Ever since what we may call its “reception” by the free-market side on this side of the Atlantic in the 1980s, the theory of public choice has had a strong influence on the way advocates for free markets and limited government think about their position and the tactics they should follow. It is a part of their mental world, as much as Hayek’s knowledge problem or the greater efficiency of markets in allocating resources.

Public choice is a massive intellectual achievement, but it also has serious problems as an analysis, and classical liberals should be very cautious about simply accepting it.

Public choice, as formulated by the Virginia School of political economy in the 1960s and 1970s, is the application of economic principles and analysis to the processes of government and politics. The Institute of Economic Affairs played a major part in disseminating the school’s ideas in Britain, publishing one of its classic works, The Vote Motive by Gordon Tullock, as early as 1976. Analysing the choices made by voters, politicians and bureaucrats through the lens of economics leads to strong conclusions, some of them discouraging for liberals of all kinds (and indeed for socialists and social democrats as well).

One of these is that the political process will systematically favour and benefit concentrated special interests over the general public good. This is for two reasons. The first is the phenomenon of concentrated benefits compared to widely dispersed costs. If a policy imposes costs on everybody but concentrates the benefits on a small group, the small group has a strong incentive to mobilise to demand and support that policy. For the population as a whole the cost at the individual level is often not enough to mobilise collective action.

The second is that it is much easier (less costly) to organise a small group of people who are much alike in important respects as compared to a much larger and heterogeneous body. The gloomy conclusion is that politics will normally work against the general interest and that this is very difficult to impossible to stop or reverse through democratic politics.

This argument persuades most economists and political scientists. This is because the argument is rigorous and supported by many, many real-world examples. Historians, though, are more sceptical. That is because there are quite a few major historical events that according to public choice should never have happened, or at least should have had a vanishingly low probability.

Yet these events did happen, and there are enough of them to perhaps cheer up those who would otherwise be depressed by reading public choice monographs. Examples include the movement to abolish slavery and the slave trade, campaigns for freedom of speech, and the emergence of organised labour, particularly so-called “general unions” in the later nineteenth century. For classical liberals the best example, and one with increasing current relevance, is the campaign to repeal the Corn Laws.

The Corn Laws were a classic example of a policy that harmed the general interest while benefiting a concentrated special interest. Building on earlier legislation, they were laws that prohibited the importation of any kind of grain unless the price of domestically produced grain went above a specified and very high level. The aim, explicitly, was to keep the price of grain higher than it would otherwise be so as to encourage domestic production. In the 1820s the simple prohibition was replaced by a sliding scale of duties determined by the domestic price level, but the effect, both actual and intended, was the same.

This harmed the interests of the bottom half of the income range in a very serious way because it raised the price of bread, their staple and primary food. It harmed the interests of the next 40 per cent of the range by generally reducing the performance of the British economy. It delivered big benefits to the top 10 per cent of income earners, above all the landowning class and all those who depended on rents for most of their income (which included most Anglican clergy).

The 10 per cent in question were the classic example of a concentrated interest that was also politically powerful. Landowners made up almost all of the upper chamber of Parliament and dominated the lower through their control of many of the constituencies (the “rotten” and “pocket” boroughs). They were as powerful and privileged as it was possible to be.

The case against the Corn Laws and in favour of free trade had been made from the later eighteenth century onwards and was classically stated by David Ricardo in 1821. However, the consensus of most economists had no effect on the politics (something economists today will recognise). Someone at the time thinking in the way public choice leads to would have concluded that the chance of completely abolishing the Corn Laws was too low to attempt it, and would have focused instead on reducing the effects and trying to slowly shift policy incrementally, mainly by lobbying and taking advantage of crises to bring about mitigating changes.

Instead, advocates for change formed a national organisation, the Anti-Corn Law League. This was formed in 1839 and grew out of a Manchester organisation formed the previous year. The initial meeting only had eight attendees, but the second brought on board two of the key figures, Richard Cobden and John Bright. Over the next seven years the League became a mass campaigning organisation – in 1834 it had 800 employees to organise its campaigns and the production and distribution of materials.

It copied the methods already pioneered by the campaigns for the abolition of slavery and for parliamentary reform but raised them to an even higher scale and level of development. The result was to organise and mobilise public opinion against the Corn Laws and also to persuade an increasing part of the elite intellectually of the need for change. First, the opposition Whig party went over to the League’s position in 1845, but the key step was the conversion of the Conservative Prime Minister, Robert Peel. In 1846 he split his own party by supporting repeal, and three years later the Corn Laws were gone.

This had extensive and massive consequences and meant a reorientation of British trade and fiscal policy, away from mercantilism and protection and towards free trade. There had been movement in that direction in the 1820s and the process was not complete until 1860, but 1846 was the decisive moment. It ushered in a policy of free trade and economic openness that would last until the early 1930s.

Several features of the successful campaign bear noticing because they are all things that orthodox public choice analysis would strongly discourage or discount. It did not focus on targeting elite opinion or influencing power networks; instead it looked to mobilise and form mass public opinion.

The arguments that were articulated and disseminated through mass meetings, pamphlets, literature and speeches were not primarily economic and aimed at policymakers. Instead, they were moral ones, and arguments about wider social and political principles. The argument for free trade in grain was always associated with and framed by wider ones about class power and the purpose of government.

Most notably, the League did not call for smaller or piecemeal changes, nor was it prepared to settle for that kind of measure. Instead, it always and consistently argued for the immediateand total repeal of the Corn Laws.

There were several points where the Whig party in particular tried to offer a compromise, such as a moderation of the sliding scale, but these were rejected. In the event, the repeal was put through over three years between 1846 and 1849, but the League remained in existence and prepared to reactivate at any suggestion of extending that period.

According to the view derived from public choice, none of this should have worked. The difficulty in organising a large and diverse constituency of people opposed to the Corn Laws should have made it impossible to create and sustain a national mass campaigning organisation, much less for it to succeed in mobilising and shaping public opinion – with multi-generational effects.

The elite should not have been responsive to this mass campaign as opposed to the (very real and organised) pressure from the vested interest. The high-probability outcome should have been a compromise and at most the start of a gradual process that would probably never have reached full completion. Yet that is not what happened.

As mentioned, this is only one of several such cases. The campaigns against colonial slavery and the slave trade are, if anything, an even more powerful example. What this kind of thing should do is twofold.

Firstly, the advocates of liberty should reconsider what kinds of arguments they use, the way they present their case and the methods of organisation that they employ. Ethical and moral arguments are sometimes more effective than ones founded on benefit, even when the latter are also true. There are ways of organising and mobilising large and diverse groups with only an apparently weak common interest if you focus on belief and methods of sociability and connection.

Secondly, and most importantly, liberals of all kinds (and people of other persuasions) should be more cautious about the powerful but simplifying arguments and analyses of economics and the often-unjustified pessimism they can lead to. We shall return to this topic in a later post.

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Even the Government’s latest Budget put energy costs at its heart, promising radical reform to bring them down. The answer should be abundance, competition and security, not another exercise in managing decline through ever-tighter Net Zero targets.

Britain rightly banned direct imports of Russian oil and liquefied natural gas. Returning to dependence on the Kremlin is no solution. Nor should we assume that supplies from volatile regions will always arrive. US Energy Information Administration data show oil flows through the Strait of Hormuz falling from 21.6 million barrels daily in late 2025 to 4.9 million in the second quarter of 2026.

There is equally nothing virtuous about a net zero policy that drives production abroad whilst leaving us importing the same fuels by tanker. Emissions do not disappear at the customs barrier. Nor should we overlook concentrated supply chains: the International Energy Agency has found that China’s share of every key stage of solar panel manufacturing exceeds 80 per cent. Imported equipment and imported fuel do not make energy cheaper or greener.

The answer lies in closer energy cooperation across the greater Anglosphere, alongside developing our own resources.

America offers abundant oil, shale gas and nuclear expertise. Its Henry Hub wholesale gas benchmark averaged $3.52 per million British thermal units in 2025. We cannot import that domestic price unchanged: liquefaction, shipping and regasification add costs. But Atlantic supplies offer a route that avoids Hormuz, whilst additional production strengthens competition. Canada offers oil, natural gas, uranium and hydroelectricity. Australia brings liquefied natural gas and the world’s largest uranium resources. These are substantial assets for an allied energy partnership, not merely commodities to admire from afar.

New Zealand offers hydroelectricity and geothermal expertise: geothermal supplied roughly one fifth of its electricity in 2024. Nobody proposes running a cable from Auckland to Kent. The opportunity is to exchange technology, engineering skills and investment, alongside trading fuels where commercially sensible. Nor should we forget our British Overseas Territories. Oxford-led research is exploring Montserrat’s geothermal resources, including electricity generation from existing wells. For an island reliant on imported diesel with one of the highest energy bills in the entire Carribean, successful development could be transformative. Energy realism should offer Montserratians greater prosperity and independence, not simply another feasibility study.

Nuclear must also be central to this approach. Buying and importing French nuclear electricity is not sustainable without our own powerhouse. Britain’s Rolls-Royce SMR programme at Wylfa offers a route towards repeatable, factory-built reactors. Canada is already building a GE Vernova Hitachi BWRX-300 at Darlington. Pair British and North American expertise with Canadian and Australian uranium, and we have the foundations of a resilient nuclear supply chain.

“Expensive power is not a badge of moral seriousness.”

But realism applies here too. Wylfa’s first reactors are targeted for the mid 2030s, not next winter. SMRs still need to demonstrate competitive delivered costs. They deserve a fair opportunity. We should share regulatory evidence with trusted partners, standardise designs and accelerate consenting without weakening safety. Alongside reactors, invest in fuel conversion, enrichment and fabrication: possessing uranium deposits alone does not deliver usable nuclear fuel.

Meanwhile, allow commercially viable North Sea oil and gas projects to proceed – drill baby drill. Domestic production cannot dictate global prices, but surrendering it while demand remains means relying more heavily on imports. Preserve the skills, investment and tax revenues instead. This should not become an argument against renewables. Back solar, storage and geothermal where they lower total system costs, including the networks and balancing services needed to make electricity reliable. Manufacture the solar here instead of China.

An Anglosphere partnership would facilitate investment, remove unnecessary trade barriers and diversify supply, not become a protectionist club. Cheaper, dependable energy means more viable factories, more productive businesses and more money left in household budgets. That is the growth prize we all desperately need.

Remove the ideology and get real. Britain needs energy realism, and an Anglosphere willing to build.

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If you listen to many people of my age or above, they will tell you that young people are a lost cause. They describe a generation fed a toxic diet of lockdown isolation and divisive algorithms, equipped with personal devices designed to entrap them in an artificial online world – devoid of freedom and human flourishing. Whether it’s their psychological resilience or their capacity for critical thinking, the received wisdom is that youngsters are now beyond saving.

Anyone who subscribes to this view clearly hasn’t come across the brilliant young people we met last week from schools in Manchester, Newcastle, Middlesbrough and Edinburgh.

From Wednesday 4 to Friday 6 November, representatives from the Institute of Economic Affairs, the Vinson Centre at the University of Buckingham and the Institute of International Monetary Research (IIMR) toured schools in the north of the UK. Stretford Grammar, Emmanuel College and the Edinburgh Academy hosted us for excellent conferences, designed for their students and those from several other invited schools. Topics included obstacles to growth, debates around inequality, the history of economic crises and, in Edinburgh specifically, the challenges and opportunities of the Scottish economy.

A principal aim of the tour was to further economic understanding in places rarely visited by similar London-based educational charities. Having the likes of Dr Steve Davies, our Senior Education Fellow, and Dr Valentin Boboc, our Chief Economist, arrive at your school is an excellent opportunity to engage with some of the best in the business, and the students rose to the challenge.

Some of the most electrifying moments came from students willing to grapple with ideas and question orthodoxies – either those they previously held or those freshly presented to them. Anyone who doubts young people’s capacity for resilience and critical thinking should witness a sixth-former take the first chance to raise their hand and engage with our economists on one of these days. In a world of polarising narratives, it was genuinely inspiring to see such appetite for open dialogue.

As the IEA’s new Head of Schools Outreach, I want to build on exactly this kind of work. Having spent years as an Assistant Headteacher, I know how much young people gain from these opportunities, which is why I’m delighted the IEA is expanding them.

If we do not make sure young people hear the full range of arguments, we cannot expect anyone else to do this job for us. Many young people are being told that rent controls are the answer to our housing problems, yet few hear that economists from across the political spectrum warn they reduce the supply and quality of homes, which could leave many young people living with their parents well into adulthood.

Others are hearing calls to “abolish” the wealthy, rarely accompanied by any discussion of what that would mean for the tax revenues that fund hospitals, roads, police and our armed forces. Students deserve to weigh up the arguments.

