Random Comments

  • UK Foreign Policy Revamped

    I’ve been hesitant to approach this subject, as there is so much to discuss and a real risk of being incoherent. But I think given the actions by the Trump administration, nearly 10 years since Brexit, and China’s actions under Xi, we all need to be thinking much more deeply about what the UK’s foreign policy goals are, and what our core beliefs are.

    I should probably start with one of my core assumptions.

    I consider the UK to be a medium-sized power. I define this as being significant, but not singlehandedly dominant across the three key areas: military, economics, and technological superiority. The UK, on any of these metrics, is clearly above the vast majority of nations, but in turn would never be a match for the USA or China.

    As a medium-sized power, we are in a difficult position because we are large enough to attract direct attention from the great powers, but not strong enough to resist impositions unilaterally. Dealing with this will require strategic nimbleness and humility.

    The UK’s post-Cold War strategy rested on three pillars: US security guarantees, EU economic integration, and engagement with China. Each pillar has weakened or collapsed, forcing Britain to rethink its position as a medium-sized power.

    The Old Worldview

    The fundamental worldview of the UK pre 2016 was loosely as follows:

    • The USA was our closest security and intelligence partner. We advocated for a strong NATO and generally believed in aligning ourselves with the USA for “influence” and preferential military technology access.
    • The EU functioned as our economic global power amplifier. By remaining in the EU but distinct with no euro and less financial regulation, we could have the best of all worlds.
    • China was the rising power that we would assiduously cultivate to form a new, deep relationship. They would handle the supply chains, and we would focus on services and finance in particular.

    These fundamental tenets have been broken and shown to be much more fragile than we had assumed.

    Why the settlement broke

    The United States

    The US is looking far less attractive than it did pre-2016, and not just because of President Trump. Firstly, consider its fundamental position. The United States rebuilt the world order after 1945. This relied on the USA consumer which worked when rising powers were Germany (under US military oversight in NATO), South Korea (military alliance and bases), and most significantly Japan (alliance and bases).

    This fell apart with the re-emergence of China, a whole new industrial giant. The US has much less leverage here, with its military dominance for the first time contested, particularly around Taiwan, and much less economic domination (or at least not without significant blowback). Deindustrialising the USA in favour of a geopolitical adversary makes the current economic regime untenable, and both domestic parties agree that China is now the biggest threat the USA has faced. Given this, it’s unsurprising that the US has pivoted from European security to focusing on Asia. Europe and the UK are going to have to relearn the art of geopolitics.

    Trump has consistently made it clear that the old order in which the USA acts as Europe’s guarantor is over, and Europe has to make security much more of a priority. The likelihood of a future President choosing Europe is small and should not be relied upon.

    Europe and the European Union

    I’d just note that I’ve touched on this in other blogposts, so feel free to check those for slightly more detail. To briefly recap, in hindsight, we were always likely to leave the EU given our history and our inability and indeed refusal to reconcile the EU’s nature with our own objectives. British politicians, from Thatcher to Blair, did not understand the EU. While I would contend that it did amplify our economic power, politically, it was inherently unstable in UK politics and thus not a sustainable long-term solution.

    Even though a majority of British people think Brexit was a mistake, the polling is clear that there is no desire to reopen this issue. Voters prefer British politicians writing British laws rather than a foreign body such as the European Parliament. Furthermore, why would the EU want to reopen this issue, given our 50/50 divide on it and the fact that it has spent years dealing with it?

    The EU is also attempting to slowly federalise in response to the actions by the Trump administration and Russia, but with inevitable gaps and shortcomings. But the EU that exists today is certainly not the one that we voted to leave in 2016, and must be treated as such.

    China

    China has massively whipsawed in our foreign policy, from the post-Cold War heyday of integration and the Western order being clearly superior, to the “Golden Age”, and to now, with the term “Systematic Rivalry”.

    It was not an entirely terrible strategy – it stood to reason that China would re-emerge into its historical role as the world’s manufacturing hub and superpower, and this required some engagement. However, there were clearly several key issues that were either not appreciated or understood enough:

    Firstly, the Chinese Communist Party’s fundamental ideology was not understood, or wilfully ignored. The UK (along with most of the West) thought that integrating China into the world economy, particularly through the World Trade Organisation, would lead to political liberalisation. In reality, there was no such change, and the UK has moved its supply chains to a hostile power.

