John Healey is different. Where the Prime Minister is all about the rupture, his Chancellor emphasizes “continuity” with his hapless predecessor. Never mind that Rachel Reeves has been voted the least popular recent resident of No 11 — as a former Treasury lackey of Gordon Brown, Healey was trained not to rock the boat too aggressively, lest the judgment of “the markets” and Fleet Street’s business pages condemn Blair’s Labour as “New” in name only. Presumably, in those halcyon days, the budding junior minister Healey didn’t slog away in the belief that he was complicit in the maintenance of some great four-decade injustice. If the last “40 years” are to be blamed for blithely destroying social-democratic Britain, then it’s as much the responsibility of Blair, Brown, and ministers like Healey as it is Margaret Thatcher, who after all left office when the Soviet Union was still around.

And herein lies the central feature — the central contradiction, some might say — of Burnham’s first Budget: the dissonance between his lofty promises and the policy reality. This was no “circuit breaker”, no fundamental shift, no new growth model. This was merely a placeholder, a tinkering exercise, a nothingburger of small-cash transfers and bean-shuffling. In short: about as much as we could have expected from a consummate Brownite. Since 2024, after all, we have been stuck in a half-baked rerun attempt at Gordon’s grand bargain: keep the financialized, globalized, FDI-dependent paradigm largely intact, but redistribute the proceeds of growth via cash transfers, statutory entitlements, and tax-and-spending. That was the modernizers’ Faustian pact. Alas for poor Healey, post-Great Financial Crisis, there is now little growth to speak of, and the whole Blair-Brown paradigm is dead.

In lieu of a replacement for this zombie model, then, we got what Healey called “a Budget for the working people of Britain”, the biggest item on which will be yet another energy-bill subsidy for poorer households (to be judged by council tax bands). There will also be some extra, modest, off-the-books investment via the British Business Bank and the National Wealth Fund. And there were some mild adjustments to capital-gains allowances, and some small rises to gambling and bank taxes. It could have been a lot worse, the spivs and the City will have concluded. Foreign bankers and hedge funds too: those omnipotent gilt markets were pretty relaxed about the Chancellor’s “steady-as-she-goes” measures. Sky’s Ed Conway tallied up the tweaks: 98 in total — a new record. But the average gross value of each pecuniary item was tiny — the lowest on record. Departmental cuts, meanwhile, are being shunted towards the end of the Parliament, rewriting St Augustine’s prayer: “Lord, make me fiscally sustainable, but not yet”.

All of which is to say: how long can this discordant Downing Street double act go on for? Surely the new dialectic between Burnham’s dad-socialist idealism and its conservative, Healeyite antithesis is bound to be resolved in an electoral and real budgetary synthesis before 2029? The prime minister cannot spend three years bobbing along with grammable titbits of cost-of-living policy while promising a post-election new dawn. Something will have to give, and despite the repeated denials, all other signs point towards an early poll. Burnham has restored Labour’s lead and has high personal ratings. Those will be slowly squandered as the inevitable compromises of power begin to bite, and as global stagflationary forces accelerate. Healey’s programmed cuts to Whitehall spending for the supposed year of the next election are testament to this. It would be suicidal for the Government that is promising post-neoliberal national renewal to begin a round of austerity heading into the year of a general election.

Burnham is caught between the cautious pledges of Labour’s thin 2024 manifesto and the necessities of a bleak fiscal outlook. The temptation to seek a fresh mandate for a more ambitious agenda — for a National Social Care service, publicly owned utilities and reindustrialization-through defense investment — will grow by the day. What’s more, running an election campaign against a still second-placed Reform Party, which rightly or wrongly the majority of the electorate is genuinely repelled by, is far more attractive to Burnham than waiting for the revived Conservatives to run a more traditional, less scary, less risky campaign against Labour profligacy.

But it isn’t simply political considerations, nor mere timidity, that is preventing a major Budget intervention before the next election, whenever that turns out to be. For Healey really is constrained by economic realities. Transformative investment that might finally change Britain’s economic geography is, whether the Labour Party likes it or not, currently precluded under the current framework, not least by spiking gilt yields. Somewhere along the way, the bond market, along with the OBR, has become a kind of unelected second and third chamber, fastening successive administrations to a narrow orthodoxy.