In a world where the poorest 10 per cent in the freest quarter of countries have incomes nearly eight times higher than those in the least free, according to the Economic Freedom of the World report, it is imperative that students are given the facts and encouraged to think critically about the future they wish to strive for.

For some of these students, it was the first time they had really considered the trade-offs involved in pursuing economic equality, or the role voluntary exchange has played in lifting people out of poverty. For others, it was simply a chance to stretch their thinking ahead of their A levels and university applications. That has immense value in itself.

Later this month, we will see 250 students in Hendon, with further conferences already booked this academic year, including in Chelmsford, Reading, Dartford, Peterborough and Bedford. At the Free Minds Economics Conference, hosted by the LSE Hayek Programme in partnership with the IEA, we drew over 350 sixth-form students. We are organising an even bigger event in Yorkshire, God’s Own Country, early next year, with the hope of reaching several hundred young people in a single day.

On top of this, and in partnership with organisations such as the Vinson Centre, the IIMR and the Adam Smith Institute, we run programmes including the Budget Challenge competition, the Monetary Essay Prize, Freedom Week, Future Thought Leaders, Camp Vinson, the Beloff Conference and the Public Policy Bootcamp.

We are also expanding many of these programmes through the Liberty Beyond London project. We are reaching sixth-formers, undergraduates and early-career professionals from across the country. With further support, we want to take this work into every region of the UK.

As John Stuart Mill put it in On Liberty, “He who knows only his own side of the case, knows little of that.” Through our growing education programme, we want the arguments for free minds and free markets to reach as many young people as possible – not so they must accept them, but so they can weigh them up for themselves.

Today’s young people aren’t a lost cause. They are hungry for debate and intellectual challenge. We are ramping up our activities to meet that demand, and we are having a lot of fun in the process!

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Dr Apostolos Pistolas is a political analyst, compliance expert and former lecturer in political marketing who combines a PhD in voting behaviour with financial sector expertise. He tweets at @appistol

Spain votes on 29 November in an election nobody planned for. Pedro Sánchez dissolved parliament on 5 October, nine months early, after Congress threw out two emergency housing decrees that would have suspended evictions of vulnerable tenants until 2030, capped rent rises at 2 per cent and tightened the rules on short-term lets. The Partido Popular (PP), Vox and the Catalan nationalists of Junts voted them down.

The question for free-marketeers is therefore unusually concrete: would a government led by Alberto Núñez Feijóo’s PP and dependent on Santiago Abascal’s Vox reverse eight years of creeping intervention, or simply swap one set of interventions for another?

The polls make the scenario plausible. Politico’s poll of polls puts the PP on about 32 per cent, the Spanish Socialist Workers’ Party (PSOE) on 26 per cent and Vox on 19 per cent. GAD3 and Sigma Dos both project a combined PP–Vox total of roughly 200 seats, comfortably above the 176 needed for a majority.

Scorecard:

On pure free-market credentials, a PP–Vox government rates 3 stars overall, against 1.5 stars for the outgoing Sánchez coalition.

Each of the five pillars is scored out of 5; the overall score is their average, rounded down to the nearest 0.5.

Score Breakdown:

Spain’s headline numbers look respectable: a deficit of around 2.4 per cent of GDP this year, debt of around 99 per centand growth of 2.3 per cent after 2.8 per cent in 2025. But the consolidation has been revenue-led. Frozen brackets and inflation have done the heavy lifting, and the government has not passed a new budget since 2023.

The PP promises to index income-tax brackets to inflation, give relief to young workers in their first four years of employment and cut income tax in its first year; Feijóo says he will resign if he fails. Vox goes much further: a €22,000 tax-free allowance, just two income-tax rates of 15 and 25 per cent and VAT cut from 21 to 18 per cent.

The direction is right; the arithmetic is not. Vox puts the cost of its income-tax plan alone at around €46bn – although the finance ministry’s estimate is €85bn – and its promise to fund it partly by reviewing €52bn of subsidies remains unspecified. Neither party will touch pension indexation, the largest driver of spending.

Under Sánchez, the state holding company Sociedad Estatal de Participaciones Industriales (SEPI) bought 10 per cent of Telefónica, holds a large stake in the defence group Indra and used its weight to replace Telefónica’s chief executive with Indra’s government-backed chairman. Both the PP and Vox criticised the move. Neither, however, has promised to sell the stakes, and Vox’s call for an industrial policy to reinforce national production suggests it is comfortable with state direction so long as it is patriotic. Expect an end to new acquisitions, not a privatisation programme.

This is where the contrast is sharpest. The minimum wage has risen by more than 60 per cent since 2018, the government tried to legislate a 37.5-hour week before Congress rejected it, and housing policy has layered rent caps and eviction moratoria onto a market short of several hundred thousand homes. Landlords have responded by shifting to seasonal and short-term lets, which the government then sought to regulate too.

The PP’s answer – a million new homes, faster release of buildable land and legal certainty for owners – goes to the root of the problem, which is supply. Vox’s housing plan is also supply-side: liberalise land, shorten planning timelines and let owners recover property quickly for non-payment. Add the PP’s pledges to abolish the 7 per cent tax on electricity generation (currently suspended) and extend the life of nuclear reactors by 10 years, and this pillar earns the coalition its best score. The half-star deduction is for Vox’s “national priority” in social housing and benefits, which rations supply rather than expanding it.

Here the right is weaker than the left. The Sánchez government backed the EU–Mercosur agreement, which has applied provisionally since 1 May this year. Abascal called it “a crime against the countryside and food sovereignty” and wants a national referendum on it. The PP supports Mercosur, but would govern with Vox’s votes, and farmers are a core constituency for both. A trade-sceptic junior partner could slow Spain’s backing for future EU deals. This is the clearest free-market shortfall relative to the incumbent.

Spain has no monetary policy of its own inside the euro, so this pillar turns on credit and banking. The bank levy, introduced in 2022 as a temporary windfall tax, was replaced in 2024 by a new tax lasting three years, at rates of 1 to 7 per cent on net interest income and fees. The government also imposed conditions on BBVA’s bid for Sabadell, barring integration for three years. The bid, which ultimately failed, had already been cleared by the European Central Bank (ECB) and the competition authority had cleared it, prompting the European Commission to open infringement proceedings.

The PP opposed the levy and criticised the intervention; a PP economy ministry would likely let the levy lapse and use merger powers sparingly. Vox’s populist instincts towards big banks make it a less reliable ally. The right is not immune to directed credit either: the PP and its regional leaders want public guarantees for 100 per cent mortgages for under-40s, the kind of state-backed lending this pillar penalises.

Overall score: Sánchez 1.5 | PP-Vox 3

A 3-star rating reflects a genuine pro-market turn on taxes, housing and energy, tempered by unfunded fiscal promises, no appetite for privatisation and a protectionist junior partner. On these five measures, it is a clear improvement on current policy, not a liberal revolution.

Broader economic implications

Spain enters the election as the fastest-growing large economy in the eurozone. The risk for a PP–Vox government is that it inherits strong headline numbers and spends the fiscal room on tax cuts before reforming spending. With debt close to 100 per cent of GDP and EU fiscal rules back in force, the margin for error is thin. Vox’s “remigration” agenda also sits awkwardly with a labour market whose recent growth has leaned heavily on foreign-born workers.

What to watch

1. The first budget. Whether a PP government presents one with spending offsets, or simply cuts taxes and hopes for growth, will define its fiscal credibility.

2. The coalition deal on trade and agriculture. Any concession to Vox on Mercosur or future EU agreements would be a red flag.

3. Housing legislation in the first 100 days. Repealing rent controls and speeding up land release would signal seriousness; layering on “national priority” rules would signal the opposite.

A PP–Vox victory would move Spain towards the market on the issues voters care most about, tax and housing, and away from it on the one Vox cares about most: protecting domestic producers. That would still leave Spain’s policy mix more market-friendly than today’s. But the improvement depends on Feijóo keeping control of the economic portfolios, and on resisting the temptation to pay for Vox’s support with the protectionism the right claims to oppose.

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No one should be surprised by what happened. Travelling through a clutch of Midwestern states last month, I could feel the coming tsunami in the mild autumn air, and was astonished that local pundits were still hedging and hanging back.

The anti-Trump feeling was especially pronounced in the Great Lakes states where I found myself; states that depended heavily on cross-border trade with Canada, importing and exporting component parts; states that had been plunged into chaos by Trump’s constant, petulant trade wars.

Driving out of Milwaukee airport, I passed a large roadside billboard. “What’s worse than Chicago?” it asked, a reference to the city that Milwaukeeans love to hate. “Tariffs!”

The rejection of the central pillar of Trumpism, the only policy that the President and his sycophants have consistently favoured, will have a big bearing on what happens next.

Donald Trump has flip-flopped on almost everything. He decried Obama’s national debt and then promptly doubled it. He wanted America to be strong and respected, but he whined and cringed before autocrats. He promised to stop “forever wars”, and is now stuck in one in Iran.

Indeed, it is hard to find any ruling principle behind MAGA beyond the convenience, at any given time, of Trump.

Except one. The President has been a lifelong opponent of free trade. “I am a tariff man,” as he likes to say. Well, all the other tariff men, which is to say everyone in his administration, are now tainted by that association.

They must have known that Trump’s trade policy would fail, for they are not fools. They must have grasped that it would not reshore jobs or raise revenue.

They must have understood that tariffs would fall on American consumers, not foreign governments – which is why no foreign governments are queuing to get their money back following the Supreme Court’s decision that the tariffs were illegal.

Above all, they must have realised that trade deficits, which so obsess Trump, don’t matter. The United States has been running them solidly since 1975, and has outperformed the rest of us.

Basic economics would have told them trade deficits are matched by investment surpluses (or vice versa) and that Trump’s demand for both surpluses and simultaneous increased investment was mathematically impossible.

But, ambitious, obsequious or frightened of the MAGA voting bloc in Republican primaries, they never objected. Instead, they flattered and amplified Trump, like so many eunuchs around a vicious child emperor.

They will surely pay a political price. JD Vance, who had previously been the bookies’ choice to succeed Trump, has seen his stock plummet. Newt Gingrich, the shrewd tactician who led the Republicans to their greatest Congressional victory of the late twentieth century, saw immediately what it meant.

“If the administration had won a big victory, Vice President JD Vance would have had an enormous argument to be the inevitable nominee,” he wrote on X. Instead, he observed, the race was wide open. He listed half a dozen possible candidates: Marco Rubio, Ted Cruz, Tom Cotton, Ron DeSantis, Pete Hegseth, Glenn Youngkin.

In fact, proximity to the regime will do for some of them, too. The Democrats have already moved articles of impeachment against Pete Hegseth, the gormless Secretary of War, whom they blame for launching unconstitutional conflicts without Congressional approval.

The clever thing for Democrats would be to leave Trump alone and impeach some of the more grotesque figures around him; but, under pressure from their own base, I am not sure their members of Congress will be able to resist.

In any event, the Republicans who stood aside from this circus-show of an administration deserve more credit than they have had. Glenn Youngkin, the former Governor of Virginia, kept his distance from MAGA and governed his state in a recognisably conservative way, cutting taxes while running surpluses.

Ron DeSantis, who is coming to the end of his term as Governor of Florida, was the man Trump beat in the last set of primaries, and has never had anything like the recognition he deserves for the success of that sun-drenched state.

Indeed, Florida is a living rebuke to Trumpery: patriotic but cosmopolitan, full of high-skilled legal immigrants, booming and open to the world – it even signed its own separate trade deal with Britain.

“Basic economics would have told them trade deficits are matched by investment surpluses.”

While Trump was musing about whether injecting disinfectant might kill the coronavirus, DeSantis resisted the massive pressure for lockdown, and was as thoroughly vindicated as a man can be in politics. Not only did Florida avoid the economic hit suffered by others; it also had a lower excess mortality rate.

More interesting is the case of Marco Rubio, whom many Reaganites and free-marketeers have until now backed as the most obvious alternative to Vance. The Secretary of State, they say, has moderated Trump’s excesses, tempering the worst of his behaviour.

Perhaps so. Still, it was on his watch that the US embraced the most revolting foreign policy in its 250-year history, turning on long-standing allies while cosying up to autocrats.

It was with Rubio’s hand on the tiller at the State Department that the US demanded the annexation of Canada and launched a trade war against that loyal friend. It was during his time in office that it threatened to seize Danish territory.

It is true that these initiatives were Trump’s, not Rubio’s. I imagine that the Secretary of State viewed them with horror. Still, we must in the end judge a man by his actions, not by his misgivings.

When Rubio began negotiating with the Russians in Riyadh, alongside that prize ass Steve Witkoff, he trotted out the Trumpian line, like a hostage reading his captors’ script, talking of “the incredible opportunities that exist to partner with the Russians”.

Some things, once seen, cannot easily be unseen.

Trump’s characteristic response to the electoral meltdown was to declare: “I wasn’t on the Ballot and if I was, we would have won IN A LANDSLIDE!”

