Feeling the Winter Blues

A new year will not give Sir Keir Starmer any second chances

Towering columns

For The Times, Juliet Samuel warns against closer economic ties with China due to its predatory approach towards UK tech firms, such as Imagination.

As laid out in a recent report by UK China Transparency (UKCT), Mandelson met with China Reform, a state-backed firm and anchor investor in the Canyon Bridge fund that bought Imagination, in 2019. Mandelson’s lobbying firm, Global Counsel, was soon building up its portfolio of Chinese clients. It was around that period when Canyon Bridge and Imagination joined the list. (Global Counsel told UKCT that Mandelson himself did not work for either client or on the Imagination deal.)

Then, in 2020, a row broke out. China Reform started trying to fill Imagination’s board with four hand-picked directors, despite assurances in 2017 about protecting it from Chinese interference. The British government intervened and the appointments were stopped but Imagination’s boss, Ron Black, got tossed out in the fallout. He won the argument at a subsequent employment tribunal that he was fired for raising concerns about growing Chinese government meddling at the company. With the plan to stuff Imagination’s board thwarted, its Chinese investors moved to Plan B. This, according to a senior Imagination whistleblower cited by UKCT, involved signing drastically lopsided contracts with Chinese clients that in effect transfer Imagination’s precious assets, namely its core IP and expertise, to its customers…

…Meanwhile, despite the high hopes of 2017 that Imagination’s sale would grant a new lease of life to this homegrown success story, its UK headcount appears to have stagnated. By contrast, a joint venture with its Chinese partner in which Imagination has a paltry 10 per cent stake seems to be thriving. Chinese industrial policy has made domestic chip design a top priority, using vast state sums to transplant foreign technology to China and develop it for its own military and consumer needs.

At UnHerd, Helen Thompson explains how the European car industry is being plunged into crisis by Net Zero policies and Chinese competition.

By itself, the sluggish demand in much of Europe for EVs would constitute a big problem for an automobile sector required to stop selling ICE cars no later than 2035, and 2030 in the UK. But China’s astonishing rise over the past three years as an EV manufacturer means that even the slow electrification of road transportation in Europe is accelerating European de-industrialisation, rather than serving, as so many European politicians hoped, as an agent of re-industrialisation. China has by far the largest domestic EV market in the world. On the IEA’s figures, of the 25% increase in global EV sales in the first half of 2024 compared to the first half of 2023, nearly 80% came from China. By contrast, sales in Germany during the same period fell. Chinese producers are now ascendant in their own country, with the Shenzhen-headquartered company BYD alone taking 30% of the market. Meanwhile, Chinese exports have grown astonishingly rapidly, rising 1,600% from 2019 to mid-2024.

China’s productive success cannot be explained simply by the labour cost advantages of late industrial development. Tesla aside, Chinese cars are technologically superior because the Chinese government systematically worked for them to be. As an industrial strategy for high-tech manufacturing, Made in China 2025 and the Five-Year Plan for 2021-25 have been highly successful. The Chinese state financially supports not just domestic EV firms but all parts of the supply chain from metal mining and processing to battery production. In comparison, European political efforts were financially paltry and much more fragmented, leaving its manufacturers dependent on Chinese-dominated supply chains…

…Ironically, the UK government has thus far adopted the free-trade-leaning approach the Scholz government would have done if Germany were not in the EU without the UK having domestically-owned manufacturers who compete in the Chinese market. But this openness to more Chinese exports is a nightmare for British-based car firms wishing to sell in the domestic market, especially when they already cannot meet the EV sales required under the Zero Emissions Vehicle (ZEV) mandate that subjects all companies selling in the UK to probably the most demanding regulatory framework anywhere in the world for ending ICE sales.

For the Telegraph, Robert Jenrick calls for a national inquiry to seek justice for the victims of ‘grooming gangs’.

