John Redwood's Diary – For freedom and prosperity

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My IEA article on local roads

August 4, 2026 32 Comments

As you sit in another traffic jam, try to work your way around another road closure, follow a diversion or sit at home waiting for someone or some delivery that is late to turn up, do you ever ask if public sector roads are the best answer? How much of our lost productivity and squeezed small business sector is down to the costs and difficulties of getting about?

In my first roads article I looked at the stressed and delay prone nationalised strategic highways, our motorways and trunk roads,which cater for a third of our vehicle miles and two thirds of the truck miles on an inadequate 2.4% of our roads. My second promised article got delayed a week by a Burnham diversion and yet more government anti driver actions. Today I look at that cross roads of congestion, our major road network of A roads. These are nationalised under local authority management but often dependent on national government grants. A further 43% of our vehicle miles take place on these routes on just 4% of our roads. The remaining 93% of our roads are local and handle only 23% of total travelled miles.

The major Council A road network is crucial to productivity and jobs in the UK. It is the main means for people to get to work, the main way to get to shops, for service companies and deliveries to reach our homes and for children to get to school. It is sadly neglected by government, starved of cash for extension and improvement whilst millions more people in recent years come to live here needing vehicles and deliveries. Over 20 years only 600 miles of new road has been added to the major road network. Much more new road has been added by developers as they build new housing estates with plenty of local and estate roads to funnel more vehicles onto the overwhelmed major road system.

There are very few new road schemes planned for the A roads to improve capacity and reach with only a small national budget of £1.6 bn . Government’s priority is to cut vehicle use, so plenty of money is spent on anti vehicle changes to roads. Active travel’s new third strategy is backed by £4.5 bn to get 55% of all short journeys in towns and cities onto bikes or on foot. The government in its usual way has a popular success story of personal transport on its hands, so it does its best to throttle it. It turns to rationing and to offering very expensive less popular choices buttressed by public spending, tax breaks and over provision. We have plenty of near empty trains apart from some peak times and favoured routes, and many unused cycleways.

As a result we face an increasing array of measures to slow, impede or stop road vehicle use. There are the 20 mph zones taking over urban areas. 20 mph is fine near a school at times when children may be in the road, or on residential estate roads, but not on a major A road route needed for heavy traffic. There are a growing number of Low Traffic Neighbourhoods restricting access to and from residential areas altogether. There are chicanes and speed humps. On some roads now Councils have put islands or barriers on one side forcing traffic to stop and wait for a gap in traffic coming the other way, a particularly dangerous as well as vexatious intervention. Many new traffic light sets are introduced. Vehicle lanes are reduced or narrowed to put in bigger pavements and cycleways. Aggressive kerbs are popular to do more damage alongside the poor road surface so motorists sometimes swerving to avoid the potholes hit a new super kerb. Tyres and suspensions are hammered by bad roads.

Junction design is often changed to slow and delay traffic. Light phasings sometimes ignore the need to give priority to the main road. Too few light sets have traffic sensors to trigger timely changes of light phasing in accord with traffic demand. Drivers on the main road have to wait at red lights when little or nothing is using the green. Some light sets now have all red phases to allow the mythical pedestrian wanting to cross both roads at the same time to do so. There are too few roundabouts which usually flow better. Some highways Authorities seek to cut flows at successful roundabouts by narrowing the highway or by introducing traffic lights and stop lines.

So why are our main local roads so badly run? Some of the changes are made as so called green policies, yet they lead to more congestion and vehicles burning more fuel whilst making little or no progress. Some are made to improve safety, yet they often increase potential conflicts between vehicles , cycles and pedestrians by complex junctions, narrower lanes, and confusing instructions.Taking roadspace away from vehicles to create a little used cycle lane causes congestion and frustration, which some bad cyclists add to by riding on pavements or the vehicle lane and shooting red lights in unpredictable ways.

Good Councils should get to work to help drivers who pay so much tax for such a poor service. They should roll out traffic management schemes that improve flows. We need more roundabouts and fewer light sets. All A road traffic lights should give priority to the main road with traffic sensors to allow entry from side roads in a controlled way.They should pursue more small schemes to remove road blockages, allow selective widening and segregate A road vehicle traffic from bikes and pedestrians. They should not have 20 mph speed restrictions.

