Domestic headlines have been dominated this week by Labour Party infighting following Tony Blair’s scathing essay about the state of British politics. For my column, I contrasted Blair’s pragmatism with Wes Streeting’s radical statism – evidenced during his outburst against social media companies – and questioned what direction Labour might take after Keir Starmer’s downfall.
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
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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