As recently as last year, the scandal was widely considered on the Left to be a Right-wing conspiracy theory. But the courageous victims and campaigners refused to be silenced. And a handful of brave reporters, like Charlie Peters at GB News, were willing to report what many mainstream media outlets wouldn’t. Despite the physical intimidation, threats and false charges of Islamophobia, they kept digging away. What we once thought was confined to a few pockets is now known to have taken place up and down the country, everywhere from Bristol to Glasgow.

To protect “community relations”, the British state has gone to immense lengths to cover it up. Reports have been blocked and deliberately kept out of the public eye. Any connection with ethnicity, immigration, or Islam was downplayed. The reports that have been published have been whitewashed – the evidence that British Pakistani men were over-represented among the perpetrators was spiked to avoid uncomfortable truths. But a recent study showed that, in Telford, one in 126 Muslim men were prosecuted between 1997 and 2017, and in Rotherham the figure was one in 73.

I am certain that, after all these years, these rape gangs are still destroying lives. Somewhere, as you read this, a girl may be being abused just as despicably as the ones whose fate we now know of. Why? Because the institutions that failed these vulnerable girls are still contaminated with cowardice. Many perpetrators evaded arrest and remain on the streets. Those who were jailed received shockingly lax sentences and are now being released, free to walk the same streets as their victims.

For the New Statesman, Imogen Sinclair reflects on how working-class conservatism can help Kemi Badenoch to renew the Tory Party.

The market economy is impatient and greedy for GDP-contributing workers. It too readily discredits the legitimate labour of those caring for others. Instead of writing off child-rearing as a costly departure from the market economy, Ruskin maintained that it was “the most directly positive” labour, for it produces life. Again, with typical rococo rhetoric, he wrote: “so that in the precise degree in which murder is hateful, on the negative side of idleness, in that exact degree child-rearing is admirable, on the positive side of idleness”. Badenoch must back the household economy. She should support – and subsidise if necessary – the labour of those who nurture children, care for the elderly, maintain social infrastructure, and unknowingly safeguard our cultural inheritance…

…And this is the turn Badenoch must make: a movement beyond Thatcherism, the governing ideology of the Conservative for almost half a century. Thatcher’s figure is still fetishised by the Conservative party. At this year’s party conference, “What would Maggie do?” events drew eager crowds and a cardboard cutout of the Iron Lady stalked the corridors of the International Convention Centre in Birmingham. Badenoch herself has been favourably compared to Mrs Thatcher. But did she not promise to “renew” her party? She should take that promise seriously. She has a mandate from party members, if she dares.

We can now see the economic liberalism imposed by Thatcher as a historically contingent aberration, making a break from a conservative tradition that includes Ruskin. Thatcher’s ruthless regime did shift the stagnation of the 1970s. But the rush to secure economic gain through a blanket application of market principles came at some cost to Britain’s cultural and social fabric. Working voters in Britain feel this, and would vote for a party whose philosophy coheres around a dignity and respect that extends beyond considerations around GDP. That is why it is time for the Conservative party to adopt a new patron saint and mascot, exchanging the stern glare of Mother Maggie for a very different character: the sideburned Romantic, John Ruskin.

For the Telegraph, Nick Timothy criticises the progressive exceptionalism that has undermined Britain’s national self-confidance.

Progressive exceptionalism is blind to its contradictions. Exceptionalists shut down debate and refuse to publish statistics about the relationship between nationality and immigration status with crime, welfare and the overall fiscal contribution of migrants. The police often publish descriptions of suspects omitting their ethnicity, and the NHS hires specialist nurses to manage birth defects arising from cousin marriages.

Progressive exceptionalists, determinedly universalist in theory, often end up relativists because they cannot compute the dissonance between their beliefs and reality. This explains the Prime Minister’s failure to reject a demand from a Labour MP in Parliament for a blasphemy law, choosing instead to condemn the “desecration” of religious texts such as the Quran. It explains how those who were appalled when the Taliban imposed the veil on Afghan women said nothing about the coercion behind women in Britain wearing the niqab and burqa, and the pre-pubescent girls forced to wear the hijab.