Yet there is nothing natural, pre-ordained or apolitical about this arrangement. The markets are not permanent, capricious deities that must be placated. They are institutions, governed by rules and political decisions. A radical Budget could have set out a major investment program to renew public capital stock, focusing on energy, transport and industrial capacity. It could have leveraged public financial institutions to finance it, and mandated pension funds to leverage their mountains of capital toward domestic investments. It could have instructed the Bank of England to use its balance sheet to hold borrowing costs down and invest in public infrastructure bonds for growth and revenue generating capital projects, all while bypassing Britain’s labyrinthine planning laws. 

More than Burnham’s abstract seismic shifts, the lesson of the postwar settlement is surely that it didn’t depend on ministerial speeches. It relied, rather, on capital controls, on directed lending, on nationalizations, on price controls, and close fiscal-monetary coordination. Ending these policies was integral to the “neoliberal” revolution that Burnham decries, and, in extremis, reimposing some version of them would be integral to any truly “post-neoliberal” order. Tellingly, two recent papers from Mainstream, the pro-Burnham parliamentary grouping, have nodded in this direction. The first, “The Productive State”, calls for extensions of public ownership; the second, “Reclaiming the UK’s Fiscal Space”, argues for an alternative macroeconomic strategy to facilitate a radical agenda.

None of this is costless. There would be losers, not least the substantial body of Britain’s asset-rich middle class. Any push to radically increase capital investment would have to be accompanied by demonstrations that ballooning current spending could be brought under control. The middle-class homeowner with a large, unearned rise in the value of their house, the landlord collecting rent from an increasingly scarce asset and the affluent saver accustomed to earning a safe return without productive investment in the domestic economy — all would face a different bargain with the state. But the purpose of policy would no longer be to preserve asset values, maximize private shareholder returns, then redistribute whatever income remained. It would instead be to end the Faustian pact, and begin a shift from a bureaucratic cash transfer and entitlement state, towards an investment-first, productive state. But Healey and his boss have chosen not to make the argument, accepting the orthodox framing and the market’s verdict before testing whether it could be challenged, managed or otherwise politically overridden.

When Burnham selected Healey as his Chancellor, there were reports that it was because he was a smaller beast than Ed Miliband or Shabana Mahmood, and could therefore be relied upon to roll over and impose No 10’s will. No 10 North has been conceived as the most significant breach in the Treasury’s monopoly on economic policy since Harold Wilson’s ill-fated Department for Economic Affairs. And yet for all the talk of a Prime Minister willing, finally, to get to grips with a proper political project, the offer of his first Budget is a thin gruel, totally at odds with the stated ambitions of his office. It seems that Healey is more powerful or persuasive than first thought — less willing to implement Burnham’s whims come-what-may, and more beholden to the Treasury mandarins. Never one to shy away from contradictory spitballing for political convenience, perhaps Our Andeh only ever intended a radical systemic overhaul at the level of rhetoric and vibes: unite the Labour Party and the progressive voter bloc by talking Left, but keep the show on the road by governing Right. Only time will tell.

Of course, it would be foolish to assume a real break with history could arrive in a single Budget. Labour’s “1945 moment” didn’t invent social democracy from thin air, but rather rested on decades of embryonic welfare state experimentation and the wartime command economy. Thatcherism had a prehistory too: before 1979, the IMF crisis and James Callaghan’s warning to his party that the Keynesian option “no longer exists” had already narrowed the field of acceptable economic policy. Perhaps Burnham’s rise, Healey’s cautious Budget, and the likely election to come will be remembered in the same way — not as the moment Britain emerged, fully formed, from “neoliberalism”, but rather as stepping stones away from a model that no longer works. Yet for now, at least, that much-touted new settlement remains mere aspiration — maybe until that election.

