CapX, London (2026)

14/01/2026

Soaring energy bills for households and industry continue to keep inflation high and create a straitjacket for growth.

Labour’s arbitrary and unnecessary 2030 Clean Power Target continues to undermine the urgent mission to cut bills. And this has been laid bare yet again today.

Some might have hoped that the seventh allocation round (AR7) for new renewable energy projects would bring some welcome news for hard-pressed billpayers. But with the results of the auction, we now know the minimum amount the Government has agreed for billpayers and taxpayers to pay for the electricity produced by these new projects. The outcome isn’t pretty, with an unwelcome increase on last year’s price.

Wind has been – and can continue to be – a significant opportunity for Britain. It is our largest source of electricity generation, bringing high-paying jobs in the construction and maintenance of turbines, and is crucially a domestically produced energy source, not susceptible to control by hostile powers in the same way that fossil fuel prices are. Along with nuclear and other renewables, it should remain an important part of our energy mix, with gas as a back up when the wind doesn’t blow.

But AR7 has been a highly uncompetitive auction round, with the Government agreeing to pay £65 per mWh (in 2012 prices), compared to £54 per mWH last year – a significant increase at a time when we urgently need costs to come down. This locks both billpayers and the Government into unnecessarily high prices for electricity produced by these new wind projects for the next 20 years.

✍️John Flesher

If we are to get a grip on energy prices and decarbonise, we have to be realistic

13/01/2026

Nigel Farage began 2026 with his usual rhetorical flair, suggesting that Britain might be better off without the Office for Budget Responsibility. Cue the accusations of fiscal irresponsibility.

These reactions ignore the fundamental question Farage raises: what has the OBR actually achieved, and does it deserve the weight of authority it now exercises?

If we consider the OBR’s stated mandate upon its founding by the Tory-Lib Dem coalition government 15 years ago – to provide independent, accurate economic forecasts which constrain a chancellor’s tendency to be over-optimistic – then the answer to that question is a resounding ‘no’. Stating this fact deserves credit, not reprimand.

Offering a critical appraisal of the economy in order to curb the Treasury’s habit of presenting its forecasts too favourably is a sensible thing to do, theoretically. In practice, however, the OBR has a poor record. As the campaign group Conservative Way Forward shows, the OBR’s cumulative errors between 2010 to 2024 exceeded £500 billion in growth forecasts and £600 billion in public sector net borrowing. By overestimating productivity growth, the body’s projections have led to an underestimation of borrowing needs and fiscal gaps. This systemic optimism in forecasts – distinct from policy decisions made by the Chancellor – does not simply amount to rounding errors, but is a sign that the organisation has failed in its primary objective. Any private forecaster with such errors would have its reputation in tatters, and rightfully so.

As Henry Hill has observed, this isn’t just technical incompetence, but a refusal to admit mistakes. This is revealed in the OBR’s productivity forecasts. For over a decade, the body has insisted that Britain will soon return to its pre-financial crisis annual productivity growth of 2%, but this has never materialised. Instead of acknowledging this error and rethinking its assumption, the OBR has doubled down, continually shifting the goal posts ever so slightly further into the future.

✍️Emmanuel Igwe

Policies should not be judged solely by whether they have the imprimatur of the OBR

13/01/2026

There are few things that are consistent in housing policy. The Housing Secretary has changed 10 times in the past decade. We’ve seen multiple National Planning Policy Frameworks in the past few years. Since the Housing, Town Planning, etc. Act 1909 first introduced town planning to the statute books, almost every single Parliament has passed a significant act changing how the planning system works.

Yet one thing that has remained consistent is that London has always built more than 10,000 homes each year since the Second World War. However, that too is about to change. London started just 4,170 homes in the past financial year and the consultancy Molior projects that only 4,550 homes will be completed in both 2027 and 2028.

Failing to build even 10,000 homes in a year for the first time since 1946 is a disaster. The worst thing is that 10,000 homes is such a low bar, that failing to clear it is humiliating. London housing target is 88,000 homes a year and we’re on track to build just 5% of that.

The causes for such a slowdown are varied, and I’ve laid them out in a the Centre for Policy Studies briefing, ‘The City That Doesn’t Build’. There are some wider economic challenges that are outside the scope of policy changes such as high interest rates impacting the cost of capital and high construction inflation at a time when the housing market is flat. But there are other causes that are well within the policy realm where Labour have failed to go far enough.