Some exceptionalists argue that mass immigration is the price Britain must pay because of our history of empire. And this sense of original sin – that we must somehow atone today for the power we enjoyed many decades past – is clear in the logic of other exceptionalist positions. We were, for example, the first country in the world to industrialise, and so, the argument goes, we must be the first to decarbonise – whatever the cost.

At UnHerd, Tom McTague exposes the collpase of centrism as a viable political pathway in modern Britain.

With his noble missions as his guide, Starmer hopes to demonstrate to voters that he can deliver tangible improvements to their lives in a way that the populists Boris Johnson and Liz Truss never could. The strategy behind this is to paint Farage not as the solution to today’s crisis of government, but as a return to the populist chaos of the Tories. There is merit in this approach, but in the end, if a wave of car plant closures is blamed on Ed Miliband’s drive to Net Zero, the debates about Liz Truss, Boris Johnson and George Osborne will feel as irrelevant as the figure of Ted Heath did in the aftermath of 1979’s Winter of Discontent.

The danger for Starmer is that trying to defeat populism through “delivery” not only leaves him at the mercy of forces he cannot control, but also ties him inextricably to a system that voters have already rejected. This, in a sense, was the story of the American election, in which a party with an apparent record of delivery was defeated by an insurgent populist. To win, Starmer needs more than a spreadsheet with the figures moving in the right direction. He needs a story about what went wrong before and why his government is different. He needs a story about what his government is for, morally and ideologically.

Unfortunately for Starmer, there is a concurrent shift in attitudes across the Western world which Starmer also needs to contend with. As a senior diplomat put it to me, the mood in European capitals has dramatically shifted since Trump’s victory, embracing his power in a way that indicates a new and far more cynical Western zeitgeist. “So many have now embraced the world of Game of Thrones, Billions and Succession,” this official said. “A world in which power is the only currency and morality is most likely to be a flaw.”

Wonky thinking

On Substack, the Lambeth Economic Review looks at what a modern trade policy should look be for Britain. Comparative advantage is not a naturally occuring phenomenon but something that can be specifically developed by policy makers. This requires a new mindset in the British state.

The United Kingdom’s current predicament underscores the need for this rethinking. Long reliant on market liberalism, the country’s production base has hollowed out in many sectors, leaving behind heavy trade deficits and chronic economic vulnerabilities. Cheap imports offer short-term gains to consumers, but these superficial “efficiencies” have not translated into robust domestic capabilities, secure employment, or a sustainable external balance. On the contrary, foreign ownership of key British firms and assets has grown, and the country remains dependent on foreign financing to maintain living standards.

This fragility calls into question the simplistic efficiency arguments often invoked to justify trade arrangements. Even when trade boosts aggregate welfare on paper, who benefits from these gains? If too large a share of value-added production is offshored, if domestic labour is left underutilised, if British firms languish while foreign-owned counterparts thrive on British soil, then “efficiency” is a hollow victory. Gains accruing disproportionately to external stakeholders fail to strengthen the UK’s own economic foundations.

Against this backdrop, a renewed interest in strategic state intervention is emerging. Discussions about reshoring critical production and rebuilding industrial capabilities are no longer dismissed as economic heresy. Most recently, the British government’s openness to exploring the nationalisation of British Steel exemplifies a growing recognition that certain industries are too important to be dictated solely by global commodity markets.

