Cap in Hand

Starmer goes all in on a reset with the European Union

Towering Columns

For The Times, Juliet Samuel says closer ties with the EU will not fix our fundamental problems.

Labour is not interested in models of success, however. It is plugging away with its dreary “reset”, promising to follow various sets of EU rules to no obvious benefit. Even the plodding Starmerites at the Institute for Government admit that “so far, the EU has done better at securing its objectives”. Well blow me down. It’s almost as if this is a mug’s game.

What, anyway, are we trying to achieve by reintegrating our legal system with a bunch of countries in exactly the same rut as us? Maybe it will do away with some passport queues and export hassle (or maybe not). But is it going to change our destiny? How is any of it going to help us do what’s necessary: replace half the civil service with AI, curtail legal delays, restore our dynamism, end reliance on immigration, and secure public support to spend less on welfare and more on industry, science and defence?

To do these things, you need a vigorous state free to tear up the rules, champion Britain’s strengths and take risks. Compared with the opportunity, the costs of Brexit are a rounding error. And with every new crisis, the need for radicalism becomes clearer.

In The Critic, Will Solfiac writes that an unwillingness to drop outdated ideologies is preventing necessary reforms at home.

One of the most bizarre characteristics of those who struggle to maintain what’s left of the liberal international order is their refusal to accept reforms that might head off its destruction. It’s not hyperbole to say that the entire rise of what is termed “right-wing populism” by its opponents stems from the unwillingness of mainstream political parties to control immigration. Considering that the continued growth of right-wing populism makes the position of the old liberal consensus ever more precarious, you’d think the latter’s defenders would have decided to compromise. Mostly, they have not.

And they could have; the forms of immigration that voters most strongly object to are also those which have the fewest practical benefits. If mainstream political parties had managed to shut down the fraudulent asylum system, enabled deportation of foreign criminals, and heavily restricted flows from countries where immigrants are particularly likely to be net drains on the state or to cause social problems, this would have taken a lot of the wind out of the sails of right-wing populist parties. Yet with the partial exception of Denmark, mainstream parties have been unwilling to do this. Currently, Shabana Mahmood is attempting to save Labour from electoral extinction by adopting aspects of the Danish model, but is being met with vociferous opposition from within her own party.

The reason for this unwillingness is, of course, ideology. It’s obvious that the asylum system functions primarily as a way for young men, and later on their families, to bypass formal immigration routes and achieve settlement in Britain. It’s also obvious that a disproportionate amount of the problems of immigration in general come from a few parts of the world. Yet maintaining the universalist, human-rights based legal infrastructure constructed after the Second World War takes priority over addressing these issues. The fact that this infrastructure was created for an entirely different world, where there was much less international migration, and where “asylum seeker” meant a political dissident from the Eastern Bloc, does not matter. The system’s advocates seem to live in a world made up of rhetoric, where principles take precedence over reality.

For Conservative Home, Katie Lam criticises those that want to close down the debate on mass migration.

Speaking at a panel event hosted by the Demos think-tank, Liberal Democrat MP Max Wilkinson said that “social media…is making sure that you can have your voice heard in a really easy way that you couldn’t in the past”.

He went on to argue that this is a “massive problem”, because it allows members of the public to highlight problems with mass migration. For Wilkinson, the issue isn’t the impact that mass migration is having on our public finances, or the healthcare system, or our communities. It’s that people can now freely express and debate their concerns.

This approach is frighteningly common in our politics. Far too often, politicians have tried to make difficult problems go away by encouraging people not to talk about them. In some quarters, there seems to be a genuine belief that real-world problems are conjured into being when people talk about them, and that problems can be made to disappear if only people would just keep their concerns to themselves.

In The Telegraph, Tom Harris warns that Starmer’s reset has echoes of David Cameron’s failed negotiations with the EU.

Previously, Starmer insisted that a firm cap on the number of citizens arriving in Britain from the EU must be set at a specific level. This was rejected by the EU, which nevertheless has accepted the need for an “emergency brake” on the scheme. This would focus on “the management of flows rather than an upfront number”, according to an EU source.

This has the whiff of David Cameron’s unsuccessful negotiations in 2016, when he returned from Brussels having had most of his own proposals for reform rejected by an EU establishment that clearly did not believe that the threat to British membership was real. Cameron had pleaded for radical change. His proposals included restricting immigrants’ access to benefit for seven years and preventing them from sending their (UK) child benefit payments home. This was a bridge too far for the Commission and so Cameron returned to Britain with a few very minor cosmetic changes to our membership terms…

If Keir Starmer really wants his reset to offer a taste of what life might be like for Britain were it safely back in the loving embrace of the EU, he needs to tread carefully. Evoking the days when Britain ceded control of immigration to the EU and forced UK taxpayers to pay for the privilege would be a perfect way not only to reignite the Brexit wars but to ensure Labour would once again be on the losing side.

