting captured the British state (Katie Carruthers)

– Why elites fear common sense (Frank Furedi)

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We’ll be back after the Bank Holiday.