There is more than a touch of fetishism here, as the Chancellor raises his battered little case and exhibits it first in one direction and then another, as a priest displays the sacred host in the monstrance. Fetishism means endowing an inanimate object with an uncanny power, whether we’re speaking of the Budget box or a pair of tight leather trousers. The opposite of fetishism is reification, since to reify is to turn something animate into a thing. It’s the way Charles Dickens’s novels see people in general, as bizarre assemblages of bits and pieces. The Chancellor’s little case does both at once: it has a pseudo-sacred aura about it that every press photographer in the business wants to capture, but at the same time it turns something animate — the life and labor of millions of men and women — into a lifeless object.

This red box isn’t in the least beautiful. If Donald Trump were Chancellor it would be made of burnished gold and the photographers would have to wear shades. But the fact that it isn’t is the point. It’s a tarnished, much knocked-about little container that proclaims the word “tradition” in its every dent and blemish. Tradition, roughly speaking, means doing the same kind of thing your ancestors did. But the Americans tend to value innovation over continuity. Trump’s ancestors might well have engaged in much the same cruel and inhuman activities as he does himself, but he would probably consider this a drawback. I once showed an American friend around Oxford University, only for him to comment: “It’s very old.” It wasn’t meant to be a compliment. It wasn’t meant to be banally self-evident either.

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AI: a very human tragedy

By Terry Eagleton

There is a strange race of people called Laputans in Jonathan Swift’s Gulliver’s Travels who carry bags on their backs, which contain Language. They’re experimenting with a new kind of speech in which they dispense with words and instead take from the bag the objects they might need to converse about, holding them up mutely to each other. This might be alright for “toothbrush” and “coconut” but there are problems with “maybe” or “vertiginous”. The Laputans’ bags must be bottomless, given the number of things in the world one can talk about, but this, alas, is not so with the Chancellor. The economy may be extensive, but running and repairing it is confined to a highly limited range of tools, rather as driving an enormous truck depends on a surprisingly restricted number of instruments. This, however, is appropriate enough for the ritual nature of the event. In fact, it’s a wonder that John Healey doesn’t wear body-paint on the steps of No. 11. Tribal rituals resemble nothing as much as neurotic acts of repetition, as one seeks for the umpteenth time to exorcise demons, placate the gods or beseech them to bestow great riches upon you. The Chancellor, rather similarly, needs to drive out the demons of inflation and unemployment, placate the back benches and save a ton of money. Most tribal rituals are unsuccessful, which is one reason why they must be repeated, and the same goes for most Budgets, not least when it comes to the bestowal of great riches.

The curious thing about the Budget is that it is a theater, a spectacle, a public exhibition, yet one performed for grimly utilitarian reasons. In his classic work The English Constitution, the Victorian thinker Walter Bagehot famously distinguishes between the practical and ceremonial aspects of social life, and the Budget neatly combines the two. The English have only to look at a routine human activity to turn it into a theatrical rite. Instead of saying “Hey, have you locked up yet?” the Yeomen at the Tower of London bellow “Who Goes There?” “The Keys.” “Whose Keys?” “King Charles’s Keys.” Don’t try this at home. You’ll just end up carried away by the rhetoric, forget to lock the front door and have your washing machine removed by the neighbors.

Not all rituals resemble the Budget in having a purpose. Some of them are performed simply for their own sake. This used to be true of sport, before the capitalists got their hands on it. It’s still true of kicking a football around a school playground. Apart from feeding the hungry and caring for the sick, all the finest human activities are done just for the hell of it. Pointlessness is next to godliness. There’s no rationale for joking, falling in love or staging a Christmas panto in your community center. This is why the arts are exemplary of the good life. Simply by what they are, not necessarily by what they say, they offer a degree of resistance to the crudely instrumental form of reason which dominates our kind of civilization. They represent what Marx calls the flourishing of human powers as an end in itself, which was his definition of communism.