Each Council or Mayoralty should set out a local strategic road network of the main through A roads in their areas. There should be plans to dual heavily trafficked routes. The national government needs to provide a better financial balance between good roads for vehicles and good active travel alternatives away from the main strategic roads.

White van man and woman need a better deal .To save our High Steets we need decent car access. To have more choice of services and deliveries to our homes we need better roads.

Anyone wanting to grow this economy should want lower taxes and cheaper energy. They need to follow that up with better main roads as highways for trade, services and getting to work. We lose both productivity and business opportunity by sitting in traffic jams. Drivers pay far more in vehicle and fuel taxes than they get in road provision.The plumber, the Amazon delivery driver , the builder, the employees going to work and the families seeking entertainment all need to get there by road vehicle. Why does the miserable government road monopolist seek to delay them and lecture them on how not to bother? It even in some places spends money on expensive signs to tell you to expect long queues and bad service, as if proud of it.

The growing gap between the US and EU economies

August 3, 2026 48 Comments

The Draghi Report highlighted the way the EU economy is falling badly behind the US this century. Sky high energy taxes and prices, and an anti high tec company set of law codes and taxes have kept the EU in the slow lane. US GDP per head is growing faster and is now 80% higher than the EU. The UK has been dragged down by EU laws and taxes, and has only grown a little faster than the EU since Brexit owing to its failure to change suffocating EU rules and charges.It has managed to avoid some of the latest unhelpful laws of the EU but is stupidly putting itself into the carbon taxes, emissions trading and carbon based tariff schemes which help make energy so dear.

A study by the European Centre for international political economy in 2023 set out how US GDP per head 47 % higher than EU in 2010 surged to 82% higher by 2023 based on cheaper energy and better technology.It showed how the major economies of Germany, France, Italy and Spain were falling further down the league table compared to US states. It is getting worse as the US accelerates its highly successful data centre and A I investments. The EU is becoming a digital colony of the US whilst protesting and seeking to constrain and tax the US companies it relies on for so many purposes.

The story of this century shows UK voters were right to vote to leave the damaging EU which has been holding down growth and living standards. This government’s wish to bind us closer to a failing economic model is bad economics and worse politics. We need much cheaper energy and we need to liberate our tec sector.No to cbam, no to EU emissions trading, no to EU net zero madness, no to the digital tax, no to more tariffs on non EU imports, no to energy dependence on EU imports, no to the big fish give away to the EU.

Mock devolution

August 2, 2026 67 Comments

Councils and Mayors are suggesting what they would like to for their communities. They are soon discovering Mr Burnham has no intention of giving them powers to do popular things in their own areas.

Some want the right to say No to housing and accommodation being made available preferentially to illegal arrivals in the UK. They think the Home Office is putting far too many young males into adapted barracks or social housing relative to the size of the local community and the facilities available. Government intends to override local wishes.

Some areas want to slow the rate of new development because of the strains it is placing on local roads, public services and utilities. Government intends to drive through more housing regardless of local wishes and the realities of service provision.

Some Mayors rightly see that if they are given more grant from Whitehall the priority is to get local tax bills down to ease the squeeze from Council tax increases on family budgets. Ms Haigh dismissively says Mayors cannot become mini Chancellors and are not to give tax cuts.

So on the big three issues, the cost of living and tax squeeze, the pace of inward migration, and plans for each local community the government says a big No to devolution. Indeed it plans to centralise more, driving up taxes to spend more, putting more illegal arrivals in unsuitable locations and overriding plans for community development. It is one big con.

Why Burnham’s economic theories will not bring growth

August 1, 2026 66 Comments

Mr Burnham’s big idea is to spend more in the public sector to promote growth. Unfortunately for him there is no extra tax revenue spare, so he needs to put up taxes or borrow more to spend more.

If he raises taxes he will hit output and investment in the private sector by more than the increase in them in the public sector. The Reeves £66 bn tax hike demonstrated that, with depressed growth and rising unemployment the result.

If he tries to borrow more, already worried markets will drive interest rates up more. This will deter private sector investment. Dear mortgages will keep housebuilding depressed. People will consume less as they pay more in credit card and mortgage interest.

In both cases Mr Burnham will get more of the wrong kind of public spending. The costs of servicing the state debt will rise more. The benefits bill will soar as more people lose jobs or are unable to find a job as the private sector slims down to pay the extra tax and interest bills.

