Great Advice From Dan The Man To Our New PM.

From car tax to Chagos, nine ways to boost growth without spending cuts:

Daniel Hannan is President of the Institute of Economic Affairs, and sits in the House of Lords as an independent peer

What can Andy Burnham actually do? He inherits an economy which is, in many ways, still in lockdown. Public sector productivity is below where it was when the pandemic hit. One in four working-age Britons claims to be disabled. We pay more to non-working adults in benefits than we raise from working adults in income tax.

Taxes are higher than since the late 1940s, when we were winding down from full mobilisation; yet, incredibly, we still borrow £23bn a month – half of which goes on paying interest on previous loans.

Indeed, we spend considerably more on servicing past debt than we do on defence. Interest payments are our biggest budget after healthcare and social security. All three are ballooning with nothing to show for it.

The new PM will know by now what is coming in the Autumn budget. I shouldn’t be surprised if he calls a snap election rather than having to face the country as a Labour PM who was forced into cuts. Yes, I know Burnham has ruled out an early poll, but so did Theresa May and Boris Johnson, right up to the moment when they called one.

Let’s assume, though, that Burnham is telling the truth when he says he won’t go to the polls yet. What, then, are his options?

What, to be more precise, can he realistically do to restore growth without alienating his MPs and his core electorate? There is no point in urging him to slash spending, in the way that Margaret Thatcher is imagined to have done. His whole shtick is that he hates Thatcherism. The Iron Lady may have taken Britain from being the slowest-growing economy in Europe in the 1970s to the fastest-growing in the 1980s, but Burnham will never let anyone accuse him of copying her.

Nor is there much purpose in pointing out that public spending has shot up since his first election to Parliament in 2001 ,from 35 per cent of GDP to 44 per cent. If Burnham sees that rise as “neoliberalism”, our definitions are so far apart that meaningful dialogue is difficult. Plainly, the new PM is not going to shrink the state. Nor is he going to privatise healthcare or scrap net zero or reduce the civil service payroll or do any of the things that would properly kick-start growth. What, then, does that leave?

I want Britain to succeed – which necessarily means wanting Burnham to succeed. So I asked my brilliant boffins at the Institute of Economic Affairs to suggest ways that the new PM could stimulate growth in ways that are compatible with what he calls his unashamed Labour values – in other words, without cutting public spending.

Here is what we have come up with – nine ideas to expand the private sector without shrinking the government, nine policies that can be implemented by the end of the year without costing the Treasury a penny.

1. Release green-belt land within walking distance of railway stations. That change alone would free up space for two million homes, which would significantly bring down the cost of living. The savings people made would then drive growth in every other sector. Burnham made the case for green-belt release as mayor of Greater Manchester. Within weeks, he could amend the National Planning Policy Framework to designate some land as “grey belt”. Since much of that land, even now, is represented by Tory MPs, it would have the added bonus of dividing the Opposition.
2. Raise nursery staffing ratios to European levels. One of the major constraints on growth is the cost of childcare, which prevents young parents from taking jobs. Although defenders of the regulation claim that it is about safety, the truth is that it is a racket whereby existing providers raise barriers against possible competitors.
3. Remove identifiably useless regulations. The Nuclear Regulatory Task Force proposed 47 changes to streamline the rules and clear away needless stipulations. All 47 proposals have been accepted, paving the way for the generation of clean and reliable energy. Why not take the same approach across the board – from financial services to planning? Lift the rocks and let the grass grow.
4. Lure back non-doms. Ministers have been privately shocked by the amount of revenue that has been lost as mobile wealth-creators have migrated to friendlier tax jurisdictions. This is a change Labour can make more easily than other parties, because no one accuses it of being in the pockets of foreign plutocrats. Undoing Rachel Reeves’s changes might slow the loss of wealth and wealth creators. But to draw them back in, and boost the Treasury’s receipts, we need to go back to where we were before Jeremy Hunt announced his expensive changes in 2024.
5. Park the uncommenced provisions of the Employment Rights Act. Keir Starmer came to understand, too late in the day, that his Employment Bill was going to become an Unemployment Bill. So he paused the more job-destroying elements of it. Dropping those elements permanently will give companies the confidence to hire. Halting the continuing and unaffordable rises in the minimum wage will tackle the crisis that has left a million young people out of work and is killing the hospitality sector.
6. Recognise trusted foreign regulators. If a new drug is approved by the European Medicines Agency, or Japan’s Pharmaceuticals and Medical Devices Agency, or the US Food and Drug Administration, that should be good enough for us. To sell the policy to the Labour base, explain that it allows us to align with the EU without giving up the freedom to innovate. That should be our approach across the board, not just with medicines. Allow British companies to follow either EU or UK standards: regulatory competition will itself stimulate competitiveness.
7. Scrap tariffs on things we don’t produce. I mean, we should scrap tariffs across the board, since they always and everywhere harm the country that imposes them. But voters never believe this, and politicians are never brave enough to explain it to them. Even the most protectionist numbskull, though, will surely struggle to explain why we have tariffs on rice, olive oil, oranges and the like, driving up costs for British firms that import them as raw materials without even any imagined benefit.
8. Replace Vehicle Excise Duty with a road charge. We have woven a cat’s-cradle of taxes around vehicles – a levy on owning them, duties on petrol, a new mileage charge for electric cars, various congestion tolls. Burnham says he wants more localism. Well, letting local authorities run their own road pricing schemes is a way for them to raise revenue while ensuring that our transport infrastructure is funded.
9. Drop the Chagos Scheme. For a fraction of what Starmer proposed to pay Mauritius, Britain could provide infrastructure for Chagossians to return to their ancestral lands. Quite apart from the monetary saving, the reversal would be a practical realisation of Burnham’s talk of national resilience, his aspiration to govern as a plain-speaking northerner rather than as a human rights lawyer.

I could go on. A Labour government could introduce market mechanisms into the NHS while retaining the principle of free treatment. It could remove benefits from illegal immigrants. It could replace the most expensive elements of the Equality Act and the Human Rights Act. It could do all these things without being accused, as other parties would be, of victimising the vulnerable.

Let’s stick, though, to the reforms that offer the best ratio of effort to outcome. The things that can be secured through simple bills or secondary legislation, where the opposition will be limited, and where the gains are immediate. While these things will not restore the levels of prosperity that we used to take for granted when the state was spending one pound in three rather than one in two, they will at least allow for some growth and ease the immediate pressure.

Will Burnham do any of them? We will know soon enough. And if you want detailed plans on how to do these things with the smallest short-term costs and the largest long-term gains, Prime Minister, the door of the IEA is always open.

Daniel Hannan is director of the Institute of Economic Affairs. DT.