CapX, London (2025)

28/03/2025

The end of this week, one in which we have had both the Chancellor‘s Spring Statement, and the second reading of the awful Employment Rights Bill in the Lords, offers a useful moment to take pause and look back over what economic plans Labour have managed to put into play so far; what economic effect their actions have had; and what we can expect to happen in the coming months and years.

Remember how we felt when Labour won last year’s election? Apprehensive, but relieved that at least the previous government, aimless and adrift after years of clueless economic policy, was gone. We suspected that the new Government could always turn out to be even worse, but we hoped for the best and that things might improve. Labour said that economic growth was their number one priority: the fact that they didn’t seem to have any kind of theory as to what actually drives economic growth was a worry, but perhaps they would muddle their way through to a better understanding.

Came the autumn Budget. The economy Labour had inherited wasn’t great. The economic consequences of Sunak were that growth was rapidly slowing to a halt, a result of steady tax increases and a failure to control government spend. Labour’s claim of a £22 billion black hole was a cheerful fantasy knocked out of nothing; regardless, years of too-large government, too-high taxes and ever-increasing regulation meant that economic growth toward the end of last year was bound to be slow-to-no; and so it proved.

Was Labour’s post-election Budget likely to turn this around? Reeves made a couple of respectable bows towards cutting cost, such as removing the winter fuel allowance for most: the ferocity of the attack against that move (by, among others, many commentators who really ought to be a little ashamed for joining in) certainly helped to discourage too many further moves in the direction of reducing the size of government (until recently it has become absolutely crucial to do so – hence, the much-desired attack on benefits). But in any event, at the time of the autumn Budget, over-generous wage settlements with public sector allies of the Government, along with a continued overall larger-state, higher-tax approach, ensured a doomed direction of travel. Before the election, recession looked likely. After the Budget, it was becoming pretty certain; and so is it transpiring.

✍️Jon Moynihan

The autumn Budget clearly wasn’t going to work.

28/03/2025

Compulsory purchase is an important institution. As the great economic historian Dan Bogart has argued, Britain made abundant use of compulsory purchase in building its canals and railways, which in turn helped it to lead the Industrial Revolution. Only anarcho-libertarians should oppose all forms of compulsory purchase in all cases.

At the same time, compulsory purchase is obviously dangerous. In the middle decades of the twentieth century, vast swathes of British cities were destroyed by local councils in misguided urban clearance schemes. We are astonished to learn today that Covent Garden, De Beauvoir Town and Jericho barely avoided demolition. Many other neighbourhoods were not so fortunate. At Great Yarmouth, to pick one of a hundred examples, the authorities demolished one of the greatest pieces of medieval urbanism in Europe.
Compulsory purchase is also a precarious institution. To its credit, the British public is deeply uneasy about expropriating and demolishing people’s homes for the supposed greater good. In point of fact, as I have said, we do sometimes have to do this to deliver projects of great public importance. But it is important that we do so with restraint and care, not least because it is only thus that we can preserve the fragile legitimacy of compulsory purchase when we really need it...

✍️Samuel Hughes

If local authorities can grab land without checks, ‘it will be cowboys at noon’

28/03/2025

The latest revelations about endemic tuition fee fraud have drawn attention once again to a truth policymakers do not want to face: that our current model for higher education is completely unsustainable, and by this means or that the system is heading for collapse.

Unfortunately for Conservatives, this isn’t one we can simply blame on New Labour’s bid to radically expand tertiary education. While that is the ultimate wellspring of the sector’s woes, the particular roots of the latest scandal owes to the confluence of two Coalition policies: the huge hike in tuition fees in 2010, and the abolition of the cap on student numbers in 2015.

I outlined the basic problem at ConservativeHome: institutions are now incentivised to pull in as many students as possible, with no investment in the eventual fate of those students (or the money loaned to them), except via reputational risk, which is a horribly intangible thing to pit against the bottom line for a vice-chancellor’s affections.