Mr Burnham’s second big idea is to give more spending power to Mayors. If they spend in the same way as the central government was spending before granting extra tax nothing much changes. If the Mayors spend additional sums and central government carries on spending as before then there need to be tax rises to pay the extra bills. That will adversely hit UK growth.

Mr Burnham will find that genuine devolution will produce different outcomes in different places. Scotland and Wales shows devolution can produce worse outcomes by over reliance on a badly run public sector. They spend more per head than England to grow more slowly. They also often get worse public services for more cost per head.

Mr Burnham sets himself up to fail

July 31, 2026 88 Comments

From my Conservative Home article

Mr Burnham has set himself up to fail. He looks backward to the 1980s. This was an era which most voters did not live through. He seeks to refight old battles which Labour lost by miles at the time. Having a distorted view of history is bad modern politics ignoring the experiences and preoccupations of modern electors and running the risk of getting them to tune out. It clouds his judgement about what is needed now to revitalise the economy, boost jobs and restore confidence as it is based on a false analysis of what happened in the 1970s and 1980s.

Most people who lived through those decades remember the financial and industrial collapse under Labour in the 1970s followed by the very strong recovery and rebuilding after 1981 led by Margaret Thatcher.

Mr Burnham wrongly thinks private capital and competition which blew as a reviving wind through the socialist 1970s economy a few years later are the cause of modern troubles. When tried in the 1980s they gave us rapid growth, many new jobs and a big boost to tax revenues. He should think again. Our car industry which had slumped in the 1970s doubled its output. Now as then the biggest problems come from monopolies, state mismanagement and ill directed regulation.

Labour already has a Post Office and British Steel in the public sector losing fortunes each year with no plans on how to save all the jobs and turn round the businesses mired in losses. They inherited a largely nationalised, heavily loss making, rail industry which does not allow competitors to bid to run different and better services.

They wish to double down on the poor performance of the monopoly by stifling what remains of private finance and initiative. More of the delays and cancellations came from mistakes of long nationalised Network Rail than from the private sector train operating companies.

No-one today thinks we should renationalise British Telecom and recreate a state monopoly. When we had one such it rationed access to phone lines, limited the equipment you could add to the network and kept the UK years behind the US in technological developments. Privatisation and the advent of competition led to exploding growth.

It rescued our services driven economy that needed so much more capacity and flexibility in communications and data than the old state owned BT provided. The great success in expanding our financial services sector depended on access to more and better telecommunications. It was the private sector that developed mobile phones and later the much needed broadband networks with fibre optic cable. Nationalised BT ran on copper cables, electro mechanical not electronic switches and wired in fixed telephones.

Today Mr Burnham wants to nationalise water, seizing on the strong public anger about sewage discharges to rivers and the recent high price rises these regulated private monopolies have inflicted on customers. He will discover that nationalisation will make the problems worse, as they did when we had a fully nationalised set of monopoly water companies prior to 1989. The faults of the industry today are the same as they were then. They stem from monopoly, not from private ownership.

One of the last acts of the nationalised industry was to poison some water users from the Camelford works. In the hot, dry summer of 1976 large numbers of customers lost all supply of water to their homes and had to queue to fill buckets from street standpipes. The nationalised industry could never get enough public money to expand and modernise its facilities as it needed to do. How would today be any better, when public spending pressures are acute and the state is already borrowing far too much?

Putting water onto the public accounts would greatly add to the strains. After all, the whole point is the regulated industry did not invest enough either thanks to strict controls on new capital so we need to spend a fortune on bigger pipes, more treatment works and new reservoirs.

Mr Burnham sees that the UK is way off being able to deliver the 1.5 million homes over five years Labour promised. It will be pushing it to do 200,000 a year, not 300,000. Instead of asking himself how the government has driven mortgage related interest rates so high through its own excessive borrowing, or why people struggle to pay the extortionate Stamp duties on homes, he has decided that the state can build and pay for more homes instead. He wants to provide more Council homes, though he probably means more social housing through Housing Associations. He will find that this imposes more strains on state finance and will come nowhere near the numbers required to hit the pledged 1.5 million 2024-9.

Everything Mr Burnham says is geared to polling and to his immediate political task, self defined as seeing off the voting threat from Reform. As Prime Minister he will be judged more by what he does than what he says. He will discover it will not matter how he spins it if the underlying reality of people’s lives is different to his honeyed tongue account. Labour MPs brought him in as Leader because he beat the Reform candidate in Makerfield. They misread that election. It wasn’t Labour that won the election. It was the anti Starmer candidate with the power to topple the PM if he got elected.