Encouraging developments, such as exploring the nationalisation of British Steel, will inevitably face criticism from those who argue that public ownership leads to inefficiency, misallocation of resources, politicised decision-making, and a lack of profit-driven discipline. Market liberals maintain that state-led enterprises, absent the competitive pressures and incentive structures found in private markets, run the risk of succumbing to bureaucratic inertia, lower productivity, and compromised innovation. These theoretical concerns cannot be simply dismissed; government ownership has, in certain historical contexts, resulted in organisational stagnation and diminished international competitiveness…

…In other words, the debate should not revolve solely around the textbook ideal of efficiency. At a time when geopolitical uncertainties demand resilience, ensuring that the UK retains a core industrial capability becomes an overriding priority. Better an imperfect but domestically grounded steel industry than an utter abdication of industrial sovereignty. By revising the terms of the conversation in this manner, nationalisation moves beyond mere nostalgia or ideological impulse and becomes a pragmatic response to a world in which national capabilities and strategic independence matter more than ever.

Also on Substack, The Econlog considers how global energy flows will be reshaped by the Syrian government’s collapse. Recent events could create a unique opportunity for Turkey to distribute oil and gas between Europe and the Middle East, giving it significant economic and political influence.

Turkey has long been Europe’s passageway into Asia. Already Alexander the Great passed through Turkey to build the world’s first empire, and even one thousand years before that, one of the best known mythological wars, the siege of Troy, took place in Turkey. But Turkey has quietly been building a new kind of passageway, a network of connections to large energy producers…

…That infrastructure was essential for keeping energy supply to Europe intact during times of political stress. When Russia first shut down the NordStream pipelines for ‘maintenance’ temporarily during the war with Ukraine, and the pipeline was sabotaged later, exports to Europe via TurkStream went on without interruption.

Similarly, the Kirkuk pipeline stayed in operation during the time of sanctions against Iraq in the 1990s. Iraq kept exporting several hundred thousand barrels of oil a day to Turkish port Ceyhan in violation of U.S. and U.N. restrictions (actually I’m working on an adventure story related to that episode right before the Iraq war – if you know an agent who might be interested please let me know!). The oil went on Panama-flagged tankers which mostly sailed to the U.S. gulf coast.

The crown jewel however was missing – Turkey was cut off from both Saudi Arabia and more importantly from Qatar by a belt of hostile countries: Iran, Iraq, and Syria. It wasn’t that much of a problem for Saudi Arabia which exports oil, and for which there is an efficient infrastructure for transport in place. But for gas, pipelines are a huge improvement for transport compared to LNG, because the 2-way process of liquefaction is a wasteful and inefficient process…

…The fate of Syria is uncertain. The coalition which brought down the Assad regime includes military factions like FSA and SNA, the powerful jihadist group HTS (Hayat Tahrir al-Sham), and other groups with varying ideologies and international backers. There’s a chance they might stabilize the country, in particular as they aren’t fighting an occupying force like in Iraq 20 years earlier. That scenario gives Turkey an opportunity to implement a strategy which, ironically, Syria’s Bashar al-Assad formulated fifteen years ago: the Four-Seas strategy, creating a new energy hub connecting the Black Sea, the Caspian Sea, the Persian Gulf, and the Mediterranean.

Book of the week

We recommend The Prize : The Epic Quest for Oil, Money & Power by Daniel Yergin. The author provides a comprehensive account of how the oil industry shaped the twentieth century. Oil played a crucial role in the rise of American hegemony and great power competition in the Middle East. This dramatic history made the modern world and demonstrates the centrality of energy in economics and politics.

Oil imports have been a political and strategic concern since the United States moved from being on oil exporter to an oil importer in the late 1940s. Today those concerns have been amplified both because of the outflow of money and because of turbulence and extremism in parts of the Middle East, the recruiting base for Al-Qaeda. But those import numbers do require some clarification. It became common to assert that the U.S. imports 70 percent of its oil. In fact, in 2008, on a net basis, it was importing about 56 percent of its oil—still a very substantial amount. There was also a widespread belief that most or all of U.S. imports came from the Middle East. That is actually not the case. Some 22 percent of imports come from Canada, part of the overall trade flows with the country that is the United States’ largest trading partner, and 12 percent from Mexico. Supplies from the Middle East (including Iraq) constitute 22 percent of total imports and about 12 percent of total U.S. oil consumption. Altogether, petroleum—both domestically produced and imported—provides about 40 percent of the total energy on which the United States’ $14 trillion economy operates. Nevertheless, a confluence of concerns turned “ending the addiction to oil” into a common phrase of political discourse in the United States, even if the definition of addiction still needed some clarification.