The more a society devotes itself to the functional and pragmatic, the less it knows what to do with what one might call the symbolic realm, other than to harness it to the business of making a profit. Traditionally, that realm has had three major constituents: the religious, the sexual and the artistic. The split between this and the business of acquisition and accumulation — the business, in a word, of the Budget — runs right down the human body. The more the body is reduced to a laboring or profit-making machine, the more the energies which might stymie these pursuits must be siphoned off elsewhere, to an insulated arena generally known as culture. This is certainly the case with religion. There used to be a saying that once religion begins to interfere with your everyday life, it’s time to give it up. This appears to mistake religion for alcohol, and doesn’t seem quite what Jesus had in mind when he preached that you are saved by helping the injured and visiting the imprisoned, not by some set of esoteric rites.

What religion, sexuality and art have in common in the modern age is that they are all privatized. Privatizing religion is known as Protestantism, which in its more radical manifestations views the whole affair of salvation as a private negotiation between oneself and God. Sexuality, too, becomes essentially a matter of what goes on in the bedroom, at least until the point when feminists and other sexual dissidents insist on its relevance to social and political existence in general. This, incidentally, had been the whole point of the churches seeing marriage as a sacrament. A sacrament is a sign or foretaste of a fulfilled human future beyond the frontier of history. It’s a matter of pointing to certain realities in the present, such as the enduring love between two people, and declaring that the so-called kingdom of heaven will be a bit like that. Whether the people in question are formally married, or of different genders, isn’t the point. The point is that such love cuts against the grain of a degraded present, and thus points in a shadowy way beyond it.

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On plagiarism

By Terry Eagleton

As for the arts, there was a time when they faithfully served various social functions. There were jobs for painters, writers and composers in those days. They could sing the military victories of the tribe, ritually recount its triumphant history, praise God, flatter a monarch or aristocratic patron, entertain the king at court, help to form a community of public-minded bourgeois, or (as in the Victorian era) play a key role in edifying and consoling a nation wracked by dire poverty, the fear of social revolution, the death of God and humanity’s newly discovered kinship with the ape. It’s true that having a function came at a high price. It meant that the arts were generally speaking a medium of political authority, and had to dance to the tune of sovereign power. When they ceased to have much of a social function, however, they were at least able to act as a critique of other social institutions. This was the moment we know as modernism.

Besides, from Romanticism to aestheticism, the utter pointlessness of works of art could be seen as exactly their point. Their function was to be functionless — to remind us that there’s a life beyond waste disposal, the accumulation of capital and Nigel Farage. Figures like Oscar Wilde could be politically relevant simply by being outrageously themselves (though Wilde was also a devout Irish Republican, which a lot of the British prefer to forget). To turn yourself into a work of art meant not to stand in the corner of the drawing room in a suitably alluring posture but to realize your creative powers as ends in themselves. Samuel Beckett was another Irish writer whose art is superficially unpolitical, though he was awarded the Croix de Guerre for his part in the French Resistance. Even so, his drama is all about failure, brokenness and defeat, thus acting as an oblique critique of the values of a Trump. Or, indeed, of Britain in its imperialist heyday. When Beckett was asked by a French journalist whether he was British, he replied: “Au contraire.”

Our own period has witnessed a reassertion of the political value of the symbolic realm. Art, religion and sexuality have been gradually recognizing their complex responsibilities to society as a whole. Just as some forms of art have become more politically sensitive, however, so politics has become more aestheticized. Much of it is now a matter of spectacle and “optics”, media and public relations, the grooming of stars and the assiduous polishing of images. The aesthetic has penetrated to the heart of modern political life, and in all the wrong ways. The quaint little ceremony we know as the Budget is by no means just for the hell of it. There is a lot in social life that can’t afford to be. But we mustn’t forget that if there is bread, there are also circuses.

Take the proposal to equalize capital gains tax with income tax. Burnham had repeatedly stressed that Britain undertaxes wealth; and not so long ago, senior figures within the party were touting the equalization idea as a “wealth tax that works”. On Tuesday, though, a Treasury source dismissed the notion as “batshit crazy”. Healey is now reported to have rejected the equalization idea.

It’s not the only proposal that Healey has rebuffed. Some of his Labour colleagues wanted to lower the threshold for Labour’s planned mansion tax from £2 million to £1.5 million — a move that would have brought an estimated 137,000 additional properties into the tax. Again, Healey is reported to have said no.