Mr Burnham is right about one thing. People want change. They are angry about depressed standards of living and high prices. He is wrong in thinking you need to put our taxes up to solve that, as it is the high taxes that cause much of the anger and stress in family budgets. We can afford the 45 per cent of the petrol price that goes to the oil company, but not the 55 per cent that is tax for the government. Home buyers are put off by high Stamp duties. Business people cannot afford to offer more jobs to young people because of the high costs of National Insurance. Farmers are giving up because of the Farms tax, and because the grants are now given out to stop them growing food instead of to help them farm.

In Mr Burnham’s world, more income and benefits come from the state in a crazy money-go-round where many have to pay more tax, to get some of it back as subsidy because the tax has done so much damage. The nationalised steel industry has to pay huge energy and carbon taxes, only to get a subsidy to pay the resulting losses.

It all creates work for administrators to do, taking the money off us and giving back some of it after a big handling charge.

Mr Burnham is also split over his lack of mandate and the need to stick to Labour’s Manifesto which he did not stand on. It did not contain a lot of positive change in it. He would be well advised to cancel the tax rises, the giveaways of our overseas territories and the other obvious violations of the Manifesto by the Starmer government but I doubt that will occur to him as a good

How rail nationalisation went wrong in the 1970 s

July 30, 2026 53 Comments

The government is completing the nationalisation of British Rail. It thinks it was much better before privatisation on 1 January 1997 after 49 years of full public ownership.

Over that half century there was a big decline in rail use. 996 m passenger journeys in 1948 had fallen to 628 min 1997. It was bad news for employees of the state concern . 500,000 of the 650,000 original jobs disappeared as freight and passengers diverted to the roads. That was an average loss of 10,000 jobs a year. That was not what the Unions and Ministers had in mind when they borrowed £1132 m to acquire the assets.That would be £47,000 m in todays money. All added to the state debt.

The nationalised railway went through phases of closures, accelerated in the Beeching notorious termination of many small lines and heavily loss making services. It failed to open new branch and spur lines to keep up with changing patterns of demand. It watched as Heathrow became one of the world’s busiest airports but failed to put in a 5 mile spur line to link the airport to the mainline network. It took BAA to do that as a private project, linking to Railtrack lines after privatisation. BR watched as many new large industrial estates opened near motorways with no thought to offer a branch line for freight shipment.

Between 1973 and 1978 30 people died in bad rail crashes and a fire. In contrast for the 14 years of Conservative government and partial privatisation 2010-24 there were just 3 deaths. Both the nationalised and privatised industry have had some serious crashes. Nationalisation was not safer.

The losses of the nationalised industry were large. Fares usually went up by more than inflation, with taxpayer subsidy paying far more of the costs than fare revenue.

My IEA article on road nationalisation

July 29, 2026 47 Comments

There is one nationalised industry that most people support. They often do not see its failings. Indeed, most do not think of it as a nationalised industry. Most think it as a natural monopoly. Most protect it because it is provided “free” at the point of use. I am talking about roads.

The truth is like many nationalised industries state run roads let us down and cost us a fortune. The state provides too little capacity and makes using the roads difficult. It is run as a monopoly with rationing, and with an ever increasing array of rules enforced by fines and other penalties. Far from being free to users, drivers are fleeced in so many ways. Drivers are made to pay an annual fee for keeping a vehicle. They pay 55% of their fuel costs in tax, with VAT even charged on the fuel duty itself. They pay high VAT and tax on buying new vehicles. They have to pay heavy parking charges for parking in publicly owned car parks and on sections of the highway, tolls on some bridges, and congestion charges in some urban areas. Some have to pay high fees for residents parking.

This contrasts with nationalised rail where fares are VAT exempt, diesel for trains attracts a very low duty rate and there are no special charges for keeping or buying a train.