The result has been a brew of remarkable toxicity. Cost pressures (the Russell Group insists they lose money on every domestic undergraduate) are seeing universities slashing jobs and courses centrally, while those with any sort of reputation lease that reputation to franchisees. These aim to process as many students as possible at the lowest possible cost, with any quality gap disguised by the clustering of fees at the maximum allowable level.

But while that would be bad enough, the effects of lifting the cap extend much farther than one might expect, and have warped and perverted even what ought to be straightforwardly benign parts of the system.

✍️Henry Hill

The current university model is completely unsustainable.

27/03/2025

It has become traditional to see stories over the winter months about the NHS in crisis. In a bleak new development, stories of institutional collapse in our healthcare system are emerging as a regular feature of early spring as well.

This year – in a repeat of last year – there is huge frustration among final year medical students still to be allocated jobs, with a large proportion yet to find out which hospital they will start work in. (Last year, NHS England gave one cohort just 18 days to find a home.)

The uncertain future of trainee doctors does not end there; competition ratios for internal medicine training (IMT) have been growing rapidly for the past few years, too. In 2024, applications for IMT outstripped the number of posts available by 73%. With such a high degree of competition, many are not so much worried about finding a new home as finding a new career, faced with losing out on training entirely.

All doctors must first complete medical school, a program lasting between four and six years. Upon graduating, they are required to apply for Foundation Training – a two-year programme in which they gain experience across various clinical specialties.

In 2024, every eligible doctor was guaranteed a place in the Foundation Programme. This guarantee, however, does not extend to specialty training, such as IMT. After completing Foundation Training, doctors must choose the GP or consultant track, and apply for the relevant specialty training, a competitive process that typically begins in November for positions starting the following August. The application process is conducted nationwide, with all candidates ranked accordingly. Here, securing a job is not guaranteed.

Doctors compete for positions based on a combination of scored applications, exams and interviews, depending on their chosen specialty. Despite a growing shortage of both GPs and specialist doctors, thousands are being turned away. An astonishing 10,940 applicants were rejected for GP training last year. To take one example of a vital specialist role, nearly 3,000 applicants were rejected from core training in anaesthetics last year, with 6.5 candidates vying for each available position – compared to just two per spot in 2015.

✍️Tom Jones

In 2023, two-thirds of doctors joining the workforce were non-UK graduates.

27/03/2025

Saturday 22 March started like any normal weekend. Awake earlier than I’d hoped. Debating with my toddler why toast was better than crisps for breakfast. A quick gym session. An even quicker dip in the cold plunge pool.

But that’s where the normality ended.

By 14:30, I had arrived at King’s House in London to find half a dozen volunteers in Looking For Growth T-shirts setting up cameras, pinning A1 paper to the walls and arranging chairs for over 200 guests. By 15:15, the venue was packed. Full of optimistic, ambitious and energised individuals from every walk of life, gathered to talk about growth.

This is not normal.

Over the next five hours, that energy only intensified.

CEOs, students, journalists, programmers, policy researchers and investors sat shoulder to shoulder to hear from the major political parties. Andrew Griffith, the Shadow Business Secretary, laid out the key issues holding Britain back and the ten policies he’d like to see implemented. Zia Yusuf, Chairman of Reform UK, delivered a powerful call to action and argued why his party was the political alternative to managed decline. Chris Curtis, Co-Chair of the Labour Growth Group, made the case for fighting for growth within government and emphasised how his group is pushing Labour to go further.

But this wasn’t a one-way street of political messaging. Harriet Green, founder of HSG Advisory, shared sharp, candid lessons on building businesses where the state has failed to deliver. Dominic Cummings, in expert form, gave a wide-ranging and unsparing critique of the broken systems we live under and laid out practical ways to fix them.

This wasn’t just talk. Real policy was made in the room, and Chris Curtis publicly committed to tying his future MP pay rises to the median increase in the private sector. These commitments – and the level of cross-party passion – would be remarkable at any event.

But Looking For Growth isn’t aiming for remarkable. It’s aiming to change the game.

Throughout the day, five workshops tackled some of the most critical issues facing Britain: from ‘Ozempic for the State’ to a deep dive into how Britain can seize the AI opportunity and lead in the next industrial revolution.

