Budget 2025: This is how you lose the world

Populism has damaged the economy. And to fix the economy, you have to damage populism.

Photo by Connor Hall on Unsplash

The conversation around the Budget seems very far removed from Donald Trump, Vladimir Putin and Nigel Farage. All this talk of fiscal headroom and property valuations seems utterly distinct to the conversation around small boats, Ukraine and pronouns. But in fact, they are component parts of the same debate. They are all one storyline, playing out in disparate narrative strands.

Since 2016, populism has mounted an artillery attack against the British economy. It has convinced people that the solution to their problems lies in hatred and suspicion of outsiders. It has seduced them into a rejection of the open society - closing the door to people, goods and ideas in roughly equal measure. The results have been ruinous: a shredded, moth-eaten economy, a thin lice-infected veil where we once enjoyed substantial cloth.

This is not a problem for populism and in fact benefits it. By worsening the existing conditions, it can then demand that voters take ever more radical steps towards its position, becoming ever more virulently nativist as they do so. Look at Farage’s current ascendancy, despite Brexit visibly refuting every promise he made before 2016. National failure is a precondition of populism’s success, not an obstacle to it. And if their demands can speed up that failure, it’s all for the best.

The battle against populism is therefore an economic battle as much as it is a cultural, moral and intellectual one.

We must build an economy which works for people, to remove the inspiration and motivation of populism. But we rarely see any efforts to actually achieve this.

Our tax system looks like it was designed by a clown on meth. Why do we tax employee pension contributions but not employer pension contributions? Why does the marginal tax rate start to behave very strangely around the £50,000 mark and basically experience a seizure at the £100,000 mark? Why do we have a VAT exception on gingerbread men who have chocolate eyes but apply it in full if they are decorated more expansively with chocolate? For no good goddamned reason at all. More importantly: What is our broader economic strategy? What kind of economy are we trying to create? Who knows. To even ask that sounds dangerously abstract and a bit foreign.

The core liberal demand in this area was first voiced by former US Treasury Secretary William Simon. It was that the tax system should look “like someone designed it on purpose”. In other words, it should be based on reason and long-term national interest, not irrationality and short-term personal interest.

We can go a step further and demand that for the whole of a government’s economic strategy. Does it look like someone designed it on purpose? Is it clear what it is trying to achieve? Does it seem likely to do so? And how would that improve people’s lives?

A rational tax system encourages growth and tax revenue. A rational economic strategy encourages wealth and material wellbeing. And those two things together can help bury populism.

The press coverage of this Budget has pitted various groups together - Reeves and Starmer versus their backbenchers, the government versus the opposition, Blue Labour versus the soft left, benefits claimants versus the comfortably off. But the true story of our time is the battle against populism. That is the most important lens to view the Budget. And that is an analysis which is sorely missing.

Rachel Reeves did numerous admirable things in the Budget. People should bear this in mind the next time they claim there is no difference between the Conservatives and Labour. There is. You are mad if you claim otherwise.

The decision to scrap the two-child benefit limit removes one of the most morally obscene policies the Treasury has ever produced, one which was so objectionable it failed on something approaching a biblical level: we do not punish children for the sins of the father. Reeves’ decision will benefit 560,000 families to the tune of £5,300 a year, leading to a 450,000 reduction in child poverty. I understand that most of the public do not support this. Most of the public should take a look in the mirror and ask themselves what has become of them.

Reeves also rationalised her fiscal rule. This is the promise she makes to markets: that day-to-day income and expenditure will match in five years’ time. It is an important rule. The moment the markets no longer believe in it, we’re all in much deeper shit than we are now.

Previously, Reeves’ met the rule with £9.9 billion to spare. This is what is annoyingly termed ‘the headroom’. The problem was that it was just too tight. Small changes blew the numbers off course. There would be a change in productivity estimates for instance, or Labour backbenchers would rebel on disability benefits. Then Reeves’ numbers no longer added up, speculation would grow about which taxes she would put up, and we’d be treated to the madcap chaos of the last six months, where every day seemed to suggest a new possible tax rise.