    This problem worsened under Xi Jinping, and the Coalition Government and the Cameron government chose to ignore it. Again, take the CCP under Xi at their word. They are a Leninist party, not a technocratic elite. They see the economy, defence, and foreign relations as one package, and one cannot be separated from the other.

    Actions such as Made in China 2025 and other struggle speeches indicate its intent to establish hegemonic status in its near local areas. China has increasingly challenged the post-WWII order, which we benefited from. It also seeks reunification with Taiwan, which is a critical chokepoint for semiconductors, and China will not hesitate to use these in any dispute, as it has with its own market, rare earths, and other areas. We have seen this being used time and time again by the CCP.

    Our strategic reality

    These have all made British power and foreign policy significantly more uncertain. The USA is dedicated towards dealing with China, and is much less willing to underwrite European security. The European Union is continuing to evolve in ways that can lead to conflict with British interests. Finally, China has emerged as a major strategic rival and one which controls our production capacity.

    We have also seen in our political class an over-reliance on international law, believing that it was a real entity in its own right and capable of constraining other powers. In reality, it has been, and will always be, a reflection of power (economic or military), and it is only able to impose itself in two scenarios: 1) it is in both parties interests to do, e.g. patent claims between similarly developed countries, and 2) it is enforced with some kind of coercive force by a stronger power. The UK contributed to this in Iraq, Kosovo, and elsewhere. In the modern world, particularly since the end of the Cold War, international law should broadly have been considered another phrase for US military might. We need to relearn the lesson that international law is a byproduct of power.

    What is the UK to do

    Firstly, we must turn to fundamentals. We are an island nation in the North Atlantic, close to Europe, with a handful of key assets worldwide. Ergo, number one is a strong navy and air force, with potentially a rebuild in our merchant navy as well. The reduction in our naval size is a significant concern, leaving us exceptionally vulnerable. It also leaves us bereft of the ability to project power around the world, which we increasingly forget can mean the difference between confronting a threat at home or dealing with it abroad. N.A.M Rodger’s A History of the Royal Navy is illustrative in this regard. There was a societal-wide effort to build the navy’s power, and it was not just an arm of the government.

    Military

    We also need to urgently review and overhaul our procurement strategy for the military. The Centre for British Progress had an excellent report, which I’ll just emphasise, notes that only two MoD projects out of 49 are on track to be on time and on budget. We have to move our procurement strategy to war footing – an emphasis on simple, ready solutions that only consider their military effectiveness, rather than any wider social issues. The best is what you have in the field, not what it is dreamed up by a contractor. The usual 10 year view of likely threats needs to be inverted from trying to predict the next competitor, and instead be how quickly the UK can mobilise resources into military assets.

    Furthermore, we should be intensively studying and leveraging the Ukrainian experience against Russia, in particular with their drone combat and manufacturing. We should absolutely be incentivising them to build drone factories over here, and educating our forces on how to integrate drones with infantry. We should also note that, despite how effective our artillery has been, it is limited by production – there should be an immediate focus on expanding supplies and an emphasis on quantity as much as quality. This fight is probably a good comparison to the Spanish Civil War, before WWII began. This is possibly our last window to prepare.

    Economic

    Our economy is dependent on imports, from food to energy. As an island, we need to maintain shipping lanes (ergo a strong navy, with the capacity to impose force) and a wide range of suppliers. So we require trade deals with energy suppliers globally and a wider variety of energy sources. We already have dependencies on Norway, the USA, and the Middle East. We should be expanding the energy supply domestically, but an interesting area for us is the Falkland Islands, with largely untapped reserves. We should be massively incentivising production here, encouraging economic growth for a dependency, and securing a domestic supply resource. Though this will take significant time, it should be started now to unlock a strong strategic resource. South America is an area the UK should cultivate, with Guyana another interesting region.

    We also benefit from selling goods and services to nations with similar GDP per capita and legal structures. So naturally, this includes the USA, the EU, and other key nations like Australia, Canada, and the Middle East to some extent. Note that this does not include China, given the differences in legal structure and the aim of substituting Western goods with their own. So China should not be a priority for our trade teams, and energy on cultivating a relationship should be limited.

    Europe and the European Union

    Our relationship with the EU has transformed, and we are struggling to adapt. We need to recognise that we are now in competition with the EU in certain areas, and act accordingly, even though we are also still close allies. We need to be willing to utilise our key assets, defence, intelligence, and our consumer demand in our negotiations where possible, but accept that this can only go so far.

