Could Britain Fight a War?

Labour's Defence Review is pointless if the UK has no industrial base

Towering Columns

In The Times, Juliet Samuel says military necessity, not international legal structures, must determine our approach to defence.

Our east European allies are not crazed warmongers. They are changing their approach in response to a real threat. In the 1990s, many argued that only anti-tank mines were needed, as opposed to the anti-personnel mines Ottawa bans. But the combined power of cluster munitions, drones and AI-powered surveillance in Ukraine has turned tanks into sitting ducks. There has been an extraordinary return to a sort of infantry-cavalry hybrid, with soldiers mounting e-bikes to cross open territory one by one, then regrouping. Landmines have become one of the few ways to slow enemy progress.

God knows, governments don’t take this lightly. They understand the devastating legacy these weapons leave behind. They care about their land and their civilians. Estonia’s generals argue that to maintain defensive manoeuvrability we need to develop new, intelligent mines that can be switched on and off. But others, such as Poland, argue that with 700,000 mines needed to defend its borders, there is neither the time nor money for this. What unites them is the clarifying effect of living next to Russia and the living memory of massacres just like Bucha.

Britain’s strategic defence review calls on the “whole of society” to defend the realm. That starts with the prime minister being prepared to put military preparedness ahead of the legal shibboleths he has spent his career glorifying. Alternatively, in the event of war we could just hand Hermer an ECHR-compliant machinegun and dispatch him to the front line. As the joke in military legal circles goes, he has a proven track record of finding rhetorical landmines and stepping on them.

For Politico, Michael Pettis says absorbing the industrial policies of Beijing drove the inequalities that ultimately led to Brexit.

Britain accepted capital inflows, and in return, it exported debt, claims on assets, and industrial capacity. It imported not just goods but the insufficient demand of surplus economies — what economist John Maynard Keynes warned against at Bretton Woods in 1944. Internally, the consequences of this were stark. Capital inflows lifted the pound, making British goods less competitive and imports cheaper. The U.K. evolved into a consumption-driven economy, where financial services and asset inflation — especially real estate — replaced industrial employment as sources of income growth.

London, in particular, benefited enormously from these inflows. Property values soared, banking and legal services flourished, and inequality rose. Meanwhile, the rest of the country — especially the North, Wales and parts of Scotland — bore the cost of this transformation. Built around manufacturing sectors no longer able to compete with industrial and trade policies abroad, they became victims of a national model increasingly dependent on foreign money, foreign imports and speculative finance…

…Like it or not, by choosing an open trade and capital account, the British economy is already subject to industrial policy. The important question is whether that industrial policy should be designed in London — or in Berlin, Beijing and Washington. The great risk for Britain now is that it becomes even more reliant on speculative capital. But choosing instead to reverse decades of underinvestment, close regional gaps and reassert control over the direction of the economy would require a dramatic policy shift. It would require confronting the entrenched power of the City, building institutional capacity outside London and prioritizing long-term productive growth over short-term asset inflation.

In The Spectator, Gavin Rice says Britain’s record prices are killing off what’s left of its industrial base - just as it should be seeking to reindustrialise.

Our industrial energy costs – among the highest in the world – are killing off what’s left of UK production, with energy intensive industrial output down by a third in just three years. Our chemicals sector, which provides vital jobs and growth outside the south east, is in freefall. Just as the UK needs more than ever to reindustrialise, Keir Starmer looks set to hook Britain to the EU’s carbon pricing mechanism – a mad scheme to place net zero ahead of economic and industrial security. The UK is hurtling towards total deindustrialisation.

Britain does not make and do enough of what the world wants and needs to buy. Its trade deficit in goods is not made up for by its surplus in services. The overall deficit on our current account must be financed in other ways. So instead of selling goods and services, we plug the gap by selling private and public debt, equities in our companies, and ownership of our prime real estate. But at some point, financing our consumption by selling ownership of the UK to foreigners will run out of road. This dependency on foreign capital has already led to the fiascos we have seen with Thames Water, Sizewell C, the sale of Admiralty Arch and the conversion of prime central London real estate into investment assets.

Britain needs radical liberalisation at home. But it also needs a robust industrial strategy to compete with the likes of China. This cannot be left to the market alone. Since it joined the WTO in 2001, China’s plan has been to achieve an artificial dominance in global manufacturing and to invest the proceeds by lending to its geostrategic rivals. While Trump’s arbitrary tariffs are mad and without logic, the underlying distortions he is responding to are real, and affect the UK as much as America. Our strategy must not be his. But we do need one.

In a speech at the Royal Society of Arts, Shadow Chancellor Mel Stride laid out Britain’s long-term failure to improve productivity or living standards.

The Global Financial Crisis of 2008 is an inflection point representing the pivot between higher and lower productivity growth and so the start of a sustained downwards path to economic weakness. Before 2008, trend growth in GDP per capita was around two percent. According to the Institute for Fiscal Studies, if that had continued today, we would have been producing around £47,000 of output per person. Instead, its reached just £37,000. A full £10,000 per head lower than where the pre 2008 trend would have taken us…in real terms, the average British worker is no better off now than they were in 2008. Average living standards in our country are around those of the poorest US state, Mississippi. Some estimates suggest that average incomes in Poland will exceed those in the UK by 2035. Since the music stopped in 2008, we have become relatively poorer. And Governments, including Conservative Governments, have not broken that cycle.