He has defended businesses as well as home-owners. Burnham had previously suggested increasing rates on warehouses and out-of-town retail developments would be a way to help revive the nation’s high streets. But the John Lewis chairman Jason Tarry and the M&S chief executive Stuart Machin warned that additional rates would penalize retailers already struggling with higher employment costs, expensive energy and property taxes. Healey subsequently ruled out additional taxation of large retail warehouses.

That makes three proposed tax increases — all rejected within days of each other. Are we seeing the early signs of a divergence between Burnham and Healey? We have a Prime Minister promising to revive Labour’s post-war tradition of Government intervention and redistribution, but the Chancellor seems to recognize — possibly reluctantly — that Britain’s problem is not a shortage of taxation, but a chronic failure to generate economic growth. With the tax burden already at a post-war high, public spending continuing to rise and precious little fiscal headroom, there is little room for maneuver. The likely outcome? A surprisingly Right-wing Budget.

The argument about Labour’s economic direction is, of course, nothing new. For a brief moment, the leadership contest that brought Burnham to Downing Street threatened to become a genuine battle of ideas about Britain’s economic future. But the contest was over almost before that debate had begun, leaving Labour’s fundamental disagreements over economic policy unresolved.

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Britain needs a gilts crisis

By Damian Pudner

One of the two factions was the Labour Growth Group, formed by 60 or so MPs — among them Wes Streeting — in the wake of Keir Starmer’s election victory in 2024. As its name suggests, the group was formed out of the frustration that Labour had spent far too much time arguing about how to divide up Britain’s wealth and nowhere near enough about how to create more of it.

In May 2026, its director Mark McVitie, with chairman Chris Curtis MP, published An Honest Day, a manifesto calling for more homes to be built, energy costs to be brought down, lower taxes on employment and to make Britain more attractive for businesses to invest. The manifesto correctly identified the high cost of housing, energy and other essentials as major obstacles to economic growth. Its authors also backed greater government intervention to address where markets were failing, alongside higher capital gains taxes to help finance a cut of up to 2p in employee National Insurance. It was an attempt to combine supply-side reform with Labour’s instinct for redistribution.

As Burnham’s star rose, the Labour Growth Group’s fell, with Curtis standing down as chair in June. Its arguments nonetheless reflected a recognition among some Labour MPs that the existing economic settlement was failing to encourage productive investment or reward work.

A different prognosis, meanwhile, has emerged from the Tribune Group, which represents a more Burnhamite vision of the economy, rooted in greater state intervention. The caucus was originally formed in 1964 and was revived in November 2025 by Labour figures including Louise Haigh, concerned at the rising threats of both Reform and the Greens. By January, the group reportedly had more than 100 Labour MPs among its members. Their diagnosis of Britain’s ills center more on questions of inequality and insufficient state intervention, with proposals including wealth taxes, greater public investment, progressive taxation, changes to fiscal rules and a stronger role for government in directing economic activity. Haigh is now First Secretary of State in Burnham’s government and has been pursuing precisely that agenda.

Both groups recognize Britain’s problems with weak productivity, expensive housing and disappointing living standards. The disagreement is about whether prosperity is best restored by removing barriers to private enterprise; or by giving the government greater control over how resources are distributed. One side sees the state as part of Britain’s economic problem, the other sees it as the solution. That is a considerable ideological divide for a governing party, particularly when its Prime Minister and Chancellor appear increasingly drawn to opposite sides of the argument.

Meanwhile, in opposition, the Conservatives are attempting to correct the economic errors of their own recent governments. In the years following Brexit, the party abandoned much of Thatcher’s free-market program and accepted higher public expenditure, greater intervention and an increasingly burdensome tax system.

The result is an economy that remains torpid: hence Kemi Badenoch’s attempt to restore some center-Right economic philosophy. On 4 October, she published The Right Way, a pamphlet that deliberately echoes the Thatcher-era The Right Approach. Badenoch’s document emphasizes private enterprise, competition, lower taxation and limiting government intervention.