    We should increasingly be targeting EU industries and sectors for relocation to the UK. An obvious area would be going further and faster with undoing net zero and carbon pricing to capture EU industrial giants. Another area would be reforming our capital markets, such as removing stamp duty tax, listing requirements, and preferential tax treatment to attract European companies to list here.

    An area where Britain still has some advantages (for now) is defence and intelligence, particularly with the Baltic states due to their proximity to Russia. We should be leaning on them for support within the EU for agreements with the UK where possible, and smoothing opposition to us. But this requires us to be willing to withdraw or reduce forces if it is clear that the Baltic states are not interested. This will lead to a reduction of influence, but a recognition that we are serious about our interests again. There will be sharper trade-offs and diplomatic uproar as a consequence. It will require a shared sense of UK purpose and obligations, both to our allies and friends, as well as reciprocal behaviour.

    We can offer ourselves as a relatively neutral party by leveraging our advantages to build military partnerships with European allies, with special emphasis on Poland and Germany, given their need to arm (and rearm), and a need for an alternative to the USA and France.

    The United States

    Our military dependence on the USA seriously needs to be rethought. Our view of close dependency and alliance equalling influence is a mirage, and unfortunately for us, the French have it right. Independence is key, even with technological limitations that we would inevitably have as a much smaller economy and power. Again, we cannot have it all, so we must choose accordingly. Our interests require a strong navy and air fleet, with relatively limited armies and an emphasis on special forces. If this coincides with American interests, great, but we should not put their interests ahead of our own.

    We also should recognise that the USA remains by far the more attractive option between the two superpowers, and reflect this in our policy accordingly. We need to avoid deluding ourselves by calling it the “Special Relationship”, but we do have a key relationship in intelligence that can continue to be deepened.

    China

    In terms of China, we are in a difficult situation. Our supply chains are tightly bound up, and it will take years, probably decades, to move our most critical chains. However, we do have some options. We should mandate that China build manufacturing capacity in the mainland UK to access our domestic market, and be willing to limit this if they refuse to cooperate. We also need to take a much harder stance towards Chinese attempts to buy influence in the UK, including throughout Parliament and our Universities. It should be designated as a threat, or at least much stricter than the current ambiguity.

    Our relations with mid-sized powers in China’s region, notably Japan and South Korea, should be strengthened where possible, such as in defence and manufacturing capacity. Intelligence, including non-military (e.g. pandemic awareness), should also be strengthened here.

    We also have to be exceptionally careful to avoid being forced into uncomfortable stances by the USA in its approach to China. To some extent, this is inevitable given our relative position. However, we should designate areas of red lines that we will not cross. An example could be allowing our domestic market to be used by Chinese car makers (under the proviso that they build capacity here), as this would benefit our own domestic capabilities as well.

    Conclusion

    The UK is in a difficult situation, but ultimately it still has a lot of control over its own destiny. What has changed is that our fundamental tenets are gone, and the political class are still struggling to come to terms with what this means. Hopefully, in this post, I’ve given a framework for what our next moves should be. We will need agility, humility, and a willingness to accept difficult trade-offs. Some of these goals will require sustained investment over decades for payoff, which will require some degree of political unity, which is difficult to imagine in the present circumstances. Furthermore, our foreign policy will be built on our domestic success or failure. We should be interlinking the domestic and international spheres together to drive home the message to British voters that the world has changed.

  • The university scandal, the UK political wage economy, and US foreign policy

    Once again it’s been too long since I posted, partially due to a honeymoon (amazing), and another bloody cold (not amazing). I’m writing a long piece on UK’s foreign policy which is taking me way too long, but I thought I’d post this for now.