On Substack, Andrew O’Brien argues that both the right and left have given up on our ability to fix our own problems.

For those of us living in the real world, our economic model was broken whilst we were in the EU. The EU was not the cause, but it certainly did not help check against poor policy decisions. Crucially, joining the EU does not offer any real prospect of fixing it, because it would not suit the other members of the EU to change our economic and trading relationships with them to our benefit at their expense. A closer relationship with the European Union would set in aspic all the economic problems we have today and perpetuate our slow economic and social decline.

Increasingly, in rooms where discussions about the UK’s economic future, the issue of European Union membership keeps coming up. My overwhelming feeling is that advocates for a closer relationship are just hoping that the EU will solve our problems because we are incapable of doing so. We are experiencing a profound crisis in faith: faith in our people, our culture, our businesses. They are hoping that a closer relationship with the EU will be a Tolkienesque Eucatastrophe - a sudden miraculous event that will save us. However, this is not merely a crisis for the ‘centre’ and the left. It is one that is shared in the right, except this time the target is the United States.

How many years were wasted after Brexit fawning over Donald Trump to try and get a ‘free trade’ deal with the United States, rather than actually fixing our problems? A deal that is never likely to happen and if it did, would be made under conditions of considerable disadvantage in negotiations and would likely see our domestic agriculture (and many industries) crushed in return for little. Moreover, when did a trade deal alone ever really solve anything?

For UnHerd, Jonny Ball says that we must adjust to the reality that we are now a developing country.

Rather than busying ourselves with the dead end of Gaullist posturing, in short, perhaps we should start thinking of ourselves as the developing country that, in many ways, we so obviously are. Certainly, financial analysts have already begun tempering their investments in Britain, a country now displaying the dysfunctional features of an “emerging market”. Rather than Anglo-Gaullism, then, surely a far better model is Anglo-Dengism. Echoing the Chinese example, Britain today should look inwards, focus on problems closer to home, build, develop, reform, innovate, and Make Britain Rich Again, before finally concerning ourselves with the global status games beloved of men-of-a-certain-age who played too much Risk as a child.

As the pro-market reformers of the Chinese Communist Party understood, following the privations of three decades of peasant communism, to project yourself abroad, you must “hide your strength, bide your time”. Before sending aircraft carriers to reopen faraway straits or threatening foreign regime, we must first become a country capable of raising real wages and living standards for our own British citizens.

Ernest Bevin once demanded a nuclear bomb “with a bloody Union Jack on top of it!”. The Anglo-Gaullists fancy themselves his heirs. But Bevin — and Glubb before him — knew that power had to be consistently built at home before it could be brandished abroad. Today, we are attempting a reverse Bevin: indulging in a fantasy of power without the necessary foundations, painting the flag onto imaginary weapons we no longer have the means to sustain.

In Prop Views, Jack Airey writes that the YIMBY movement needs to move beyond just planning reform.

A more effective YIMBY movement would take those market realities more seriously. So much time in government is spent discussing reforms that sound good in theory but run into difficulty when confronted with the economics of development. If campaigners want to help unlock delivery, they should be as interested in who will buy, rent and finance new homes, and on what terms land will come forward, as they are in whether policy allows them to be built in principle. A movement focused only on the legal right to build, rather than the conditions under which building actually happens, will only get so far.

Second, YIMBY groups need a more mature relationship with the development industry. That does not mean becoming their uncritical cheerleaders. But it does mean engaging seriously with the companies that will build almost all new homes for the foreseeable future. Much of the YIMBY movement seems at best uninterested in how the development industry actually functions, and at worst openly suspicious of the firms and commercial models that will deliver most new homes. That matters because the more practical and operational constraints on development get downplayed.

There is a tendency in pro-housing circles to romanticise micro-scale, street-by-street intensification while disregarding the role of larger developers. The former might play a role in decades to come, but the reality is most new homes in England are built on larger sites by larger firms with complex delivery models. A serious pro-housing movement should want those systems to work better, not keep them at arm’s length.

For The Telegraph, John Bew and Guglielmo Verdirame say we need to drop our sentimental attachment to the dying international order.

Our concern starts from the way that the idea of a rules-based order is treated as an almost theological abstraction, as a God-given gift from which dissent cannot be contemplated. By this argument, the answer to our current discontent is to make fidelity to international law the organising goal of our foreign policy and the premise of every decision we take. This risks creating an imbalance in our foreign policy in a world where ever-fewer states share this approach.

Importantly, it is an approach that goes way beyond the astute Chilcot checklist in which international law is treated as one of 10 critical points to consider in the making of national security decisions. Yet those who may question this prioritisation – international law crowding out all other considerations – have been accused of being followers of the Nazi theorist Carl Schmitt, as somehow willing to give up on international law in favour of might over right.