Her new Shadow Chancellor, Andrew Griffith, has reinforced that message with proposals for substantial deregulation, arguing that Britain needs to reduce the barriers to investment and development. So the Conservatives are returning to the principles of sound money and economic liberalism that they spent years neglecting, even as Labour’s Chancellor appears to be moving towards much the same economic ground. One can discern echoes of the New Labour era, when both main parties broadly accepted the case for markets, fiscal discipline and private enterprise, even if they disagreed over the details.

The IMF, at least, appeared this week to think Healey was heading in the right direction. On Tuesday, the Fund published its October 2026 World Economic Outlook. British growth this year has been revised upwards from 1.0% to 1.3%, but the Fund expects the economy to expand by just 1.2% in 2027, down from its previous forecast of 1.3%. Higher energy prices and long-term interest rates are expected to weigh on consumption and investment, while inflation is forecast to average 2.8% next year.

The Government has welcomed the upgrade for 2026, but next year’s outlook is considerably less encouraging. The Institute for Fiscal Studies has identified substantial pressures on departmental spending: higher defense costs, rising health spending  and plausible increases in both public-sector pay and the cost of delivering services, even as the Government tries to avoid making cuts elsewhere. As a result, the Chancellor could require an extra £35 billion a year by 2030–31.

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The great Net Zero showdown

By John Rapley

It is with these constraints in mind that the IMF has urged Healey to maintain fiscal consolidation despite the pressures on public spending. Its chief economist, Silvana Tenreyro, told a press conference in Bangkok that “the message for the UK is simply stay the course and continue on that trajectory”.The IMF’s warning followed similar comments from the governor of the Bank of England. Andrew Bailey cautioned that the Government’s fiscal plans must retain the confidence of financial markets or risk another gilt market crisis, recalling the turmoil following Liz Truss’s disastrous 2022 mini-Budget.

That leaves the Government in a tricky situation. On one hand, it faces demands for more money for defense, hospitals and other public services. On the other hand, it needs to convince investors that it can afford to pay for those services. Perhaps Burnham and Healey will attempt to plug the yawning gap in the public finances via higher taxes on businesses and investors. But, paradoxically, this will make those same businesses and investors less inclined or able to create jobs, innovation and, ultimately, growth. The unfortunate reality is that previous governments have already squeezed the productive parts of the economy for as much as they could. Businesses are struggling with higher employment costs, expensive energy and weak domestic demand. Investment remains disappointing, productivity growth is anemic and the incentives to work, save and invest have been steadily eroded.

Healey consequently faces weak growth, expensive borrowing and a Prime Minister committed to expanding the state’s responsibilities. Rejecting additional tax increases may protect investment incentives, but it does nothing to reduce the expenditure commitments those taxes might otherwise have financed. The Chancellor may therefore find himself increasingly drawn towards the economic arguments being advanced by the Conservatives: spending restraint, welfare reform, deregulation and stronger incentives for private investment. This month’s Budget may offer the first indication of that shift, although the real test will come when Healey has to decide whether protecting the welfare state means confronting its increasingly unsustainable costs. Successive governments have spent years putting off difficult reforms, which is precisely why Britain finds itself in this position.

It’s not hard to see how this will become a problem for Burnham, who has built his entire political persona on Manchesterism; greater public provision and government intervention. Promising more services at little or no direct cost to the public is politically attractive. Paying for them is rather less straightforward. The autumn Budget, then, will provide an important indication of how Healey intends to reconcile Labour’s ambitions for a larger state, and Burnham’s ambitions in particular, with the financial constraints imposed by increasingly nervous gilt investors.

The party has an opportunity to put Britain’s dire public finances on a sustainable footing for a generation, potentially depriving the Conservatives and others of their strongest economic argument. An uncomfortably Right-wing budget would be the first of many difficult steps.

But if Healey starts squeezing departmental budgets, cutting welfare spending and reducing the size of the state, Burnham could find himself presiding over the very economic program he came to power to oppose. The economic recovery job will be a long one — but can Healey survive the next Budget, or the one after that? Is Labour prepared to tear itself apart to deliver the reforms Britain needs?

