Rewire the State

Bad policy outcomes are being driven by political systems failures

Towering columns

At The Spectator, Michael Simmons warns that Britain’s toxic combination of high debt, high taxes, and low growth is getting tougher to reverse.

After a series of economic shocks, the report says, Britain is in a ‘relatively vulnerable position’. Our deficit (nearly 6 per cent of GDP) is around 4 percentage points higher than the average for advanced economies and the third highest among European countries. Worse, UK government debt (94 per cent of GDP) is the fourth highest in Europe and we face the third highest borrowing costs of any advanced economy in the world. And much, much worse, say the OBR, is yet to come: by the early 2070s, an ageing population, rising healthcare costs and other ‘age-related’ spending will push debt above 270 per cent of GDP.

Whilst many of the pressures on our economy are structural, the government’s own policies do not escape criticism. ‘Planned tax rises have been reversed, and more significantly, planned spending reductions have been abandoned’, the report says. At the same time, increased borrowing (across multiple governments) and the persistent deficit have been accompanied by back-to-back loosening of the fiscal rules – eroding confidence in the bond markets we now rely on to function.

Individual policies highlight the massive pit of unfunded commitments that require constant feeding with more and more expensive debt. The state pension and the triple lock are singled out for costing three times more than initial expectations. In the 1950s, the state pension accounted for 2 per cent of GDP, since then it has climbed to 5 per cent and within 50 years, the OBR finds, it will cost nearly 8 per cent. This is not something an aging population can afford.

For the Financial Times, Martin Wolf argues that Britain’s discontents are fuelled by the political establishment’s failure to fix the economy.

According to the IMF, the trend growth of GDP per head in the UK had been 2.5 per cent a year from 1990 to 2007: then, between 2008 and 2025, it was just 0.7 per cent. This reduction of 1.8 percentage points in the growth rate was the largest in the group of seven high-income countries (plus Spain). In the second period, only Italy has grown considerably more slowly than the UK. As a result, UK GDP per head in 2025 is forecast to be 33 per cent lower than it would have been if the 1990-2007 trend growth had continued. This is the biggest shortfall among all these countries.

All of this is rooted in the most important collapse of all, that in productivity growth. According to the OECD, real output per hour rose by a miserable 6 per cent in the UK between 2007 and 2023. This was the same as in France and again, above Italy. But in the US the rise was 22 per cent. In the Eurozone as a whole it was 10 per cent.

The UK’s stagnant productivity is a big worry. When economies cease to grow, everything becomes zero-sum: more for one group of people means less for others. The problem is even greater if demographic change increases the number of beneficiaries of fiscal transfers relative to that of productive taxpayers. The overwhelming questions in politics become how to contain the discontent when much of the population has stagnant real incomes, how to manage the public finances, especially during shocks, and how to get the economy growing again.

At UnHerd, Tom Ough reflects on the growing power and wealth of Nvidia and what it means for the influence of nation states over AI.

There remains the uncomfortable question of what will become of the countries that fail to secure any meaningful kind of AI sovereignty. They are likely to outsource some amount of decision-making to foreign tech companies, and this decision-making will be inflected by someone else’s values. The decision-making would be based on data that might be held in foreign servers. One can imagine President Donald Trump Jr, a couple of election cycles hence, demanding access to a third-world country’s cobalt mines, threatening to turn off this country’s access to its own data.

More subtly, a leading power might use other levers: limiting, for instance, a rival’s speed of access to the latest AI models. No less significantly for such a country, its selfhood will inevitably be eroded if it is governed by algorithmic values that are not quite its own. As Nathan Benaich, an investor and the author of the “State of AI” report, tells me: “For countries that opt out of building strategic AI infrastructure, the risk isn’t immediate subjugation but progressive loss of agency, what I’ve called a form of AI colonialism. These nations will increasingly find their economies, healthcare systems, security apparatus, and political discourse shaped by foreign models they neither control nor fully understand.”

The classical nation-state model, says Benaich, will struggle to adapt to these conditions. What emerges from the “sovereign AI” sales pitch, he suggests, is “a kind of neo-mercantilist compute empire, whereby Nvidia occupies the position of upstream monopolist, extracting rents across multiple national industrial strategies”.

At Bloomberg UK, Adrian Wooldridge considers how the process of elite formation has gone wrong and created a dysfunctional state bureaucracy.

