John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems. Promoted by John Redwood 152 Grosvenor Road SW1V 3JL

Anyone submitting a comment to this site is giving their permission for it to be published here along with the name and identifiers they have submitted.

The moderator reserves the sole right to decide whether to publish or not.

Based on my IEA article about nationalisation and the 1970 s

October 31, 2026 3 Comments
The government’s economics are being derived from  the bus industry  of Manchester. The Mayor took control of bus services and directed them from the centre. Copying the London model local government takes the fare revenue, sets the  fares and dictates  the pattern of services. Private sector bus companies compete for contracts to own and run the buses.
     The leading socialists have a view that the best economy is state planned, eliminating what they call  the extra costs of choice and competition, and expropriating the profits of successful enterprise. They see all business revenues as something the state should control or receive, often objecting to the role of profit in attracting investment and innovation. Profits to them are a loss of money for the state, to be taxed or preferably to be taken over. Ideally they would also want the state to own the operating assets and employ the staff.
    The bus industry in England went through a period of deregulation, allowing some free enterprise companies to offer new routes. New  companies could in some places be set up and established companies could expand. Innovation could thrive. Labour are gradually reversing this working towards a fully nationalised answer. They are going for  nationalisation of  the railways and steel. Their middle course of a Council controlling bus services is called franchising where all the key decisions are taken by the  public sector. The residual private companies operate on small margins to own and drive the buses.
     Many socialists want to nationalise more companies, as they struggle to manage the Post Office, HS 2, the railways  and other unruly state enterprises. In their rush back to the 1970s they have overlooked how in that decade the grim reality of the failure of the Soviet nationalised system became ever clearer. The long post war contest between planned state directed economies in the east of Europe and the freer more free enterprise economies of the west was coming to an end.
The 1980s which Mr Burnham so dislikes saw the capitulation of the Soviet model and the liberation of economies and people. The Berlin Wall finally came down. That was a symbol of people’s wish to be free themselves. They were tired of being kept in poor countries with controls over what they were allowed to think and say. In the extreme version of the USSR they  could be shot if they tried to leave for the more prosperous West.  The broken wall  was based on their appetite for the more abundant and better products  the free enterprise consumer system delivered. Shopping in West Berlin was a pleasure with plenty of choice of good products. Shopping in  the east was painful, working around shortages and empty shelves.
Past Labour governments in the 1940s, 1960s and 1970s nationalised the “commanding heights” of the economy. The big three of rail, coal and steel supported each other in an interdependent system of coal mining, steam trains and a  coal burning steel industry. All three stumbled into large losses. All three ended up closing down much of their activity and sacking the bulk of their employees.
All three failed to innovate, falling behind the advances elsewhere. Japan pioneered the pace and reliability of bullet trains, whilst the UK responded to falling passenger numbers with big cuts in lines and services.  Germany, Korea and later China came to dominate the steel market. The five large UK integrated works created by large taxpayer investment  through the nationalised industry had to plan reducing outputs and  making staff redundant, only  to be followed by eventual closure. The UK gave up on coal mining altogether and switched to gas.
The experience of the nationalised Post Office who owned the phone system was not much better. The UK continued with an older electro mechanical switching technology when the world moved on to  Crossbar then to fully electronic exchanges. The UK supply industry was left mainly servicing the UK nationalised industry with an out of date  product the rest of the world did not want to buy any more. Only after privatisation of telecoms did the UK system spend big money on catching up with the electronic technology. The UK supply industry then enjoyed a better home base to help drive an export business but the delay getting into the electronic market caused by nationalisation meant overseas competition was already well set.
Today Mr Burnham and Mr Healey are held back in their desires to nationalise more by the lack of money and the high costs of nationalising. The UK would have to compensate existing owners when taking over water or energy or transport businesses. If it failed to do so it would hit foreign investment into the country and steal from  UK savers and pension funds.  If they take over a low cost or near bankrupt business like steel it still comes with a huge public spending cost as the taxpayer has to pick up the bills for all the losses and for every pound of new investment the business needs to make. If Thames Water became available for a low price the costs of its annual capital programme to put in more reservoir capacity and to replace old and small pipes would be very large and all part of public spending.