It was a rare thing: a room full of people trying to fix problems, not just score points. This kind of gathering shouldn’t be unusual. But it is.

✍️James Newport

There's real hunger for a politics that doesn't accept failure.

27/03/2025

One of the most surprising aspects of yesterday’s Spring Statement is that in 2029, according to the Office for Budget Responsibility (OBR), the size of the economy will be bigger than it previously expected, reaching £3,433 billion. This compares with the £3,367bn that the OBR forecast last October.

This is largely because the OBR is upbeat about the outlook for growth from next year onwards. For this year, the OBR cut its growth forecast from 2% to 1%, noting that one-third of this reduction was due to ‘structural weakness’ linked to low productivity and two-thirds because of cyclical factors, which it largely expects to be reversed next year with lower gas prices and lower interest rates, allowing slack in the economy to be then used up.

As a result, it expects growth of 1.9% in 2026 and around 1.75% over the remainder of the decade, as the workforce rises. The economic consensus sees growth of 1% this year also, and 1.3% next. It is the OBR’s projection for future productivity that leaves it optimistic relative to other forecasters. It continues to expect productivity to recover and outstrip its recent trend.

It is this economic projection that gives rise to three key takeaways from yesterday’s Spring Statement.

First, is that supply-side policies are expected to work. The OBR’s approach to dynamic provisioning has frequently left it open to criticism. This is where it scores the likely impact of government policy on future growth. Often it takes a dim view of a government’s wishful thinking, but not in this statement when it comes to planning reform.

These reforms are seen as boosting house building and in turn raising growth by 0.2% per year, which is the largest-ever policy boost that the OBR has expected to succeed. While still only a forecast, it fits with what many economists think. Too often these fiscal events focus on boosting demand, led by the government spending more money, but it is the supply-side where the answer to Britain’s weak growth lies. This should set any government thinking about what other supply side measures it should consider.

Second, is how worrying the debt outlook is...

✍️Dr Gerard Lyons

A wealth tax won't fix our ballooning debt

26/03/2025

First, the good news. Rachel Reeves’ Spring Statement is unlikely to do any significant harm to business or consumer confidence, and it was largely shrugged off by the financial markets. These days, that is something to celebrate.

In particular, the Chancellor wisely resisted the siren calls to relax her fiscal rules to finance more spending on defence or welfare, which would have added to the upward pressures on the cost of borrowing – as we have already seen in Germany.

She also ignored the cries of left-wing commentators and social media celebrities for additional taxes on wealth, which would almost certainly backfire by deterring investment and driving more taxpayers overseas.

Instead, she actually kept a promise, reiterating her pledge to change taxes only in an Autumn Budget – though that may only be a temporary reprieve.

There was even some good news in the Office for Budget Responsibility’s (OBR) new economic forecasts. The GDP growth projection for 2025 was halved from 2% to 1%, as expected, which brought it back in line with the consensus. But the numbers for later years were nudged up slightly, partly reflecting the boost from planning reforms.

Overall, however, the OBR’s forecasts are hardly a ringing endorsement of the Government’s long-term strategy. Inflation and interest rates are both expected to be higher for longer, and the growth downgrade for this year reflects the fallout from Labour’s policies on tax, the labour market and energy prices at least as much as the additional ‘global headwinds’.

✍️Julian Jessop

Cuts in public spending are just a drop in the ocean

26/03/2025

We have the highest levels of peacetime spending. We have the highest levels of public debt. We have non-existent growth, even negative on the most important measure, GDP per capita growth. And yet, despite all this spending and debt, we have managed the unfortunate trick of having record levels of public dissatisfaction with public services.

On top of all this, we have an uncertain global economy, the sudden withdrawal of the USA from being guarantor of European security and rapidly rising global anxieties. Plus all the other long-term problems which are much discussed but never confronted: our ageing population, uncontrolled immigration, unsustainable pensions, overcrowded prisons, a failing health service, deeply inadequate long-term care and so on.

So all hail the recent announcements from the Prime Minister and his Cabinet signalling a return to fiscal rectitude! Alleluia, alleluia, alleluia! Surely?

Sadly not.