✍️Ben Hopkinson

Housebuilding in London is falling to levels not seen since the Second World War

09/01/2026

Another year, another Government U-turn. From welfare cuts to scrapping the two-child benefit cap, Labour have consistently adhered to policy positions, only to subsequently reverse them.

In the first U-turn of 2026, the Government is expected to say it will make changes to how pubs have their business rates calculated, resulting in a smaller tax increase than was announced at the Autumn Budget.

In November, Rachel Reeves unveiled her second Budget, and introduced sweeping tax hikes in what was being described as a smorgasbord. Among these measures, Reeves scaled back business rate discounts from 75% to 40%, which had been in force since the Covid pandemic, and announced that from April, there would be no discount at all.

These changes, along with large upward adjustments to the rateable values of pub premises, employers’ National Insurance hikes, minimum wage increases, higher energy costs and general economic malaise, left pubs in a rather unfortunate position.

Campaigns ensued, and many pubs decided to ban Labour MPs from their premises altogether. Many backbenchers were not happy about being shut out from their local boozers. Labour MP for Bournemouth East, Tom Hayes, made a rather petulant video on the matter, claiming that ‘businesses with a ‘no Labour MPs’ sticker in the window are undermining the inclusive culture’. Yawn!

The details of what the U-turn will actually look like are yet to be published, but a reversal of business rates hikes is expected.

Unfortunately, this is too little too late.

✍️Reem Ibrahim

The decline of the pub is a microcosm of our broader deterioration

09/01/2026

Back in the 1980s The Beastie Boys famously sang that ‘you gotta fight for your right to party’. Fast forward to 2026 in London, and perhaps it’s never been harder to take advantage of that ‘right’. The house party has become one more casualty of the housing crisis.

While there’s no hard quantitative evidence (those buzzkills at the ONS apparently don’t survey people about when they last attended a house party), there’s plenty of anecdotal evidence that house parties are in decline. And while people in general may be socialising less than they used to, the decline isn’t necessarily down to a lack of demand. After all, there’s clearly nostalgia for them, how else to explain Stormzy opening a house-party themed bar in Soho a couple of years ago.

In some sense, it’s hardly surprising that house parties are less common now. A Londoner living in the private rented sector pays on average over £350 per week just on rent. And what you get for that large chunk of money has been shrinking for the last few decades, with the average renter in London having just 24.6m² of space in 2018, compared to 30.6m² in 1996, a 20% decline.

And of course, for many renters, there’s a constant fear of complaints from neighbours, potentially leading to eviction and the pain and expense of having to find new accommodation. For example, I know of at least one friend living in London who after hosting a hardly rambunctious gathering was evicted after one of their neighbours complained. Many listings on Spare Room now require quiet tenants or explicitly forbidding guests. This all acts to raise the risk of hosting.

It would be easy to blame this on greedy landlords trying to squeeze more profit out of an already overburdened renter class, and many people do and call for measures such as rent control and tougher regulation. But that is a fundamentally simplistic analysis that addresses the symptoms rather than the root cause, which is of course a lack of supply caused by the planning system and all the other disproportionate regulations which are entangled with it.

✍️Jethro Elsden

A lack of supply in the rental market is making it harder for young people to party

08/01/2026

When Labour took office in July 2024, Britain’s unemployment rate stood at 4.2%. Today it is 5.1%, the highest level since early 2021 and rising in a way that should trouble any Chancellor, especially one who has produced two tax-raising Budgets in succession. Ministers say the labour market is simply normalising, but the pattern now looks far more worrying, especially for the young.

Youth unemployment is now at 16%, with roughly 735,000 young people unable to find work, up 128,000 in a year. Another 946,000 are NEETs, not in education, employment or training, the highest since 2014. Economists call the consequences ‘scarring’ – weaker lifetime earnings, a looser attachment to work and higher welfare costs that endure long after the downturn has passed. A country that cannot integrate its young people into work undermines its own growth prospects and future tax base.