As a result they are turning to creative accounting. Rachel Reeves relaxed the Fiscal rules substantially. She allowed the state to reduce its debt figure by deducting the value of an asset built or acquired by extra borrowing.  Whilst it is true that if you borrow too much you can always sell an asset to help you repay, the fact that you own an asset does not cancel the debt and leaves you liable for the interest. Many people own a house with a mortgage. The house is usually worth more than the debt. They still however have to pay the interest, and do not want to sell the house to pay the bill as they need somewhere to live. They are in debt.
The UK state is often a bad investor. It frequently pays too much for a new facility, whose value will be less than the debt the state incurred to buy it. The biggest current case is that of HS2. The costs have escalated giddily. It may now cost £100 bn for a rail line that just runs from London to Birmingham, duplicating other lines we already own. All of the cost is effectively being borrowed as the state is in long running large deficit. What would be the value of a new line? Nothing like the £100 bn of extra state debt. The new line will have to compete with the existing lines to win passengers and may well operate at a loss when it finally opens around 2040. In the meantime the taxpayers have to go on  paying the interest on the ever growing debt. It would be difficult  to attribute any significant sale value to the potential new line.
The case of Sizewell shows the state getting clever at finding ways to borrow that do not count. The state has the largest minority share stake in Sizewell at 45%. The government will lend  £36.6 bn to the Sizewell consortium to help build the new plant. It will do it by routing the money through the National Wealth Fund. The Fund will earn a profit by charging Sizewell more than the rate of interest the Treasury will have to pay to borrow this large sum. It will be electricity customers who pay the bills to ensure the delivery of reliable nuclear power to the grid. This will be a rare example of a profit making activity by the state based on  lending at a higher rate than the borrowing. This gain  will appear as a positive in the accounts of the National Wealth Fund. The taxpayer will however pay for the equity stake and the risks involved, whilst energy bill payers will pay for the higher  lending costs the state will charge them.
Great British Energy is building a portfolio of renewable energy investments which rely heavily on guaranteed prices, green subsidies and high taxes on rival gas production and generation. These investments will be supported by increasingly tough bans on the fossil fuel alternative and by extensive redistribution through taxes and subsidies.
Great British Rail will dictate routes, services and investment for the rail industry and will doubtless remain heavily in loss before grants. The investment will continue to be a claim on  public spending. British Steel and the Post Office remain big loss makers, with taxpayers having to pay the compensation to Post Office staff who were wrongly accused of fraud and sent to prison and to pay for the £1.3 m a day losses at steel. Neither of these businesses have convincing business plans to get into profit.
The problem with all of this is the growing public sector loses too much money and demands too much investment, forcing government to tax the private sector ever more severely. Socialists see profit making private business as potential “exploiters” to be taxed or regulated into submission. This may just result in more  businesses closing,  more investors taking their money abroad,  more companies leaving the country altogether or re siting crucial activities. We see this on a big scale with the closures of UK refineries, oil and gas production, glass, ceramics, paper, steel and many other energy intensive activities. Even higher bank taxes might switch large amounts of capital and financial activity to other centres.
Meanwhile as in the 1970s the growing nationalised estate will cost taxpayers a fortune in losses and in large and often uneconomic capital spending programmes. This will face government with difficult decisions. Will it have to replace the two blast furnaces of British Steel with an electric arc plant that would probably entail  sacking half the workforce ? Will it end up having to close the blast furnaces owing to their age and large losses, undermining the pledge to the employees? Will rail investment have to be cut back to accommodate more defence spending? Will the Post Office continue to close more branches and sell properties? Will rail losses require more service cuts? Will HS 2 suffer further delays and further cuts in the scope of the scheme?
     The government hopes more regulatory control wil lift performance. They need to puzzle why strong powers already given to the Water Regulator havecnot stopped many discharges of sewage into rivers and the sea, a practice much used by the former nationalised industry without even having to report it. Why has the Bank of England allowed inflation  over target for the whole of the  last five years? Why have rail delays and cancellations continued despite the presence  of the Rail regulator?Experience shows Regulators  struggle  to improve monopolies without competition  to keep  businesses responsive to customer needs.
    The new Chancellor  says he wants to back private sector entrepreneurs and sees the need for a lively private sector. Many of his colleagues are pursuing policies that will burden the state with more expensive white elephant public sector investments, and more high cost and loss making activities subsidised by the hard pressed taxpayers who stay to pay. In the 1980s even the Soviets woke up to the way large scale nationalisation and much central direction meant falling further and further behind  freer economies. It is such a pity Mr Burnham opposes the 1980s . He instead  dreams of the 1970s, an era of high nationalised  losses, high inflation and a  borrowing crisis when the state ran out of money.