    • The unfairness of the UK University system: https://open.substack.com/pub/edrith/p/rage-rage-against-the-growing-of?utm_campaign=post-expanded-share&utm_medium=post%20viewer
      • Universities have been attracting a lot of attention recently, with it yet another area where the political agreement has failed. Graduates have not seen wages rise uniformly post university, and are saddled with debt that they realistically have no chance of repaying
      • It partially comes back to a disagreement over the point of universities – are they there to educate the mind (in which case, no taxation for that given the benefit only accrues to the individual), for labour skills (in which case you need to shutting down universities that fail to do this, with students missing out and funding through graduate taxation), or something else?
      • Off the top of my head I’d prefer the second option but again implies real losers in the economy, and good luck volunteering for that
    • The UK political wage economy: https://open.substack.com/pub/cromredoubt/p/britains-wage-suppression-addiction?utm_campaign=post-expanded-share&utm_medium=web
      • Probably worth a whole long article in itself, this is an excellent diagnosis of the British economy right now
      • Essentially it diagnoses the fundamental tenet of the UK economy is around wage suppression – no surprise when we have a nationalised healthcare system, an inadequate care system, and a highly centralised public sector including schools, prisons, police, etc. It works (or maybe even now just worked) for a time, but the costs are increasingly unbearable
      • Again, we are going to have to start breaking these elements apart and accept that wages for these sectors, or at least a few of them, will go up – but in return we must demand much better. E.g., a police force that will do the basics again, and a prison service that will safely house violent criminals
    • An interesting take on the USA foreign policy ambitions after the recent Japanese elections: https://richardc145655.substack.com/p/rupture?r=22u0c&utm_medium=ios&triedRedirect=true
      • I don’t know if I agree with all of this and I’m always sceptical about how many steps ahead the US administration is thinking, but broadly this piece seems correct to me
      • Essentially the USA and China are forcing the world to pick sides, whether they like it or not. Trump may be a bully and vindictive, but this trend won’t go away with another President
      • I’m trying to finish a way too long piece on the UK’s foreign policy that I hope to release soon, but its clear that the UK is going to have to adjust its position substantially in order to assert its interests in this new age

  • The UK becoming ungovernable, the 1947 TCPA, and rethinking Britain for the majority

    Been awhile since I posted, mostly due to contracting a near fatal case of the plague. Luckily, I survived and managed to have some Christmas chocolate, recommended by most doctors.

    Anyway, without further ado, here are some things I found interesting over the break:

    • How the UK became ungovernable:https://overcast.fm/+ABOJ-83RV-I
    • I absolutely loved Talking Politics with Helen Thompson and David Runciman, for my money it was the best current affairs / political podcast around. So having these two back with Galen Druke was an absolute treat, even if the content was unsurprisingly depressing. A couple of things to note:
      • It was notable how scathing both HT and DR were of Keir Starmer and Rachel Reeves as politicians, not just as individuals but as their complete inability to communicate what they believe in, and their refusal to tell the truth. Remarkable considering we lived through Boris Johnson, but in my mind everyone knew he was a clown – we got Labour in as they were the “grownups”, and instead we got the sanctimonious liars.
      • Energy was the key highlight, unsurprising given HT book_Disorder_. Until the British political class reckon with the energy straightjacket we have self-imposed through net zero I expect further turbulence.
      • The absolute hope of Labour on areas like AI, of which we have no real control over, and actively take measures to reduce control, through AI safety regulation and critically through energy prices
      • A lot more, including on Europe, the USA, and China – definitely worth a listen
    • A fantastic deep dive into the 1947 TCPA: https://open.substack.com/pub/danlewis8/p/dissecting-the-1947-town-and-country?r=22u0c&utm_medium=ios
      • For the love of god, abolishing this and moving to a zoning system like Japan, or even devolving it to the regions, has to be the key priority, along with reforming the net zero act for any party serious about economic policy
      • It’s quite staggering how immensely damaging this policy has been. I would argue it was less of an issue with councils able to build social housing, and low levels of immigration or even emigration in the UK. Still doesn’t make this policy any better.
    • Rethinking Britain for the 98%: https://substack.com/@edrith/note/p-181658437?r=22u0c&utm_medium=ios&utm_source=notes-share-action
      • This is a great look into a part of that fairness disease I talked about in my UK overview post – the fact that we can’t ever negatively punish disruptive groups as the final result isn’t fair. This naturally leads to greater costs being incurred by the majority of society
      • I have some vague ideas for a post about this but again, for politicians at the back, if you make life clearly harder for the majority of people, with a minority of absolute winners (who clearly do not share the same norms and views as the majority), do not be surprised when politics appears more febrile than ever
      • The first party (perhaps already Reform, maybe some signs of the conservatives finally getting this) to decisively back the majority and is prepared to weather the pushback from removing advantages to these minority groups will become the dominant party of the UK. The pushback will be extremely loud, but ultimately it will come from a narrow electoral base

  • Railways, Gatekeepers, and Parenthood

    A shorter post today, with some links and comments to various articles I’ve found interesting.