Where the jobs are disappearing matters as much as how many. The sectors now under strain are exactly those that have traditionally absorbed younger and less experienced workers. High-street retail – for decades the first rung on the jobs ladder – has been shrinking fast. Tens of thousands of retail jobs vanished last year. Claire’s Accessories and The Original Factory Shop have gone into administration just this week, putting between 2,000 and 2,500 roles at risk across almost 300 stores. Even Next, one of Britain’s best-run retailers, is warning of a significant fall in sales next year as households tighten their belts. These are the entry-level roles that ease people into work. Their disappearance has coincided with rising youth unemployment.

Ministers often respond that Britain’s unemployment rate remains below the EU average of 6%. This is true, and almost wholly beside the point. An economy can deteriorate while still performing marginally better than its neighbours. The real question is whether the labour market is strengthening or weakening. On that test, the direction of travel is clear.

✍️Damian Pudner

A country that cannot integrate its young people into work undermines its growth prospects

08/01/2026

Just before Christmas, His Majesty’s Inspectorate of Prisons (HMIP) walked out of HMP Swaleside on the Kent coast to issue a rare red flag warning to Ministers. The ‘Urgent Notification’ painted a dystopian picture of an institution no longer in the control of the state, wracked by staff shortages, violence and drugs. The prison was in crisis, with a ‘protracted period of decline’ which meant none of the concerns raised at a previous inspection had been addressed. Indeed, since then, assaults on staff had increased by 122%. The positive rate of drugs testing by officers could be over 50% but no-one knew for sure because so many prisoners were refusing to be tested. Behaviour and consequence had disintegrated.

None of this ought to have been news to senior officials at His Majesty’s Prison and Probation Service (HMPPS) or their ministerial bosses. But so great is the institutional helplessness and incuriosity of this national law enforcement agency, a high security prison has been allowed to devolve into anarchy in plain sight. One clue in particular to this failure was apparent months before.

Each prison has its own local independent monitoring board (IMB). The IMB report for Swaleside published before national inspectors walked in was close to apocalyptic. ‘Violence is a constant theme and the manufacturing of bladed weapons on site is ominous,’ it said. The inexperience of new staff, bolstered by a huge number of foreign national officers, who were at risk of being sent home again after bungled visa changes, gave prisoners an environment to exploit. Of the 107 assaults on staff, the IMB said that 70% involved prisoners reacting violently to basic instructions from officers. But buried in the detail was something new and worrying. ‘A recurring theme is the perception of widespread violence… As well as unchecked gang control – particularly by religious gangs.’

✍️Ian Acheson

Prison inspectors are reporting a disturbing, sectarian trend among inmates

07/01/2026

The UK is the place where free markets first unlocked what the economist Deirdre McCloskey calls the ‘Great Enrichment’ – the extraordinary wealth and human flourishing made possible by the industrial revolution. Yet today, the UK – as well as much of the rest of the western world – is economically stagnant, and has drifted away from the free market ideals that made it rich. So the question is – how can we release the power of free markets once again in the 21st century?

At Próspera, a startup city in Roatán, Honduras, we believe that the answer is to reinvent the very way governments provide services to their residents – its governance framework. Próspera’s model is to partner with countries to deploy its governance model, which includes a set of laws, regulations, taxes and dispute resolution forums.

The basic insight driving Próspera is this: to get a truly free commercial market, you need to inject market mechanisms into the underlying framework that governs that jurisdiction.

Without good governance, particularly rule of law, you can’t have effective markets or meaningful growth. It was only because the UK was the first country in history with real rule of law that the industrial revolution could take off almost 100 years before the rest of continental Europe.

✍️Lonis Hamaili

The system in Britain that made the Industrial Revolution possible has crumbled

07/01/2026

‘Britain doesn’t need to become great again – iit already is.’ That’s the flattering verdict of the former Polish ambassador to both the UK and USA, Piotr Wilczek, writing in the Spectator.

After the year-long gloom fest that was 2025, Wilczek’s positivity will come as a surprise to many. Descriptions of Britain as ‘one of the most astonishing places in the world’ and reminders that we are in fact ‘the sixth-largest economy on earth’ and home to some world’s best universities don’t chime with the experience of 82% of Britons who think the country is in a bad state.

The Times soon published data which seemed to back Wilczek up. Almost 80% of Britons feel safe walking the streets, we are fifth globally in terms of defence spending and our average happiness is higher than that of the Americans and the French. This apparently gives us a final verdict of ‘surprisingly upbeat, given everything’.