The British civil service, once widely regarded as a Rolls-Royce, is now a sputtering Trabant. The decline of the Foreign Office is so pronounced that a recent ambassador to France struggled to speak the local language. The Office for National Statistics calculates that, in the second quarter of 2024, public sector productivity was 2.6% lower than it was in 2023 and 8.6% lower than it was in the fourth quarter of 2019. Some 79% of Britons say that the system for governing the country could be improved “quite a lot” or “a great deal.” If the art of governing means a combination of thinking about where you want to go in the long term and keeping the ship of state in good working order, then Britain is failing at both.

What explains this institutional rot? Part of the reason lies in poor pay and rations. Politicians must endure the twin ignominies of low remuneration and relentless scrutiny. Two MPs, Jo Cox and David Amess, have been murdered in the past decade. Another part lies in the growing complexity of governing, which is becoming more difficult and less effective the world over. (The number of laws has increased by 60% in Germany, for example, over the past three decades). A constant complaint from both ministers and senior civil servants is that when you pull on a lever it turns out to be made of rubber. Yet there is also a deeper reason: The British governing class is making a poor job of reproducing itself — of recruiting new members and providing them with the necessary combination of competence and self-confidence to run the country.

The old systems of elite formation have been allowed to crumble. The trade unions once provided formal education as well as day-to-day training for such Labour giants as Ernest Bevin and Nye Bevan. Now they are a shadow of their former selves. Oxford University emphasized the study of political history in both its Modern History course and in the politics part of PPE (Politics, Philosophy and Economics). Now the history course puts less emphasis on the study of political, administrative and constitutional history than in the past, and the politics course focuses more on theory than on practice.

On his Substack, David Goodhart examines how liberal censorship of debates around ethnicity and immigration is harming public discourse.

We are a big, complex, liberal society which can and does accommodate many different ways of life, and it is true that most white people are not conscious of their ethnicity most of the time or even of having a distinct way of life. But people who are perfectly comfortable, indeed welcoming, when their child’s class has 15 or 20% of chidren from different countries and ethnicities, some of whom might need extra help, might start to feel uncomfortable when that number hits 40 or 50%. Or when a neighbourhood shifts from 10% minority to 30% or 40% minority, attitudes can change fast.

This is not because people have suddenly become racist, if they live in a big city they will probably have minority friends, but because they have lost the familiarity and ease of local connection they once enjoyed, unless the incomers are thoroughly integrated into mainstream British life (as noted, something much more likely in affluent areas). Thomas Schelling, the American economist, famously demonstrated that even a small preference for not being in the minority can quickly convert into highly segregated neighbourhoods.

Ben Ansell and Sam Freedman are obviously entitled to their pro-mass immigration views but they are not entitled to believe that they are morally superior to those with more restrictionist views who are not motivated by racism, which is the vast majority of us. Their reflex is to collapse any discussion of average group differences, such as my Australia/Afghanistan example, into a story of individual exclusion. This might have been justified back in the racist 1960s or 1970s, when there was plenty of such exclusion, but is now just an obstacle to a rational discussion.

At CapX, Karl Williams believes the late Norman Tebbit would have made a great Prime Minister for 1990s Britain.

An MP from 1970 until 1992, for many people, Norman Tebbit will be remembered – for good or ill – as the hardman of the Thatcher regime. As Margaret Thatcher’s Secretary of State for Employment and then Secretary of State for Trade and Industry in the early 1980s, he played a decisive role in crushing the power of the trade unions. As Chairman of the Conservative Party from 1985 until the aftermath of the 1987 general election, he helped to consolidate the first phase of the Thatcher Revolution and usher in the second. And in later years, from the red benches and the pages of The Telegraph, he was one of the most inveterate and outspoken Eurosceptics and keepers of the Thatcherite flame…

…For older generations who lived through the turbulence of the 1970s and 80s, Tebbit is more usually associated with catchphrases such as ‘on yer bike’. Responding to the suggestion that rioting was the natural reaction to unemployment, he said: ‘I grew up in the ’30s with an unemployed father. He didn’t riot. He got on his bike and looked for work, and he kept looking till he found it’. And thus a reputation was made. The other phrase commonly associated with Tebbit is of course ‘the cricket test’, after a remark he made in 1990: ‘A large proportion of Britain’s Asian population fail to pass the cricket test. Which side do they cheer for? It’s an interesting test. Are you still harking back to where you came from or where you are?’ He has received a lot of criticism over the years for this. But many would now concede that Tebbit had a point about immigration and integration. Indeed, Tebbit’s remark would not look out of place in a Keir Starmer speech about Britain becoming an ‘island of strangers’.

