‘I genuinely believe we are one major geopolitical shock away from a proper meltdown. And it’s an ugly contest at this point between us and France.’
What does the fight for free markets look like in 2026 – and how can Britain escape its high-debt, high-tax, low-growth doom loop?
Liam Halligan, the new Director of the Centre for Policy Studies – and so now in charge of CapX as well – joined me on The Capitalist to explain why he decided to get more involved in frontline policymaking.
He argues that our perilous fiscal position today looks alarmingly similar to the mid-Seventies, when the CPS was founded to break a failing consensus, only two years before that same consensus forced Britain to go to the IMF for a bailout. Fifty years later, he says, the case for free enterprise and limited government must be won all over again.
We discussed why Britain’s debt interest bill is a moral failure, not just a fiscal one; why he thinks the market will not fund upfront tax cuts, however much he wants them; and why he blames his own trade – economics journalism – for leaving the public unequipped to hold politicians to account.
Below, you’ll find some short excerpts from our conversation.
Marc Sidwell
Editor, CapX
Why lead the Centre for Policy Studies now?:
‘It’s not an easy time to become the Director of the CPS if you want a quiet life. I think it’s a very interesting time to become Director of the CPS, and it’s precisely because of the bind our country is in that I decided to get more heavily involved in frontline policymaking – because I genuinely believe this is a once in a generation moment. This isn’t 1997 or 1998, as many people thought it would be, when Starmer won that huge majority. We’re 1974, 1975. We are literally on a fiscal cliff edge. The government is increasingly dysfunctional. The state is far too big. Vested interests are clogging up the economy, the country’s stagnating, there’s a growing sense on the international stage that the UK is diminishing. And I genuinely believe that Britain needs saving from itself at this point.’
Debt interest is out of control:
‘The fact that we’re spending 120 billion quid on debt interest – how many nurses and teachers and doctors could you employ for that money? How many hospitals could you build? And it’s dead money, because it’s just going to our creditors. Many of them overseas creditors. It’s not even going to UK-based institutions or UK-based savers in the main, who would then recycle that money back into our own economy. It’s going overseas. It’s undermining our exchange rate. It’s making us very, very vulnerable, as the phrase goes, to the kindness of strangers.’
The ghosts of 1976:
‘I’ve been saying it for a couple of years now, even before Starmer came in – I was writing that the ghosts of 1976 are going to haunt this government. I genuinely believe we are one major geopolitical shock away from a proper meltdown. And it’s an ugly contest at this point, I would say, between us and France.’
Why tax cuts can’t come first:
‘My view is that the Laffer Curve is completely real. Of course it is. You can see it happening already. Look what’s happened to CGT. Look what’s happened to the tax take from independent schools. Look what’s happened to cigarettes. Look at the energy profits levy – the annual total from that’s gone from like £10 billion to £2 billion, as North Sea activity’s been crushed by taxation, not by geological constraints. So the Laffer Curve is real, but the Laffer Curve also involves a J curve. Until the tax cut sticks and people believe it and start hiring more people, start acting on the lower tax, that tax cut will cost you money – and the markets have to finance that, at least for a short period of time… Of course we need to lower tax. But we’re in a situation now where the public finances are so weak, and successive governments of all colours have so fiscally mismanaged this country, that I don’t think the market will fund upfront tax cuts. So you have to have the fiscal consolidation first.’
The media’s failure:
‘I’m outraged at how the media, during my career, have systematically underestimated what ordinary people can understand and want to know about complex ideas, not least surrounding the economy, finance and business. My generation of so-called specialist broadcasters has completely failed the public. And the fact that the public isn’t helped to understand these things means that politicians think they don’t have to address them – which leads to increasingly irresponsible policymaking.’
Why big business likes more regulation:
‘Even more of the growth upfront, I would say, comes from policy moves that don’t cost money – which is lower regulation. But to lower regulation takes a lot of guts, because there are a lot of vested interests that want the regulation. A lot of our big businesses want regulation, because it stops small businesses having a go and it keeps their competitors at bay. Some big business organisations, industry lobby groups that I could mention, exist entirely to maintain regulation where it is, and maybe even increase it on their terms, to protect their market share. Sometimes being pro free markets doesn’t mean being pro big business. It means entirely the opposite.’
What makes him optimistic:
‘Our people. We have incredible people. I’ll always feel that about the UK. I’m from an immigrant family. I have that kind of gratitude of an immigrant… Britain is an incredible place to live, to work, to come from, to be part of and to help shape and influence. We are respected around the world. We’re known for fair dealing, good ideas, energy, great sense of humour, bad weather. Decent food these days – it’s getting better. But joking aside, we need to rebuild our confidence. I think we have lost our confidence in recent years, and a lot of that loss has come from the existence and the knock-on effects of a state that is now entirely out of control.’