Speech in Lords on war and peace

October 30, 2026 49 Comments

There is no more important topic; the world would be a much better place if there could be peace in places today torn by war, with the damage, destruction, and the violence that brings. I agree with a lot of what the noble Lord said about the opportunities for the United Kingdom with our great diplomatic skills, the reach of our diplomatic service, the experience we have gained over many decades and centuries of intervening around the world and, where we could, trying to find resolution of conflict, and with our own experiences bringing peace out of the very difficult situation in Northern Ireland. But, as the noble Lord referred to at the end, one of the reasons the United Kingdom does have a role in the world and is taken seriously is that we have serious and important defence forces. It is most important that they are used with a view to promoting peace where we are intervening, or to right wrongs that can be righted relatively easily by the judicious use of force. That has not always been true in the interventions that we and our NATO allies have made in recent decades in different parts of the world.

I hope the Government, as they go through a rather long defence review and discussion about how best to spend the money that is clearly needed, will have at the forefront of their mind how those forces can be used to deter violence and the outbreak of new conflicts, and how they can be used for expeditionary forces that can make timely interventions where necessary, particularly where those interventions can help create a peace, or where they are needed to police a peace which has been brought about by diplomatic process.

I am sure all of us agree that talking and diplomatic compromise are usually better than conflict extending into aggressive war, and that we would all agree that you only get a war when diplomacy and politics have failed. We all here believe that politics, particularly democratic politics, should be a benign force channelling the conflicts and disagreements into words and arguments and resolving them by compromise or votes. But that will not always be possible in different parts of the world, and that is why we need to choose to spend our money on defence wisely, and to see how we can best help the world through those places where we have power: through the United Nations, through our senior membership of NATO and through the Commonwealth and all the associations that brings.

Looking at defence priorities, it is most important that the Government do not forget that the main priority is to be able to defend these islands and to show that these islands are so well defended that they would be a very hostile environment should any external force wish to intervene. That must mean strengthening our sea forces and our ability to respond to drone and missile attack, and to know how to police our waters when we see possible hostile powers looking enviously at our cables and pipes that are such an important part of our economic progress. So, will the Government please make sure that that is all beefed up and the best modern technology adopted?

When it comes to expeditionary force, we have in the past shown that we have that expeditionary capability, and at times it has been very successful. The Falklands are only free today, and the people of the Falklands are only safe in their wish to be British, because we had enough expeditionary force on our own to drive out the Argentinian invader and restore order. It is most important that we now keep enough force available in case anybody has changed their minds in Argentina about what they might wish to do to try to gain control of islands that are clearly British. British forces were also very successful alongside the American allies leading the operation when Kuwait was liberated, which was a very good example of a sharp use of overwhelming force to right a very obvious wrong where a country had been badly invaded.

Today we have two very big conflicts, which are damaging in themselves—particularly damaging for those involved with them, with too many deaths and too much destruction of property—but also very damaging to the rest of us economically, and because we are morally offended by how they originated. Those are the conflicts in Ukraine and in the Middle East.