Perhaps all this unpleasantness – and much more – could have been avoided, had Tebbit stood to succeed Thatcher in 1990. What a glorious decade the 1990s could have been under Prime Minister Tebbit. No Maastricht – and hence no EU and no Brexit down the line. The era of mass migration would have been at least postponed, if not foreclosed. Public sector reform would have continued apace. Everyone would have had the right to a fair trial in the shadow of the noose. And perhaps ‘Old England’ would have endured a little longer. Alas, for what might have been.

Wonky thinking

The Centre for Policy Studies has published Britain and the ECHR: Past Myths, Present Problems and Future Options by the Rt Hon Lord Lilley. The report exposes the real history behind the UK’s adoption of the European Convention on Human Rights and how it has been distorted by activist judges. Judgements from the Strasbourg Court have found the UK in violation in 329 out of 567 cases, affecting a wide range of areas beyond asylum and immigration. Lord Lilley makes the case for leaving the ECHR to restore democratic accountability.

Court rulings causing problems to governments have ranged across a whole range of issues, including:

• The McCann and others case, involving three IRA terrorists killed by the SAS in Gibraltar. The Court (by a majority of 10 to 9, with the President and three most senior judges in the minority) held the UK (not the soldiers) responsible for loss of life because of ‘inadequate planning’.

• The operations of the Armed Forces. Although the Convention provides that contracting states shall secure the rights of ‘everyone within their jurisdiction’, the Court has held that this applies outside UK territory where UK forces exercise control – even though the Convention gave member states the option not to apply it in their dependent territories. Former Defence Secretary Ben Wallace condemned this as ‘lunacy’, not least because it means the Armed Forces may opt to use lethal force to avoid ECHR complications if suspected terrorists are captured.

• The Osman case. This ruled that ‘it is sufficient for an applicant to show that the authorities did not do all that could be reasonably expected of them to avoid a real and immediate risk to life of which they have or ought to have knowledge’. As a result, where police have intelligence of a death threat or risk of murder, but not enough evidence to justify arresting the possible offender, the police must devote considerable resources to giving ‘Threat to Life Warnings’ and advice. In practice the main beneficiaries (75% in the case of Manchester police) are criminals involved in gang feuds who are probably well aware that their rivals are hostile and violent.

• The Tigere case, where the UK Supreme Court ruled that requiring students to be lawfully ordinarily resident in the UK for three years to be entitled to a student loan was unlawful discrimination under the ECHR.

• The Chahal case, where the Strasbourg Court ruled that the Government cannot weigh the risk a person poses to national security against the risk of ill-treatment they might face if deported (in this case to India). It ruled that Article 3, which forbids ‘torture or inhuman or degrading treatment or punishment’, provides ‘absolute’ protection against deportation if there is any substantive risk of this in the destination country.

• The Hatton case, in which the Court established that Article 8, the Right to Family Life, can extend to environmental matters. Even though it found that in this case the UK had properly balanced benefits to the economy from night flights at Heathrow against the impact of noise on the appellants (under their right to family life), this had profound implications for the future.

• Manchester City Council v Pinnock and Others, in which the Supreme Court overrode the Anti-Social Behaviour Act 2003, which gave local authorities the right to regain possession of ‘demoted tenancies’ from anti-social tenants. The Court ruled that the courts would have to assess in each case whether repossession was proportionate to the right to family life under Article 8, making repossession much more uncertain despite the clear intent of the Act.

All these cases, however, have recently been put in the shade by the Strasbourg Court’s momentous decision in favour of 2,000 elderly Swiss ladies who argued that their lives were vulnerable to heatwaves unless their government did more to tackle global warming. The Swiss government was ordered to set aside a previous referendum result which had rejected further costly measures, in order to eliminate more rapidly Switzerland’s negligible 0.2% share of world CO2 emissions. ‘Democracy,’ the Court ruled, ‘cannot be reduced to the will of the majority of the electorate and elected representatives in disregard of the requirements of the rule of law.’ In other words, the opinions of the Strasbourg judges.