Worse still is the state of the roads. The main motorways and A roads, usually dualled, that take the bulk of the traffic are run by the national government through the Highways Agency. There has been no attempt to complete a proper network serving the main cities, ports, airports and train stations. There is still no south coast motorway. There is no fully dualled A 303 road to the south west. There is too little capacity across the Pennines, inadequate roads to Felixstowe and Dover, two of our busiest ports and no main highway between Oxford and Cambridge to top the golden triangle ear marked for more homes and business investment. There are many other regional gaps and uncompleted main routes. The state has usually adopted a string of beads approach, dualling individual by passes along a main highway but not dualling the whole. The Highways Agency seems to be run by people who want to ration our access to roadspace, rather than by a growth driven organisation that wishes to expand to meet the obvious existing and growing demand.

Road management often leaves much to be desired as well. Potholes and poor surfaces are becoming a problem even on these national highways. There is endless tinkering with them overnight with clumsy lane and whole road closures disrupting journeys and driving trucks onto smaller roads. The policy to convert some safety lanes into additional running lane capacity had its critics which led to expensive and complex initial works being followed by more cost and disruptive remedial works. The advent of so called smart motorways gives them powers to intervene over lanes closures and speeds which are not always judged well.

The state did build one of the most vital pieces of twentieth century infrastructure when it completed the M 25. Without this the UK economy would be throttled by having to route too many goods and people through London with its medieval street plan and hostile Councils. The road was so successful that soon its critics switched from claiming it was not needed to claiming it had become a large car park from congestion. Subsequent attempts to widen it were always too little too late. The expansion has also led to intrusive works delaying traffic over a period of many months. The failure to put in wide enough bridges initially left no room for expansion without expensive replacement of bridges.

A similar attempt to provide a ringway around Birmingham also produced a good road that was too small. There government allowed an experiment with the provision of additional private sector roadspace. The M6 toll road has provided much needed extra capacity at no cost to the taxpayer. Those who want the certainty of no congestion or no delays pay for the toll road, freeing more of the space on the nationalised alternative for those who do not want to pay or cannot afford to. It’s a win win for payers and users of the free system.

When I produced a report for the incoming Cameron government on economic policy with Simon Wolfson of Next we argued that we needed to go over to private capital for roads to tackle the scarcity and poor performance. We suggested selling long leases of the main roads for around £100 bn to companies that would improve and manage them and expand them, collecting toll revenues which would be subject to regulation. This money would be used to cut the state debt, cutting the interest bill by enough to abolish Vehicle Excise Duty. The tolls were to be set so that on average no-one was worse or better off from the tolls versus the cancelled VED. The scheme would have been mildly redistributional from richer to poorer as lower income people tend to drive fewer miles. Drivers could also always divert from the national highways to the free local roads if they wished. I understand why George Osborne rejected this as too difficult, as polling said people would oppose it , believing they would end up paying more. I did not pursue the idea further and am not recommending it today.

This leaves the Birmingham model as the obvious hybrid to adopt. Letting the private sector build new relief roads is a win win, freeing road space on so called free roads whilst offering those in a hurry or wanting a better service the option of paying for it. Every time I have used the M6 Toll it has been free flowing, with a good quality of service and easy payment technology. The services are also good and not under the same pressure as the often crowded and sparse service areas on the free network. The free network decided to strictly limit service areas giving them strong monopoly like positions.

The government could draw up a list of motorways and main A roads where a relief road or a new route is needed. The government would need to offer planning permission for the construction to companies bidding to be granted the rights. The government could offer a long lease with future reversion, or the freehold. They could set criteria and requirements on the private contractors bidding, and award to the one in each case that offered the best package.

This government is cutting back on the scarcely adequate new roads programme it inherited. The public and business votes with its vehicles, choosing 59% of all trips by car and just 2% by train. Rail freight’s market share has fallen a long way under BR and now Network Rail. Gone are the days of more sidings in industrial plants and branch lines into business estates. Today new business parks are located near motorways and trunk roads. The railway likes trainload quantities which few producers can now manage. To take a bigger share of freight as many would like it needs more active marketing of single wagon marshalling with new branch lines into leading business centres. In the meantime more truck fleets take to the roads, hammering the surfaces with their high axle weights.

If the government cannot bring itself to allow some private capital to top up and improve our road network it needs to find the borrowings to put in more highway. You cannot have a growing economy without more transport capacity. The government has put a target for growth of railfreight into its nationalisation plans, but so far has not produced any supporting material to show how it will identify new customers and pick up their loads, let alone deliver them to their end destination. The truth is roads go everywhere in the UK and rail only go to a limited number of places with stations. The marketing , service arrangements and pricing still favour the truck door to door over the train for part of the journey.

