Fixing the foundations

We need an economic model that turbo-charges building, manufacturing, and exporting again

Towering columns

For The Telegraph, Karl Williams examines the latest data on how the increase in low-wage migration carries a multi-generational fiscal cost.

A recent Centre for Policy Studies report looked at how many visas were issued in 2022-23 for different job types on skilled worker routes and compared them with the salary data for those occupations. This analysis suggested that around 72 per cent were likely to be earning less than the average UK salary. Fully 54 per cent were probably on just half of the average salary – the OBR’s “low-wage migrant”. Given another chunk were likely on around 40 per cent of the average salary, it appears that roughly three-fifths of workers on skilled worker visas are destined to be net recipients.

If we extrapolate these figures, then 242,000 skilled worker visas went to low-wage migrants in recent years and just 91,000 to high-wage, with another 115,000 spread in between. By the age of 81, for every £1 contributed to HMRC by the high-wage migrant group, the larger low-wage migrant group will have taken out £1.60. The forecast becomes gloomier when you consider that the OBR has excluded dependents – overwhelmingly more likely to be a drain on public finances – from their analysis entirely. More dependents have been brought into Britain under skilled visa schemes than workers.

If there are so many issues with the “skilled” visa route, where a small minority seem to actually be net contributors, what about the larger picture? Of 3.6 million visas issued in recent years, just 12 per cent went to workers on the skilled route. Around three-fifths of those are probably in the lower wage bracket. This overall leaves 5 per cent of visas going to higher skilled migrants who may be net contributors.

For The Times, Tomiwa Owolade argues that the criminalisation of hate speech is creating a new blasphemy law that has no place in a liberal democracy.

I don’t like being told what to think. It makes me feel trapped. This is why I am amused whenever I am called a coon. Or a house negro. Or an Uncle Tom. Or a coconut. Terms which imply I am acting out of subservience to a “white establishment” or controlled like a puppet; nothing could be further from the truth. I think what I think on matters of race because I have independently come to my conclusions. But I am sometimes described as a race traitor because I think racism is not the only factor that explains inequality in society. That we shouldn’t reduce anyone to their racial identity. I am a moral universalist. And I think the term anti-racist, which should be a noble one, has been tarnished by many who claim to embody its principles…

…But what is even more shameful than describing black and brown people as race traitors is being criminalised for doing so. It is scandalous that the police are coming into the homes of people for opinions they have expressed online: this is a scenario more befitting a fable by Franz Kafka than a society that claims to be a liberal democracy…Freedom of speech is the foundation of all the other freedoms — to think, to dispute, to discover, to be. Hate speech laws are abused so often that they now perform the same role as blasphemy laws did in the past: what constitutes hateful is often to the person charged with such an offence a legitimate moral or political point of view.

Hate speech laws should be scrapped for written or published remarks. Expressions that are offensive should not fall under the jurisdiction of the law but should, as far as they are genuinely offensive, be condemned by wider society. Disliking being told what to think — my guiding principle — also means rejecting the prosecution of speech I or anyone else may consider offensive. We need to be stricter about what kinds of views should be scrutinised by the law.

On his Substack, Michael Dunne considers how the Chinese automaker boom is breaking Western car dominance.

The sudden flood of Chinese cars is upending decades of stable market shares and profits. Take Thailand for example. A friend – and veteran car dealer based in Bangkok – gets frequent quotes from Chinese automakers these days. “One guy in China – and he sounded very confident – said he can deliver a Territory replica for just $8,000,” recounted my friend. “Look, I sell the real Ford Territory here starting at $32,000. Can you imagine?”

His words gave me a flashback to the 1990s and 2000s when I was building our first company in Bangkok. Thailand was then known as “Japan’s backyard.” And for good reason. Japanese brands utterly dominated the market, year in and year out, taking more than 90% of the market. No more. In the first half of 2024, BYD’s market share jumped to 5%. Every Japanese brand, including Toyota, saw sales drop. Honda was forced to close a plant. And Suzuki is exiting the Kingdom.