In The Telegraph, George Chesterton takes a deep dive into the intellectual forces that have brought Islamism into alliance with the Far-Left. Jeremy Corbyn’s new party, Islamist infiltration of the Greens, and the spread of pro-Gaza Independents in Parliament and local government are coalescing into a new form of authoritarian politics.

Fifty years ago, much of the far-Left was inspired by the Soviet Union’s Middle East propaganda, a pro-Islamist stance in response to US and European support for Israel. That influenced Left-wing groups in the UK – such as the Communist Party of Great Britain and the Revolutionary Communist Group – who identified Arabs as oppressed, while Israel, then as now, was seen as an illegitimate “white” state. But the far-Left remains a politically insignificant force on its own. Part of the motivation for an alliance with Islamism is to harness the power of others for their own ends – which, of course, works both ways.

This is neatly illustrated in a 1994 article by Chris Harman of the Socialist Workers Party (SWP) for International Socialism, “The Prophet and the Proletariat”, which advocated for a pragmatic working relationship between Islamists and revolutionary socialists. Harman is open about the areas of opposition between the two groups – over the role of women, for example – but concludes: “On some issues we will find ourselves on the same side as the Islamists against imperialism and the state… It should be true in countries like France or Britain... Where the Islamists are in opposition, our rule should be, ‘with the Islamists sometimes, with the state never’.”

In Britain, where Islamism only speaks for a fraction of the country’s Muslims, the Labour party remained a natural home for many Muslim voters up to Tony Blair’s premiership. “To put it crudely, community leaders were able to ‘deliver’ votes for Labour from within those communities in certain areas such as Birmingham or Bradford,” says Timothy Peace, a senior lecturer in politics and international relations at the University of Glasgow. “From the 1980s, Muslims themselves began to enter local councils, but the closeness with Labour continued up to the late 1990s.”

This began to break down thanks to the wars in Iraq (2003-2011) and Afghanistan (2001-2021). The establishment of the Stop The War Coalition (STWC) in 2001 was a milestone which provided Corbyn and other prominent Leftists with a forum to connect with groups such as the Muslim Association of Britain (MAB).

Last year, the then Communities Secretary, Michael Gove, alleged in Parliament that the MAB, together with Mend and Cage, which campaigns against counter-terror measures, “give rise to concern for their Islamist orientation and views”. All three groups rejected the label, with Mend’s chief executive Azhar Qayum saying his organisation was “not at all” extremist, Cage pledging to “explore all avenues, including legal” to challenge the “government’s deep dive into authoritarianism”, and the MAB accusing Gove of a “blatant effort to stifle dissenting voices”.

Britain’s action in Iraq and elsewhere gave overtly Islamist groups an opportunity to tap into the concept of the “Ummah” – the worldwide Islamic community. Shawcross’s review warned that key Islamist narratives included, “commanding that [their interpretation of] the Islamic faith is placed at the centre of an individual’s identity, and must govern all social and political decision-making”.

At the same time, a definition of Islamophobia proposed by some MPs and backed by bodies such as Mend and the MAB would prohibit anyone from “accusing Muslim citizens of being more loyal to the ‘Ummah’… than to the interests of their own nations”, raising concerns about potential limits on freedom of speech.

Quick links

The UK economy shrank by 0.1% in May, after output fell in April as well…

…and the Chancellor is considering a tax raid on pensions in the autumn.

Under long-term productivity growth of just 0.5% a year, debt would rapidly rise to 647% of GDP by 2073-74.

The triple lock on the State Pension has cost three times more than expected.

OECD data forecasts annual GDP per capita growth of just 0.41% between now and 2060 due to the UK’s ageing population.

Cost of Net Zero mitigation will hit £803 billion over 25 years, which is around 0.8% of GDP annually.

President Macron criticised the UK for not enforcing its laws against illegal work.

Figures show that unemployed people on sickness benefits can receive £2,500 more a year than a minimum wage worker.

Last year, the NHS issued more than 11 million “fit notes”, which is up from 5.3 million in 2015.

Research suggests the UK will suffer a net loss of around 16,500 millionaires in 2025…

…and 70 companies have already left the UK so far this year.

Germany’s education minister is looking at capping the proportion of immigrant pupils in each school class at 30 or 40 per cent.

A 24-year-old father was killed during a knife robbery outside a Knightsbridge hotel.

A defence tech firm will open a new factory in Plymouth for autonomous submarines.

IVF pioneer Professor Lord Robert Winston left the BMA in protest against the junior doctors’ strike.