We need to hear from the Government a bit more about how they wish to proceed. If we take the case of Ukraine, the war has dragged on for so long and we keep Prime Ministers for such little time that there have now been five United Kingdom Prime Ministers who have had to respond to the difficult situation in Ukraine. They have shown complete unity of understanding and purpose, they have all condemned the Russian invasion and the atrocities that have resulted and they have all wished to offer sensible support to the very brave Ukrainians defending their country. But they have all been very clear that we are not going to declare war on Russia, commit British forces or drag NATO into a conflict with Russia. That would greatly worsen the position and is much against everybody’s interests, including those of the Ukrainians, because it would intensify the exchange of barbarity with all the extra firepower it would bring to the conflict.

That means that we in the West have a dilemma: we are not going to offer a military coalition to beat the Russians, and the Ukrainians, fighting very bravely, have not yet been able to evict the Russians from their territory. I would be interested to know what the latest government thinking is about when and if there is going to be any chance for talking to replace war-fighting and for the two belligerents to be brought to the table in a way that might produce some kind of diplomatic answer. It is not obvious how you do it. President Trump has been much criticised for trying to do it; people thought he was being too kind to Russia, which is not something that people want. It would be interesting to know what the United Kingdom and the European Union position on all this is, and whether there is any way through. I think we all feel that five years of war is excessive and that the awful problems it is creating for the Ukrainian people are unacceptable, difficult though it is to see a way out.

In the case of the Middle East, the United Kingdom does not have a big role to play because it appears that we do not really have serious forces to offer to try to police the sea-lanes and to deal with some of the attacks on our allies in the Gulf. America has the near monopoly of power that can be committed to that, and in that sense it is America’s war. We all rest upon what happens in the exchanges between the President of the United States of America and those now leading Iran.

I would be interested to know whether the Government feel there is anything we can do by way of helping our allies in the Gulf, and whether they can see any way forward, which is more likely to be led by local interests there, as the noble Lord, Lord McConnell, very sensibly said. We too are friends of the UAE, Qatar and so forth—the places most likely to be able to help. It would be good if we could get our defence forces into a shape where we could play a more significant role in trying to help the restoration of normal shipping in the Gulf and Red Sea area. Clearly, energy prices, interest rates and other things globally have been driven up by the extent of that conflict and by the interruptions to trade. In a world that should have plenty of oil and is in transition to using less of it, we find ourselves short of it because of a very nasty war.

I would hope that the defence review would come up with good answers on that combination of defending the home base, which needs more defence, and the appropriate expeditionary force for policing commerce and sea-lanes and going to the aid of allies. It would be very useful to know from the Minister how the Government can extend the skills and the experiences we have had diplomatically and in governing places that are subject to these conflicts. The world desperately needs peace, particularly in those two centres of warfare at the moment, and we would all be better off if that could be brought about.