Thailand is just one example. Another is Brazil, the world’s 6th largest car market. Chinese automakers sent 175,000 cars there in the first half, a 450 percent increase over the same period in 2023. You read that right – 450 percent. How to explain the sensational growth? “The governments of China and Brazil are getting closer,” an executive from a leading dealer group in Sao Paulo told me this week, hinting at China’s geopolitical charm offensive. “Aggressive pricing and good products are part of it, too.” Chinese gains means fresh pain for existing automakers. Count Chevy, Jeep and Fiat among the walking wounded. As a group, they lost more than 125,000 Brazilian customers to Chinese brands in the first half in 2024.

At The Critic, Sebastian Millbank believes Labour is continuing an anti-industrial strategy perpetuated by successive governments.

What kind of “tough” decisions is Labour making? Well, Sir Keir Starmer decided not to loan shipbuilder Harland and Wolff £200 million back in July. The result of which is that the company has now declared insolvency. Harland and Wolff was founded 163 years ago, employs 1,500 highly skilled workers, and built everything from the Titanic to much of the Royal Navy, forming a crucial component of British industrial and military might. To call this an historic and strategic asset scarcely covers it, and its loss will leave a serious gap in our naval capacity…

…Certain things are never allowed to fail or collapse in Britain, whether they be universities, banks or house prices, even when such a crash might provide the impetus for necessary change and reform. Why? Because those who dominate our establishment are heavily invested in these institutions. They are “too bourgeois to fail”. But other things — factories, shipyards and real wages — can be allowed to fall off a cliff, even when the consequences are catastrophic for the public interest. All sorts of covert help and subsidy is available, or loopholes exploitable, if you’re running a hedge fund, or speculating on property, but a great deal less if you’re trying to build and make things in the UK. 

Other governments are treating manufacturing, especially in strategic sectors, as a life and death issue; a ferocious competition for economic dominance. They are pouring billions into making such industries a success. In the case of China, the one-party state is using a command economy to flood global markets with cheap goods in a conscious attempt to collapse the manufacturing capacity of competitors, and seize a greater share of global output. In this global struggle, even more fundamental than manufacturing alone, is the secure supply of food, raw materials and energy upon which national survival, let alone growth, depends. 

For The Telegraph, Sam Bidwell criticises John Major’s patrician conservatism for being outdated and unresponsive to Britain’s present problems.

It is noteworthy that Major did not advance a single substantive criticism of the Rwanda scheme – and there are plenty of criticisms that one might choose to make. In the two years from inception to cancellation, the scheme failed to remove even a single migrant, costing millions of pounds in the process. Major’s objection was instead rooted in pure sentiment, a feeling of fundamental wrongness. For Major, this sort of policy doesn’t feel like the sort of thing that he would have done as Prime Minister – perhaps that’s because the country has changed beyond recognition over the last twenty-five years.

Now well into his twilight years, Major is simply out of touch with the political realities of the 21st century. When he was unceremoniously kicked out of Downing Street in 1997, net migration had crept upwards to 48,000. Last year, that figure stood at 685,000. On illegal migration in particular, the UK has seen a sharp uptick in recent years, as millions of people from fast-growing countries in Africa and Asia pour into Europe. The Britain that Major once envisioned – of invincible green suburbs, dog lovers and old maids bicycling to Holy Communion through the morning mist – has been torn apart by the rapid social, political, and economic changes of the past thirty years…

…And yet Major seems oblivious to the damage that his intellectual tradition has wrought, insulated from the realities of modern Britain by wealth, status, and age. Splitting their time between Westminster, Pall Mall social clubs, and pleasant country piles, retired politicians like Major have constructed a comforting mirage of Britain as it once was. Their careers are no longer on the line, and they no longer need to think too deeply about how the country might look in twenty or thirty years, By then, they will be long gone, and their children will undoubtedly have the financial means to flee the sinking ship.