In fact, Trump had been telling his voters at every rally to act as though he were on the ballot. And that is precisely what they did. The MAGA core still exists, but it has shrunk as Trump’s policies have failed in their own terms, and as the wealth of his friends and family has expanded in the manner of an African kleptocracy.

There is a gap in the market for a party that stands for limited government, the rule of law and the principles of the American founding.

Both main parties at present seem to want to mobilise the full coercive power of the state against people they dislike. Both elevate outcome over process. Both are inclined to treat election results as contingent unless they win.

Americans deserve better. Theirs is the world’s greatest republic, designed to be “a government of laws, not of men”.

I see little prospect of the Democrats becoming such a party, at least not in the short term. They have drawn the worst possible lesson from the election result, seeing it as an endorsement of their own most radical policies.

Are the Republicans, as their name suggests, prepared to step up and defend republican principles – the idea that the citizen should be elevated above the government, the individual above the collective?

Someone has to. The rest of the world needs a free America just as Americans themselves do.

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There can be a temptation to view Budgets as purely economic events: a technocratic divvying up of the pie as best as possible, as if the ideal chancellor could find a utilitarian formula to answer the questions of the day.

There has been a trend in recent times to separate the economic and the cultural, describing parties and individuals as fiscally X and socially Y. But this is a false distinction. Economics, like politics, is downstream of culture.

How we engage in deals, honour contracts and trade, much like our other democratic “norms”, is not the natural inheritance of all humankind. It has developed over centuries. In fact, our historic commercial success as a nation is a product of our shared moral and cultural outlook.

And what did the 28 October Budget tell us about the culture of our current Government? That it puts off tough decisions, delaying, again, a date for meeting its defence spending target. That it prefers one-off £100 payments to structural reform – more willing to provide a fish than a net – and that the problems of today are being left for another day. It’s this cultural malaise that precedes the economic one.

This is perhaps most clear in the Government’s approach to the national debt. Not only are there no real plans to cut the £3tn debt pile, but taxes and spending continue to rise even though long-term gilt yields are at their highest since 1998. The effect is to saddle future generations with ever-increasing liabilities in exchange for avoiding a backlash now.

That is a short-sighted approach.

This filters down to society at large, weakening the link between effort and reward. The health and disability benefits bill, which the Office for Budget Responsibility (OBR) now expects to pass £100bn in 2028–29, is one sign of a system that does too little to help people back into work.

It is also a culture in which fewer than a quarter of recorded shoplifting offences lead to a charge. In that climate, the individualism that comes naturally to the British people has come to mean selfishness rather than resourcefulness.

After the Conservative Party conference, some claimed the party had tacked back to its home turf of the “Waitrose woman” by pledging to abolish the £100,000 childcare cliff edge and inheritance tax on family homes. The charge was that these were targeted tax breaks for a group of voters the party hopes to win back.

But there is another way to read policies like these: as attempts to change the culture, rather than simply the tax code. A tax expert like Dan Neidle will pick apart the specific economic pros and cons, giving less weight to the moral implications than the fiscal.

Whatever the politics, the logic of such policies is cultural. They reward someone who works, saves, plans ahead and wants to leave something for her children. That is a cultural attitude, and economic prosperity is a fortunate by-product of it.

If any future government can change this culture, it will go a long way towards rebuilding the social contract and a shared sense of nationhood. After all, why would you care about a country you have no stake in, where any spare cash you build up is taxed away and redistributed? Settlement rules matter here too: indefinite leave to remain opens the door to the benefits system, so the terms on which it is granted should reward contribution.

The economic culture that has made us so historically prosperous depends on a shared sense of belonging, which is why migration, both legal and illegal, and integration matter to economic policy too.

Some commentators have concluded that it is no longer “the economy, stupid”, that cultural concerns around nationhood, immigration and culture have eclipsed fiscal concerns. But the reality is that the two are not separate: if you fix the economic X-axis by creating sensible incentives, you can go a long way to fixing the social Y.

Chancellor John Healey’s Budget was a fiscal event, but it is worth seeing it as a cultural one too. Yes, there are myriad economic symptoms, but the underlying problem is cultural, and our politics too often makes it worse.

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James Turk is the founder of Goldmoney Inc. and the author of several books on money and gold.

For decades Westminster has treated the housing crisis as a problem of bricks and mortar. The script never changes. Ministers promise building targets, the Opposition demands more social housing and councils quarrel over planning. Thousands of pages later, the housing ladder is still out of reach for a generation.

That is because the diagnosis is wrong. Britain does not have a housing crisis. It has a money crisis.

House prices have outrun wages for 30 years. Planning delays alone cannot explain that. Too many pounds can.

More than a decade of ultra-low interest rates and quantitative easing, from 2009 to 2022, flooded the financial system with cheap credit. That new currency flows into property before it ever reaches wages. We now see a home not as shelter but as an investment.

To see how distorted the market has become, we must stop pricing houses in a melting currency and price them in gold sovereigns instead. The sovereign, the Coin of the Realm first struck under Henry VII, has been minted with the same weight of gold since 1817, when it was worth £1. Gold is the ultimate store of purchasing power. For generations Britons have used the sovereign to protect their savings from inflation, and it still works.

The chart tells the story. In 1913 the average British house cost £243. Today it costs about £276,000, a rise of 1,136 times.

Priced in sovereigns, the average house cost 243 coins in 1913 and 344 today: up just 1.4 times in 113 years. And today’s house, with central heating and an indoor bathroom, is a far better house than its 1913 counterpart.

Houses have barely become dearer. The pound has become cheaper. A young couple saving for a deposit are not losing a race against the builders. They are losing a race against the Bank of England, which erodes their savings while the deposit they need keeps rising.

Building more homes is necessary, but it cannot fix a broken yardstick. A lasting solution means fixing the money, beginning with the 2 per cent inflation target that is called price stability. A pound that loses nearly a fifth of its value every decade is not stable.

Planning reform alone cannot close the gap between those who own and those who rent. That requires money that no bank or government can create at will: gold.

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An intriguing duality has emerged in our City AM/Freshwater Strategy poll. Each month, we ask a series of questions not only about vote share (Labour is up to 30 per cent, Tories and Reform down at 22 per cent each) and topical policy issues (the Budget has been received with a collective sigh of relief, with few excited for it or particularly concerned), but also about how people see the economy and their own financial position.

In news that will undoubtedly be welcomed by the Government, there has been an increase in the number of people who believe the country is heading in the right direction and that the economy will improve over the next 12 months. Almost a third (31 per cent) now say the country is heading in the right direction, the highest since our tracking began and up from 22 per cent before Prime Minister Andy Burnham took office, while 28 per cent expect the economy to improve over the next year, up from 22 per cent.

None of this should be confused with a particularly strong result. Most people do still think things are going badly and the economy will worsen: almost two-thirds (63 per cent) say the country is heading in the wrong direction, and almost half (47 per cent) expect the economy to worsen over the next year, against just 28 per cent who expect it to improve.

But a new trend has to start somewhere, and this is still a positive movement. There really has been a post-Burnham vibe shift, and that’s a big political victory after several miserable years in a row. People really do want hope for the future, and that in itself can potentially have positive economic consequences.

On the other hand, just as important, if not more so, is people’s personal experience, which is going in the opposite direction. Since Burnham took office, the share of voters cutting back or struggling with essential bills has risen from 38 per cent to 41 per cent, the highest since our tracking began in January 2025, while those who are comfortable or confident about their finances have slipped to 26 per cent, the joint lowest on record.

We also asked voters which of five statements best describes their current financial situation, ranging from “confident”, able to spend freely each month, to “troubled”, unable to pay essential bills or taking on debt to do so. Two in five (41 per cent) now say they are either having to limit or cut discretionary spending to cover essentials (31 per cent) or are unable to pay essential bills at all (10 per cent), putting them into the financial stress category.

This is the highest level since our tracking began in January 2025, up from 38 per cent before Burnham took office. Just a quarter (26 per cent) are comfortable or confident about their finances, the joint lowest on record, and more than one in five (22 per cent) say they could not find a way to pay an unexpected £500 bill.

The squeeze is about to tighten. Energy bills are forecast to rise sharply in the new year as the conflict in the Middle East continues to disrupt gas supplies. Cornwall Insight expects Ofgem’s price cap to rise 16 per cent in January, to around £1,999 a year for a typical household, and some suppliers forecast even higher increases. Ofgem is due to confirm the figure on 25 November.

Food prices are also picking up again: the British Retail Consortium found food inflation rose to 2.9 per cent in October, from 2.5 per cent the month before. Then there are mortgages. Our survey found that half of mortgage holders (52 per cent) say they will come off their fixed-rate deal by the end of 2028, and almost three in five (58 per cent) of those on a fix expect their monthly payments to rise.

The Office for Budget Responsibility’s forecasts, published alongside the Budget, are particularly grim. Growth next year has been cut from 1.6 per cent to around 1 per cent, inflation is expected to average 3.4 per cent in 2027, and unemployment is forecast to peak at 5.1 per cent. Real household disposable incomes, what families have left after tax and inflation, are forecast to fall this year and next, leaving them just 2 per cent higher in 2030 than before the pandemic. It’s all pretty miserable.

So while hope for the future may have ticked up, today’s reality is different and trending in the wrong direction. While it is imaginable that Burnham will be able to maintain the optimism for a bit longer, it’s hard to see this being forever, particularly as reality comes crashing down.

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• Matt Ridley on what we lose when managerialism takes over

• Watch: The Atonement Complex | IEA Events

• Five lessons from the OBR forecasts

• The IEA’s Northern Schools Tour

An introduction from Economic Affairs editor Maeve Halligan

Welcome to this week’s newsletter. Britain is now set to spend more on debt interest than on education, which is one way to teach the country a lesson. Meanwhile, households heeding the Government’s call to “Be Ready” have cleared Ocado of 40 varieties of tinned soup.

On the podcast, Lord Hannan and Robert Armstrong ask whether tariffs just lost Trump the midterms. Matt Ridley argues that the line that matters in the economy is not between employers and employees, but between those with skin in the game and those without. And if the Budget left you none the wiser, we draw five lessons from the OBR’s forecasts.

Elsewhere, the new IEA report authored by Professor Doug Stokes, The Atonement Complex, takes a hard look at the £18.8 trillion reparations claim and the bill Britain footed for ending the slave trade. If you missed the launch, you can catch up below.

Finally, book your free tickets for the launch of The Higher Education Delusion this Wednesday 11 November. Come along to find out what is going so wrong at some of the UK’s most historic universities, and whether getting a degree is still worth it at all.

Matt Ridley is a science writer and a former member of the House of Lords.

“I don’t think employers are working people.” When Emma Reynolds, Chief Secretary to the Treasury (effectively Britain’s deputy finance minister), uttered those words in a recent television interview, her words were widely shared online. She was given two chances by her interviewer, Camilla Tominey, to back down – but she doubled down instead. “The distinction I am drawing is between employees and employers,” she said, while acknowledging that she employs a cleaner.

It is a fascinating glimpse into old-fashioned, almost Marxist, view of the economy. On this view, it seems, we are back in the nineteenth century when top-hatted plutocrats sit back and enrich themselves off the back of hard-toiling employees. You are either one or the other.

Except it was not true then either. At the weekend I happened to be reading about Sir Amos Nelson, a man who went to work in a cotton mill part time at the age of 8 (full time from 13) and ended up the stupendously wealthy owner of a large country estate in Yorkshire on which he built a brand-new stately home, Gledstone Hall. Was he not a “working person”?

My point here is not political point scoring, however. It is to suggest a more valuable distinction: whether you have skin in the game. Both employers and employees can be great if they really care what happens to their organisation, or really useless if they don’t.

A friend once asked about my experience of leaving employment to work for myself as a freelance writer. A few weeks later he messaged me: “You never warned me that when you work for yourself, your boss is a bastard.” The most driven and motivated people I know are self-employed sole traders, the founders of their own businesses.

That’s why Marc Andreessen, the founder of Netscape and star venture capitalist, prefers to back founders rather than hired MBAs. He refers to the 1940s book The Machiavellians by James Burnham, which saw the world of “bourgeois capitalists” who built their own businesses – Henry Ford and co – being replaced by the world of managerialists trained and hired to run firms.

Andreessen thinks management as a skill set that can be used to run many different kinds of business, in the public as well as the private sector, is the cause of many of our problems. “If there is one dominant theme in the last 30 years in the west it is that managers generally, writ large, are not doing a great job.”

Imagine Elon Musk’s firms run by hired Harvard or Stanford MBAs. They would never have dared try half the outrageous things he has pulled off.

The story of Mike Lynch, founder of the software firm Autonomy, exemplifies the issue in two ways. As recounted in Katie Prescott’s excellent book The Curious Case of Mike Lynch, published in November last year, Autonomy was a brilliantly successful company built by a founder with a devout obsession to work hard and grow the firm, admittedly accompanied by sometimes tyrannical behaviour towards others in the company.