And our failure to address productivity and growth means that we carry greater risks as a country and a lower likelihood of meeting a variety of critical challenges. In a world which is increasingly less secure and in which the support of the US cannot be taken for granted, we will need higher defence spending. Domestically, we have an ageing population, increasing pressure on health, social care and pensions. There is the challenge of intergenerational fairness with younger age groups doubting they will ever be as well off as their parents. Amongst many young people, there is a profound sense of dislocation from what our country has to offer…

…Take energy, for example. Overall UK electricity supply has declined since the mid-2000s, and prices have risen. We have halved the electricity we generate through nuclear power –surely one of the greatest strategic errors our governments have made over recent generations. The UK now has the highest industrial electricity prices of any member of the International Energy Agency – 50 per cent higher than France or Germany, and an astonishing four times higher than the US or Canada. This is not just a problem for heavy industry. It also affects our ability to build the large, energy-hungry data centres essential for modern artificial intelligence. So we must develop a plan that can move us to having amongst the most secure and competitive energy in the world.

On his Substack, Matt Goodwin lays out stark figures on the reality of Britain’s impending demographic change.

Between the early 2020s and the end of this century, the share of the UK population that’s comprised of people who were born in the UK and are not the direct offspring of immigrants will collapse from 81 to 39 per cent, while the share who are foreign-born or the descendants of foreign-born will rocket from 33 to 61 per cent. What this means is that by the end of this century around six in ten people in this country will either not have been born on these islands, or will only be able to trace their roots back one or two generations.

While some will become ‘British’, this will simply be a much ‘thinner’ sense of Britishness and national identity than what has traditionally defined these islands. While Britain’s identity will increasingly be reshaped, by its ruling class, around the celebration of ‘diversity’, a rapidly dwindling number of people will actually be rooted in the distinctive identity, history, culture, and collective memory that is ultimately what make these islands distinctive to begin with.

The foreign-born and their offspring will become a majority in England in 2079, in Wales in 2081, in Scotland in 2093, and in Northern Ireland sometime after 2122. Yet, once again, this will happen much sooner among the under-40s, with the foreign-born and their descendants becoming a majority among the young in England as early as 2062 —just thirty-seven years from now. This further underlines how the 2060s look set to be a watershed moment in the history of this country, as the white British become a majority and the foreign-born and their descendants become a majority among the under-40s. Our projections also reveal how the religious identity of the country, too, will be completely transformed, with the Muslim population surging three-fold, from 7 per cent today to over 15 per cent by 2075, and then to nearly 20 per cent by the year 2100.

On Engelsberg Ideas, Ionnes Chountis de Fabbri explains the contribution of the Pope’s 19th Century predecessor, Leo XIII, to political thought on the balance between markets, workers and the state.

[The papal encyclical] Rerum Novarum set forth, in striking detail, the obligations of both employers and workers. The former must never treat their employees as mere instruments of profit, but respect their human dignity, provide adequate rest, allow time for religion, family, and recreation, and never exact labour beyond one’s strength. The latter, in turn, must fulfil agreed work, preserve property, and refrain from violence or disorder. Yet beyond this juridical reciprocity, Leo invoked a deeper imperative: Christian charity, what Aquinas described as the principle by which one’s possessions, though legally one’s own, should be held as common when necessity demands. ‘Of what remains, give alms,’ Leo reminded his readers.

Among the wider ranging topics of the encyclical, Leo touched upon wages and the limits of free contracts. Where pay failed to sustain a decent and frugal life, Leo wrote, the worker was not truly free, but ‘the victim of force and injustice’. To this end, he endorsed Christian associations and trade unions, provided they remained voluntary, temperate in tone, and respectful of individual conscience and private property. These he saw as heirs to the medieval guilds, instruments of solidarity within the wider framework of the common good, while warning against coercion, partisanship, and subordination to radical politics.

A decade later, in Graves de Communi Re (1901), Leo returned to the theme to dispel lingering ambiguities. He explicitly rejected terms such as Christian Socialism and Social Democracy, preferring instead Christian Democracy – not in its constitutional sense, but as ‘beneficent Christian action on behalf of the people’. Such action, he insisted, aimed not at the overthrow of existing orders, but at the perfection of souls and the defence of justice by moral means: ‘[Christian Democracy and Social Democracy] differ from each other, as much as the sect of socialism differs from the profession of Christianity.’ This vision of principled reform continues to animate the centre-right on the Continent, in Germany and beyond.

Wonky Thinking

Onward launched The Turnaround: Rebuilding Britain’s Economy by Gavin Rice, with a foreword by Sir Simon Clarke. The report launches a new series of work on reforming the UK economy, calling for supply-side liberalisation of the domestic market with a more strategic approach to international trade.