For First Things, Oren Cass reflects on the role of faith and virtue in constructing a conservatism for the common good.

The way forward does not involve giving the American public a moderated, tempered version of the left’s false moralism. We must insist upon a shared definition of virtue derived from a shared moral vision and set of values, which in turn reflect the traditions and character of our nation and its culture. We must provide an account of human flourishing that gives purpose and meaning to life. That account must emphasize the fulfillment of obligations and duties rather than merely the enjoyment of privileges and rights. We will renew our country when we recover a vision that constrains individual behavior and orients it toward cooperative and productive pursuits.

It is true that, historically, this shared vision and set of values have been expressly religious. But we must recognize that they do not have to be. We should understand religion not as the moral foundation upon which the nation’s culture and morality are constructed but as the form into which many ideas and much experience were poured—shaping them and holding them upright. With time, those ideas and experiences hardened into a foundation. Yes, some of the best aspects of American society were formed by religion, derived from it and eternally consistent with it. But those aspects—upholding virtue, honoring work, caring for those less fortunate, fulfilling obligations to one’s community—are not innately religious. They are freestanding.

Thus, two distinct arguments may be made for our moral tradition. The religious argument is that our moral tradition has the shape conferred by God and thus is good as a matter of faith. A second argument, from tradition and reason, notes that our moral tradition has stood the test of time; it is structurally sound and capable of bearing great weight. It works.

Wonky thinking

The Adam Smith Institute has published Selecting the Best: Building a Future-Focused Immigration System by David Cowan and Tom Jones with a foreword by David Frost. Reducing immigration to the tens of thousands is urgently needed, but it also matters what kinds of immigration we incentivise. To create a highly selective immigration system, the report supports abolishing the graduate visa route, retiring the Shortage Occupation List, and setting an overall skilled worker cap.

Right-wing progressivism is nothing less than the revival of Smithian political economy. Instead of trying to return to the unique economic and cultural circumstances of the 20th century, which the progressive left and traditionalist right hope to do in their own ways, we need to build a Britain fit for the 21st century through an unashamedly futurist vision. This means embracing a combination of technological innovation and strong governance to deliver a British renaissance.

Key to that agenda is the question of human capital. One of the most contested issues today is our recent experiment with mass migration over the past thirty years. It is not just the quantity but also the quality of migration that has provoked questions about the status quo in this area. Leaving aside the issue of illegal migration, which could be a paper in its own right, thirty years of mass legal migration has generated significant challenges for modern Britain.

Controlling and reducing immigration should be a progressive cause. It is not entirely coincidental that thirty years of mass migration has been accompanied by economic stagnation. We need to get businesses and universities meaningfully investing again in our domestic workforce, students, and technology, delivering higher productivity and long-term growth. The key is to establish a much more selective immigration system that not only accepts, but actively seeks out, the very best of global talent. Far from pulling up the drawbridge and reinforcing any kind of hostility towards other cultures, controlled migration is about ensuring that we are as open as possible to economic and technological change.

A more intelligent application of high-quality human capital will ensure Britain’s revival as a vibrant market economy, particularly at a time when population growth is going into reverse everywhere bar sub-Saharan Africa. Opening the borders to all comers lowers the overall value of migration. Global demographic decline will only reduce the pool of talent available to us. To thrive in this context, Britain needs to identify, attract, and select the best. Lee Kuan Yew transformed Singapore into a vibrant economy by making every effort to draw global talent to his country. Britain needs to act and behave like a start-up nation, just like Singapore, and this should start with fixing our immigration system.

This does not mean being ‘pro’ or ‘anti’ migration but getting it right by selecting “the best” migration. Britain can and should be the destination for the world’s best and brightest, particularly as global trends are likely to increase migratory pressures. We are already seeing what happens when the state loses control and allows these forces to run unchecked. Populism and political extremism will only intensify, toxifying our democracy, if our political class continues to ignore the problem. Much work has been done already on why we need to reduce migration by organisations such as the Centre for Policy Studies. Now is the time to shift the focus of the debate to how we can achieve sustainable reductions and reshape the economy.