Budget just means more tax,spend, borrow

October 29, 2026 66 Comments
The budget boosted spending again, taking the 2027-8 total up to £1504 bn from  £1416bn  this year. That’s another increase of £88bn.  Borrowing was up again to £146.1 bn . The need to also borrow an additional £166.5 to roll over retiring debt takes the total bond issue nesxt year  to £312.6bn. The forecast deficit for 2027-8 was stated at  £98.5bn last time but this has risen to £146bn . So the government has increased spending by £88 bn next year over this  and will be borrowing £47.6 bn more than the previous forecast.
     Debt interest shoots up to £155 bn from £135 bn with benefits up by £30 bn and health by £15 bn. The government acknowledges that benefit spending is too high and rightly wants to get  more people into work and off benefits. It however still lacks a strategy to do so and is still following policies that lead to higher unemployment and fewer job vacancies. The big increase in National Insurance, the increases in Minimum Wage and public sector wages, and a range of anti business tax measures from Business rates to the  Packaging tax have helped the numbers on benefits to climb higher. The government has been sent the Milburn Report it commissioned into getting young people into employment, education and   training but has not yet  published it nor responded to it. They will need to adopt a range of measures to help create more jobs suitable for young people and to set out the right balance of incentives and conditions for benefits to get more into jobs. This is policy delayed.
      The same is true of the unresolved issue of the Defence budget. The Chancellor resigned from the Starmer government over its refusal to spend 3% of GDP on defence by 2030 on the way to 3.5% to meet the NATO commitment  by 2035. This has been put off until sometime next year as part of a wider review of Public Spending. This budget has not provided for additional tax revenue to meet the need for more spending, so the assumption must be the Chancellor expects to find spending reductions elsewhere to cover  the additional  money for our armed forces.
    The government takes comfort from the kind words of the IMF saying the government has a plan to get the deficit under control. The problem with this is the Plan assumes much tougher spending controls in the next two years than the government has imposed over its first three years in office. Past experience tells us that governments usually give in to spending pressures when the tough year approaches. They can do so because the target moves on by one  year every year, so the Year 3 target never has to be hit. It is very unlikely if this government  holds an election after 4-5 years that it will enforce very tight spending limits on itself around the time of the election.
     The government is also exploiting  the extra flexibility or looseness over the Fiscal Rules Rachel Reeves introduced to allow it to spend more on capital account. It is directing more money to the National Wealth Fund and the British Business Bank who in turn can borrow more to finance spending, They can create assets which the government deducts from the debt figure. It wishes to provide more stimulus by backing or part financing energy and transport investments in particular. The OBR has warned the government that if it does take more control over the water industry it would then need to include that industry’s large debts and substantial capital spend as part of public spending and debt.
    In order to cover the costs of modest giveaways to energy users and some small businesses, the government decided on an extra 3% tax on bank profits. The danger of this is it will reduce the amount of money commercial banks have available to lend to businesses needing capital to grow and consumers needing money to buy homes and bigger ticket items. This is a tax to slow growth and to tempt some banks to divert more business to other banking centres who keep their tax rates down.
     The budget was advertised as a steady as she goes budget, a budget to try to please backbench MPs whilst not threatening the bond markets. It was instead a continuity Starmer/ Reeves budget, with taxes up, spending up and borrowing up. That recipe did not work well for them and will not work well for the new team.  The OBR gave it poor marks, moving growth next year down  to just 1%. That is not enough to solve the country’s financial problems.

What to expect in the Budget

October 28, 2026 50 Comments

The main aim is to check out the budget judgement. The starting point is the 2025 Budget forecast for 2027-8, with the Rachel Reeves £164 bn increase in spending,  £66bn of extra tax rises and £ 98bn of extra borrowing added to the outgoing Conservative government plans for 2027-8. It is unlikely the government can add much to the spending and borrowing given the impact of the Fiscal rules and the fragility of the bond market. It is also unlikely they will go for a further large tax hike, as the Reeves ones led to fewer jobs, higher unemployment, higher prices, and enterprising people and money leaving the country.

 

The OBR revised forecasts may make the position tighter. They may need to increase the inflation assumed driving up costs, increase the allocation for higher interest charges on the debt given the increase in interest rates, and lower the assumption of a housing boom in 2027 based on easier planning rules. There may be some offsets in the slightly better productivity and growth figures achieved this year so far.

 

The government’s growth strategy rested heavily on more housebuilding and greater public sector investment. This latter has taken time to put through with delays to planned water, rail and energy infrastructure investments, cancellation of some road  schemes and limits on local government capital given  budget pressures. The government is likely to boost the National wealth Fund and British Business Bank and hope they can lever in more private capital. They will use the greater flexibility of the looser Reeves Fiscal rules to keep some of the borrowings for these projects off the balance sheet for debt control.

They will suppress future spending growth by delaying the increases for defence and the extra costs likely from the Milburn review to get more young people into work.

The ideas to ease pressure on family budgets will be small. It is ironic that  they will useBrexit freedoms to lower some tariffs, taxes on UK consumers, whilst trying to realign us with EU rules and taxes that will impede growth.