Not when you put the much-trailed cuts into the context of overall government spending, which the OBR estimates will be £1,276 billion this financial year. So Liz Kendall’s £5bn welfare cuts are equivalent to 0.39% of government spending (and the OBR apparently thinks the much-trailed £5bn figure is an overestimate). Rachel Reeves’ proposed £2bn cuts to departmental spending are just 0.16% of the total. Her newly-revealed extra £2.2bn in defence spending, which in her words ‘is not just about increasing our national security but increasing our economic security, too’ will, if true, achieve remarkable value at 0.17%. Transferring £6bn of international aid to defence spending is just a transfer of 0.47% between government departments.

So yes, these announcements – and that is all they are so far – have caused cries of great anguish. But step back and ask yourself whether they are proportionate to the size of the challenges facing us, and do you have any alternative but to sadly shake your head?

✍️Tim Knox

Fixing public sector productivity would release £100bn a year

26/03/2025

As the Chancellor delivers her Spring Statement today – or, to call it what it really is, an emergency Budget – and declares for the umpteenth time that growth is this government’s defining mission, I can’t help but ask: where is monetary policy in this conversation?

Tax and planning reform, net zero initiatives, public investment – all the expected levers are being pulled. Yet the Bank of England’s central role in shaping economic conditions is treated as peripheral. It isn’t. And in my new paper for the Institute of Economic Affairs (IEA), I make the case directly: if ministers are serious about delivering growth, they need to re-examine the monetary framework steering the economy.

In ‘Rethinking Monetary Policy’, I argue that the Bank of England’s 30-year-old commitment to inflation targeting is no longer the best regime for the UK. Instead, I propose a shift to nominal GDP (NGDP) targeting – anchoring monetary policy not just to prices, but to the overall growth in nominal spending across the economy.

Nominal GDP – the combination of real output and inflation – is a good proxy for household incomes, business revenues and debt-servicing capacity. In a world of heightened geopolitical risk, targeting this broader metric would reduce policy uncertainty by minimising discretionary decision-making, improving transparency, while allowing monetary policy flexibility to manage supply-side shocks more effectively, thereby reducing potential policy errors.

When the UK adopted inflation targeting in October 1992, it made perfect sense. Sterling had just crashed out of the Exchange Rate Mechanism. Trust in monetary stewardship had evaporated. A simple inflation target gave the Bank a clear benchmark – and gave the public a reason to believe price stability could be restored. And, for a time, it worked. Although an inconvenient truth is that globalisation and advances in technology also played a large part.

But that was over three decades ago. Since then, we’ve experienced a financial crisis, a global pandemic, a war on the edge of Europe, energy shocks and a political shift towards protectionism. The economic environment of 2025 looks nothing like that of 1992. Yet the Bank is still working from the same playbook.

✍️Damian Pudner

The current monetary regime is holding Britain back.

25/03/2025

It can be infuriating making the case for free markets. Too much time has to be spent batting away obviously terrible, tried-and-failed ideas. Proposals for a wealth tax are just the latest iteration requiring many a wall to be bashed with many a head. Just in the last few days, a group called ‘Patriotic Millionaires’ has urged Rachel Reeves to consider a ‘simple way’ to grow the economy with a tax of 2% on wealth over £10 million per year. A recent piece in the New Statesman concluded that a wealth tax wouldn’t be straightforward, but it could work. The new director of the Institute for Fiscal Studies has also called for a one-off wealth tax.

This is mad. As a TaxPayers’ Alliance study of wealth taxes has demonstrated, they’ve failed everywhere they’ve been tried. When Labour considered one in the 1970s, they concluded it would be unworkable, despite capital being far less mobile then than it is today.

We are already seeing the wealthy flee at a shocking rate (just look at the Adam Smith Institute’s millionaire tracker), forced abroad by changes to non-dom rules, punitive marginal tax rates, shoddy public services, increasing crime and the imposition of VAT on private schools, to name just a few incentives. When this is pointed out to proponents of wealth taxes, as I recently found on LBC, the response is not to dispute the problem but to bemoan the fact that every time the rich are asked to pay their ‘fair share’, they throw their toys out the pram and flee.

