Is Britain broken?

Jack Jeffrey, Senior Researcher at the Fairness Foundation, argues that progress depends on an honest recognition of the problems with Britain's economic model

In an interview earlier this year with the New Statesman editor Tom McTague, Keir Starmer outlined how he didn’t think that Britain’s national model was fundamentally broken. All that was needed, according to the Prime Minister, was intelligent and stable leadership. After a febrile summer, this position seems even more wrong-headed than it was in June. Labour is in office but not in power. What they thought would require a few technical fixes needs a much more substantial break with the status quo. But lacking in political vision, they are ill-prepared to do this. And yet the government trundles on against the backdrop of an all but certain leadership contest. Writing about this should bore all of us senseless. Who’s up, who’s down, who’s in, who’s out. Who gives a shit. The country is in serious trouble. Whoever is in government must reckon with that.

In the absence of a more substantial political programme, Nigel Farage has re-emerged as a political force, capitalising on the disaffection and anomie reshaping British politics. This is not to say that the Reform Party stand ready with a plan either. Despite a new Reform-adjacent think tank (Centre for a Better Britain), and a growing cadre of policy wonks and experts, Farage’s party lacks a serious agenda for government. What policies they do have are mostly about cutting an already enfeebled state, made impotent by years of austerity. It is a politics of subtraction. A Thatcherite fantasy premised on the idea that the state is overregulated. In so far as this contains elements of truth, it obscures the painful reality of a country paralysed less by obstruction than by incapacity. To be sure, the incapacity to build, innovate and create, but, perhaps more importantly, the inability to conceive of a future better than the present. This is happening on parts of the right – e.g. the Anglofuturists and Looking For Growth, as well as parts of the British tech start-up scene. It is emphatically not happening on the left.

The ecosystem of think tanks, NGOs and professional activists that now constitutes the modern left, long abandoned by its working-class base, appears more frightened than complacent. Rather than learning any lessons from Brexit or Trump, many on the liberal left have doubled down on the same tired ideas, incapable of entertaining the thought that populism, as John Gray has put it, is a backlash against the social disruption produced by their policies. Until those of us who work in these spaces acknowledge that, the country will regard us with a hostility that is not entirely undeserved.

That infrastructure seems interminably trapped in a different era, when economic growth alongside a system of public welfare worked to reconcile interests across society. The job of policymakers was to redistribute and manage the proceeds from expanding productive capacity. The problem is what to do when there is no growth to manage or redistribute. What’s the alternative?

I’m not sure anyone really has the answer to this. Getting growth back is one option, which is easier said than done. A wealth tax plays well with the public and would deliver benefits, but would not solve many of the underlying structural problems with our economy, which are less about wealth per se than what that wealth is doing. The story of British decline, economically, is a story about the misallocation of capital. Instead of financing productive investment – new firms, modern factories, clean energy, infrastructure – our financial system has turned inward, chasing easy rents from property, credit, and financial engineering. Banks lend overwhelmingly against existing assets rather than to enterprises that might expand the productive frontier. The UK is cited as an exemplar of what Lisa Adkins calls an asset economy. Its most profitable sectors, such as finance, real estate, infrastructure, and utilities, are all organised around owning assets and then, in one way or another, extracting rents from those assets. For a time, this system sustained the illusion of prosperity. But this was never sustainable. The underlying weakness of the British economy has been exposed, and without dramatic changes everything will likely get much worse.

This has been made all the more difficult by decades of politicians of all parties conspiring to accept the idea that government’s role was to correct market failures from the margins, not to shape markets or build capacity. This has had huge consequences on how, and to what extent, decisionmakers can leverage the power of the British state to act in the interest of its people, as well deliver on basic functions. Instead of a command-and-control state, what we now have is a regulatory state that defers responsibility rather than exercises it. Under the banner of efficiency, this has meant the outsourcing of more and more duties, obligations and services to a profligate private sector, but it has also meant that the state has lost the ability to intervene and act. The point cannot be overstated. Solutions like a wealth tax, whatever you think of its merits, depend on a functional and competent state. Policymakers, think tankers, and politicians - who have found themselves pulling at levers that aren’t attached to anything - take this for granted at their peril.

Old assumptions about how things work don’t seem to make much sense anymore, and nothing new has emerged to replace them. It is in this context that our sclerotic politics has created a vacuum wherein people experience themselves as subjects of impersonal forces beyond their control. As Alana Newhouse argues, the real fracture today is not left versus right but between those who feel that our key systems are broken and those still insisting that they are not. Any sense of collective direction – the belief that Britain is building towards something – has vanished. In its place is a brittle mixture of exhaustion and anger. This defines the national mood. Some understand this; others, regrettably, do not.

This piece is written by Jack Jeffrey, Senior Researcher at the Fairness Foundation