But when Autonomy floated on the stock market, different incentives began to dominate. The pressure to keep growing the company’s share price turned Lynch and his colleagues into managerialists who rushed to acquire other firms and sign up clients at any cost to please market analysts. Soon the company was cutting corners at best, or, according to the US courts that convicted its former finance director, booking revenue improperly at worst.

Whether that amounted to fraud, let alone justified the criminal persecution Lynch received in the United States after Hewlett Packard vastly overpaid to buy Autonomy, is a different question. Lynch was eventually acquitted of criminal charges before dying in a freak yacht accident, but Hewlett Packard has been awarded £920m in damages against his estate to compensate it for the embarrassment of having not done its homework before the deal.

“Founders drive change, disrupt monopoly, challenge stagnation and make the future happen.”

My point is that both firms, Autonomy and Hewlett Packard, were ruined by managerialism losing touch with founderism.

The world needs more founders. They drive change, disrupt monopoly, challenge stagnation and make the future happen. Some, like Elizabeth Holmes of Theranos, poured their entrepreneurial energy into fraud, but most get rich by improving the lives of their customers. From Thomas Newcomen to Andrew Carnegie to Elon Musk, they drive down prices for all.

So here’s my question. Are there enough potential founders out there at any time, or could we do with flooding the market – and stifling the supply of managers? I am not generally a fan of the great man theory of history. I think that if the likes of Gates and Jobs, Bezos and Zuckerberg did not exist, other names would still have come forward.

But Musk gives me pause, I admit. The world of space, of cars, of tunnels, of social media would look very different if he had not existed. And it must be true that an economy which incentivises founders at the expense of managers (in both the private and public sectors) would be one that grew faster, innovated more richly and solved more problems.

So yes, let’s at least give it a try: see what happens if we incentivise more working people to start their own businesses. Just as every common soldier was said by Napoleon to carry a marshal’s baton in his knapsack, so perhaps every pie-shop owner carries a tech mogul’s black T-shirt in his tote bag.

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Did tariffs just lose Trump the midterms? Maeve Halligan, Lord Hannan and Robert Armstrong look at what the Democrats’ historic gains reveal about voters’ verdict on protectionism, and why free trade has suddenly become an election-winning issue. They then turn to the UK–EU summit and a draft deal that would tie Britain to EU food rules, asking whether the Government is trading sovereignty for a smoother border, before closing with whether rejoining the EU is a realistic prospect. Watch on YouTube

This week in Economic Affairs

News and Views from the IEA

The Atonement Complex | IEA Events

The campaign for slavery reparations has rarely had more momentum, and its case has rarely been examined less. With Caribbean leaders taking a £18.8 trillion claim to the Commonwealth summit in November, Professor Doug Stokes’s new paper, The Atonement Complex, examines the accounts: who really profited from slavery, what the British public paid to end it, how the trillion-pound figure was built, why other parties to the trade are left out of the story, and how hostile states have turned Western guilt into a tool of statecraft.

Read the report

_{Catch up on the report launch event:}

Calls for Britain to pay slavery reparations to the Caribbean come under scrutiny. Professor Doug Stokes, author of the recently published IEA paper The Atonement Complex, is quoted on why the economic legacy of slavery is not as simple as the case for reparations assumes.

“The dynamics of slavery are complex. While it enriched small groups of Britons, it did not enrich the nation.”

Ending slavery cost Britain far more than it ever profited from the trade. Professor Doug Stokes writes for the Daily Mail on why the case for slavery reparations does not stand up to the historical evidence.

“Britain must always refuse to accept liability for a trade it spent 60 years and thousands of lives suppressing.”

Commonwealth leaders should focus on modern slavery rather than reparations, GB News reports. Professor Doug Stokes is quoted arguing that the £18.8 trillion reparations estimate rests on highly sensitive assumptions, and that Britain’s campaign to suppress the slave trade cost around 1.8 per cent of national income a year for 60 years.

If rights are available even to people working illegally, what does it mean to be a citizen? Lord Hannan, Director General of the IEA, writes for the Daily Mail on why Britain should replace refugee status with a small, capped number of discretionary admissions set by Parliament.

“Modern states work on the basis of an implied contract between government and citizens.”

Britain is set to spend more on debt interest than on education for the first time, This is Money reports. Julian Jessop, IEA Economics Fellow, is quoted on how to bring the debt burden under control, arguing that “the Government needs to free the economy to grow faster.”

Households are hoarding cash at home on the Government’s advice, the Daily Mail reports. Lord Hannan, Director General of the IEA, is quoted on the Government’s “Be Ready” campaign, arguing that “the last thing we need is a Government encouraging people to panic.”

The Government’s planned ban on new North Sea oil and gas moves a step closer, GB News reports. Andy Mayer, IEA Energy Fellow, is quoted discussing the Energy Independence Bill, arguing that it has collapsed investment in new fields, reduced future tax receipts and increased the UK’s dependence on imports.

“The Energy Independence Bill is rooted in a delusion that the Government can centrally plan energy, and, in particular, a low-carbon transition for the North Sea.”

Education, Events and Opportunities

The Northern Schools Tour

Three cities, three days and plenty of big economic questions. This week, the IEA’s Northern Schools Tour took our speakers to sixth-form students at Stretford Grammar School in Manchester, Emmanuel College in Newcastle and The Edinburgh Academy, in partnership with the Vinson Centre.

Across the three conferences, students explored what drives economic growth, why trade matters, how we should think about inequality and opportunity, and what past economic crises can teach us. The tour closed in Edinburgh with a focus on liberty, choice and responsibility.

The real highlight was the students themselves, who brought sharp questions and lively debate to every session. Our thanks go to the schools, speakers and students who made the tour such a success. Economic education shouldn’t stop at the classroom door, and we look forward to the next one.

Upcoming:

_{The Higher Education Delusion - Book Launch}

_11.11.2026

Britain’s universities are still called “world-leading”, yet the sector has rarely looked more troubled. More than a third of institutions are in deficit, first-class degrees have risen from 7% to 30% of all awards, and only around a third of recent students are expected ever to repay their loans in full. In The Higher Education Delusion, ten contributors ask what has gone wrong, from the falling graduate premium and a student loan system that works like a badly designed tax, to universities’ reliance on international students, the political monoculture on campus and the threat posed by artificial intelligence. The book’s editor, Professor Len Shackleton, will join two of its contributors for a panel discussion on the case for radical reform. Join us for this free launch event, open to all.

Speakers

• Professor Len Shackleton - Professor of economics at the University of Buckingham and Editorial and Research Fellow at the Institute of Economic Affairs.

• Julian Jessop - Economics Fellow at the Institute of Economic Affairs

• Joanna Williams - Academic and commentator, and a former director of the Centre for the Study of Higher Education at the University of Kent. She is the author of How Woke Won, Women vs Feminism, Academic Freedom in an Age of Conformity and Consuming Higher Education.

• Maeve Halligan - Spokesman for the Institute of Economic Affairs and editor of Economic Affairs, the IEA’s Substack. She comments on free speech, women’s rights and the political attitudes of young people, and has written for The Free Press.

• Saqib Bhatti MBE is a British Conservative Party politician who has been the Member of Parliament for Meriden and Solihull East, formerly Meriden, since the 2019 general election. Saqib currently serves as Shadow Minister for Education.

Event details

Wednesday 11 November 2026 at the Institute of Economic Affairs, 2 Lord North Street, London SW1P 3LB.

18:00-18:30 Doors open and welcome
18:30-20:00 Panel discussion
20:00-21:00 Post event reception; refreshments provided

Register to attend

Chancellor John Healey claimed that his Budget was for working people, but the detail tells a different story. Rather than helping workers by cutting taxes, the Chancellor has chosen to continue the freeze on both income tax and National Insurance thresholds, dragging half a million more workers into paying the higher rate.

Not only will this stealth tax leave workers with less disposable income, it will also weaken incentives to work and earn more. With workers keeping less of each additional pound they earn, they will be discouraged from working overtime or pursuing a promotion. Just this month, the Office for Budget Responsibility (OBR) estimated that, taken together, the threshold freezes in income tax and National Insurance from 2022–23 to 2030–31 could decrease labour supply by 215,000 in average-hours equivalent terms by 2030–31.

The long-term effect of this will be a smaller tax base, which will partially offset the revenue gains from freezing thresholds in the first place. And if people turn down extra responsibilities and promotions, businesses will find it harder to fill skilled positions, weakening productivity and wage growth across the economy.

As the old saying goes: “To think you can make a man richer by putting on a tax is like a man thinking he can stand in a bucket and lift himself up by the handle.” Similarly, by freezing the income tax thresholds, the Chancellor is stifling the growth and productivity upon which the state and the public sector depend.

At the same time as freezing tax thresholds, which imposes costs on working-age people, the Government has announced a new Pension Tax Allowance to shield low-income pensioners from income tax. This new “quadruple lock” adds complexity to the tax system and further narrows the tax base. At a time when welfare spending is already out of control, it makes little sense to give extra protection to pensioners while imposing extra costs on workers.

A typical 25-year-old, for example, might earn £28,000 a year. With tax thresholds frozen, he or she will be paying around £295 extra in annual tax by 2030–31, assuming inflation averages 2 per cent. That’s £25 a month: money that could otherwise go towards savings, transport, holidays or household bills.

With younger workers bearing the brunt of the Government’s stealth tax, it’s hard to see the Budget as anything other than an attack on the young.

As well as being made worse off by stealth taxes, young people will also be adversely affected by the Government’s decision to raise the minimum wage. This will make it more costly for businesses to take on younger and less experienced workers, worsening the current crisis of youth worklessness.

Earlier this year, the CIPD told the Low Pay Commission that nearly a quarter of employers reported reducing employee numbers or recruiting fewer workers following the April 2026 minimum-wage increase. Among employers most affected by the increase, the figure rose to 35 per cent. With 715,000 young people (15.6 per cent) already unemployed, the highest figure since 2011, the Government needs to recognise that its own policies are making the problem worse.

Some might say that, by refusing to accept the trade-off between higher wages and higher unemployment, the Chancellor is overlooking a well-established lesson in economics.

The Government should recognise a basic truth about the minimum wage: it does not guarantee anyone a job at that rate. If a worker’s skills are not yet worth the legal minimum to an employer, the job is simply never offered, and the wage that worker actually receives is zero.

By raising the minimum wage, the Government is not helping the lowest paid. It simply legislates for higher unemployment.

Healey did reference the roughly 1 million young people not in employment, education or training (NEET), but said that the Government would wait for the findings of the Milburn Report before taking action next year. The country deserves better than this. Rather than taking the necessary measures to increase employment through tax cuts, the Government has increased taxes by stealth to fund people on benefits.

The £100 giveaway to households living in council tax bands A to D is another example of the Government favouring state support over lower taxes. Instead of empowering households through tax cuts, which would allow people to keep more of their money, the Chancellor has chosen to increase their dependence on the state.

Young people don’t want handouts. They want a hand up. That means raising tax thresholds, cutting tax rates and scrapping employment regulations for businesses so that they can afford to hire more workers. Tax cuts on income are entirely affordable and can be paid for by cuts to welfare and tax simplification measures laid out in the IEA’s Alternative Budget.

Some will say that tax rises are necessary to fund public services and pensions for our ageing population. They are not. For Britain to become a truly rich and successful country, the Government should reward aspiration instead of taxing it, and get the economy growing.

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It is always dangerous to read public policy lessons into election results, especially so soon after polling day. Midterm outcomes are overdetermined, the president’s party almost always loses ground, and factors like local candidate quality and, recently, mid-cycle redistricting complicate any evaluation of what happened.

Still, there’s good evidence that the Republican wipeout in the US midterms was not helped, shall we say, by President Trump’s key economic policies. His approval rating stood at a historically low 38 per cent in exit polling, with 89 per cent of voters saying the cost of living was a major or crucial factor in their vote. It wouldn’t be the first time inflation has claimed the scalps of incumbent politicians in the past decade.

This amounts, though, to a stunning reversal for a party whose president won in 2024 because voters hated the price surge on Joe Biden’s watch. That post-COVID inflation – peaking at 9 per cent, the highest since 1981 – left real scars.

Research by Erik Hurst and co-authors found that by the end of 2024, 58 per cent of workers had wages below their pre-pandemic trajectory, and 37 per cent had seen their real pay actually fall. The average worker who stayed at the same firm in 2020–24 lost 9 per cent of their real purchasing power.

That left voters furious with President Biden, whose team had first promised to “run the economy hot” with fiscal and monetary stimulus and then blamed one-off supply shocks and greedy corporations for the resulting price-level spike.