    British Railways lack of direction: https://open.substack.com/pub/catchingmice/p/were-getting-worried-about-great?utm_campaign=post-expanded-share&utm_medium=post%20viewer

    • Seemingly, along with everything else this government has touched, British Railways has been half-hearted and almost entirely based on the vibes “we’re a left government, so of course it’ll be nationalised”. Great – now what do you want to do with it? How will nationalising this solve the problems identified with service, strikes, and quality? Why would nationalising it lead to more funding and a better service when it’s up against the NHS?
    • The post makes it very clear that there is nothing inherently wrong with nationalisation – Switzerland has done it very successfully. But the key with that is a huge amount of devolution to the cantons (close enough to regions for UK purposes), allowing them to decide how best to raise funds to provide railway services. Labour or whoever is next in government has to resist the siren songs of power and rethink accordingly.

    Politics, and why the left is struggling: https://open.substack.com/pub/conspicuouscognition/p/lets-not-bring-back-the-gatekeepers?r=22u0c&utm_medium=ios

    • A fantastic piece on how the left are struggling with the loss of control over information, and the incoherent responses towards the populists
    • To me, it’s the example of Aggregation Theory in practice, see here:https://stratechery.com/2016/the-voters-decide/(although note Ben Thompson did not view Trump as an aggregator). It feels increasingly in the UK that we have the worst of all worlds – a left that cling to their ideas, yet refuse to debate them openly, and consider opponents (e.g. Farage) as beyond the pale.
    • Ironically, this both emboldens Farage/Reform as ordinary voters consider him as closer to their views on the key issue (immigration), and the extremists, as there is a persuasion gap being left open. Voters are going directly to their solution and bypassing the filtering performed by the traditional gatekeepers. Given that the left is much closer to these traditional gatekeepers, or puts higher status on parts of them (experts, universities), shocks will continue to happen.
    • There’s definitely a piece to be written on how Europe is struggling with this in particular, with its lack of domestic tech industry really coming back to bite it. The key players seem to think it’s still 1990 rather than 2025 and don’t seem to be able to formulate a response at all.

    Parenthood: https://substack.com/home/post/p-175138681

    • Not much to say beyond it’s a beautiful and heartbreaking piece on parenting with a child who has just been diagnosed with autism

  • UK Overview

    Intro

    I thought my next post should be a general overview of the UK, with some reasons why we are struggling badly from an economic point of view, and an overview about what we should do going forward. To stop this blog turning into a book I have chosen to focus mostly on domestic economic policy in this section, which will lead to many blindspots.

    It’s no secret that the UK has had a horrendous economic run since the financial crash in 2008, with GDP per capita stagnant for 20 years. To some extent, this is because the preceding 5 years or so pre-crisis had unsustainable growth, but even allowing for this the economy has been catastrophic since then. Couple this with inflationary shocks and massive cultural changes and it’s unsurprising to see the British public deeply disillusioned. Nothing seems to work, and there are no groups that benefit enough to justify the current regime. The Conservative Party seems finished and Labour are doing their best to follow them. The next most likely parties are to varying extents delusional about the problems the UK faces, which is extremely worrying.

    Overview

    The UK has forgotten how to be a rich nation and has taken its inheritance for granted.

    Since 2000, the UK has faced 5 huge shifts. Firstly, China joined the WTO in 2001. In 2005, the UK was no longer an energy exporter. In 2008, the financial crisis led to the end of the “business model” of the UK. In 2016, the UK voted for Brexit against the majority of elite opinion. Finally, in 2020, we had COVID. In addition to this economic growth became dependent on immigration, in direct opposition to the British voters’ preference. I’d argue that this was contained after 08 through asset price inflation, but once directly put to the voters (Brexit), it became untenable.

    I’d like to focus on the 2nd and 3rd points in particular, as I think they show a lot of our political climate and dominant ideas, and how we have gone so wrong.

    Since 2005, we have made a significant effort to reduce energy usage and become an energy importer. Industry has been decimated, even taking into account the service nature of the modern economy. We have made a virtue of being world leaders in decarbonisation, but the real costs we have faced are ignored. The key foundational elements of a modern economy are missing from the UK.

    Since 2008, we have tried to pay for our welfare state by taxing the top 1% of earners, rather than serious reforms and changes to our post-WWII welfare state. As a result of this and other measures, we have severely compressed the range of outcomes for a mediocre result.

    How did we get here

    It’s dangerous to try and give a coherent narrative to the above, and we have to acknowledge how much of history is random and uncertain. With that in mind, I’m going to ignore that and suggest two vague strands that characterise the UK in this period.

    In a nutshell, it’s the overwhelming priority of the British electorate on “fairness” and a refusal to embrace risk by our political class. Let’s quickly dive into the key events.