The Chancellor finds his flexible friend to spend and borrow more

October 26, 2026 36 Comments
The budget will be full of extra borrowing as the government tries to find ways to boost GDP through bigger spending programmes and additional public sector investment. John Healey  inherited plans from Rachel Reeves to spend £145 bn more and borrow £97 bn more in 2027-8 than the outgoing Conservative plans for that year set out in the 2024 forecast. This big increase was only possible thanks to Reeves relaxing the fiscal rules and saying there would be better control on spending in the final fifth year of the forecast. She made the Fiscal rules  her flexible friend, to help disguise her spending binge.
Mr Burnham  does not think that enough. There is the unfunded increase in defence they are pledged to deliver. There are the growing claims of the nationalised industries, the soaring benefits bill and the surge in public sector wages. As tax has already been pushed up by £66 bn from the Reeves tax raids, and as some taxes now yield less as the rates go up, this government will likely go in for concealed extra borrowing. There might be a  tax raid on the banks as well, just when they need them to lend more to power growth.
The government is likely to rummage  through the worst of the Gordon Brown funny money playbook  of Private/public financings. Take   Sizewell, a new nuclear project. The government owns 44% of it so it says it does not have to put it on its balance sheet as it is just below 50%. However the Treasury will borrow over £36 bn to build it. It will pass that money to the National Wealth Fund who will lend it for interest to Sizewell, secured against putting an extra charge into everyone’s electricity bill.
Under the Reeves relaxation if the government borrows to spend on a new asset it can net the value of the asset off the borrowing when calculating state debt for the fiscal rules. So if you take out a mortgage you could say I do not have any debt because the house is worth more than the borrowings. Yet you do have a real debt and need to pay the interest on it. You could pay off the debt by selling the house but then you would be homeless, facing big rent bills.
The government’s biggest investment spend is on HS2, now likely to cost around £100 bn. As this government has pledged a nationalised railway it should not deduct a value of the track from the borrowings. Were government policy to change and sale became a possible option, what value would you put on it? It is likely to be a heavily  loss making line after allowing for the interest charges on the debt. A new owner would probably want the debt written off, so its value would be small at best and negative if the buyer had to take debt.
The government thinks the state financing bodies, National Wealth Fund, British Business Bank and Great British Energy are ways of increasing spend from more borrowing without counting as state debt. This will need careful analysis as the likelihood  is the risk remains with the state so the  extra  debt should  count as a state liability.
  They are also looking at a way of getting borrowing into defence to up defence spend without it counting as state debt. If it is expansion of private sector defence contractors with proper risk transfer to them then that could work, but not if the risk and effective  debt obligation remains with the taxpayer.
Next year Sizewell will probably need over £6 bn and HS 2 £3 bn, around £10 bn for the pair. British Steel will need £500m for losses without any money for the replacement electric arc furnace they are discussing. Council houses are a lot dearer in public spending terms than Housing Association, where the private money is not regarded as state debt.
The budget will be a wonder of creative accounting, delayed decisions and unfunded liabilities.

So why does the government want us to stock up for disaster?

October 24, 2026 58 Comments

In the  case of each  kind of event the government thinks  might need us to keep some tins of food and some water in the store cupboard it is the government that should be taking action to prevent the event from  happening.

If it’s hostile countries or terrorist groups disrupting our undersea cables, issuing cyber attacks and damaging UK facilities that is an argument for the government to get on with strengthening our defences and putting in a sufficient Defence budget. Where are the ships to patrol our nearby seas and the counter forces to stop illegal criminals getting into the country?

If it’s hot weather leading to us running out of water why the delay in putting in the new reservoirs? If the threat of flood in winter where the new containment and storage measures?

If it is running out of power, where are the back up facilities, the energy stores, the stand by generators that can work when the wind has gone on strike and the sun gone to bed?

If it is poor harvest and a food shortage, where are the grants and support for farmers to farm, and to put in farm irrigation with more fruit and vegetables under cover?

