Andy Burnham is unapologetic about his claim that Britain shouldn’t be ‘in hock to the bond markets’. He told the New Statesman in an interview that the recent spike in borrowing costs shows he was right that we were over-exposed. As to why we’re in this position – or what to do about it – he didn’t seem to have an answer.
If the Prime Minister wants to understand why Britain’s fiscal picture is so grim, he need only look at one chart: how public spending jumped as a percentage of GDP in the wake of the Covid lockdowns.
The OECD today warned governments across advanced economies to reduce their debt and ‘contain and reallocate’ spending to keep bond markets from threatening financial stability. The head of the IMF also called for politicians to find the courage to cut borrowing and lower their debt levels. With borrowing costs burning through the Chancellor’s headroom, Britain cannot pretend these warnings don’t apply to us.
So, can we expect spending cuts and a reining-in of borrowing at the upcoming Budget to reduce that exposure? Don’t hold your breath.
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
AI regulation offers Britain no safety
Samuel Williamson
‘If heavy-handed rules drive AI development out of the UK, we will still face the consequences, without any ability to influence our fate.’
The US and China are steaming ahead of the UK in the AI race, even as senior researchers are worried about a superintelligent AI taking over. Our naïve response has been to threaten to regulate ourselves into irrelevancy. Instead, we should favour open-source models that offer a cost-effective option to stay close to the frontier and allow us to influence continuing AI developments. Read More
Bristol's Greens have declared war on the bargain
Jack Rowlett
‘For the Greens, it seems, the cost of living only needs to come down when they approve of how you live.’
In Bristol, the Green-led council is cracking down on ‘high-carbon’ advertising. But advertising helps people choose between products they already want to buy. Waging a war on discounts will only make the market less competitive and the things voters want to buy more expensive. A party serious about the cost of living needs to welcome competition. Read More
The Capitalist: the past was worse than you think
Why do so many people – on the Right as well as the Left – look back fondly on a pre-industrial world they would never actually want to live in?
This week on The Capitalist, I spoke to Chelsea Follett of the Cato Institute about her new book, ‘The Grim Old Days: An Introduction to the Preindustrial Past’, which will be published next month. It sets out what life was really like before modern economic growth: famine every few years, streets that doubled as open sewers and a world in which parents put their surviving children to work instead of playing with them.
We discussed why the fantasy of cosy village life is so persistent and how it feeds today’s scepticism about growth and AI. We also covered why the pre-industrial world was no environmental idyll, and what passed for entertainment when an execution was a family day out. Plus, the Dutch mob who killed and ate their prime minister in 1672.
Best of the Web
High energy prices are crippling Britain
Matthew Lynn, The Spectator
‘Unless Andy Burnham and his team can come up with a way to bring energy costs down they will end up presiding over deindustrialisation on a scale that even Mrs Thatcher, the one politician they most dislike, would have found unacceptable.’
Andy Burnham could preside over the largest deindustrialisation in over 40 years. The difference today is that many of the factories and businesses shutting down are highly competitive. Blaming a tax exile billionaire Jim Ratcliffe clsoing down three plants ignores the real issues like our sky-high energy costs and taxes. Read More
🎧 Britain can't reform what it can't measure
Alan Hibben
MPs will need courage to cut the welfare bill
Joseph Dinnage, City AM
‘With creeping inflation and tax rises on the horizon, Britons are in for a rough ride, and their tolerance for political cowardice is running thin.’
PIP claimants outweigh the incumbent MPs majority in a number of constituencies. This poses a real challenge to reforming our welfare system which Keir Starmer called the ‘worst of all worlds’. There are some politicians with the courage to take on this daunting electoral calculus but it may not be enough to fight back against Labour backbenchers who refuse to allow any welfare reform, even from their own party. Read More
Stat of the Day
And if you want more...
– The Bank of England has lost the plot (ConservativeHome)
– The free market isn’t dead yet (Reason)
– Is this Nefertiti’s tomb? (Nature)
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A Rolls-Royce SMR in every appropriate constituency ?
The long ignored answer to the energy problem https://www.researchgate.net/publication/414541177_The_Case_of_Nuclear_Energy_the_Dog_that_Did_Not_Bark#fullTextFileContent