When it comes to passengers too few people live close to a rail station or wish to go to a destination close to a station. Most so called rail journeys include two car/taxi/bus journeys as well as a train ride. You do not go shopping by train for the weekly groceries. You cannot usually take the children to school by train outside London. Most households with two workers need two cars to get each to work, usually travelling in different directions. To get growth in business and to help people do their jobs we need better roads with more capacity. That starts with the national network. The debate should be about how to raise the money and how to pay for it.

The abolition of a department

July 28, 2026 41 Comments

I am willing to give one cheer for the disappearance of a whole government department, the Science, Innovation and Technology department. I would give more cheers if I thought things would be better and overheads were lower from the changes. I will be surprised if they do slim government as a result, as I suspect there will be the rebuilding of what it does and who does it through a complex redistribution of tasks and posts. The expanding Business department will be the main “winner”, gaining staff and work. Some activities will pass to DCMS.

The critics of the move claim this will mean less representation for science and technology in decision making. The supporters say all departments need to be alert to scientific and technology threats and opportunities. The government Scientists already operate across government depending on need, from the Government Office of Science. There will be a Minister for AI in the Cabinet Office.

The danger of these reorganisations is they incur substantial costs and divert energies away from the subject itself to the complications of the Whitehall power structures and musical chairs. It is difficult to point to what the outgoing Department has achieved. I asked recently that the Lords Minister set out what benefits we are getting from the government’s £3bn programme of introducing AI to its own processes, and what greater staff efficiencies it would generate. It was a friendly question giving the Minister the chance to explain how they were spending this large sum and what good it was doing. There was no reply, so presumably there was no briefing. The suspiciously round sums of the original announcement of AI money without precise programmes was always a concern. I thought now they were well into spending it they could tell us on what and how we will gain.Their inability to do so invites more questions about how this cash is splashed.

This change in the architecture of government to handle the most exciting scientific and technological developments now underway goes unexplained. It would be good to see what the plan for transfer is, how much it will cost and who will control it. I doubt they have worked all that out. Officials look for promotions or for a better deal and politicians lazily dismiss a whole department whilst wanting its work to live on elsewhere.Costs go up. No one is responsible for controlling them. In business if you scrap a department it is usually to take out cost and reduce functions. Government works by different rules which usually ensure reorganisation brings more staff and more cost. AI too in the public sector may do the same, impeding not advancing labour productivity.

Instead of planning more spending the PM needs to unleash more growth

July 27, 2026 82 Comments

The PM wants to spend more. He cannot afford that. He needs to start by helping the country earn more. Increasing the number and rates of taxes in this situation will damage growth and depress revenues. Removing bans, self defeating tax rates and excessive regulation could boost growth and bring in more tax receipts.

1. Lift the ban on exploring for new oil and gas offshore and onshore. Tax revenue will flow from the exploration work and jobs created.

2. Licence Rosebank and Jackdaw fields.Immediate big tax boost as their production kicks in.

3. Allow new onshore gas away from settlements and with royalties for local property owners. Plenty of potential new tax revenue.

4. Abolish carbon taxes and emissions trading to save high energy using industries. There has been a catastrophic rate of closures of oil refineries, ceramics factories, steel plant, petrochemical works,sugar beet,fibreglass, glass and other high energy users in the last two years. Pay for this by cancelling carbon capture and storage expenditures. Saving businesses keeps tax revenue on their jobs and activities which we still need.

5. Lift the progressive ban on new diesel and petrol car making which is destroying the car industry.

6.Remove the new 50% steel tariff which is damaging steel using industries and putting up construction costs.

7.Switch farming grants to helping food growing away from environmental and solar panel based hand outs

8. Cancel the disastrous give away of our fish to the EU and offer loans and grants to expand our fishing fleet, building the boats in the UK.

9. Cancel the tourist taxes and stop Councils buying investments in property and renewables with borrowed money

10. Exempt all small shops, leisure,pubs and High Street businesses from business rates, paid for by cutting money for anti vehicle road schemes which make it difficult for customers to use the roads to get to the shops and raise business costs.

The PM’s challenges My IEA piece this week

July 26, 2026 59 Comments

The PM is right to say people want him to tackle the problem of living standards. The cost of living has risen too far too fast, with the Starmer government presiding over another lurch upwards in inflation from the 2% they inherited. Energy costs are too high thanks to the UK policy of ultra dear energy with very high carbon and energy taxes. Rents and mortgages are too dear for many, thanks to a shortage of supply of homes and very high levels of migration in recent years creating so much more demand. Mortgages were driven up by rate rises needed to curb the covid and war generated excess inflation, and then by a Labour government adding to UK public spending and borrowing.