This is a terrible way to write policy, but it is also economically damaging in its own right. It stops people taking economic decisions because they want to wait to see what will happen at the Budget. It took Labour’s greatest economic asset - stability as a trigger for investment - and eradicated it.

Reeves gave herself the £9.9 billion in the first Budget. Then in the Spring Statement she fiddles in various ways to rebuild it, almost to the penny, and the whole shitshow played out again. This time she seems to have finally learned the lesson. The headroom has been expanded to £22 billion. She has also changed the rules so that the Office of Budget Responsibility only assesses compliance once per year rather than twice.

These are good, smart changes. But that is pretty much where the good news stops. Elsewhere in the Budget we see a continuation of three traditional Treasury approaches to economic policymaking: Sticking plaster solutions, arbitrary no-plan chaos, and fiddly bullshit with time and categories.

Sticking plaster solutions are clearest in property tax. The government introduced a mansion tax, applied on homes over £2 million. This is morally sensible. People with homes of that value can afford to pay more. But it is not actually very effective. It’ll secure just £400 million by 2029-30 - a rounding error.

We all know what’s required. Even a child knows. Council tax is based on property valuations from the 1990s. It taxes people in low-value homes more than high value ones. It is irrational. But Reeves is too scared to change it, so instead she introduces a second set of valuations for high-value homes in addition to the existing set of dated valuations for establishing council tax.

This is how we end up with such an insane tax system: because it is much easier to add a tax element than to repair what we already have.

Now look at the income tax thresholds. This is an example of arbitrary no-plan chaos. Reeves promised not to raise income tax, VAT or national insurance at the election. Reeves has therefore frozen the thresholds instead. These are the points at which you start paying income tax, at £12,570, or when you start paying the higher rate, at £50,271. Because of inflation, people’s salaries are constantly being pushed upwards into these thresholds, but it is not a real increase in pay, because the price of everything else has gone up alongside it. They have no additional purchasing power. And yet by keeping the thresholds fixed, Reeves is extracting more money.

The moral consequences are severe. It means that the tax system is grounded in fluctuation of future inflation. There is no justice, no sense of basic fairness, as to the income tax that someone pays. It is entirely unpredictable and arbitrary.

Elsewhere we see the third Treasury tradition: Fiddly bullshit. This Budget frontloaded the pleasure and backloaded the pain. The benefit changes come into force immediately, but the tax changes are mostly delayed to later in the parliament. More than half of the tax increase comes in 2029/30 - the crucial five year fiscal rule target.

Reeves then went a step further and started writing in cuts to public spending in 2028-29 and 2029-30. A third of the increase in her headroom was due to a projected £4 billion of ‘efficiency savings’, which have about as much objective reality as KPop Demon Hunters. Actually, that’s not right. KPop Demon Hunters makes real money that exists in an objectively real world. The projected efficiency savings invent imaginary money which exists in a future fantastical world.

Elsewhere there is simply nothing. An absence where policymaking should be. This is the single greatest crime in this Budget. It is an historic betrayal, a vitiation of national responsibility. The government came to power promising growth. It pledged to put this at the root of everything it did. But there is no plan for it. No new policies that the OBR scores positively towards higher GDP. No strategy. No vision. No ideas.

It is a vacuum. A void.

The reason for this absence is ideological. The government has become seduced by populism.

There are moments when it breaks free of this trance - the last Labour conference, or those now rare points where Keir Starmer’s vestigial moral sentiment gets the better of him. But Starmer has now broadly submitted to the ideology which he once set out to destroy. No.10 chief of staff Morgan McSweeney happily notifies the press that he is spending 90 minutes in private meetings with Maurice Glasman, a babbling sexual neurotic who considers Steve Bannon his ally and progressives the enemy.