Most of us agree we need greater national resilience. Current policy forces dependence on more and more imports, with all the extra risks to supply that that brings. We are increasingly dependent on the goodwill of foreigners for energy and food, and on their ability to provide for themselves and for us. That may not always be possible.

My IEA article on the collapse of the UK car industry

October 23, 2026 75 Comments
Two collapses of the UK car industry
Car output in the UK over the last century has been subject to two major crashes. One was in Mr Burnham’s much loved 1970s. The other is happening this decade. Output peaked at 1.92 m vehicles during 1972, our last year before entering the European Community. Many UK brands and past success stories were concentrated in the conglomerate British Leyland.  During our first decade in the EEC and its Customs Union output slumped to 868,000  by 1982. BL was taken into  government control in 1975 and kept afloat by public money. It struggled to survive with its output plunging from 916,000 cars produced in 1972 to just 405,000 in 1982, a fall of 56%.
The 1980s and early 1990s saw a rebuild of the industry, with the government helping attract in substantial Japanese investment as Nissan, Honda and Toyota added substantial new capacity alongside Ford and Vauxhall. Part of BL was sold off to BMW who were only interested in continuing the Mini as a major product. Industry output recovered from the 1982 low to reach 1.78 m in 1999. The new Labour government took  over in 1997.  By 2009 as they prepared to leave office output slumped to just under 1 million as the economy  battled the banking  crash and recession of 2008.In 2005 when the residual Rover Group left over from BL got into financial trouble the government only offered temporary relief so the brands were subsequently  sold off to a Chinese company. They decided to make cars under the MG brand in China.
By 2016 under the Coalition and the Conservatives output had recovered to 1.72 m. As net zero policies were rolled out the industry started to lose ground, and lost substantial output over the covid lockdowns, taking it back down to 920,000 in 2020. Instead of sustaining a recovery post covid in recent years a major slide has been underway under both the Conservative and Labour governments. The industry prepares to close all its factories making petrol and diesel cars in time for the ban on making any more of them  which comes in  in 2030. Output was just 717,000 in 2025 and falling.
Why did the industry fail?
The big falls in the 1970s occurred for three main reasons. The first was the removal of tariffs on cars and the easing of  trade barriers against European competition. The UK market saw imports account for just 5% of the total in 1965. This leapt to 56% in 1979, with most of the gains occurring after entry of the UK into the European Community. Continental producers in Germany, France and Italy were good at exploiting the market opportunities whilst the UK failed to stay competitive with product or prices as the tariffs were removed. Leading international groups took advantage of market opening to shift production from UK factories to continental ones to get economies of scale. They integrated their UK production and amalgamated their models with their continental businesses. They no longer thought they needed different designs for the UK from the EEC.
The second was the chaotic labour relations in a strife torn UK . Managers were unable to win  over employees and get them to accept positive leadership . Unions wanted to drive wages higher in an inflation ridden economy and were willing to strike often to do so.
The third was the decision of the government in 1975 to buy up 95% of the shares of BL, to direct the business, appoint the Chief Executive and finance the investment. By doing this they acquired control of the largest part of the UK car industry. They with their chosen managers failed to design and produce a streamlined and profitable car range as they played around with the large number of brands and plants they inherited.
Where BL had a good selling product like the Mini they did not charge enough for it to make a sensible profit. They badge engineered the vehicle so they were selling an Austin, a Morris, a Wolseley and a Riley version adding to production and sales costs and competing against themselves with brand promotions. Where they had ageing product as with the main Austin and Morris saloon cars they failed to develop products that could outsell the new popular Ford ,Vauxhall, VW and other European competitors.
The end result is no-one makes and sells cars under most of the brands they once held, including the death of Austin, Morris, Triumph, Wolseley, Riley, Vanden Plas and Rover. Jaguar survived but has not produced a single car for sale over the last year. Mini survived under BMW ownership and launched new models  but is now mainly made abroad. Land Rover has survived . MG has changed from making  UK built sports cars to making family vehicles running on batteries made in China.
Why has the industry plunged to even lower depths this decade?
The 2020s started badly with covid lockdowns hitting all European producers. Now well into what should be a sustained  recovery the UK has continued to decline. The main reason is government decisions to force the pace of transition from making diesel and petrol cars to making just battery vehicles. The UK industry failed to explain to the government that their timetable was too demanding. The main players accepted the unrealistic targets set only to discover there were not nearly enough willing buyers of  battery cars. Government  tipped in some modest subsidies for the new electric vehicles and made it dearer and more difficult to buy petrol or diesel. Electric cars are spared high taxes on fuel, unlike the fossil fuel based alternatives. They have favourable tax treatment when bought by companies. Still they remain a minority choice of the public. At the same time diesels in  particular have experienced a very sharp decline adding to the difficulties of car makers. They have to rush to write off their investments and move to close plants.
On the other side of the account the manufacturers have failed to put in much new electric capacity. Jaguar has gone a year without a car to sell and is only just getting round to offering a single choice of vehicle with battery propulsion at a much higher price than many of the older petrol and diesel cars that sold well. It is putting in a large battery plant but will be launching dear new vehicles which will not be affordable in the mass market. Range Rover is planning new all electric products.  BMW is making most of  its all electric Minis outside the UK. A major investment plan to make larger car batteries in the UK was dropped. Nissan is the one large manufacturer  that has committed to switching  production to new EV cars with UK made batteries. Government and other companies over the last seven years have watched as China has cornered the market in materials and components needed to make batteries, and has launched big  ranges of battery cars at very competitive prices.
How much of the  UK car industry will revive?
The government is determined to end all production of petrol and diesel cars in three years time. It wants the production lines and many of the factories closed. It looks as if that is going to happen.  Vauxhall, Ford,  Honda and other makers of petrol and diesel cars in prior years are not planning to make any battery cars in the UK. Toyota is also importing EVs but has said it might later start to produce a battery car in the UK. There is no firm project or timetable.   The industry will be a lot smaller than in its heyday. Many jobs making petrol  and diesel cars will go, much capital will be written off and the UK will be importing far more from China.
The industry is keen to see the UK adopt Made in Europe rules and standards and to impose a high tariff on Chinese imports. This is unlikely to make much  difference to the many plans for leading manufacturers to cease making cars in the UK or to avoid returning to UK manufacture. The higher the Chinese tariff wall imposed the more they might be able to switch some of our imports from China to EU factories. This would come at the cost of a slower transition to battery cars and would give the UK consumer a worse deal.