There is a clear choice before us. The broken status quo under successive governments has failed. We cannot have a new economic model without a new immigration system. This paper presents a clear economic case for how we can reduce Britain’s dependence on mass migration. The overall numbers are certainly important, but numbers cannot come down without major economic reform. It is often assumed that reducing migration must reduce economic growth. On the contrary, we believe that ending the era of mass migration can help finally unleash the productive capacity of the British economy, generating wealth, good jobs, and new technologies. But this can only be done by fundamentally changing our economic model, easing the transition away from our dependency on foreign labour and creating more opportunities for innovative tech-led growth.

In their long essay, Foundations: Why Britain has stagnated, Ben Southwood, Samuel Hughes, and Sam Bowman take a deep dive into how anti-growth policies, such as the UK's ban on investment in housing, infrastructure, and energy is not just a problem. It is the defining problem for our generation. The authors provide a detailed analysis of the scale of the challenge we face and propose measures to unleash economic prosperity that can sustain social and political stability.

The fundamental thesis of this essay is that Britain can have rapid economic growth in the near future, swiftly catching up with the world’s most prosperous countries. It can do this because the sources of its current sclerosis are easy to identify and straightforward, in principle, to fix. The problem is not too little investment by the state. It is that the state has prohibited most of the investments we need to make. The solution is to remove these obstacles to investment, mobility and trade, in a politically viable and durable way.

We should not despair. Britain has been here before a century ago, and triumphed. By the end of the 1920s, Britain was still reeling from the national catastrophe of the First World War. Many damaging emergency measures that had been brought in during the War still lingered, it was recovering from levels of inflation never seen before or since, and economic growth had slowed to a crawl. The housing sector was moribund, thanks to a combination of rent controls imposed during the First World War, tight lending policy, and the effects of rapid inflation, which made the rent controls even more punitive in real terms.

Stanley Baldwin’s government abolished rent controls and removed mortgage regulations by 1932, causing a dramatic housing boom that provided the foundations for the British economic miracle of the 1930s. Millions of extra homes were built in just six years – the fastest period of building ever – probably adding several percentage points to GDP growth in just a few years. The homes were concentrated in the cities in which Britain’s key growth industries were based, giving those industries access to the workforce they needed to continue expanding. It may have been the greatest rapid expansion in a given economic sector in British history, and it was the key reason we didn’t experience a Great Depression while Germany, the USA, and France did.

These homes were enabled by rapid infrastructure development: new roads such as the A3 Kingston Bypass, an enormous expansion of the bus network, and extensions of many of the major railways and tube networks, with the Piccadilly, District and Northern Lines sweeping out into suburban London. During this time Britain built its national electricity grid, in one of the most remarkable achievements of engineering and public works in modern history. In the space of three years, the new Central Electricity Board devised a plan to connect more than 100 of the UK’s most efficient power stations into seven local grids across the country, and passed the legislation needed to enable the plan and begin work on it. It took just five years for the project to be completed in 1936, with 4,000 miles of cables running across 26,000 pylons around the country being built in this time.

In 1937, a year after the seven local grids were finished, a group of impatient and rebellious engineers switched on the connections between the seven grid areas themselves to form a single national system, deciding it was easier to ask forgiveness than permission. They created a world-class grid that remains in operation to this day. The price of electricity collapsed and the share of the population connected to electricity soared, rising faster than in any other country on earth. Britain went from being a laggard to a leader in electrification in just a few years.

We believe that Britain can enjoy such a renewal once more. To do so, it need simply remove the barriers that stop the private sector from doing what it already wants to do: build homes, bridges, tunnels, roads, trams, railways, nuclear power plants, grid connections, prisons, aqueducts, reservoirs, and more.