Culturally we can see the impact of this conversion in proposals around asylum, including the flirtation with the notion that the British state should strip refugees of their jewelry - halfhearted Nazi cosplay, essentially. But economically it has been much more ruinous.

Earlier this month, Andrew Sissons and John Springford published the outline of a plan for the British economy. I would urge you to take an hour, make a cup of coffee, and read it in full. It is valuable not just in its own right but as a reminder that there are still serious-minded conscientious people in this country who care deeply about its future.

The authors’ diagnosis of our economic malaise is simple: “Britain has fallen out of love with the things it is good at and in doing so it has undermined its advantages in the international economy.” What is it good at? “Finance and business services, tech and the creative economy, various advanced manufacturing niches”. What do these things rely on? “Openness: to trade, to ideas, to skilled workers”. In other words, precisely the quality which populism aims to kill.

Once you recognise what British economic success entails, it becomes fairly clear what kind of tax system you need to fund it. You would make the system rational, transparent and, most importantly, fair. It is precisely the arbitrary unfairness of the current system which motivates people to avoid it wherever possible and its labyrinthine complexities which provides avenues to do so. Needless to say, Reeves did not take that opportunity.

Populists argue that Britain’s historic openness to trade and immigration hurts the indigenous working class. In fact, it serves them. Successful productive industries create well paid jobs, which increases local spending, which revitalises town centres and provides revenue to the Treasury, which can fund public investment. But when our political priorities strangle those industries, the precise opposite happens. And that is the continuity we are living in today. That, in a word, is why we are so fucked.

Look at what the populists have wrought. Nine years ago they scored their first triumph: Brexit. The campaign was grounded in a fear of immigrants, specifically through a rejection of European free movement. Back then the demonised immigrant was a Polish plumber. Today it is a Syrian refugee. The scapegoat changes, but the storyline remains the same.

The consequences to trade were disastrous. Our trade in goods is now lower, as a share of GDP, than in 2019, whereas other economies of our size and type have reverted to around the same level as before the pandemic. Manufacturing is still a vital part of the British economy, particularly in major towns where it is often a regional anchor. They were the ones which took the worst hit.

This process continues today. Our obsession with immigration, fuelled and made vicious by populism, is once again strangling the life out of our economy. It is killing us.

Take higher education. This is a British success story. It is a vital economic lifeline to the country. Almost every medium-sized UK city has a university. They support their local economy through demand and supply. And they bring youth and vigour and dynamism to locations which might otherwise face stagnation.

The government’s response to this success is to try to kill it. Ministers never say anything good about universities anymore - that is against the populist code, which treats them as incubators for liberalism. Tuition fees were frozen in the face of inflation for years on end, basically eradicating their revenue. Universities were instead encouraged to make ends meet by taking on international students, who pay higher fees. Then the government decided that this was intolerable because it had to reduce immigration.

Labour originally threatened to impose a six per cent levy on international students. Instead, it decided this week to apply a £925 flat fee per student from 2028, with an exemption for the first 220 students per provider. This is better than the original threat but still completely insane. They are actively trying to reduce numbers, despite the fact that these numbers bring real economic benefit to the UK. They’re not even unpopular. Just two per cent of the public want the government to restrict international students. And yet the government is intent on reducing them and indifferent as to the effect it will have on universities.

Yesterday, new immigration numbers were released.

They showed that net migration at the end of the year ending June 2025 was 204,000, a drop of 445,000 compared to a year earlier, driven mostly by a sharp decline in student dependents and health and care visas.

This is largely a result of policy decisions taken by the outgoing Conservative government. We haven’t yet seen the impact of policy decisions taken by the new Labour government, which has decided to follow a similar populist approach. They will lead to even greater reductions, predominantly due to Shabana Mahmood’s purposeful demeaning residency rules and high salary and qualification thresholds for young skilled workers. The Home office estimates a further fall of 100,000. Other estimates suggest net migration could fall as low as 70,000 next year.