    The first and most obvious one was the financial crisis. In popular memory, the banks took massive financial risks that blew themselves and the economy up. Understandably, politicians were compelled to act to prevent this from ever happening again and passed several acts, including the Financial Services Act 2013, which, as ever with the UK, “gold-plated” global standards.

    The problem for the UK is that banks are the linchpins of the modern economy, with lending crucial. Being able to borrow relatively easily leads to risk-taking, which can lead to the financial crisis in the absolute worst-case scenario. It also leads to the formation of new companies, which have no credit history, but perhaps a future compelling product. In the USA, banks have mostly recovered their position, and corporate lending is also served by private credit firms, but in the UK (and Europe), this has been largely stifled by heavy regulation. The sensible fear of catastrophic risk metamorphosed into stopping risk altogether, and ironically led to the UK being much worse off than it could have been.

    This unfortunately spread elsewhere in the economy, including areas like pensions, leading to nonsensical outcomes. I would seriously recommend that anyone reading this checks their pension, particularly if you are under 40, to ensure that you are being well served by the default plan’s long-term goal. In most cases, you will not be.

    Again, it’s well-meaning legislation aiming to avoid risk, but it is ultimately negative for the UK. Areas such as the charge cap in 2015 (aiming to protect consumers from overpaying for pension management) led to pension providers refusing to invest in areas like private equity and infrastructure funds, due to the higher costs. The legislation around pensions basically means the number one priority for pension managers is to avoid losing money – sensible on the surface, but if you make that the overwhelming mandate, guess what? You don’t invest in anything risky! Hence very boring and underwhelming returns, and a key source of capital for venture firms/start-ups / etc, lost altogether. The government is trying to reverse this, but efforts are slow, and there is a real lack of urgency here.

    We also consistently see an emphasis on fairness, particularly for the UK’s role in global history and economic footprint. A lot of this leads to a desire to be the global leader in righting the historic “wrongs” that we did, even if these wrongs included the Industrial Revolution, which led humans out of poverty.

    Hence acts like the UK Climate Change Act of 2008, which later became a legally binding emission reduction target for the UK, that in no sense would take account of the global situation, the UK’s strategic interests (beyond a vague sense of softpower, ever the UK superpower, and being the leader of the green revolution, whatever that means). What made it even worse was the sheer legalistic nature of the act – there were carbon budgets, independent advice from a body that had no other mandate (unlike politicians), and the availability for legal challenges in court from interest groups uninterested in the downsides.

    A much better approach would have been to ditch the legal framework behind this. Instead, we should have adopted something similar to what China (yes, I know) has been doing with its 5-year plans. Clear statements of intent, but crucially (for obvious reasons) not legally enforceable, and able to be amended if, say, circumstances required it.

    Or even more obviously, let it be driven from “below” – if economics says solar power was the best idea for the grid, or wind, or whatever you fancy, by all means go for it, but to tie the UK to long-term commitments is the height of folly. The number one act of any future government should be to amend or remove this act and allow local experimentation – if solar power is the best for the grid, by all means, whack it in, but why on earth would you deprive yourself of existing gas and oil infrastructure?

    We also need a hard examination of what this green revolution is for – the solar panels/wind turbines are produced by China (a geopolitical adversary), for European companies, for use by British consumers. Our energy costs are among the highest in the developed world. From a strategic point of view, it seems strange to deny ourselves the use of oil and gas fields in the North Sea, particularly given that Norway intends to continue exploiting them. In addition to this, we have come close to blackouts in January 2025, and have averted these by the skin of our teeth. We are more dependent on foreign imports than ever, with most of these recently coming from the United States, due to its emphasis on fracking and other sources of domestic production.

    This has led to significant knock-on effects as we close down most of our industrial capacity. The obvious negative implications are for national security, particularly when our security guarantor has made it clear it is far less interested in defending us / Europe than it has ever been. We have also lost a significant number of skilled jobs as a result of this, up and down the value chain. We’ve also made it so consumers, either directly or through general taxation, are spending more on energy compared to competitors such as the United States, meaning less expenditure in the economy for other goods and services, which has also fed into our stagnation.

    Part of the problem of increasing stagnation without a fundamental reassessment of our economy is ever more arcane means of dividing up the pie. For an example of this, see the noble intention behind the work provisions of the UK Equality Act in 2010, specifically, work rated as equivalent and work of equal value. To most economists, this is a pretty obvious problem – why should the government (or in this case, a judge) tell employers to pay individuals in different roles the same amount, when that is precisely what the market can solve for you? To me this seems like the perennial problem we have with the idea of poor nurses, bloody overpaid footballers – the inherent nobility of a certain kind of work with what a free market tells you it is worth. We need to amend or undo this part of the legislation entirely, and accept the inherent difference in work, even (and in fact especially) when it is not fair.