This is a disturbing attitude. The antipathy to the wealthy and successful seems to only be escalating. The more that leave, the worse it gets. It’s not inconceivable to picture a Britain where the wealthy have all jumped ship, leaving public services to suffer while tax rates on ordinary families are sent through the roof in a desperate scramble to plug the black hole. The Titanic may be sinking, but at least the Gini coefficient of those left on the boat is closer to zero.

✍️Elliot Keck

It can be infuriating making the case for free markets. Too much time has to be spent batting away obviously terrible, tried-and-failed ideas. Proposals for a wealth tax are just the latest iteration requiring many a wall to be bashed with many a head. Just in the last few days, a group called ‘Pa...

25/03/2025

Labour’s pre-election courtship of business has given way to a familiar reality: the unions are in charge.

Unlike Tony Blair, who had the foresight to tell the unions to wait until his second term, Keir Starmer has shown no such political or economic acumen. Instead, his Government has rushed into anti-business policies that threaten to undermine the workforce it claims to protect.

Labour say they want to safeguard workers’ rights and support the vulnerable, but their real goal is empowering the unions. Hiking the minimum wage, raising National Insurance and piling on employer burdens cripple the very businesses that drive employment and growth. This comes at a time when the Office for Budget Responsibility is set to downgrade the growth rate for the 2025 financial year by half – further evidence that Labour’s policies are actively harming the economy.

The upcoming Spring Statement – effectively an emergency Budget – is a critical opportunity for the Chancellor of the Exchequer to address the damage she has inflicted on small and medium-sized enterprises...

✍️Danielle Dunfield-Prayero

The Chancellor should address the damage she has inflicted on smaller firms.

25/03/2025

Tomorrow, when Rachel Reeves stands up in Parliament to deliver the Spring Statement, it is likely to make for grim viewing.

With growth flatlining – the most recent figures show the economy shrank by 0.1% in January – despite the Government’s best efforts, Britain is still stuck in a slump.

This is bad for a number of reasons, but mostly because it means that any spending decisions become essentially a zero-sum game. That’s why in order to increase defence spending, Keir Starmer felt he had to cut aid spending. Whereas if the economy had continued to grow at the rate it had before the 2008 global financial crisis, it’s conceivable that by now we could be spending more money on both.

The goal then, as now widely recognised by both the current Government and the Conservative Opposition, is growth.

But then the obvious questions to ask are ‘how?’ and ‘to what ends?’ Keir Starmer doesn’t seem to have a ready answer, reportedly once saying ‘There is no such thing as Starmerism’. And Kemi Badenoch has so far been reticent to offer anything concrete, as she leads the search for her party’s ideological renewal.

So it’s exciting that an answer for both parties – or whichever is brave enough – might be slowly emerging from the other side of the Atlantic. As the Democrats have been searching for a new direction following Donald Trump’s second victory, a new set of ideas have come to the fore – which could answer our growth questions too.

✍️James O'Malley

Tomorrow, when Rachel Reeves stands up in Parliament to deliver the Spring Statement, it is likely to make for grim viewing. With growth flatlining – the most recent figures show the economy shrank by 0.1% in January – despite the Government’s best efforts, Britain is still stuck in a slump. T...

24/03/2025

On Wednesday, the Chancellor of the Exchequer will deliver her Spring Statement to the House of Commons. It is an opportunity for her to respond to the latest forecast of the Office for Budget Responsibility (OBR) for the economy and public finances, but there will also be some changes in expenditure. Unless she is by now numbed by the grisliness of her first nine months as Chancellor, Rachel Reeves cannot be looking forward to it: the OBR is expected to predict a lower rate of growth for 2025 and the Government is facing a squeeze on its resources.

Pre-briefing is now a universal practice – which does not mean it is any less a gross discourtesy to the House of Commons and its exclusive authority over taxation and expenditure – and the Chancellor has revealed that she will cut spending on the Civil Service by £2 billion a year. That, at least, is the headline she was emphasising, but closer examination shows a more complicated policy picture – and one which has a strong whiff of wild-eyed panic about it...