If Healey retreats every time Labour supporters object, though, we will simply repeat the mistakes that got us here in the first place. And we know where that ends: a gilt market crisis, spending cuts Britain refused to make voluntarily forced upon it, and at far greater cost. The longer politicians refuse to make the necessary decisions, the fewer choices they will eventually have. That is what decades of political cowardice have brought us to.

The question is whether Burnham would sacrifice his political convictions to keep his Chancellor, or sacrifice his Chancellor to save his premiership.

However, that understates the import of her promotion. Energy will be a vital component of Andy Burnham’s premiership. Net Zero has become a defining element of Labour’s offering. Consumers and businesses desperately want energy bills to come down.

Meanwhile, Fahnbulleh is anything but an underling. A child refugee from war-torn Liberia, she made her way to Oxford and proceeded to a doctorate at the London School of Economics. Here, she established her bona fides as a scholar with well-elaborated and nuanced academic publications on industrial policy and the climate crisis. Moreover, her strong vision for localism, rooted in the cooperative tradition, has earned her the moniker of Burnham’s brain. It’s therefore safe to say she assumes her position with both authority and clout.

That’s all for the better, because she will immediately face two big decisions: how to bring down energy bills about which consumers and businesses alike have been screaming; and how to reconcile that imperative with her commitment to Net Zero and the phasing-out of fossil fuels at a time of extreme volatility, when a rebel group in Yemen can push the price of oil to over $100 a barrel .

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Burnham vs the bond markets

By John Rapley

To a considerable degree, this task comes down to balancing short-term with long-term goals, and strategy with tactics. In the short term, scrapping green levies and allowing for further exploration of Britain’s oil and gas reserves in the North Sea, as called for by both Reform and Conservative parties, would appear to be an obvious win: not only could the measures create jobs, advocates argue, but they would reduce energy bills and allow the country to substitute cheap, local gas for imports.

However, such benefits would be largely short-term, while the gains can be exaggerated. In the first place, it isn’t renewable energy that is driving up British electricity bills — it is the pricing model and the high cost of natural gas (a price which is itself set on international markets). Indeed, the most effective way to bring down bills in the long term would be to double down on renewables and completely eliminate gas from the energy system. As for green levies, these make up only a small share of total electricity bills, and in any case, the programs these levies fund, such as the Warm Home Discount for vulnerable households, would otherwise have to be paid for through general taxation. Distribution costs count for more, and one of the reasons electricity bills are rising so fast is that infrastructure must be upgraded to deal with increasingly severe weather events, itself a product of the climate change caused by carbon emissions.

Meanwhile, as an investment proposition, the fossil industry’s benefits are immediate, but possibly no more than that. Oil companies pay large dividends — but that’s because it’s an industry which appears to have a finite life and so their capital expenditure tends to fall below that of growth industries. This, indeed, has been a source of Donald Trump’s frustration with the sector: he wants the companies to drill, baby, drill to bring down prices, and they understandably reply: why bother? We’re happy to keep supply limited and make money off higher prices while the good times last.

Most of the future growth in demand for energy will come from the developing world, much of which is leading the way in the transition away from fossil fuels. Developing countries are not necessarily pursuing this path out of concern for climate change. What is driving this is instead energy security — that is, the eminently practical consideration that renewable energy relies on entirely local resources. Countries with abundant renewable energy reserves are not so vulnerable to foreign suppliers or the vagaries of the market — let alone price shocks like the recent interruption caused by the Middle East war. When the price of your input can leap in a week or its supply can suddenly get cut, as we’re seeing  now in both the Strait of Hormuz and the Red Sea, the attraction of relying on home-grown energy only grows stronger.

Meanwhile, renewable energy has turned out to be one of the most dynamic sectors of the UK economy, with a vibrant startup ecosystem that is riding on the back of Government policies and growing much faster than the overall economy. Investment in the sector has grown 20 times over in just the last decade and London is now Europe’s leading climate-tech hub. To roll back Net Zero would be to cripple a sector that could potentially be at the vanguard of a new industrial revolution — a spectacular economic own goal.