The need for new supplies—conventional, renewables, and alternatives—plus price and security and climate concerns has unleashed a wave of innovation and research all across energy industries. But how fast will change come? Certainly energy will be a major policy focus. Barack Obama described energy as “priority number one.” Technology and markets will provide the answer over time. Many renewables, such as wind and photovoltaics, provide electricity and will do little to supplant oil imports, as only 2 percent of U.S. electricity is generated from oil—unless there is a big growth in electricity-powered transportation. Indeed, transportation is critical. Whatever the innovations—and much is in the works—the auto fleet will not change overnight. It can take five or six years, and a billion dollars to bring new models to market. Only about 8 percent of the auto fleet turns over each year, and so it will take years for the impact to be felt.

But in five or ten years the auto fleet will almost certainly change and will look different from today’s fleet, in terms of its energy sources and perhaps its engines. Certainly cars will be more efficient. New automobile fuel efficiency standards, passed at the end of December 2007, represent the first mandated increase in thirty-two years. The original fuel efficiency standards in 1975 were one of the two most important energy policy decisions in the 1970s (the other being the approval of the trans-Alaskan oil pipeline). These new standards will likely have similar impact. But what will be the changes? What kind of breakthroughs lie ahead for biofuels beyond corn-based ethanol? One way or the other, there will be more electricity in auto transportation. Hybrids will gain market share. Will plug-in hybrids mean that the electric power industry will be fueling some part of the auto fleet? Will natural gas become a significant motor fuel?

The dramatic changes in world oil are inevitably leading to a renewed focus on the perennial question of energy security. World War I and World War II had so starkly demonstrated the strategic importance of energy, particularly oil. But, as described in these pages, the present international system for energy security emerged only in the 1970s around the International Energy Agency and has evolved in the decades since. But much has changed in recent years. The major new consumers, China and India, need to be brought into the international energy security system, and that will require greater confidence and communication between them and the traditional importing countries. At the same time, there is an urgent need to address the physical security of energy infrastructure—pipelines, power plants, and transmission lines—and the supply chains that carry oil and natural gas from wellheads in the Persian Gulf, West Africa, Central Asia, and other parts of the world, to consumers. The integration of China and India and the focus on infrastructure are both essential for energy security in the twenty-first century.

Greater efficiency in the use of oil and other energy sources is emerging as a major and common policy objective in countries around the world. The industrial world is twice as energy efficient as it was in the 1970s. The potential for future efficiency is still very large. And yet it seems likely that a growing world economy, with rising incomes and increasing population, will require more oil—perhaps 40 percent or more over the next quarter century, at least according to some estimates. Perhaps innovation will lower that number. The answers depend upon policy and markets and on technology and the scale and character of research and development.

Quick links

Labour’s polling has fallen to 26% from an average of between 43 and 45% in early 2024, while Reform has increased from 9% to 22%…

…and less than 60% of Conservative-Labour switchers would vote Labour again.

To hit its target employment rate of 80%, the government needs to get 2.1 million people back to work.

Transgender police officers can carry multiple warrant cards for their gender identities in 11 police forces.

VAT on school fees will only raise £1.8bn, falling short of the £5bn needed to recruit new teachers.

Annual salaries for recent graduates fell by 4% in 2001 to 2023.

The Technology Secretary has ruled out banning social media for under-16s.

Two-thirds of transgender women in prisons are serving sentences for sex offences.

Despite increased NHS spending, life expectancy in the UK has stalled.

China will build world’s largest hydropower dam in Tibet.

Greek shipping allowed Russia to benefit from high oil prices in 2022.

CEO of Games Workshop named business person of the year.