By Nick Timothy MP, Published in the Daily Telegraph on 6 April 2025
If the PM is right that the ‘world has changed’, why on earth is he still wedded to his high-tax, high-spend policies?
This weekend, as the Prime Minister declared globalisation dead and boasted of his economic leadership, his jobs tax – the £25 billion hike in employers’ National Insurance Contributions – came into effect.
The juxtaposition of the PM’s words and actions was glaring. But it was far from an aberration. Like his response to the withdrawal of American support for Ukraine – in which Britain has made risky military commitments without a plan or partnerships with other countries – this new posture is all politics and little policy substance.
For if the Government really believed “the world as we knew it has gone”, and “old assumptions can no longer be taken for granted”, it would surely have come up with a policy prospectus that parted with its own old assumptions. Instead, Keir Starmer has chosen to double down on his “Plan for Change”, the programme for government he published four months ago – before, by his own admission, he realised the world economy had changed.
And so, despite the claim that everything is different, Labour’s economically destructive policies continue. Government spending will still rise eight times faster than Starmer promised during the general election campaign. The £40 billion in tax rises, and more in extra borrowing, will still come. Despite claiming he is “slashing the red tape that holds businesses back”, Angela Rayner’s new labour laws will still be imposed, at a cost to employers in new regulation of at least £5 billion a year.
And the net zero zealotry will continue unabated. The Government plans to decarbonise the grid by 2030, which almost nobody believes is feasible or affordable. Ministers are making us dependent on China for solar panels and wind turbines, and on electricity imports from Europe via vulnerable interconnectors. They will sign contracts in which they promise subsidies and payments for hidden costs for years into the future. For households and businesses, prices will continue to rise.
In response to US tariffs, the Government says it will introduce support for sectors that are most at risk. Briefings suggest food and drink might get help, along with others that will be hit, such as the chemicals industry. Downing Street says electric vehicle targets – which would see car manufacturers fined up to £15,000 for every vehicle sold above their quota of petrol and diesel cars – will be weakened.
But if it is worth doing these things to help business now, why would the Government not do them in the first place? The regulations for electric vehicles are insane, as is the refusal to contemplate tariffs on Chinese EVs, which are manufactured with artificially lowered costs. Europe’s chemicals industry – hugely important in pharmaceutical supply chains, and a big British exporter – faces “extinction”, according to Sir Jim Ratcliffe, because of net zero and unaffordable energy costs.
A similar story comes with the promise of rearmament. The PM says “this investment will bring a ‘defence dividend’ with more, better paid jobs.” But if this were automatically true, surely the Government would have committed to extra defence spending in its first Budget. Instead, it prevaricated, and it is impossible to believe ministers will ensure, as they promise, that rearmament will mean reindustrialisation. Primary steelmaking ended at Port Talbot last year, and the Chinese owners of British Steel will soon close the blast furnaces in Scunthorpe. The Government has refused to nationalise, and the real reasons for the problem – prohibitive energy costs and an international market rigged by countries like China – go undiscussed.
Indeed, rigged international markets lie behind America’s great trade confrontation, but the Government has said nothing about the problem. For the rise of protectionism today is, like in the 1930s, a consequence of unsustainable trade imbalances. China has exploited its status as a “developing country” within the World Trade Organisation to dodge rules imposed on the West. It dominates world manufacturing, and is systematically destroying Western productive capacity. It now seeks a competitive edge in advanced technologies, and in geopolitical power and military strength.
States that hold down production costs to run trade surpluses do so at the expense of more open economies. These latter countries – such as America, but also Britain and the Anglosphere and to a degree others in Europe – necessarily lose productive capacity and absorb the excess savings from surplus countries caused by their lower domestic consumption. Claims by free-trade purists that cheaper imported goods mean more consumer spending on more advanced and perhaps homegrown products will not come true if our productive capacity is lost, we over-depend on services, and incomes stagnate.
This is the issue that explains what Donald Trump is trying to achieve with tariffs. We may query the logic of applying tariffs universally – on all countries, on all products and not just high-end goods that might alternatively be sourced in America – and we might worry that the tariffs will cause such a trade shock that the world falls quickly and deeply into recession. It might yet prove to be a negotiating position, aimed to get Western countries to rethink how global trade and investment works. Regardless, the problem Trump is attempting to confront is undoubtedly a real one – and one that applies just as much to Britain as America.
And yet the Government has no big idea but fiscal transfers from private to public sector. In the Budget last year, the theme centred on the hardly original insight that Britain suffers a lack of investment. But there was no attempt to understand the deeper reasons for this problem, and instead an ideological determination that we must increase state, not private, investment. But much of the investment was misallocated on green energy projects, and much of the increase in overall spending was on public sector pay and current budgets. Labour’s tax rises spooked businesses, the extra borrowing spooked the bond markets, and state investment will anyway crowd out private investment.
As the Spring Statement showed, the Autumn Budget has already failed. But now, as the Government scrambles to react to a new world, a grim truth has been exposed: Britain has no real economic policy. We need one, and fast.