Unlike in the UK, real growth held up in the US, so supply shocks couldn’t explain much of the enduring rise in the price level. It was excess demand. And President Trump promised not just to defuse it, but to bring prices back down, “starting day one”.

Two years later, voters have now delivered a vote of dissatisfaction against Trump and the Republicans’ approach.

That raises the question of what, exactly, voters are mad about where living costs are concerned. Republican camps seem to be splitting into two big schools of thought here. One, held by many old Reaganite types, is that the tariffs explain such anger. The more paleo-conservative wing pins the blame exclusively on the Iran war and the shock to gas and diesel prices it generated. Vice President JD Vance posted as much on X the morning after the election: “The reason we lost is the war.”

The truth, however, is that discontent with Trump on inflation was growing pre-Iran. President Trump’s net approval on inflation in the Economist/YouGov poll slid steadily throughout 2025, even as real average hourly earnings were improving. By February 2026, before any strikes, Trump’s net approval on inflation had fallen to –28, a level not dissimilar to that Joe Biden suffered in the dying days of his presidency.

The explanation is twofold. First, polling regularly showed that a large chunk of voters believed the president when he said he’d deliver deflation. They really did think he would bring down prices across the board and got more agitated as it became evident he couldn’t.

Even today, supermarket prices feature heavily in public complaints, despite having risen only 1.9 per cent over the past year. It’s the “sticker shock” of consumer prices having risen by 30 per cent since 2020 that still rankles for many.

Second, every major plank of the president’s economic policy has made the cost of living worse, at least at the margin. Tariffs are a tax paid largely by Americans, and voters noticed the higher prices that resulted.

Enormous ongoing budget deficits are putting upward pressure on interest rates. Demanding the Federal Reserve cut rates could’ve de-anchored inflation expectations somewhat, while Trump’s recent ode to inflating away the national debt sent the same signal. Deportations, and the fear of them, disrupted agriculture and construction.

Then the Iran war began, and the bottom dropped out on Trump’s support. By April, the president’s net approval on inflation, at –35, matched Biden’s worst in the history of the poll; at one stage it fell to –48.

Gas prices are today up almost 50 per cent on January, and rose 9 per cent in September alone. This cost shock pushed headline inflation back up to 3.7 per cent, meaning prices are once again outstripping wage growth. Inflation-adjusted hourly earnings have fallen by 0.7 per cent over the past year.

That alone would have made this election very difficult for Republicans. In NBC’s exit poll, 62 per cent blamed higher prices more on Trump’s policies than on factors beyond his control, while 65 per cent said his policies had made the economy worse. And almost two-thirds said his tariffs hurt the national economy, while over 80 per cent said they were worried about the price of necessities like gas and diesel, food and groceries, utilities and healthcare.

In the coming weeks, other analysts will seek to unpick the relative contribution of these factors compared with, say, individual candidate quality or other gripes, such as concerns about ethics in the administration.

But the economic headwind on living costs is undeniable. Having won an election because people hated high inflation, the president over-promised that he would deliver deflation, imposed tariffs, badgered the Fed for rate cuts, green-lit enormous budget deficits and took the US into a Middle Eastern conflict that drove up gas prices. Now, his party has reaped the backlash.

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This is instalment No. 3: Frédéric Bastiat

Dr Richard M. Ebeling is an American libertarian author who was the president of the Foundation for Economic Education from 2003 to 2008.

The defence of economic liberty has never been an easy task. In the nineteenth century, however, there was one champion of personal freedom and the free market who mastered the art of making the complexities of economic reasoning understandable to the layman: the French classical-liberal economist Frédéric Bastiat. More than one historian of economic thought has emphasised Bastiat’s special abilities in undermining the rationales for protectionism, socialism and interventionism.

Other authors have modelled some of their own works after him. And surely the most famous and influential adaptation of Bastiat’s method and approach in the twentieth century was Henry Hazlitt’s (1894–1993) Economics in One Lesson(1946), in which the author said, “The present work may, in fact, be regarded as a modernisation, extension and generalisation of the approach found in Bastiat’s pamphlet”, known by the title “What Is Seen and What Is Not Seen”.^[1]

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Bastiat’s Life and Discovery of the Liberty Literature

Claude-Frédéric Bastiat was born on 30 June 1801 in Bayonne, France, the son of a prominent merchant. His mother died when he was seven years old, and his father passed away two years later, when Frédéric was only nine. He was brought up by an aunt, who also saw to it that he went to the College of Sorèze beginning when he was 14. But at 17, he left without finishing the requirements for his degree and entered his uncle’s commercial firm in Bayonne. Shortly afterwards, he came across the writings of the French classical-liberal economist Jean-Baptiste Say, and that transformed his life and thinking. He began a serious study of political economy and soon discovered the works of many of the other classical-liberal writers in France and Great Britain.

In the late 1820s and 1830s, he began writing monographs and essays on a variety of economic topics, but his real reputation as a writer began in 1844, when he published a lengthy article in defence of free trade and then a monograph on Cobden and the League: The English Movement for Free Trade. While writing these works, Bastiat began a correspondence with Richard Cobden, one of the primary leaders of the British Anti-Corn Law League, the association working for the repeal of all barriers to free trade. These two proponents of economic freedom became fast friends, supporting each other in the cause of liberty.

Following the revolution of February 1848, Bastiat began a career in politics, serving first in the French Constituent Assembly and then in the Legislative Assembly. Having devoted most of his previous writings to demonstrating the fallacies in the arguments for protectionism, Bastiat turned his attention to a new enemy of economic liberty: socialism. In the Legislative Assembly, he delivered powerful speeches against public-works programmes, guaranteed national-employment schemes, wealth-redistribution proposals, nationalisation of industry and rationales for the expansion of bureaucratic controls over social and economic life. But because of a worsening tuberculosis that weakened his voice, he turned to the written word, producing a large number of essays detailing the absurdities in the arguments of the socialists.

He died in Rome on 24 December 1850, at the age of 49.^[2]

The Law of Liberty versus the Politics of Legalised Plunder

Bastiat is perhaps most famous for an essay entitled “The Law”, which he wrote shortly before his death in 1850. He asked, “What, then, is law?” He answered that it is to protect every individual’s natural right to his life, liberty and honestly acquired property.

The purpose of government and the law, therefore, is to prevent and punish “illegal plunder”, that is, the wrongful taking of another man’s property (including his life). Thus, the role of the law is to uphold morality and justice, because it is both immoral and unjust to violate another man’s right to his life, liberty and honestly acquired possessions. He argued, however, that the law can be “perverted”. Instead of protecting people from the plundering of others, the law can be used to serve the act of plundering, what he called a system of “legal plunder”.

Bastiat argues that there are three ways of organising the political system of a society: either the few plunder the many, the many plunder the few or attempt to plunder each other, or no one plunders anyone else, under a system of protection for everyone’s right to their own honestly acquired property. Under the rule of absolute kings, favours and privileges at the expense of others were given to those who were close to and could influence the economic policies of the monarch. It was a system of political plunder by a few at the expense of the many in society.

But under democracy, the process of political plunder has been democratised, Bastiat warns. Now all groups in society use their voting power in an attempt to lobby and influence those holding political office to grant them favours and privileges at the expense of other individuals and groups, who are also attempting to do the same. Thus, Bastiat concluded that in the democratic society, the government becomes a great fiction through which everyone tries to live at the expense of everyone else. The cumulative consequence of this is a vast waste of resources and wealth in the competition for political favours, rather than the production of useful goods and services to sell to consumers on the market.

The Sources of Legalised Plunder: Robbery and Wrong-Headed Charity

Bastiat believed that there were two primary ideas behind the establishment of legalised plunder: the first was “stupid greed”, by which Bastiat means that some desire to obtain the wealth of others that they find themselves unable to acquire through the open, honest competition of the marketplace. Hence, individuals and groups lobby those with political power for trade protections from more efficient foreign competitors, anti-competition regulations that restrict domestic rivals in their part of the market and government subsidies to cover costs of production that consumers are unwilling to pay because they do not value the goods these producers offer on the market.

The second was “false philanthropy”, by which Bastiat means those who believe that they know what is good for people and therefore want to use government to create economic outcomes different from what they might have been if people had been left alone to make their own choices and spend their own money as they thought best. Thus, some in society lobby and try to influence government policy to redistribute income and wealth by taxing one segment of society and giving it to others in that society, for example, and taxing people to undertake spending projects for public education, support for the arts, public-works projects or charity work.

Bastiat calls for the end to all forms of political and legal plunder. In its place, there should be a system of liberty in which all have the same individual rights, protected by law and government, not violated and abused by government.

What Is Seen and What Is Not Seen in Economic Understanding

Another famous essay of Frédéric Bastiat’s is “What Is Seen and What Is Not Seen”. In it, he argues that too often people see and appreciate only the immediate or “present” effect of an event or action and do not consider the longer-term or more indirect and less immediate consequences.

He considers this to be especially true when analysing various types and forms of government policy. He first explains this in terms of what he calls the “broken-window” fallacy. A young boy throws a brick through the plate-glass window of a bakery store. At first, a crowd of people form and criticise the destructiveness caused by the young vandal. But then someone in the crowd says, “Well, yes, this is a misfortune for the store owner, who has to pay to replace the broken window. But think of the extra work for the glazier and the jobs for those in the glass-window industry who will be hired and will increase their spending with the income they earn.”

But what is not seen, says Bastiat, is that the store owner and the society in general are made poorer due to this destruction. If the window had not been broken, the store owner might have spent the replacement money instead on buying a new oven to add to the production and supply of bread available to consumers in society. Or he might have bought a new coat for his wife or new shoes for his daughter, which would have generated employment and income in the clothing or shoe industries.

Either way, the store owner and society would have had the window and these other goods, all of which also would have created employment and income for those making these different things. Instead, the owner and society have to use scarce resources just to produce what they already had (a window), and, thus, economic improvement is delayed or prevented.

The Good vs the Bad Economist: The Long-Run vs the Short-Run View

The hallmark of clear-thinking economists, therefore, is whether they include and carefully weigh the longer-run consequences from various short-run policies that may be advanced:

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favourable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.”^[3]

Bastiat was a master at demonstrating the absurdities in the thinking of those who turned to the state for favours and privileges. In a famous example, he imagines the candlestick producers calling for the government to prohibit the unfair competition of a rival who offers illumination for a good part of the day for free! They want the government to command everyone to shutter their windows during the daytime to prevent the sun from supplying that free lighting they cannot match. That way, day or night, the public will have to buy their candles to provide lighting in their homes and places of business. Just think of all the extra jobs that would be created!

Bastiat’s Legacy

Historian of economic thought Sir Alexander Gray said of Bastiat, “No one has ever been quite so skilful in making the case of his antagonist look extremely foolish. Even now his most ephemeral work remains a joy to read, by reason of its wit, its merciless satire and the neatness with which he pinks his opponents”.^[4]

Those qualities led Joseph A. Schumpeter to call Bastiat “the most brilliant economic journalist who ever lived”,^[5] and Ludwig von Mises praised him as a “brilliant stylist, so that the reading of his writings affords a quite genuine pleasure. . . . His critique of all protectionist and related tendencies is even today unsurpassed. The protectionists and interventionists have not been able to advance a single word in pertinent and objective rejoinder”.^[6]

Even though more than 175 years have passed since Frédéric Bastiat’s death, there are few writers on economic topics who remain as readable or relevant to the issues of our own day. Anyone interested in the issues of liberty and prosperity can do no better than discover, or rediscover, the essays of this master of economic insight and wit.

^[1]Henry Hazlitt, Economics in One Lesson (New York: Harper & Brothers, 1946), ix.

^[2]Dean Russell, Frédéric Bastiat: Ideas and Influence (Irvington-on-Hudson, NY: Foundation for Economic Education, 1965); George Roche, Frédéric Bastiat: A Man Alone (Hillsdale, MI: Hillsdale College Press, 1977).

^[3]Frédéric Bastiat, “What Is Seen and What Is Not Seen”, in Selected Essays on Political Economy, trans. Seymour Cain, ed. George B. de Huszar (Princeton, NJ: D. Van Nostrand, 1964), 1.

^[4]Alexander Gray, The Development of Economic Doctrine: An Introductory Survey (London: Longmans, Green, 1931), 244–45.

^[5]Joseph A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), 500.

^[6]Ludwig von Mises, Liberalism: The Classical Tradition (Indianapolis, IN: Liberty Fund, 2005; first published 1927), 155.

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The Government tells us that UK electricity prices are amongst the highest in the world because our electricity is priced from gas-generated power on many days and this is now expensive. It claims that as we add more and more wind and solar to the grid, so the price of electricity will come down, replacing the dear gas-generated energy. This has not happened so far, with our electricity prices climbing as we add large amounts of new renewable power.

The Government’s explanation also leaves open the question of why it does not change the pricing arrangements if the cause is as it describes. The result of days of shortage of wind, when gas is a larger part of the mix and also pushes up the prices of every other type of generation, could presumably be adjusted by different pricing methods.

