Economics newsletter
Who can wean Britain off its immigration addiction?
It is a fact curiously overlooked by many Conservatives today that Margaret Thatcher did more than almost any European leader to embed the free movement of people across the continent. In 1988 she told British business to seize the opportunity of a Single Market with ‘direct and unhindered access’ to more than 300 million consumers – underpinned by the four freedoms of goods, services, capital and people. To Mrs Thatcher, and to Lord Cockfield, its great architect, the project was a machine for competition, growth and enterprise. That view was not shared by much of the old Labour movement. For many trade unionists, the Common Market looked like a bosses’ project: a way of exposing British workers to the relentless march of multinational capital.
Why Andy Burnham could be tempted by a snap election
Andy Burnham has catapulted his way back to Westminster in a landslide victory, winning 55 per cent of the vote in Makerfield. The scale of that victory – and how much he trounced Reform – means it’s likely the Labour party hands him the keys to No. 10 in weeks rather than months as James Heale said on Coffee House this morning. The scale of his by-election victory is the only card Andy Burnham has to play But if I were the soon-to-be-former Manchester mayor, I would not want the keys to that particular door. An economic mess is all that awaits inside. And that mess was made worse by the latest figures on the public finances released this morning by the Office for National Statistics. They show the Treasury had to borrow £23.
How much is PM Burnham going to cost Britain?
The Makerfield by-election – in which Andy Burnham swept to victory overnight – has been presented as a fight for the soul of Britain, but in a few years’ time we will look back upon it as a quaint sideshow in a long-lost world. As Britain spirals towards fiscal disaster, the days of having the likes of Andy Burnham trying to buy the electorate by showering them with spending promises are rapidly drawing to a close. Just how much could Burnham cost us if, as expected, he challenges Keir Starmer and goes on to become prime minister? Social housing: Burnham has promised to relocate £39 billion earmarked for social and affordable housing to purely new social homes, to be funded by borrowing.
Economic gloom is Keir Starmer’s real legacy
This week has been described by some as Keir Starmer’s ‘legacy week’. The ban on social media and the G7 summit in Evian were meant to show what this Prime Minister has been able to achieve at home and abroad for the safety of us all. No. 10 disputes that it is anything about legacy, of course, and says it actually demonstrates a Prime Minister who puts country over party and is determined to fight on. Whatever the truth, figures just released by the Office for National Statistics (ONS) cement what Starmer should really be remembered for. New recruits in British firms hit their lowest level in five years, while 138,000 jobs disappeared from payrolls in the year to April and 53,000 in a single month.
Britain will never be the ‘Saudi Arabia of wind’
If you thought that Net Zero couldn’t get any sillier, it just has. Remember how, according to Boris Johnson, Britain was going to become the ‘Saudi Arabia of wind’, exporting massive amounts of abundant power? Actually, we are importing record amounts of electricity: a net 330 terawatt-hours’ worth in 2024, equivalent to over 10 per cent of that consumed in Britain in 2024. This comes via subsea cables from France, the Netherlands, Belgium and Norway. UK households are also subsidising energy consumers abroad But, as the energy company Octopus pointed out before a House of Lords committee on Tuesday, even when we do export electricity we are often doing so at a loss, with UK households effectively subsidising their counterparts in France and other countries.
Did Brexit really harm economic growth?
This weekend, there were more claims that Brexit has led to slow economic growth in the UK, repeating the views of senior Labour politicians seeking re-entry into the European Union. It is hard to disentangle the economic effects of Brexit from those of the Covid lockdowns and the Russia–Ukraine and US–Iran wars An article in the Sunday Times said it is ‘irritating’ when people say Brexit’s effect on the economy ‘cannot have been that bad because, since 2016, the UK’s economic growth has been in line with the big European economies’.
MPs don’t want to confront the youth worklessness crisis
‘It is hard not to be pessimistic when you examine the data,’ former health secretary Alan Milburn says in the foreword to his report into young people doing nothing with their lives. That is quite the understatement. Figures released this morning by the Office for National Statistics show that the number of those classed as not in education, employment or training (Neets) has passed one million – 13.5 per cent of all 16 to 24-year-olds. But Milburn’s review into the crisis suggests we are nowhere near the peak. Forecasting carried out for the report estimates that the rate could hit 16 per cent within five years, meaning more than 1.25 million young Britons would be classed as Neets.
Reform’s overtime policy is comically bad
Labour’s increase to employer National Insurance as part of the 2024 Budget may well have been the worst tax rise it was possible to come up with – leading only to lower wages and reduced employment. Now Reform UK appear determined to find the worst possible tax cut, with their proposal to exempt overtime from income tax. The party calls it a ‘hard work bonus’, says it will cost £5 billion a year, and that welfare cuts will pay for it. It is a clever and bold piece of PR. It is also, on almost any view, terrible. Reform have caught a disease normally found on the left – they’re ignoring incentives. They think their policy encourages more overtime.
Burnham’s buses show why he will probably fail as prime minister
It’s one of those political facts that everyone parrots without really knowing whether it’s true: Andy Burnham has, in his own words, ‘transformed’ Greater Manchester’s bus service. Burnham’s publicly-controlled double-deckers are Exhibit A in the claim that his ‘Manchesterism’ amounts to more than a catchphrase. Real voters, including in Makerfield, bring it up spontaneously. And even the SW1 classes, while often dismissing Our Next Prime Minister as a weathervane and lightweight, usually mention the buses. What’s the point of being in power if you’re never willing to use your political capital to do anything serious?
Streeting’s wealth tax could be very costly
Claim: Streeting’s wealth tax would raise £12 billion a year. Reality Check verdict: False Wes Streeting has proposed a ‘wealth tax that works’, raising around £12 billion a year by aligning capital gains tax rates with income tax rates. That would mean an increase in the top rate from 24 per cent to 45 per cent. He says ‘a pound made from simply owning assets should not be taxed less than a pound made from a hard day’s work.’ There are a few problems with his proposal. It would mean huge tax rates on assets that hadn’t actually made money, after inflation. It reduces the incentive to take investment risks that make us all richer – though Streeting has proposed allowances for ‘genuine entrepreneurialism’.