    I’d also suggest that our lack of local experimentation has finally caught up with us, particularly with a centre that seems to have been noticeably poorer / distracted since austerity and Brexit in particular. The UK is extraordinarily centralised, with local taxes at around 5% of total taxes, compared to 45% in the USA and 20% in France. What this tells us is that local government here is basically pointless – very little room to try new areas and experiment. It also means it is hugely incumbent on the centre, i.e. the government of the day to be effective in administration. Austerity and Brexit have both put paid to that in resources and attention. I’m pleased to see the announcement from the Budget about local tourism taxation as a great step in the right direction, but we really need to loosen the Treasury’s grip on local projects. Let local regions and nations decide how they want to spend – if it’s on poor uses of capital, so be it. But I believe most will find better ways for their money than we have seen so far in the UK, based on our region’s performance relative to the rest of the world.

    Where to go next

    I would like to be honest here and accept trade-offs where possible. Firstly, the UK is a mid-sized country and economic power in the world of extremes – best to be a giant (USA, EU, China, India, etc), or a highly nimble city/state (UAE, Singapore, etc). We run the dual risk of being too small to impose our interests on the world, but large enough to be an attractive proposition to those seeking to impose their demands on us. Furthermore, we run the risk of being unable to swiftly adjust through our own legislation, or international legislation.

    Given this, our fundamental guiding principle of a nation should be flexibility and allow maximum experimentation where possible in the areas that we can. So, in no particular order, here are my suggestions:

    • Massively weaken the centre in key areas to enhance risk-taking: ideas such as net zero, equal pay provisions, and others need to be curtailed significantly. The centre should only form the lowest layer of regulation, rather than aim to legislate for all eventualities.
      • As part of this, there needs to be a true empowerment of the regions/cities / etc. This includes major tax-raising capabilities (and spending crucially, including over healthcare and welfare), bringing us into line with other modern economies such as France, Germany, and the United States, and political power to match. No individual in Whitehall should be dictating to Manchester, Scotland, Cornwall, or London, even what the correct economic course is – let them decide for themselves. Accept that some regions will do much better and others will mess it up – that is the consequence of devolution.
      • I think a pretty controversial area will be the minimum wage. UK policy since 1998 has been an incoherent mix of attempting to increase worker earnings by forcing the lowest salaries to rise, and yet an insistence on high levels of immigration into health care and social care to keep these costs down. Add that our taxation system that pretty much demands individuals stay between 50k to 100k, and you can see why stagnation has been happening. Let local regions decide for themselves if a minimum wage is appropriate, and if so, what level is required.
      • No more national centres or significant curtailment of these: inevitably, these end up in London and naturally focus on London issues. Attempts to move these to other parts of the country are usually folly – let local regions build their own institutions and stay away from meddling with them.
    • Massively strengthen the centre in other key areas, particularly around security:
      • The UK of the 1990s is gone. We have seen significant demographic change in the country and examples of failures to integrate, particularly in areas of high deprivation – take Tower Hamlets, central Birmingham, and so on. With the recent summer riots and anti-Israel protests, we are seeing the limits of law and order without a gendarme / national guard. It is time for the UK to introduce this in-between security force between the police and the army, like we have in other countries. This force must only answer to the central government and have the power and ability to intervene on multiple fronts.
    • Removing or significant reform to non-political areas and bring them back under democratic control:
      • Non-political here being slightly incorrect, as obviously everything is political. But we need to seriously rethink areas such as statutory care, SEND, net zero, etc. We (like any other country) do our best to avoid facing up to costs and shoving these off in creative ways to show that actually, we don’t need to handle these! In particular, with statutory care and SEND costs, we mandate these as essential services from the centre, but offer absolutely no support or discretion to local authorities. Spoiler alert – local government on the verge of bankruptcy, unable to provide services for the majority of taxpayers, and increasingly vulnerable to insane short-term measures such as turning to Private Equity. Decide what we want here – if we are mandating obligations, then provide central (i.e. general taxation) funding to match, or remove the obligation and allow regions to decide for themselves (and accept an unequal outcome).
    • Tackle the two biggest issues in the UK – use of land and the NHS:
      • It is no coincidence that our highly dysfunctional land usage (nothing ever gets built) and our NHS are both products of the Attlee government, which believed in socialism. These were the byproducts of a different age and thinking and have consistently ignored the price mechanism at their height, and to our extreme cost. My preference here would be wholesale reform, but this seems unlikely. Instead, let regions decide for themselves how to go about land use and healthcare – at the very least, the incentives will be better aligned.