How can I put this tactfully to the Government? It is likely to be dearer to rely on increasing amounts of renewable power when you have to allow for all the capital and running costs of a duplicate back-up system for when the wind does not blow. Whilst it is true that the costs of the gas fuel can be high when world markets are disrupted by wars, the costs of the wind farms do not stop with just the costs of putting in the turbines and blades.

The investor in new facilities would need to find the high up-front capital costs and the debt service. They would need to pay for maintenance and accept a shorter active life for the wind farm than for the gas power station. They would need to pay a gas power station to be on standby for days when the wind did not blow.

They would have to pay premium prices for the gas power when they did need to rely on a gas power station. The gas power station would have to charge more as it stands idle for long periods of time and so needs a higher price when it can run. By definition it is likely to run most when gas prices are dearest, as it runs when all else has failed in the system, leaving us short of energy.

It is true just building a new gas power station would also have a high capital cost and also have higher running costs as it needs to buy in gas. It is difficult for renewable power to be cheaper all the time there has to be a duplicate gas system on standby as well.

The extra costs for the country do not end with the issue of capital cost and running costs of the different generators. The renewables system needs considerably more grid capacity. Much of the wind power is generated many miles away from the electricity consumers, so the grid needs to be enlarged.

In order to keep the system balanced when more renewables are destabilising the grid, the operator needs to add expensive big investments to create inertia to avoid problems with system stability. It may need, as a cheaper answer, old gas power stations to keep spinning without the boiler. There are blackouts if the system is driven outside its safe power ranges.

It is true the country could move to battery or hydro storage of power, so the system can store electricity when there is plenty of wind and run down the stores when the wind drops. All this extra storage capacity has a capital cost.

There are losses of electricity from storage and issues about how much storage is needed. The technology of long-duration storage is still developing. A longish period of high pressure with little wind, especially in a cold winter with high demand for power, could stretch the system and would require major storage investment to be safe.

The Government, beneath the gas soundbites, is at last thinking through why the electricity price climbs as more renewables are added, and why there are new concerns about system stability. The Chancellor has said it makes no sense to add more renewables all the time there is a shortage of grid capacity to send the power to the customers. The energy minister has confirmed there is too much wind electricity generated in Scotland much of the time, leading the system to have to pay large sums to wind producers not to produce.

It also has to pay large sums to gas generators in southern England, where more of the power is needed, to switch on to see them over surges in demand or during periods of low wind. Data from the National Energy System Operator (NESO), confirmed that, in 2024-25, £1.5bn was paid to level out wind and gas power to get the electricity to the right place. Some forecast this sum surging to £8bn by 2030 as we become more dependent on wind.

The grid lacks pylons and power lines to bring enough of the Scottish power south. It also needs to add inertia to its system to keep it stable, which requires investment in synchronous condensers and grid-forming inverters.

In the second quarter of 2026 the electricity supplied cost £333 out of a total bill of £875 for a typical household, according to Ofgem. Transmission of the power and distribution to the home cost £199. The costs of balancing renewables and gas were £42 and the costs of low-carbon policies were £56. VAT added £42 and company profit £22. Other costs accounted for the rest.

This reveals that the UK has chosen an expensive way of planning its energy transition. It still has an ageing grid with the need for updating to handle the renewables and to cope with higher overall demand. This will prove costly and may add another £200 to bills by 2030 if the work proceeds in a timely way.

The UK has also unwisely decided to run down its own gas supplies, preventing new exploration and delaying production of proven reserves. As a result it has to import more liquefied natural gas (LNG) when it needs more gas to fuel its power stations. At times of world market stress and shortage this is particularly expensive.

LNG is always likely to be dearer than piped gas from a local field owing to all the additional costs – and CO₂generation – from liquefying, cooling, transport and regasifying the product. More local gas could be secured under long-term contracts with some smoothing of spot price market volatility.

Ministers are desperately looking at all the items on a household bill to see what more they could do to try to reverse the remorseless upwards trend. They have been transferring some policy costs of transition to general taxation and have now begun to think about limiting the rise in payments to wind farms to abate their output.

This in turn leads to large extra spending on grid improvement and expansion. There is a particular pinch point in getting excess wind energy out of Scotland heading south to the large markets of London and the south-east. Meanwhile, previous generous guaranteed prices for wind and solar power keep average costs high and have led to the Electricity Generator Levy on generators earning exceptional revenues from high wholesale prices.

The price of domestic electricity is four times the price of gas based on the cost per kilowatt hour. Advocates of heat pumps say that their much greater efficiency can remove the cost disadvantage. It does not remove most of it for electric heaters compared to gas boilers to heat a home. This has made people reluctant to switch from gas central heating to electricity, which in turn has avoided a big additional build-up in power demand which the present electricity system could not accommodate without more grid.

All the renewables come at a high total cost and will be dearer than the older fossil-fuel generators, which have to close their plants prematurely. All these renewables also come with CO₂ produced in the making of the turbines, solar panels and the shipping to bring them to the UK.

It is good to see the Government rethinking the speed and nature of the energy transition. It is learning the hard way that some of the policies adopted in the name of net zero increase world CO₂ output, whilst failing to lower UK electricity prices. It also needs to be concerned about the loss of supply security with increasing dependence on imports and with grid management issues with so much renewable interruptible power in the mix. Keeping the lights on should be its first duty.

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Nonetheless, the 8-1 vote was surprisingly hawkish, with the sole dissenter (Catherine Mann) preferring a larger increase, to 4.25 per cent.

This hawkishness can largely be explained by the Bank staff’s new economic forecasts, which surely made a rate increase inevitable. In particular, CPI inflation is now expected to rise to around 5 per cent by the middle of next year.

This may be too pessimistic, depending especially on what happens to energy prices. But there is no doubt that the risks relative to the MPC’s 2 per cent inflation target are firmly skewed to the upside.

MPC members rightly emphasised the importance of “risk management” and “credibility”. It is better to send a clear signal by getting ahead of the inflation risks now, rather than having to respond with even bigger rate increases later.

Inflation has been above the 2 per cent target for most of the last five years, and an increase to at least 4 per cent is baked in for early in the new year. The argument that policymakers should look past “temporary shocks” is surely worn out by now.

Nobody (least of all the Bank) is suggesting that higher UK interest rates will have any impact on global commodity prices. But they could help to prevent an energy-led jump in headline inflation from becoming embedded in the economy, especially when underlying cost and price pressures are strong too.

Economic activity has also been more resilient than expected, and the labour market appears to be stabilising. One or two rate rises are therefore unlikely to trigger a recession, especially as mortgage rates and the cost of government borrowing are already pricing in bigger increases.

This week’s rate hike is also not necessarily the start of a prolonged hiking cycle. With a bit of luck, the Bank of England will not have to raise interest rates much further. And with a lot of luck, especially on energy prices, this week’s hike could still be a case of “one and done”.

In the meantime, there is still little evidence that higher energy prices are having large second-round effects either on inflation expectations or on wage pressures. Money growth also remains subdued.

But while these are good arguments for why interest rates should not have to rise as far as some fear, they were not good enough to keep them on hold this week. Inflation expectations in particular were already too high for comfort, and cannot be allowed to take off.

Borrowers are still having to pay the price for years of government policy failures which have added to costs, including labour and housing as well as energy, and held back productivity. In turn, this has limited the ability of the economy to grow more quickly without generating additional inflation.

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On 3 November, Americans went to the polls for the 2026 midterm elections, which take place halfway through a president’s four-year term. This year, all 435 seats in the House of Representatives were contested, alongside 35 of the Senate’s 100 seats. Voters in 36 states also elected governors. This includes the California gubernatorial race, in which British-born Republican Steve Hilton lost to a Democrat. Hilton’s wife, Rachel Whetstone, happens to be the granddaughter of Antony Fisher, who founded the Institute of Economic Affairs.

The midterms saw some major upsets. In Texas, Democrat James Talarico defeated Republican Ken Paxton, marking the first time Democrats had won a Senate election in the state in 38 years. In Kansas, Adam Hamilton made history by becoming the first Democrat to win a Senate seat there since 1932. Meanwhile, in Maine, five-term Republican incumbent Susan Collins lost to Democrat Troy Jackson after nearly three decades in the Senate.

Democrats have now won control of both the House and the Senate, marking a dramatic reversal of political fortunes and giving the opposition party considerable power to obstruct the president’s legislative agenda.

So, how did the “New Right”, a movement known for its combative online culture, “America First” principles, mass deportations and protectionism, fail to deliver prosperity for the American people at such a scale that the electorate wholeheartedly rejected it the first chance they got? If you ask those of us on the libertarian side of the political aisle, the answer seems obvious. On the campaign trail, President Trump insisted voters pretend he is on the ballot, and voters listened.

Tariffs were one of President Trump’s flagship policies, and he claimed America would see a “golden age” in the economy from the boost to manufacturing. Trump gleefully announced a Minnesota company’s plan to build a $15bn steel mill in Iowa, promising more manufacturing jobs. Instead, total manufacturing employment has fallen by 13,000 since the month before the tariffs were introduced. An NBC News exit poll of midterm voters found that 66 per cent think Trump’s tariff policies have hurt the national economy.

The war in Iran was also deeply unpopular, especially with the MAGA base. In his 2024 victory speech, President Trump made a promise: “I’m not going to start a war. I’m going to stop wars.” Many people voted for the Republicans because they were tired of American tax dollars being sent to fight in conflicts abroad. Trump and Vance ran on an explicit peace ticket.

What has ensued, of course, is a long and expensive war with Iran, with the cost already exceeding $47bn, according to a Pentagon estimate. Indeed, the NBC News exit poll found that 63 per cent of voters thought that taking military action against Iran was the wrong decision.

Corruption was also a key issue for voters. According to a CNBC survey, 36 per cent of respondents thought that government corruption was the most important issue facing America. Of course, the larger the government gets, the more opportunities there are for corruption.

A total of 15 companies backed by investment firms affiliated with the president’s sons Donald Trump Jr. and Eric Trump have received about $3.2bn in federal contracts, loans and investments, most after Trump returned to office. It has been reported that the Trump family’s business interests have earned billions since he returned to office.

Much of the administration’s agenda has also centred on the president personally. He renamed the Kennedy Center after himself, among other things. He decided he wanted a 250-foot triumphal arch built in Washington DC, which he later decided would be a “Military Complex” with “large numbers of drones, plus Snipers”.

In his final speech prior to the midterms, Trump spoke primarily about projects in DC, including the White House ballroom project and the reflecting pool (which was drained and refilled after botched attempts to repaint it). It is easy to see why many voters felt the president was out of touch.

There is also the issue of immigration. Trump undoubtedly had a mandate to tackle illegal immigration, having made “mass deportations” a central promise of his 2024 campaign. But support for enforcing immigration laws does not necessarily translate into support for the methods his administration has employed.

The fatal shootings of Renee Good and Alex Pretti by federal immigration agents in Minneapolis became major flashpoints, particularly after footage of the incidents circulated widely. Polling found that 62 per cent of voters thought the shooting of Pretti was unjustified, while 63 per cent disapproved of the way Immigration and Customs Enforcement (ICE) was enforcing immigration laws.

Even within Trump’s own party, there was growing unease. Texas Governor Greg Abbott, a Republican ally of the president, called on the administration to recalibrate its approach, arguing that immigration agents needed to remove people without creating the conflict and disruption communities were experiencing.

More than 500 American citizens were arrested by ICE under Trump’s presidency, some of whom were detained and held for days. For Hispanic Americans in particular, many of whom voted for Trump, “immigration policy, deportations, and ICE” were what determined their vote for the Democrats.

So, what can Britain learn from the short life of America’s “New Right”?

Winning an election on a promise to shake up the establishment is one thing; delivering a country that is more prosperous, freer and better governed is quite another. Trump’s New Right promised to put America first, but its economic nationalism has meant tariffs on American consumers, an expensive foreign war and a government increasingly entangled with the president’s own business interests. Its immigration crackdown has also demonstrated that even voters who want stronger borders have limits when it comes to how those policies are enforced, and I’d argue the British have even less tolerance for needless violence.

If British politicians want to offer something genuinely different, they should focus less on importing what critics call Trump’s personality cult and more on the principles that actually make countries prosperous: free trade and individual liberty. Otherwise, they risk discovering that the New Right’s shelf life is considerably shorter than it imagined.

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John Healey presented his first Budget last Wednesday, accompanied by an Office for Budget Responsibility (OBR) forecast that runs to 2031-32 for the first time. That forecast was finalised in March, before the conflict in the Middle East pushed up prices and borrowing costs. Any headroom the Chancellor found by assuming faster productivity growth is a tax rise postponed, and households will pay it when the forecast misses.