Buses and trains preoccupy Mr Burnham

October 22, 2026 36 Comments

 

Downing Street South must have a cluttered desk. There is the delayed need to pay for a better defence settlement. There is the Milburn Report on how to get people back to work, delayed until after a budget it was meant to influence. There is the escalating benefits  bill as more young people get a sick note for life . There is the  brain drain as more talented and hard working people and businesses flee UK taxes.There is the collapse of high energy using businesses, throttled by the UK’s super dear energy.There is the progressive closure of all our petrol and diesel car factories thanks to the early ban in 2030. There is the threat to the Falklands and the disastrous and expensive attempted give away of the Chagos. There is the delay in getting our own oil and gas out forcing us to rely  on dear and less reliable  imports.There are many more problem files in the in box.

So what does Mr Burnham do as he sits at his desk in Downing Street North? He plans £2 bus fares, reviving an old Conservative policy. He dreams up new fines for people playing loud music on buses and trains. He imagines a nationalised rail and steel industry will work fine, and dreams of an industrial strategy which remains unconnected to government reality.

Where has he got to with his first pledge, to offer every rough sleeper in every postcode somewhere to live? How can he pass more powers to Mayors whilst giving away hard won rights to self government in his proposed Re set with the EU? Why can’t regional Mayors say No to illegal migrant accommodation?Why can’t they use any extra grant to cut taxes? Why can’t they turn down plans for developments they do not like?

Talking about buses, noisy trains and devolution from Manchester to look away from the growing inbox in Downing Street south is not  a good way to do the job.