    It’s been a longer blog than I had anticipated, and there’s been a great deal missed out. Hopefully, I can come back to addressing some of these latter points in other posts, especially around healthcare and land usage.

    I’ve also added the links below for areas/articles that I found most useful.

    Links:

    Equal pay: https://substack.com/home/post/p-161661611
    Local funding: https://substack.com/home/post/p-179025535
    Energy and net zero: https://dieterhelm.co.uk/energy-climate/the-price-of-energy-and-the-system-costs-of-renewables/
    Local power: https://tomforth.co.uk/whynorthenglandispoor/
    Europe / UK finance: https://encompass-europe.com/comment/europes-crippling-risk-aversion

  • Between the Waves thoughts

    I’ve been meaning to write a post about Between the Waves by Tom McTague for awhile now.

    Firstly, the book itself is an excellent read about how the British political class (with a handful of exceptions) consistently deludes itself over the nature of the European Union. I would highly recommend that anyone with an interest in UK-EU relations read this, or frankly, any current affairs interest.

    What I think makes this book so fascinating is the bind that “leavers” or “remainers” find themselves in relation to the EU now. Leavers would argue that (re)joining the EU entails giving up unacceptable levels of political control for no economic benefit (and that this is increasingly becoming a disadvantage over time). Remainers would argue that we have significantly hurt our economy for illusory domestic sovereignty, and giving up influence within the EU (and that this is as far as integration will go). McTague would suggest from history that both sides are deluding themselves. The leavers assumed that Britain could exit the EU with minimal disruption to its economy, which was proven wrong from 2016 onwards, though not to the hysterical levels predicted by the Remain campaign. From the remainers, the key argument was that Britain could pick and choose its economic benefits, without giving up significant levels of sovereignty and crucially, the EU would remain firmly out of the political sphere. But from the beginning, the EU has been set up as “an ever closer union”, and McTague consistently highlights British politicians being unable or unwilling to grasp this reality in their dealings with it. This cuts across Labour and Conservatives, with key figures such as Thatcher and Blair both unable to fully reconcile their understanding of British interests with the EU interests.

    Part of the problem is that British politicians viewed the EU as a way to enhance British power (or to mask underlying weaknesses), but failed to consider the associated political consequences of doing so. You cannot demand influence, but significant carveouts from an organisation, and then be surprised when said organisation consistently shifts away from you. What makes this ironic to me is that for the most part the UK problems are nearly entirely self-inflicted – massive centralisation under Thatcher and a lack of room for experiment and risk taking in the local regions, net zero being written into law by parliament, the TCPA and other associated NIMBYISM acts. Those issues were and are eminently able to be addressed inside or outside the EU. But they also require significant political costs to key domestic stakeholders that are unlikely to ever agree to them and so the consistent out was a move towards Europe.

    I’m not entirely sure where that leaves the UK now. From the polls it seems clear that most voters consider Brexit to have gone badly, but there does not appear to be any appetite to rejoin. Part of this is likely because the EU is also struggling economically, making our own underperformance appear more palatable, but I suspect it’s mostly voters remembering how miserable the entire Brexit process was. I also think there is awareness that to rejoin would be to reopen the same questions that our political class have never been able to face, namely, can a nation with a fundamentally different history, political structure, and world outlook (debatable) integrate into a different system. But given the insurmountable problems that the UK faces (and here insurmountable means politically untouchable), rejoining the EU may be advocated by whatever replaces Labour as the centre-left party as a quick fix to our economic problems.

    Other items I’ve read / watched / listened to recently:

    • Welcome to Faketown by Anon and I: brilliant episode on how the UK economy consists of transfers propping up entire parts of the country. Given the economic strangulation of the UK this surely is going to have to end, but I have no idea how you unwind it without further massive damage. Personally, I’m in the Tom Forth school of thought that says devolve political and economic power to the regions, smash the centre, and see what happens.
    • The Constitution of Innovation; A New European Renaissance: Honestly delighted that someone in the EU with influence is trying to fight the good economic fight but I wonder if they’re deluding themselves like the British have done. Can any nation state in the EU accept definite losers in return for vague winners? But I hope this is read widely and followed up with action.