The Budget’s most revealing choice, however, concerns lending rather than taxing. The National Wealth Fund, the state-backed investor that ministers want to pick winners in sectors such as AI, defence and clean energy, has been allocated a further £15.4bn. The British Business Bank gets another £5bn. Together, the two lenders receive £20.4bn of borrowed money, which the OBR estimates will add £3.4bn to debt by 2031-32. Yet because a loan counts as an asset, the debt rule largely ignores it. A rule designed to restrain ministers instead lets them carry on borrowing to lend.

This comes on top of a dramatic expansion already under way. The amount of taxpayers’ money that UK state-owned lenders can put at risk has more than doubled this Parliament, from £106.8bn to £229.3bn, with most of the rise stemming from earlier decisions.

The National Wealth Fund’s track record hardly justifies such confidence. It has made a pre-tax loss in each of the last four years: £152.2m in 2024-25 and £67.5m in 2025-26. Even the improvement in the latest year is flattered by a single deal. Without its biggest loan, to the Sizewell C nuclear power station, the 2025-26 loss would have been £144.4m.

UK state bodies have a poor record of picking winners, and this Budget doubles down on that failure. Industrial policy typically lacks clear measures of success, making waste hard to spot, especially when the organisation that makes the investments is also the one that judges whether they have added value. Exempting state lending from the debt rule all but guarantees more of it, whatever the quality.

The deeper problem is one of knowledge and incentives. Officials at a state lender do not risk their own money, face no real threat of bankruptcy and answer to political priorities as much as commercial ones. A private investor who backs the wrong firm loses capital and learns quickly; a public body that does the same can simply be topped up at the next fiscal event. Nor is it obvious what problem the extra cash solves. AI, defence and clean energy already attract substantial private investment. Where a project is genuinely viable, private finance will usually fund it. Where it is not, state lending simply shifts the risk onto taxpayers while crowding out capital that might have been better deployed elsewhere.

There is one welcome decision in the Budget: the cut in capital gains tax for founders to 10 per cent on their first £10m of gains. Founders can now keep more of the proceeds of their success to reinvest, and private investors allocating their own money make better decisions than officials allocating taxpayers’.

This measure points to a better path. The Budget pulls in two directions at once, trusting entrepreneurs with their own gains on the one hand while handing ever larger sums to state lenders on the other. If the Government wants growth, it should follow the logic of its capital gains reform rather than its lending spree: lower the tax burden on investment, remove the barriers that hold it back, and let the market, not ministers, decide where capital goes.

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“I don’t think employers are working people.” When Emma Reynolds, Chief Secretary to the Treasury (effectively Britain’s deputy finance minister), uttered those words in a recent television interview, her words were widely shared online. She was given two chances by her interviewer, Camilla Tominey, to back down – but she doubled down instead. “The distinction I am drawing is between employees and employers,” she said, while acknowledging that she employs a cleaner.

It is a fascinating glimpse into old-fashioned, almost Marxist, view of the economy. On this view, it seems, we are back in the nineteenth century when top-hatted plutocrats sit back and enrich themselves off the back of hard-toiling employees. You are either one or the other.

Except it was not true then either. At the weekend I happened to be reading about Sir Amos Nelson, a man who went to work in a cotton mill part time at the age of 8 (full time from 13) and ended up the stupendously wealthy owner of a large country estate in Yorkshire on which he built a brand-new stately home, Gledstone Hall. Was he not a “working person”?

My point here is not political point scoring, however. It is to suggest a more valuable distinction: whether you have skin in the game. Both employers and employees can be great if they really care what happens to their organisation, or really useless if they don’t.

A friend once asked about my experience of leaving employment to work for myself as a freelance writer. A few weeks later he messaged me: “You never warned me that when you work for yourself, your boss is a bastard.” The most driven and motivated people I know are self-employed sole traders, the founders of their own businesses.

That’s why Marc Andreessen, the founder of Netscape and star venture capitalist, prefers to back founders rather than hired MBAs. He refers to the 1940s book The Machiavellians by James Burnham, which saw the world of “bourgeois capitalists” who built their own businesses – Henry Ford and co – being replaced by the world of managerialists trained and hired to run firms.

Andreessen thinks management as a skill set that can be used to run many different kinds of business, in the public as well as the private sector, is the cause of many of our problems. “If there is one dominant theme in the last 30 years in the west it is that managers generally, writ large, are not doing a great job.”

Imagine Elon Musk’s firms run by hired Harvard or Stanford MBAs. They would never have dared try half the outrageous things he has pulled off.

The story of Mike Lynch, founder of the software firm Autonomy, exemplifies the issue in two ways. As recounted in Katie Prescott’s excellent book The Curious Case of Mike Lynch, published in November last year, Autonomy was a brilliantly successful company built by a founder with a devout obsession to work hard and grow the firm, admittedly accompanied by sometimes tyrannical behaviour towards others in the company.

But when Autonomy floated on the stock market, different incentives began to dominate. The pressure to keep growing the company’s share price turned Lynch and his colleagues into managerialists who rushed to acquire other firms and sign up clients at any cost to please market analysts. Soon the company was cutting corners at best, or, according to the US courts that convicted its former finance director, booking revenue improperly at worst.

Whether that amounted to fraud, let alone justified the criminal persecution Lynch received in the United States after Hewlett Packard vastly overpaid to buy Autonomy, is a different question. Lynch was eventually acquitted of criminal charges before dying in a freak yacht accident, but Hewlett Packard has been awarded £920m in damages against his estate to compensate it for the embarrassment of having not done its homework before the deal.

My point is that both firms, Autonomy and Hewlett Packard, were ruined by managerialism losing touch with founderism.

The world needs more founders. They drive change, disrupt monopoly, challenge stagnation and make the future happen. Some, like Elizabeth Holmes of Theranos, poured their entrepreneurial energy into fraud, but most get rich by improving the lives of their customers. From Thomas Newcomen to Andrew Carnegie to Elon Musk, they drive down prices for all.

So here’s my question. Are there enough potential founders out there at any time, or could we do with flooding the market – and stifling the supply of managers? I am not generally a fan of the great man theory of history. I think that if the likes of Gates and Jobs, Bezos and Zuckerberg did not exist, other names would still have come forward.

But Musk gives me pause, I admit. The world of space, of cars, of tunnels, of social media would look very different if he had not existed. And it must be true that an economy which incentivises founders at the expense of managers (in both the private and public sectors) would be one that grew faster, innovated more richly and solved more problems.

So yes, let’s at least give it a try: see what happens if we incentivise more working people to start their own businesses. Just as every common soldier was said by Napoleon to carry a marshal’s baton in his knapsack, so perhaps every pie-shop owner carries a tech mogul’s black T-shirt in his tote bag.

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“For the average person, all problems date to World War II; for the more informed, to World War I; for the genuine historian, to the French Revolution”, writes the philosopher Erik von Kuehnelt-Leddihn in Leftism Revisited (1990). I would add a line to that: it all starts with the French Enlightenment.

There are two ideals of the Enlightenment: the Scottish and the French. One could add other traditions, such as the German one, but these two explain what Thomas Sowell called a “conflict of visions”, one that shaped modern political thinking.

The Scottish tradition teaches us that institutions are not the product of human design, but of human action. Adam Ferguson, one of the giants of the Scottish Enlightenment, wrote that “nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design”. This idea influenced Hayek’s notion of spontaneous order.

But the French Enlightenment had a different view of human institutions. In Bourgeois Equality, the final volume of her trilogy The Bourgeois Era, Deirdre McCloskey writes: “The French Enlightenment, by contrast, admired rationality extravagantly and therefore the rule of experts, a rule which Adam Smith so deprecated.” In this tradition, institutions are the product of human design. The conclusion that follows is that, if institutions can be easily designed, they can also be easily changed to achieve the vision of planners.

This difference in thinking is reflected in the distinct traditions of common law and civil law. The Economist magazine wrote: “Hayek argued that common law is a better basis for a legal system than civil law for similar reasons that markets are a better foundation for an economy than central planning.” The decentralised knowledge of different judiciaries, together with the embedded knowledge contained in previous court cases, is superior to the centralised system of civil law.

But this distinction also manifests itself in political traditions. The British system is one of the greatest models of how to combine change with tradition. And that is the main challenge of any political order. As the famous legal scholar Aharon Barak wrote: “Stability without change is decline. Change without stability is anarchy.”

The art of a political system lies in finding the middle ground, and France’s problem is that it is particularly bad at it. Since the French Revolution, France has followed a tradition of wholesale change, transforming institutions, laws and class relations all at once.

That is the weakness of revolutionaries. They erase the blackboard of history, and, as time goes by, rewrite the old, familiar lessons with shaking hands.

Tradition is not what Karl Marx described as “a nightmare on the brains of the living”. Rather, it is the accumulated knowledge of generations: all the trials and errors that have helped produce the civilisation we have today. And, as I stated at the beginning, no single person designed it, nor can anyone design it. Consider language: who designed the English language?

The Newbolt Report on The Teaching of English in England (1921) concluded: “[It is] impossible at the present juncture to teach English grammar in the schools for the simple reason that no one knows exactly what it is.”

Who remembers Esperanto? Designed by L. L. Zamenhof as a simple international second language, free of linguistic hierarchies, it was meant to be spoken by the whole world. It did not succeed, just as the French Revolution did not succeed. You cannot design things that are inherently spontaneous and the product of centuries of evolution.

But France has not learned this lesson. Protesters in the streets still demand a state that does more, not less. They want even more money to be distributed by a state whose spending, as a share of GDP, is among the highest in the developed world. But what is pushing France’s economic model to the brink of collapse, with government spending at 57 per cent of GDP and borrowing costs at a 24-year high, is precisely the French tradition of thinking that the state should solve all problems.

That is the difference Tocqueville saw, in Democracy in America, between the United States and France. In France, everyone looked to the government to solve their problems, while in the United States, scepticism towards government overreach empowered citizens to solve their own. It was the power of decentralised communities, solving their own problems and working together through a free-enterprise system, rather than looking for the next technocrat or general promising to solve all their problems.

This tradition also helps to explain what we have seen in France’s second-most populous city, Marseille, which has become one of the centres of the protests of October 2026.

President Emmanuel Macron had his own answer for Marseille: more money from Paris. In September 2021, Mr Macron announced an ambitious plan, Marseille en Grand, which promised €5bn in state spending to improve the city’s public services.

In October 2024, as RTL reported, France’s Court of Auditors published a scathing assessment, saying that the government had spent only 1.31 per cent of the funds announced. France is once again learning the hard way that you cannot simply throw money at your problems, especially when it is other people’s money.

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In Europe, there is a widespread misconception that the United States is a country of “pure capitalism” and that there is no such thing as an American welfare state. This perception is fundamentally wrong, and anyone who holds it will be surprised by much of what follows.

There are 100 federal programmes in the US alone that each distribute more than $100m a year, plus countless programmes at state and local level, as former US Senator Phil Gramm and economists Robert Ekelund and John Early write in their excellent book The Myth of American Inequality.^[1]

At the same time, there are federal, state and local taxes, resulting in an unmanageable tangle of tax payments on the one hand and transfer payments on the other. The absurd result is that the typical middle-class household receives almost as much in government transfer payments ($17,850) as it pays in taxes ($19,314).^[2]

Of course, the bureaucracy that runs all of this swallows up a massive amount of money. Many middle-class Americans sense that there is something wrong with the system, which is largely financed by the top 20 per cent of income earners, who have an average household income of $295,904 but pay taxes of almost $107,000.^[3] This refutes the popular belief that America’s top earners get off lightly when it comes to paying taxes.

No. More than one in every three dollars earned by these households ends up in the government’s coffers. And the top 20 per cent of households pay more than 60 per cent of all taxes. If you look at federal income taxes alone, the top 20 per cent pay 83 per cent of the total income tax bill!^[4]

So, the system fleeces higher earners and discourages the middle class by removing any financial incentive to work.

And perhaps the most absurd aspect of all this is that it has done little to help people escape poverty on their own. Since the “War on Poverty” began in the US in the mid-1960s, with government programmes constantly ballooning in size and scope, the share of Americans unable to support themselves without government help has barely changed. In the two decades before the “War on Poverty” began, poverty in the US had steadily declined from 32.1 per cent to 14.7 per cent.^[5]

One of the welfare state’s favourite areas of intervention in every country is housing construction and housing assistance for people on lower incomes. This is the subject of Howard A. Husock’s 2025 book, The Projects: A New History of Public Housing.

