The government's government problem

New Statesman​

23-07-2025

The Environment Secretary Steve Reed promised to revolutionise the water industry. But what has happened? Photo byThe heavy rain that arrived last week was, for the nation's gardeners, an encouraging sign after what had been the driest spring since 1893. But the sad truth is that relatively little of that water will have ended up in the country's reservoirs, the newest of which was completed in 1992. Most of it ran into our combined sewers, where rainwater is mixed with household waste. The untreated effluent then overflowed into our rivers and inshore waters, giving them a fresh coat of bleach, microplastics and faecal matter, just in time for the school holidays.
Fortunately the government had prepared by adding this long-running disaster to the list of things it is planning to do something about, unless anyone has any strong objections. The public wants water companies to stop extracting tens of billions of pounds from a captive market of bill-payers while turning the country's waterways into open sewers. The Environment Secretary, Steve Reed, has promised them a 'revolution'. Will the system be renationalised? Are the most highly remunerated executives going to prison? Will they be forced to swim through the noxious gubbins while a gleeful public pelts them with toilet rolls? Not quite. Ofwat and the Drinking Water Inspectorate will be replaced by a new regulator, hopefully by 2027. Robespierre was not available for comment.
On the same day, the Work and Pensions Secretary, Liz Kendall, revealed that she, too, had a revolutionary solution to one of Britain's deep, long-running problems: the fact that very few people of the current generation of workers are saving enough for retirement. Almost half of all working-age adults are putting nothing at all away for later life, and will spend the last 20 years of their lives wholly dependent on the state.
This is a slow-moving disaster that can be seen happening from a long way off, and there is a set of options that have been discussed by economists and pension fund companies for decades. Employers could be told that they have to contribute to employees' pensions whether or not employees opt out of paying in (as many people on lower incomes do). Auto-enrolment could start at 16, or as soon as one starts working. The default rate of contributions could be bumped up to 12 per cent. We could make pension contributions mandatory, as they are in Switzerland and for some employees in Australia. But let's not be too hasty: the first step is to bring back the Pension Commission, which will also look at the options, really stare at them, like one of those magic 3D pictures, until the right one pops out. And then it will report to the government in 2027.
Both these commitments to doing something, eventually, follow the hotly anticipated 'Leeds Reforms' announced by Rachel Reeves in her Mansion House speech on 15 July. In it, the Chancellor committed to probably doing something about the fact that British companies are underinvested in, and that many British savers are keeping their money in low-interest savings accounts rather than using them to Back British Businesses. Reeves had previously considered making significant changes to cash ISA allowances, but this was a bit contentious, so there will be an advertising campaign, reminiscent of the 1980s 'Tell Sid' adverts, which encouraged the public to buy shares in the newly privatised British Gas.
The difference with Thatcher's ad campaign was that Thatcher was actually doing something for Sid to be told about. The thing that was being done (privatisation of state industries) was ideologically driven, inept and ultimately disastrous for the UK economy, but one thing we can say about it is that it did in fact happen. The problem that the Labour government has is that it is a group of very clever, well-intentioned people who do not seem to be able to get things done. The Employment Rights Bill and planning reform are other areas in which good plans are turning into insufficient compromises.
The most immediate danger of this trend is that it creates a financial credibility problem. When investors decide how much they will pay for Britain's debt, they are to a great extent making a prediction about two things: the path of inflation (because higher inflation reduces the returns from buying bonds) and how much more debt the government is going to borrow (the more debt it sells, the lower the demand). When the UK is run by a government with a large majority, which is apparently unable to enforce its own policies to save money, a reasonable prediction is that it will have to borrow quite a lot more in the future. This means the market will pay less for our debt, which means our borrowing costs are higher.
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Politically, this will combine with growing frustration among the government's own MPs, such as the 100-strong Labour Growth Group, which is increasingly resorting to blatant means of criticism, such as fulminating in the New Statesman about 'the exhausted politics of technocratic incrementalism'.
Not all revolutionaries need to be Montagnards, determined to write history in blood. As Camille Desmoulins put it, having been sentenced to death on the order of his old pal Robespierre, 'a little ink would have sufficed'. But in times that demand change, withholding it begins to look less like prudence, and more like the narcissism of people whose political project does not extend beyond holding on to power.
[See also: Who is an acceptable migrant?]
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