John Redwood is a former Secretary of State for Wales and MP for Wokingham. He writes regularly at his diary
Andy Burnham is right to say people want him to tackle the problem of living standards. The cost of living has risen too far too fast, with Keir Starmer’s government presiding over another lurch upwards in inflation from the 2 per cent they inherited.
Energy costs are too high thanks to the UK policy of ultra dear energy with very high carbon and energy taxes. Rents and mortgages are too dear for many, thanks to a shortage of supply of homes and very high levels of migration in recent years creating so much more demand. Mortgages were driven up by rate rises needed to curb the Covid-and-war-generated excess inflation, and then by a Labour government adding to UK public spending and borrowing.
The Government’s cost of borrowing has been well above the one-day-worst Liz Truss spike in rates for the last year and a half. That is the cost of overspending. The interest rate bill is now a major government headache, being far too high and rising too much with new borrowings and higher rates of interest. If Burnham just wants to add more to the debt he will burden taxpayers with ever-larger debt interest bills which have to take priority over the public services we need when it comes to allocating the money.
Burnham has three theories of how to tackle the cost-of-living crisis. The first is to continue the policy of sell-out to the EU in the mistaken belief this will generate more growth. The second is to create more regional mayors and give them all more powers to promote growth and prosperity. The third is to continue the high-spending policies of more benefit payments for more people, and more subsidies and cheap or free services for those on lower incomes. These three will fail to deliver more and better paid jobs which have to be the key to greater prosperity for the many.
Sell-out to the EU will mean larger financial payments by hard pressed UK taxpayers to the EU. In return we will get a worse and much dearer student support scheme, we will have to accept a wide range of EU laws that will often impede our companies, and we will sign up to yet dearer energy by joining their emissions trading and carbon tax scheme. To round off the damage we have given away £6 billion of our fish over 12 years short-changing our own fishing industry. We will have to impose tariffs on imports from non-EU sources through the carbon border tax they want to set. Their legal impositions may well interfere with our innovative food, agriculture, and digital industries. Since Brexit these industries have been freer to innovate and to grow with new ideas.
The belief in the power of mayors is at loggerheads with Burnham’s wish to ensure prosperity spreads to every postcode. Trusting local government means local and regional differentiation. Some may succeed, some will surely fail. If you believe in devolution you accept the right of Wales to lag England as it has thanks to poorer policy choices and higher taxes. The Prime Minister will have to deal with the feeling in local government that those places with city region mayors are going to get a better deal than all the rest, and with the obvious differences there will be in the national treatment of Manchester compared to Essex.
Burnham has never explained how city region mayors can promote much faster growth as they do not determine interest rates, nor the main taxes, money, and credit policies. These decisions have such a dominant effect on whether private sector companies can expand or not. He seems to think all growth comes from higher public spending and borrowing, and sees the mayors as agents of change by putting in new facilities themselves or grant-aiding those who do. This ignores all those crucial goods and services from fuel to heating and from clothes to the family car that are supplied by the private sector who have to pay the taxes to support the mayors. A few cheaper bus fares from more subsidy is not going to crack the cost of living crisis.
I am all in favour of generous benefit payments to those who through sickness or old age cannot afford the things they need for a decent life. I am not in favour of the current benefits system which puts far too many people of working-age onto benefits with no requirement for them to look for work in a new culture of sicknotes for life.
Nor am I in favour of more and more concessions and free passes to people on benefits for nice-to-have spending items to make it even more difficult for them to be better off in work. The essence of a good benefits and tax system is that it looks after those who cannot fend for themselves but leaves good incentives to everyone else to get a job.
The new Prime Minister says he wants to make savings on the benefits bill by getting more people into work. Good idea but not a new one. That will require him to review how to make it more worthwhile to go to work and to review the conditions you need to meet to be on benefits. There are no short cuts or easy options to getting the benefits bill under control. Does he have the wish to understand the detail and the political toughness to push through what needs to be done to bring some reality to the out of control benefits bill?
His choice of ending rough sleeping as his first distinctive national policy shows the contradictions of his thinking. Finding accommodation for people and helping people to a better life than being on the streets are the responsibilities of local government.
Is the Prime Minister going to take powers away from localities to roll out a national rough sleepers policy? Or is he going to find money for new specific grants for local government to do this better, and hope they will take up the money with the conditions? It is not clear how this will work. Meanwhile, critics point out that after some welcome initial success in Manchester as a mayor with a rough sleeper policy, in recent years the problem has again got worse.
Warm words of hope and communicating a sense that he does want people to be better off is fine. That will only work if these words are true. That will require an altogether more professional and thought-through set of policies, backed up by proper control of borrowing and lower levels of taxation. So far, there is no sign of either. We have government by Prime Ministerial soundbite and wish list. These will now collide with reality.
What we’re reading
Business of government. For ConservativeHome, Tim Dier has argued that too few MPs have first-hand experience of creating and running a business, leaving Parliament with an incomplete understanding of how government decisions affect entrepreneurs, investment and economic growth. A legislature with more entrepreneurs would be better equipped to foster a pro-growth economy and produce laws grounded in the realities of wealth creation rather than theory alone.
Campus comedy. Joanna Marchong has been in the Telegraph to make the case that Britain’s student loan system has evolved from a form of income-contingent graduate contribution into what she brands a burden of “phantom debt”, with many graduates watching their balances rise despite years of repayments. Repeated policy changes have undermined trust in the student finance system; the old advice to never repay loans early may no longer be universally correct.
Crisis? What crisis? Over at CapX, Adam Thierer has suggested that repeated predictions of an AI-driven employment catastrophe have consistently failed to materialise, just as earlier fears about mechanisation and computers proved overstated. He believes that AI is more likely to reshape jobs than eliminate them, boosting productivity while creating new occupations and remaining in line with historical patterns of technological change. Don’t panic!
A monster task. Noah Smith has tackled a cheery subject: who was the worst monster of the 20th century? He suggests that when creating such a ranking, the key question is not simply the number of people killed but also intent, ideology, the scale of planned atrocities, and the conditions imposed on those who survived. He argues that the greatest lesson of the 20th century is that aggressive expansionist regimes and unchecked power can produce catastrophic outcomes.
Jam today, pain tomorrow. Meanwhile, Ryan Bourne has argued in his Times column that Andy Burnham’s early policy agenda risks making future tax rises unavoidable. Our new Prime Minister’s string of expensive commitments, including measures on rough sleeping and energy bills, entail a substantial funding challenge if the Government is committed to maintaining fiscal rules and avoiding higher borrowing. There is never a painless way to fund a larger state.