The danger is that we end up as curators of an old system rather than active participants in a new world in which power is being more nakedly asserted. It is by a combination of tenacity, risk-taking and creativity that we have made ourselves present at the creation of previous international orders. If Britain is to have any say in the shaping of a future one, it cannot do so based on an abridged or ideological version of what has served us so well in the past.

Wonky Thinking

On his Substack, Fraser Nelson analyses our public debt and how an attachment to inflation-linked gilts (so-called linkers) and quantitative easing are creating the conditions for a ‘debt bomb’ that could blow up the British economy.

These ‘linkers’ - inflation-linked bonds - worked very well for Britain until they didn’t. Offering to make loans inflation-proof helps flog them, so you borrow at a lower rate - so it’s a saving assuming (as they all did) that inflation, as we once knew it, would not come back. From its independence in 1997, HM Treasury had high confidence in its ability to control inflation and imagined the old tiger had been slain.

The linkers is just one part of the story. Perhaps just as big a factor is the way we did QE. Every country printed money after the crash, but the UK wanted to put HM Government at the front of the queue for cheap debt. The Bank of England bought bonds and turned long-term, future-proofed debt into short-term exposure at the overnight rate. According to the OBR, it has increased the speed at which higher borrowing costs jack up our debt interest bill by a factor of six (!). As its report explains:-

“The impact of a 1 percentage point rise in interest rates within one year has increased by around six-fold from a less than 0.1 per cent of GDP hit to net interest costs at the beginning of the century to about a 0.5 per cent of GDP hit by 2022.”

So QE swapped long-term security for short-term risk by replacing fixed-rate gilts with floating-rate reserves. The Bank of England created £713 billion (!) of these reserves — paying interest at Bank Rate — to buy long-dated gilts during QE. What once seemed a clever accounting trick ended up becoming fiscal hazard: a third of Britain’s debt now tracks monetary policy in real time. It has left us with a unique level of exposure.

A new paper by academics at the University of Manchester of productivity gaps in England has found there is less of a ‘North-South’ divide on productivity and more patches of poor performance. There are many low productivity centres in the South of England, whilst there are parts of the Midlands and North that have seen much more rapid growth. The paper calls for more a targeted and localised approach to spatial planning and investment.

Previous research by Wong and Zheng (2023) found that there was a very weak correlation between the labour productivity index and its change rate. This study goes further to unravel the spatial patterns and finds that while the headline of a pronounced productivity divide between the Greater London-South East region and the rest of the country broadly stands, there are however major variations in productivity level within the region, ranging from below national average (Group 6), through average (Groups 5, 7 & 9), to very strong (Groups 8, 10, 11 & 12) performance. Indeed, a much more complex and paradoxical picture emerges after factoring in the temporal dimension of annual growth rate. Nearly half of LADs perform below national level on both productivity level and growth rate and only less than a fifth show strong performance on both counts. Many high productivity LADs in Greater London and the South East have experienced stagnation or decline over the last twelve years, whereas many lagging LADs in the Midlands and northern England, starting from very low levels, have had positive growth trajectories. The productivity puzzle can be interpreted as a new ‘hare and tortoise story’: many high performers are losing ground in the race, when some poor performers are trying hard to catch up but have a long way to go. This rather bleak picture prompts for more tailored policy actions to accelerate or shift the trajectories of growth in different localities…

In policy terms, the uneven geography of productivity dynamics underscores the importance of place-based interventions to sustain the momentum of high-performing areas and to address structural weaknesses in those lagging behind. Indeed, many LADs south of the Severn-Wash line and in coastal areas have below national average productivity levels and growth rates. When zooming into the Greater London Authority and mayoral CA areas, the picture of spatial interactions is rather mixed and sporadic. While there are positive spatial spillovers found in Greater London and Cambridgeshire & Peterborough CA on productivity levels, the situation flips when positive spillovers of productivity growth are witnessed in their northern counterparts such as LADs in West Yorkshire, South Yorkshire and Greater Manchester CAs. There is also no one size fits all approach, as different combinations of driving factors are operating in different places. All these findings point to the need to have more contextualised approaches of spatial planning and resource allocation. These differential spatial trajectories require long-term strategic policy actions and local capacity building through further devolution of power and resources.

Podcast of the Week

In The Spectator’s Coffee House Shots this week, Conservative MP Jack Rankin lays out the case for a more radical conservatism based on wealth creation and aspiration, building on the work of ‘Next Gen Tories’.

Quick Links

The government has u-turned on granting North Sea drilling licences.

The Conservatives pledge to scrap carbon taxes on industry.

Britain has developed a new AI powered drone for finding hidden bombs.

The new mansion tax will cost the Treasury £275m before it raises any money.

President Trump has fired the US Army Chief of Staff.

Food inflation is set to hit 9% by the end of the year - three times higher than previously predicted.

One of the country’s key ball bearing manufacturers has shut down.

The government predicts it will miss its 1.5m new homes target by 400,000.