These pieces are well-intentioned – they are intended to make us feel good about ourselves and the state of our nation. But they also make my nostrils flare and fists clench.

The hard truth that Panglossian commentators fail to swallow is what many of us feel reading their articles: that holding up the continued existence of certain institutions and meagre economic prosperity as proof of British glory is a coping mechanism in the face of near total stagnation. We should not be setting the bar for national success at not yet having fallen into oblivion.

Across the board, Britain does not work as it should, and our decision-making class is all too happy to give in and accept that status quo.

After mismanagement under the Conservatives, we now have a Government that, after promising to reverse that economic decline, is intent on making matters worse.

✍️Joseph Dinnage

From migration to driving tests, our decision makers get nothing right

07/01/2026

"The trust businesses place in the Government has dropped like a hanged man through the scaffold’s trapdoor."

Before Labour came to power, Keir Starmer and Rachel Reeves worked hard to win the confidence of Britain's business leaders. Their actions in office have already lost that trust – and even a leadership change will not bring it back.

✍️Eliot Wilson

68% of family businesses do not have faith in Labour's pro-growth rhetoric

06/01/2026

Kemi Badenoch had a rough start to her time at the Tory helm. When she was elected leader, the party had a net favourability of -30%. Yet after some time in the job, she has seemingly steadied the ship – with many Tory insiders declaring a ‘Badenoch bounce’. And now, as we head into the new year, the Conservatives are ahead of Labour for the first time since the general election. But now is not the time for complacency – Badenoch must continue to resist vested interests both from within the party and outside it.

While there were grounds for criticism at the beginning of her leadership, since the Conservative Party conference, a feeling of positivity has surrounded her. A flurry of policy announcements including pledges to scrap stamp duty and withdraw Britain from the European Convention on Human Rights received widespread support, and helped to position Badenoch as conference season’s biggest winner.

Coupled with this was her response to Rachel Reeves’ Budget in November. The message she sent at the despatch box was clear: the Budget was a failure, and Britons will be worse off as a result. She was quick to rally behind squeezed middle-income earners, and made the important point that welfare spending must be tamed, or risk public spending spiralling out of all control.

In other words, she provided an example of what today’s Conservative Party should look like. A party with an agenda that supports those who work hard and pay in.

These two standout moments have helped Badenoch warm to voters. Although her recent positive polling may seem a far cry from the heights of previous years, to be in such a position when Reform UK are vacuuming up so much of the centre-right vote should be commended. Indeed, these numbers may well be intoxicating to Badenoch and her team. Yet much of her recent success in the polls could reasonably be put down to Labour’s poor record in government, rather than any genuine fondness for the Conservatives.

✍️Oliver Dean

As Labour flounder in government, the Tories have bounced in the polls

06/01/2026

According to Ernest Hemingway, there are two ways to go bankrupt: ‘Gradually, then suddenly.’ It’s a lesson the UK would do well to remember.

Rather than fixing our frayed social contract, successive governments have merely tinkered with the public finances, doing just enough to keep the ship afloat. This deck-chair rearranging cannot continue forever.

New research from the Adam Smith Institute projects that, without serious reform of our spending commitments, the UK will soon fall into a debt spiral. By 2033, the UK’s debt-to-GDP will begin increasing at an accelerating rate. Even if this Government stays within its fiscal limits, our sclerotic economy will be unable to sustain ever-growing spending. To keep the cash flowing, the Government will have to take on even more debt.

Left unchecked, this trajectory sees public sector net debt soar to 330% of GDP by 2075 – a patently unsustainable scenario. And we can already see a few early warning signs. Lenders are already losing confidence in the UK, as shown by our relatively high bond yields. If this continues without correction, it could trigger a financial crisis. A once rich country can decline rapidly through political and fiscal mismanagement; just look at Argentina.

Some accelerationist libertarians might welcome this as a catalyst for a Milei-style revolution. But why should the public endure decades of stagnation just to restore some semblance of economic credibility? Britons deserve a functioning government now, not decades in the future.

The good news is that our fate is not yet sealed. Sensible and targeted spending cuts can still prevent disaster. The ASI’s modelling shows that, to keep net public debt below 120% of GDP until 2075, permanent spending cuts equal to 4% of GDP must begin in 2026.

✍️Mitchell Palmer

Piecemeal reforms combined with ever-higher taxes will not stabilise the state

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