Book of the week

This week we recommend The Singapore Story by Lee Kuan Yew. In his memoirs, the Singaporean founding father and first prime minister, explains his country’s journey from the third world to the first world. Economic development, administrative reform, and public order were critical ingredients in Lee’s programme. Navigating the pressures of the Cold War, Lee’s experience holds lessons for others to follow.

After we were sworn in, everyone was keen to get cracking, to get to grips with his job and earn as much credit for us as possible before the euphoria wore off. I knew from experience that enthusiasm was not enough. To give of their best, the ministers had to have air-conditioned offices. Without air-conditioning, efficient work in tropical Singapore would not have been feasible.

At Laycock & Ong, I sat in the main office. The heat, humidity and noise were hellish, especially in the afternoons. My energy was sapped, the clerks would work at only half the normal pace, typists would make mistakes, and lawyers more errors in correcting them, as well as in dictation. A turning point in my life in terms of comfort and efficiency came in 1954, when Choo and I installed a one-horse-power air-conditioner in the bedroom. Thereafter, we never lost sleep because of the humid heat. So I encouraged air-conditioning for all government offices.

I took over the mayor’s office on the second floor of City Hall, sharing with Chin Chye, as deputy prime minister, a general office, a reception room and a conference room; for ease of communication, my secretary occupied the room between us. Ong Eng Guan chose public housing premises in his own Hong Lim constituency as headquarters for his ministry of national development. He did not want to share the glory of City Hall with Chin Chye and me.

It was only months later that I realised that his megalomania was undiminished. He wanted to outdo everyone else in the cabinet, to keep himself in the public eye as he had when he was mayor. Keng Swee had assumed the finance portfolio and moved into Fullerton Building. Finance was our most important ministry, and I allowed him to have his pick of government officers. For permanent secretary he chose Hon Sui Sen, my good friend since the days of the Japanese occupation, then commissioner of lands. He was to prove a tower of strength.

Within a few days, Keng Swee reported that the last government had dipped into the reserves and used up $200 million. He foresaw a budget deficit of more than $14 million for 1959. Ministers should therefore be warned that there was absolutely no way to finance development schemes over and above what had already been allowed for, and even those would have to be ruthlessly pruned. The steps necessary to balance the budget would prove unpopular, but it was imperative that we did not end up in the red in our first year of government.

I agreed, and told him that we had better take the unpopular measures early in our term. On 12 June, the newspapers reported that the finance ministry had ordered that no further expenditure was to be incurred without the finance minister’s approval. Among the items likely to be affected were the government’s charitable contributions, advances to civil servants for buying cars, and disbursements for scholarships, fellowships and training courses abroad. But that would not yield much. Keng Swee proposed that we cut our own ministerial salaries from $2,600 to $2,000 a month to set an example, and also reduce the variable allowances of civil servants. Again, I agreed. The government announced that allowances would be scaled down from 1 July, but that it would receive representations on the subject from staff unions and associations.

It was a significant but not devastating pay cut, and affected only 6,000 of the 14,000 government servants. All personnel drawing $220 a month and above would lose a part of their variable allowances, but only 10 per cent of them would suffer cuts of more than $250 a month, and only a handful the maximum of $400. The 8,000 employees in the lower income brackets would not be touched. We had to take action quickly if we were to set the tone for thrift and financial discipline right from the start. There was great unhappiness, especially among the senior officers.

Quick links

The Bank of England held interest rates at 5% after a 8-1 majority vote on the Monetary Policy Committee.

Data showed there were 369,000 migrant arrests in England and Wales between 2021 and 2023.

Research found that over 75% of foreign students are doing subjects, such as gender studies and circus arts, that do not meet the UK’s needs.

The United States is the world leader in the number of active ‘unicorns’ with the EU trailing far behind China.

Iran is deporting 2 million Afghans in a major expulsion programme.

Prisoner on early release was jailed again 48 hours later after assaulting his ex-partner.

Twelve examples of the last government talking right but governing left.