This is covered as if it was good news. The reality is that it will hurt us very badly indeed. This is stated in black and white in the Office for Budget Responsibility (OBR) paper published alongside the Budget. “Our central forecast sees potential output growth slow from 1.8 per cent in 2025 to 1.3 per cent in 2026,” it states. “The slowdown next year partly reflects a further fall in levels of net migration”. You can’t get any clearer than that, and yet we choose to ignore it.

This kind of decline would hurt any country but it hurts us most of all. An economy which relies on high-skilled services needs human capital. A country with aging infrastructure and cities which lack decent connectivity needs imported labour. A nation which wishes to have a decent health and social care system needs foreign nationals to work inside it.

Instead, Starmer says the reduced numbers are a “step in the right direction”. A direction to where? How many immigrants does the government think we need? What kind of sectors should they be operating in? On what basis should we make those decisions and towards what end? No idea. There is simply no coherent government view on this issue, except to do whatever Farage and his press supporters demand of them.

The populists will welcome the fall in numbers - not because of the reduction in immigration per se, but because it will impoverish the country. This is the immigration doom loop, outlined by Jonathan Portes and Minnie Rahman: Reducing immigration damages the economy and hurts public services, which feeds the disillusionment on which populism thrives, which leads to further demands for reduced immigration, which then starts the process again.

We are in a struggle against populism. That is the story of our age. It desires a closed society: closed to people, and goods, and ideas. It would impoverish us, then use the hatred and anger which results to target immigrants in ever more grievous ways.

The open society has the ability to improve people’s lives in a way populism never will. But to do so, it must commit to its principles: rationality, transparency, sober policy-making and national responsibility. We need a tax policy which is geared to growth, an economic strategy which desires growth, and a political agenda which is prepared to face down the nativist complaints which get in the way of growth. That is how we will improve people’s lives. That is how we can kill populism.

The Budget may have had some welcome policies, but on the core issue of our time it was an act of criminal negligence.

Odds and sods

It’s that time of year again: The day of my world famous Black Friday Sale. For one month only, you get a massive 50% reduction off a paid subscription to Striking 13. That’s 50% off of fuck all, giving you absolutely nothing back in return. Just £2.50 a month or £25 for the year.

Other websites offer piddly deals, like ten or 20% off their goods. But I go deep with the cuts, slicing half off the asking price. What better values can there be? Well, admittedly the sort that offers something which you cannot get for free. But there is no sense of pride in that, none of the deep satisfaction that comes with funding independent liberal journalism.

Joking aside though, I really will give you nothing. Sign up here.

We’ve gone live with our first Origin Story live show of 2026.The previous shows all sold out quickly, so we’ve booked our biggest ever venue - the Bloomsbury Theatre. We’re already starting work on how that night will work. It’s going to be rather wonderful.

This week’s i paper column was on the Budget, obviously, and this week’s Origin Story, in a rather wonderful bit of timing, is a recording of our previous live show, which you can watch below. Oh, while we’re on the subject of Black Friday deals, the i paper has a very robust offer of £20 for the year or £2 for the month for a premium subscription. That has the rather significant additional benefit of giving you things you can’t just access for free, ie getting you past the paywall, and I highly recommend it.

I am loving Pluribus, on Apple TV. It’s such a delightfully unusual piece of work. At first I thought that the notion of the whole world being happy is as distant from our current preoccupations as it is possible to imagine. But it turns out that the sight of people behaving in a drone-like fashion is in fact very on point to the world we live in today.

Most of all, it is so refreshingly different. We’re so used to seeing dystopian Children-of-Men-style thrillers about collapsed future states, that it’s actually a relief to see a topical sci-fi which comes from a completely different angle, namely that of a disturbing utopia. We live in a George Orwell world, but Aldous Huxley has always had just as much to say and it’s about time we explored his concerns a little more thoroughly. It’s also very satisfying to see a return to the style of the Twilight Zone.

Most of all, I start each episode with no idea at all what the hell is going to happen next. Feels great.

Right that’s your lot, you cunts. Fuck off.