There is no dispute that Britain is stuck in a growth crisis. Over the last ten years overall GDP growth has averaged just 1.44%, while the population has grown by between 4 and 5%. This matters because a fundamental principle of a market-driven economy is that consistent growth generates a gradual rise in overall living standards, reducing the political and moral pressure for wholesale redistribution. Growth provides the tax yields that fund our public services, the cost of which is only set to rise as our society ages. Just to fund current spending commitments without raising taxes, the Office for Budget Responsibility calculates annual GDP growth would need to be closer to 3%. And growth is the only way to maintain living standards in the face of inflation.

For too long policymakers have focused only on GDP and not on GDP per capita. Real net GDP per head in June 2024 was only £1,072 higher in today’s prices than it was in 2007, the pre financial crisis peak. And it remains lower than in 2019, before the Covid pandemic struck. Real wages have barely moved since 2008, and were falling during the bout of inflation the UK experienced in the wake of global lockdowns ending and the war in Ukraine. British workers now earn on average 28% less than their American counterparts as US growth rates have accelerated. Underlying this is the UK’s flatlining productivity growth, which has historically lagged behind the US, Japan, Germany, Canada and France. This is a story of lost opportunity.

Without stronger growth, no other political goals can be achieved. But Britain suffers from other economic woes too. Its income inequality is relatively low, though this is due in part to its “bunched” income spectrum. However, it is suffering from increasing wealth inequality, with the opportunity to acquire capital - particularly a house - increasingly cut off. A part of the story that is unique to the UK is the scale of regional inequality - it remains one of the most geographically unequal in the developed world, operating a large transfer union to the regions beyond London and the South East. And without London, living standards would be 14% lower, leaving Britain as poor as the US state of Mississippi.

At the same time the country has undergone a profound loss of economic security. A loss of security in the sense of being increasingly beholden to soaring global wholesale gas prices given its status as a significant net importer of energy. But also a loss of personal economic security, caused in part by unfair competition from global low-wage migration, and in part by the rise in forms of unstable work in the gig economy. Putting these factors together, it is becoming increasingly difficult for British households to put down roots, own their own home and start a family. This compounds the demographic crisis the UK faces in the medium term, which will see the share of the population that is retired skyrocket relative to workers - a trend that is sadly set only to continue as the birth rate falls to below 1.5 children per woman, putting enormous pressure on future taxpayers.

An economy can sustain relatively high inequality with healthy growth, and may survive lower growth with lower inequality, but it cannot sustain both simultaneously. And without faster growth the public’s political demands for better funded public services will simply be fiscally impossible. And the country faces this challenge in the most challenging of global contexts, with enormous disruption to supply chains, turmoil on global capital markets, an unpredictable United States and pressure to spend much more on defence. Britain must treat the growth crisis in effect as a national emergency. And it must rebuild with growth that is sufficiently widely shared, sustainable and built on strong foundations.

For Works in Progress, Alex Chalmers argues that a lack of central planning has resulted in poor delivery of grid infrastructure.

The Supergrid cost roughly the same to build as the original grid (£1.5 billion in today’s money), but took ten years to complete, despite stretching for only around a quarter of the length. Partly this was just because Supergrid cables were heavier, and needed glass suspension insulators to prevent entire towers going live, but it was also owing to changes in planning rules. The 1947 Town and Country Planning Act threw sand in the gears, as the Central Electricity Generating Board had either to win local authority acceptance or ask the Ministry of Fuel and Power to convene an inquiry, where a government appointed inspector would take evidence on local amenity questions. When the original grid was built in the 1930s, local authorities could raise concerns about projects, but had no power to stop them going ahead.

Over the course of the 1960s and 1970s, the UK would gradually upgrade the supergrid to 400 kilovolts, but structurally the grid remained relatively recognizable for the next 20 years. In 1961, the UK and French governments commissioned ASEA, a Swedish electricity company to build the first UK-France electricity interconnector, allowing the two countries to trade excess power.

Radical change wouldn’t come again until the Electricity Act of 1989, which was part of Margaret Thatcher’s governments’ pushes to privatize utilities. The Central Electricity Generating Board was dismantled, re-creating a competitive generation market while the newly formed National Grid Company took over transmission and was privatized through a 1995 stock market flotation. Regional electricity boards became fourteen private Distribution Network Operators. The Distribution Network Operators underwent multiple ownership changes and consolidations, eventually forming the current structure of six ownership groups operating fourteen license areas, all functioning as regulated private monopolies.

The privatization has gone on to be a matter of controversy ever since, with critics accusing the privatized National Grid public limited company of prioritizing dividends and profits over investment. But this is simplistic. By allowing private companies to invest in the network, transmission and distribution costs have fallen by 30 percent since the 1990s. Meanwhile, nationalization came with its own distortions. For example, to support domestic industry, the Central Electricity Generating Board would pay twice the international price for coal.

Overall electricity prices continued their slow decline until 2002, after which point the centuries-long trend turned around.

The current government made the decision to renationalize the operation (although not ownership) of the electricity network, moving this task out of National Grid into a new National Energy System Operator in October 2024. This takes our model full circle back to a version of the 1920s: national operation with private ownership. As in the early days of the UK’s electricity network, we are now seeing the consequences of fragmented planning, as our account of the breaking of the grid makes clear.

Quick Links

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