✍️Eliot Wilson

The Chancellor is reaching for glib slogans ahead of the Spring Statement

24/03/2025

For years, the economic establishment has insisted that central banks and fiscal watchdogs must operate free from political influence, arguing that these institutions are too complex and delicate to be left to elected representatives. Instead, they have been placed in the hands of unelected technocrats who claim to act in the national interest, insulated from political pressures.

But after more than a decade of failure, this illusion must be challenged. The past 15 years have shown that those in charge of the most significant economic decisions are neither neutral nor infallible. They have made major miscalculations, failed to foresee crises and allowed economic policy to drift away from the real needs of businesses and households. Worse still, they remain largely beyond meaningful scrutiny, accountable to no one but themselves.

Two institutions stand out as the most glaring examples of this democratic deficit: the Bank of England and the Office for Budget Responsibility. Between them, they exert more control over Britain’s economic direction than any elected government, yet they are rarely questioned by parliament, their leaders seldom held to account for their mistakes.

Economics is not a precise science, but a field shaped by ideology, assumptions and personal beliefs. And yet, the philosophical leanings of those running these institutions are barely examined. This has resulted in policies detached from reality, crafted by a closed circle of career economists who operate in an echo chamber rather than in the real economy.

✍️Kit Malthouse

This is the fourth in a series of essays from the Rt Hon Kit Malthouse MP on how to fix the British economy. You can read the other instalments in the series here: Growth is the Child of Capital Ownership and Nationhood: The Fight for Economic Belonging We need a competition revolution – here’s ...

21/03/2025

For these last few years, first as a candidate and then as regional President for the Partido Popular, I have advocated for the need of our centre-right party – the People’s Party – to become the ‘casa común’, the ‘common house’ of conservatives, liberals and all those who believe in freedom, prosperity and respect for human life, who love Spain, the West and the rule of law. Something similar to the ‘common ground’ proposed by Margaret Thatcher and Keith Joseph.

Today, I intend to talk to you about the core of ideas around which we are building this project in Madrid: el liberalismo a la española. (Liberalism, the Spanish way.)

‘How did we get here?’ This was the question I asked publicly a few years ago, seeing the rise of the far Left, the ‘Argentinisation’ of Spanish politics and the decline of liberal democracy.

‘Listen to us: we come from the future’, our friends from Hispanic America used to tell us, as they were fleeing their countries, where socialism and demagogy had stolen their freedom, prosperity and, ultimately, their own country.

Since then, I have denounced what I called the ‘woodworm strategy’: Spain’s socialist Government and its communist and separatist partners have been colonising institutions, universities, primary and secondary education, the media, public companies and the boards of directors of private companies. They have appointed political commissars, they have spread everywhere their manipulation of language and reality.

We had to start to speak up, to give people back their hope, their faith in Spain, in their own personal projects and in the future. To denounce every abuse, every lie, every trap, and offer a common project everyone could join.

✍️Isabel Díaz Ayuso

Below is a transcript of a speech delivered by Isabel Díaz Ayuso, the President of the Community of Madrid, at the ‘Remaking Conservatism’ Margaret Thatcher Conference hosted by the Centre for Policy Studies on March 17, 2025. For these last few years, first as a candidate and then as regional ...

21/03/2025

Special educational needs and disabilities (SEND) is an area of public policy that is eye-wateringly expensive for local government. It is also, like adult and children’s services, failing to deliver on a spectacular scale. We are racking up an £11 billion bill, without getting the quality of service required, and without driving improvements in outcomes for those who really need it. We simply cannot afford to keep getting the solution to SEND so wrong.

The current system hinges on legally-binding Education and Health Care Plans (EHCP). But as SchoolsWeek recently reported, local education authorities (LEA) and schools are frequently not meeting the requirements of EHCPs. They are also often being forced to implement vague and poorly evidenced provisions within EHCPs.

As a result, the young people this system is designed to serve are being let down. Children with manageable additional needs start to exhibit worsening behaviour, demanding more interventions and further harming their life chances.

✍️

The road to bankruptcy is paved with good intentions

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