Today, no fewer than 1.6 million Americans live in 886,000 public housing units.^[6] There used to be far more: between 1937 and the mid-1980s, 1.5 million units were built in the “Projects”, most of them (1 million) between 1950 and 1976.^[7] Today, a total of 6.7 million Americans live either in Projects or in a “voucher household”.^[8]

Hundreds of thousands of these units have, however, been demolished over the past decades. Today, the Projects are socially troubled areas with high levels of crime. “An analysis of New York police data has found that although residents of public housing make up only 4 percent of New York City’s population, an estimated 20 percent of violent crime, prominently shootings, occur within one hundred feet of public housing.”^[9]

The residents of the Projects are poor: only 3 per cent of tenants are married couples with children, and the proportion of Black residents, at 42 per cent, is more than three times as high as in the population as a whole.^[10]

Lee Rainwater, a Harvard sociologist who studied the Pruitt-Igoe project in St Louis, quoted residents in his study based on interviews: “There’s too much broken glass and trash outside. The elevators are dangerous. The elevators don’t stop at every floor, so many people have to walk up or down to get to their apartments. There are mice and cockroaches in the building.” Violence and vandalism were commonplace.^[11]

Yet it had all begun very differently. The Projects were intended to realise utopian concepts of better housing: it was no longer the market but government planning and administration that would determine how people lived.

According to the author, it all began as early as 1934 with the “Housing Exhibition of the City of New York” in the city’s Museum of Modern Art. In a book published for the occasion, America Can’t Have Housing, the authors made clear that this was not merely about new architecture and housing: “It discusses the radical changes which must be made in our social philosophy and public policy in order to improve the housing condition of the masses of the American people.”^[12]

The central thesis was that the market had failed when it came to housing.^[13] The volume accompanying the exhibition stated: “Nowhere has laissez-faire failed more dismally than in the field of shelter for the low-income groups. A national housing policy will not make much progress with us until it is generally conceded that housing for these groups never has been and never will be produced for profit.”^[14]

The proponents of these ideas agreed that the market had failed in the housing sector. One of the most important initiators, Catherine Bauer, played a central role in bringing about the Housing Act of 1937 and was affectionately referred to as “Communist Catherine”. Another, Philip Johnson, admired Adolf Hitler, attended the Nazi Party rally in Nuremberg and supported the antisemitic radio preacher Father Coughlin.^[15]

Bauer wrote: “Modern housing means complete new communities planned entirely from the point of view of fullest usefulness and long-time amenity – instead of chaotic subdivision and the erection of dwellings designed only to bring quick speculative profits. It means that rentals must be geared to the capacity to pay and not to the ‘market’.”^[16] Her book Modern Housing was illustrated with photographs of European projects, including examples from Hitler’s Germany and Stalin’s Soviet Union.^[17]

The visionaries were without exception intellectuals who believed that a perfect society and perfect housing could be planned at a desk, with their own aesthetic sensibilities serving as the guiding principle. It never occurred to them to involve the people for whom the Projects were intended. “Bauer et al would be the ones choosing the architects, the locations, and the modernist housing style. It is hard to see the process as anything else but one of elites – of different social class and even religion – deciding how the working class was meant to live.”^[18]

It was not voters or builders who had demanded the concept of the Projects, but “essayists and ambitious architects”.^[19] The conviction they all shared was that capitalism had failed in the housing sector and that “a marriage between government and modernist architects and planners could create a new and better kind of city, one that would uplift its residents in campus-style oases of towers set in parks”.^[20]

Le Corbusier, one of the most influential intellectual pioneers of the new movement, described the city of the future in his 1924 book Urbanisme, first published in English in 1929 as The City of Tomorrow. It was a city in which “the plan must rule”, with everything organised by the state and designed by architects who followed his vision.^[21]

This way of thinking is typical of the constructivism repeatedly criticised by Friedrich August von Hayek, namely the idea that a society and its economic order can be consciously shaped according to a rationally devised plan. Hayek criticised this pretence of knowledge because no individual and no central planning authority possesses the dispersed knowledge of millions of people that would be necessary to manage a complex society.

Many successful institutions, such as the market, law or language, are not the result of conscious planning but have developed through a long evolutionary process without anyone having centrally designed them.

The prerequisite for creating something entirely new and utopian was, of course, the elimination – indeed, the violent and brutal elimination – of everything that had developed organically. This applied in particular to the structures referred to as “slums”.

They had to make way even when their residents resisted and when there was not enough room in the Projects that replaced them to accommodate everyone. Time and again, residents resisted having their homes razed to the ground and being forced to move into the new Projects.^[22] In some cases, for example in Detroit, votes were held on whether the neighbourhoods should be destroyed, but opponents won more often than supporters.^[23]

Indeed, living conditions in many of the neighbourhoods described as slums were terrible: overcrowded, dark and a reflection of social problems. But they could also be described more positively as spontaneously evolved social structures populated by hardworking immigrants and small-business owners.

The author writes about one neighbourhood in New York: “Theirs was an unplanned, chaotic and spontaneous place, certainly with flaws. Yet it is hard to be at all certain that residents and business owners would, if asked, through translators, have agreed to be relocated to a high-rise tower set in a ‘park’ without any cross streets and all without any stores or businesses. They were certainly not surveyed as to their opinions.”^[24]

So-called “slum clearance” meant the violent destruction of spontaneously evolved structures, usually without consulting the tenants and owners whose property was expropriated. And it was not just housing that was affected. In one of the demolished slums, in addition to more than 10,000 dwellings, there were 137 food stores, 118 bars and restaurants, 86 barber shops and beauty parlours, 80 churches and missions, 24 dry cleaners and 6 funeral homes.^[25]

Yes, the slums were overcrowded and much was wrong with them. “But they teemed with life: with apartments above stores, with churches and synagogues, and newspapers and barber shops. They buzzed with what we call civil society: the social clubs and charitable groups born through the efforts of residents and neighbors.” Since most slums were predominantly inhabited by Black Americans, resistance emerged under the slogan “Slum clearance is Negro clearance”.^[26]

What replaced the demolished slums initially seemed better. In the early years, when the developments were new, they were usually clean and attractive, and many residents enjoyed living there. But their character changed increasingly over time. Originally conceived for working-class families on average incomes, they increasingly became poorhouses and centres of social problems.

The rents were insufficient to cover maintenance. Government administration was hopelessly overwhelmed and incapable, and the problems grew worse year after year. Bauer, the most prominent intellectual pioneer of the housing and social programme known as the Projects, eventually acknowledged its failure herself: “Life in the usual public housing project just is not the way most American families want to live. Nor does it reflect our accepted values as to the way people should live.”^[27]

In 1973, the then US President Richard Nixon stated: “Leaders of all political persuasions and from all levels of government have given a great deal of thought in recent years to the problem of low-income housing. Many of them agree that the federally subsidized housing approach has failed.”^[28]

In many respects, the new ghettos were even worse than the old ones. “In the projects, there were, by design, no locally owned businesses or commercial streets. No extra income could be (legally) realized by renting a room to someone who might otherwise be without shelter.”^[29] There was no longer any private home ownership here; renting was the only option.

The Projects were intended to replace the slums, but in reality, after their promising beginnings, they themselves became slums, often worse than those that had been demolished to make way for them. Following Nixon’s moratorium in 1973, other concepts increasingly came to the fore. Hundreds of thousands of units were demolished, and the new fashion was “mixed communities”, which sounded good on paper but did not correspond to what many Americans wanted.

The voucher system also creates perverse incentives, since rent is calculated as a percentage of income. This means that as income rises, tenants have to pay higher rents, leaving many residents with little motivation to earn more. Maintaining the completely run-down Projects was often even more expensive (per square metre) than building a new average-sized house.^[30]

The problems of government-organised housing were similar to those in East Germany. In 1989, when East Germany was nearing its end, 65 per cent of all homes – including the 3.2 million built after the war – were still heated by coal stoves.

Twenty-four per cent had no private toilet and 18 per cent had no bathroom. The provision of lifts, balconies and modern kitchens was even more limited. Forty per cent of blocks of flats were considered severely damaged, and 11 per cent were completely uninhabitable.

The author shows that one government-run system was replaced by another, but the new ideas failed as well. What remained unquestioned was the constructivist and statist approach, according to which the market had supposedly failed in the housing sector and government concepts and plans, often devised by well-meaning intellectuals, were therefore the solution.

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^[1]Phil Gramm, Robert Ekelund and John Early, The Myth of American Inequality: How Government Biases Policy Debate (Rowman & Littlefield, 2022), p. 14.

^[2]Gramm, Ekelund and Early, The Myth of American Inequality, p. 29.

^[3]Gramm, Ekelund and Early, The Myth of American Inequality, p. 29.

^[4]Gramm, Ekelund and Early, The Myth of American Inequality, p. 26.

^[5]Gramm, Ekelund and Early, The Myth of American Inequality, p. 35.

^[6]Howard A. Husock, The Projects: A New History of Public Housing (New York University Press, 2025), p. 4.

^[7]Husock, The Projects, p. 37.

^[8]Husock, The Projects, p. 146.

^[9]Husock, The Projects, p. 1.

^[10]Husock, The Projects, p. 1.

^[11]Husock, The Projects, p. 106.

^[12]Quoted in Husock, The Projects, p. 11.

^[13]Husock, The Projects, p. 19.

^[14]Quoted in Husock, The Projects, p. 19.

^[15]Husock, The Projects, p. 40.

^[16]Quoted in Husock, The Projects, p. 28.

^[17]Husock, The Projects, p. 34.

^[18]Husock, The Projects, p. 65.

^[19]Husock, The Projects, p. 7.

^[20]Husock, The Projects, p. 15.

^[21]Quoted in Husock, The Projects, p. 27.

^[22]Husock, The Projects, p. 49.

^[23]Husock, The Projects, pp. 92–93.

^[24]Husock, The Projects, p. 64.

^[25]Husock, The Projects, p. 79.

^[26]Husock, The Projects, p. 94.

^[27]Quoted in Husock, The Projects, p. 114.

^[28]Quoted in Husock, The Projects, p. 105.

^[29]Husock, The Projects, p. 99.

^[30]Husock, The Projects, p. 171.

Britain’s public finances have deteriorated since March. The Government now faces even higher borrowing and debt interest. I compared the Office for Budget Responsibility’s March and October 2026 forecasts to better understand how the Government’s underlying economic assumptions have changed. Here are five key observations.

1. Borrowing falls more slowly

Compared with its March forecast, the OBR now expects borrowing to be £17.7bn higher in 2026-27, £15.5bn higher in 2027-28 and £13.5bn higher in 2028-29. That is £46.7bn more borrowing over three years than was forecast just seven months ago.

There is still an annual improvement in public sector borrowing, but from a worse starting position. Most of the upward revision comes from changes in the underlying forecast, but some increases can be attributed to new policy decisions. Lesson one is that public finances are hard to fix if the Government is tempted to keep making new spending commitments.

2. Growth predictions are down

The most interesting discovery is that the OBR has cut its 2027 growth forecast from 1.6 per cent to 1 per cent, with the economy’s projected size in 2029 staying around 0.2 per cent below March’s forecast.

Whilst the OBR’s forecast was finalised before the latest GDP figures were published, it’s important to note that weak growth means that the large national debt becomes more difficult to manage in the short and medium term.

3. Real wages are poised to decline

Real wage growth in 2026 is now projected to be just 0.6 per cent compared to the 1.1 per cent prediction made in the March forecast. To make things worse, real wages are set to decline in 2027 and then flatline between 2028 and the end of the Parliament.

Current policies, such as successive minimum wage increases and the Employment Rights Act 2025, have created a very cool labour market, and now living standards are predicted to stagnate for the foreseeable future. Youth unemployment is at its highest since 2011, mirroring the aftermath of the Great Financial Crisis. The biggest lesson to remember here is that a highly inflexible labour market could delay economic recovery (assuming that even is on the horizon).

4. Debt interest is a hard constraint on future governments

Britain is currently caught in a vicious “chain” in which debt interest crowds out Government spending, which, in turn, crowds out private spending. This pincer movement will continue to erode consumer wellbeing until we get serious about fiscal consolidation.

The worst-case scenario is a debt default forcing the country into a very harsh consolidation programme. Outside that scenario, this is a question of how abrupt and how harsh we want balancing the books to be, with the observation that the earlier we act, the less disruptive this will be.

5. The current Budget surplus is set to arrive later

Perhaps the one fact binding together all previous Budgets is that each new Budget delays balancing the books by one more year. Most Budgets also delay unfreezing various tax thresholds and either add or take twopence off a pint of beer in the pub.

Gilt markets are uneasy about British debt in particular because Britain has failed to commit to a credible programme of fiscal discipline. What discipline there is has been incidental rather than planned, and given that successive governments have pushed back the promised current Budget surplus by a year at every fiscal event, the gilt markets understandably refuse to believe it will ever happen.

Given the pressure that growing debt interest puts on government spending, and a Government willing to spend more, it’s no wonder that other think tanks have also predicted painful years ahead.

The most distressing thing about the chart below is that – much like the gilt markets – I find it hard to believe a surplus will be achieved at any point by the end of this Parliament. Happy to be proved wrong, though.

All charts sourced from: OBR, Economic and fiscal outlook, March and October 2026

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