The government’s cost of borrowing has been well above the one day worst Liz Truss spike in rates for the last year and a half. That is the cost of Labour overspending. The interest rate bill is now a major government headache, being far too high and rising too much with new borrowings and higher rates of interest. If Mr Burnham just wants to add more to the debt he will burden taxpayers with ever large interest rate bills which have to take priority over the public services we need when it comes to allocating the money.

Mr Burnham has three theories of how to tackle the cost of living crisis. The first is to continue the policy of sell out to the EU in the mistaken belief this will generate more growth. The second is to create more regional Mayors and give them all more powers to promote growth and prosperity. The third is to continue the high spend policies of more benefit payments for more people, and more subsidies and cheap or free services for those on lower incomes. These three will fail to deliver more and better paid jobs which have to be the key to greater prosperity for the many.

Sell out in Europe will mean larger financial payments by hard pressed UK taxpayers to the EU. In return we will get a worse and much dearer student support scheme, we will have to accept a wide range of EU laws that will often impede our companies, and we will sign up to yet dearer energy by joining their emissions trading and carbon tax scheme. To round off the damage we have given away £6bn of our fish over 12 years short changing our own fishing industry. We will have to impose tariffs on imports from non EU sources through the carbon border tax they want to set. Their legal impositions may well interfere with our innovative food, agriculture and digital industries. Since Brexit these industries have been freer to innovate and to grow with new ideas.

The belief in the power of Mayors is at loggerheads with the PM’s wish to ensure prosperity spreads to every postcode. Trusting local government means local and regional differentiation. Some may succeed, some will surely fail. If you believe in devolution you accept the right of Wales to lag England as it has thanks to poorer policy choices and higher taxes. The PM will have to deal with the feeling in local government that those places with City region Mayors are going to get a better deal than all the rest, and with the obvious differences there will be in the national treatment of Manchester compared to Essex.

Mr Burnham has never explained how City region Mayors can promote much faster growth as they do not determine interest rates, nor the main taxes and money and credit policies. These decisions have such a dominant effect on whether private sector companies can expand or not. He seems to think all growth comes from higher public spending and borrowing, and sees the Mayors as agents of change by putting in new facilities themselves or grant aiding those who do. This ignores all those crucial goods and services from fuel to heating and from clothes to the family car that are supplied by the private sector who have to pay the taxes to support the Mayors. A few cheaper bus fares from more subsidy is not going to crack the cost of living crisis.

I am all in favour of generous benefit payments to those who through sickness or old age cannot afford the things they need for a decent life. I am not in favour of the current benefits system which puts far too many people of working age onto benefits with no requirement for them to look for work in a new culture of sicknotes for life. Now am I in favour of more and more concessions and free passes to people on benefits for nice to have spending items to make it even more difficult for them to be better off in work. The essence of a good benefits and tax system is it looks after those who cannot fend for themselves but leaves good incentives to everyone else to get a job.

The new PM says he wants to make savings on the benefits bill by getting more people into work. Good idea but not a new one. That will require him to review how to make it more worthwhile to go to work and to review the conditions you need to meet to be on benefits. There are no short cuts or easy options to getting the benefits bill under control. Does he have the wish to understand the detail and the political toughness to push through what needs to be done to bring some reality to the out of control benefits bill?

His choice of ending rough sleeping as his first distinctive national policy shows the contradictions of his thinking. Finding accommodation for people and helping people to a better life than being on the streets are the responsibilities of local government. So is the PM going to take powers away from localities to roll out a national rough sleepers policy? Or is he going to find money for new specific grants for local government to do this better, and hope they will take up the money with the conditions? It is not clear how this will work. Meanwhile critics point out that after some welcome initial success in Manchester as a Mayor with a rough sleeper policy, in recent years the problem has again got worse.

Warm words of hope and communicating a sense that he does want people to be better off is fine. That will only work if these words are true. That will require an altogether more professional and thought through set of policies, backed up by proper control of borrowing and lower levels of taxation. So far there is no sign of either. We have government by PM soundbite and wish list. These now will collide with reality.