Valentin Boboc is a Senior Economist at the IEA
Andy Burnham has entered Downing Street as Britain’s sixth Prime Minister in a decade. On the state of politics and the economy in this country, he told us this:
“Our state apparatus is so deplorable, not to say wretched, that we must first think very carefully how to combat its defects, bearing in mind that these defects are rooted in the past, which, although it has been overthrown, has not yet been overcome.”
I am joking, of course. That was Vladimir Lenin in one of the last essays he wrote before his death, reflecting on the wiles of the Soviet bureaucracy.
But it could have been a Burnham line. The new Prime Minister’s first speech, delivered outside Number 10, offered little in the way of concrete proposals. However, he did his best to inspire in us an air of change, a “circuit breaker” for a country he believes has been taking “wrong turns” since the 1980s, a full and final break with the past, a new politics and a new economy. To top it all off, he promised a ten-year plan for Britain later this year, to take the economy to where he believes we all want it to be.
There are some inevitable parallels with Keir Starmer’s first speech. Whilst the departing Prime Minister once promised that the government would ‘tread more lightly’ on our lives, the incoming one promised us ‘some breathing space’ on the cost of living. Beyond that, a few things stood out, from a renewed commitment to nationalise utilities to reforming procurement and ending rough sleeping.
One of the first items on the agenda will be to bring utilities under “strong public control” in the name of lowering costs. The issue with nationalising an indebted company is that debts do not disappear with its share certificates. They move onto the public balance sheet, where taxpayers service them, while lower bills must still be weighed against the £60 billion-plus owed by the water companies alone.
Once utilities get nationalised, they must then compete for money and ministerial attention with every other claim on the Exchequer, from healthcare to welfare and to defence. We know how that contest usually ends. The water regulator’s own account of the years before 1989 is that investment was constrained because the industry stood in the same queue as schools and hospitals. That investment has roughly doubled.
A second promise was “reindustrialising Britain” by rewriting procurement rules to favour British suppliers. This is protectionism through and through. The natural consequence of preferential systems is that the state pays more than it needs to for what it buys, and the taxpayer foots the bill. Firms sheltered from competition become less efficient, whilst our trading partners are meanwhile invited to return the favour against British exporters. A government that promises to cut the cost of living could hardly have chosen a policy more certain to raise it.
Perhaps the one new pledge that hasn’t yet circulated in the media is to end rough sleeping. The tricky thing about solving homelessness during a major housing shortage is that public intervention is exceptionally costly, because governments and councils must outbid ordinary citizens for housing that is already expensive. The best way to solve homelessness, and to control the cost of any further intervention, is to aggressively speed up private housebuilding across the country. Until then, we will be stuck running large bureaucratic programmes that are both expensive and ineffective.
As Mayor of Greater Manchester, Burnham pledged in 2017 to end rough sleeping in the city-region by 2020. The official snapshot count fell from 268 people in 2017 to 89 in 2021, and has risen every year since. The count has more than doubled from its low point, even as the region’s ‘A Bed Every Night’ scheme grew from 550 bed spaces to more than 600. It now sits nearer to where Burnham started than to his best year.
Which brings us back to the ten-year plan. Even the economic planning of the Soviet Union began with yearly ‘control targets’. Extending this planning horizon to five years was met with considerable resistance from the same statisticians who established the control targets and was seen by many as a maximalist escalation.
Britain is entering a maximalist era: large-scale nationalisation projects, a radical increase in protectionist policies, and large-scale government programmes to tackle various issues. Needless to say, there is an inherent tension between these large-scale centralist ambitions and the idea of further devolution of powers.
Late-stage Lenin and early-stage Burnham do seem to agree that the problems of the British are rooted in a past that has been overthrown but not yet overcome. On the evidence so far, our new premier means to overcome that past by restoring it.
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