So, when it comes to industrial policy, which both Burnham and Fahnbulleh favor, there is much to commend Net Zero. In principle, it might be possible to partially reconcile the competing demands by allowing an expansion of oil and gas production — the windfall tax may come in for reconsideration — and then using the Government’s share of the revenues to support the energy transition. (This is the approach used by Norway and some of the Gulf states). But long-term, it makes sense for the Government to put its eggs in the basket of this rising sector rather than a legacy industry.

However, this is where the real challenge to the country’s energy policy will lie — namely, does the Government have any eggs to play with? Burnham has entered Downing Street with the same set of fiscal constraints that felled his predecessor, and there is little reason to expect those to ease much. Burnham has said that while he might look for a little flexibility, he will abide by the same fiscal rules Rachel Reeves had set for herself.

In truth, he doesn’t have much choice: if he doesn’t bind John Healey, the new Chancellor, this way, the bond market will do it for him. And while investors have greeted Healey favorably, with gilts moving in line with the bonds of Britain’s G7 partners, those rates have been rising across the board, and look set to keep doing so.

Meanwhile, given that Healey resigned from the Starmer government over its failure to adequately fund the country’s defense budget, it’s a safe bet that doing so was a condition for his taking his new job. So, in addition to having to find more money to pay rising debt costs, Burnham will need to find more money to pay for defense spending.

And yet for all that urgency, he has further tied his hands by making it impossible, at least for now, to tackle the one Government bill that everyone agrees has got out of control: welfare spending. Burnham campaigned on the pledge not to scrap the triple-lock that is the principal driver of that portfolio’s ever-rising price tag. As a result, we saw how tricky he made his task the moment he crossed the threshold of No. 10. The Prime Minister announced he would eliminate VAT on energy bills and fund it from the savings he’d make by scrapping the digital ID scheme, only to have a former minister point out that scheme was unfunded.

If Burnham is to proceed with his ambitious plans to remake Britain and shift the economy to renewable energy, effecting a new industrial revolution in the process, he will therefore need to make some very tough choices, lest he end up making lots of promises that his Chancellor nixes. Since the Labour manifesto did not ask for a mandate for such hard choices, he may have to secure one of his own.

But that poses a rather large dilemma. To secure his own mandate, Burnham would need to call an election, something for which there appears to be little appetite among either the public at large or his own backbenchers, many of whom would probably lose their jobs, given the scale of Labour’s current majority. But to make the sort of bold decisions that might underpin his attempt at national renewal — such as serious welfare reform, raising income taxes or reintegrating with Europe — Burnham would effectively have to tear up the manifesto Labour campaigned on.

On the upside, he comes to office with some advantages over his predecessor. He is, obviously, a more gifted communicator, and he also has a clearer message to deliver — a more fully-formed vision of government based on devolution, local action, and a constructive state presence in daily life. He also takes power with an evident plan to make government more effective, placing more power in the Cabinet Office rather than maintaining Starmer’s approach of relinquishing decision-making authority to a Chancellor who often gave the impression of looking at a computer spreadsheet before reciting “Treasury says no”.

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But he’ll need all these skills and powers, because his task isn’t enviable. He is shackled with the albatross that sank the Starmer premiership, bequeathed to him by Starmer and Reeves — a set of fiscal constraints, resulting from careless election pledges, which still make it impossible to do anything more than incremental tinkering — like ostensibly temporary VAT cuts, or £2 bus fares. His new energy secretary has the potential to assist him in his goal of transforming Britain — but only if he can figure how to pay for it.

He must therefore find a way to offload the weight of his inherited burden. If he doesn’t, he will join the lengthening list of short-term premiers that Britain has begun compiling.

This, then, was the Downing Street clear-out of the decade, less a reshuffle than a political detonation of much of the Labour Right. And while the extent of the change is extraordinary, so too is the fact Burnham’s retinue kept the purge concealed. We should now recognize the endless briefings in recent weeks, from Mahmood being the next chancellor to Bridget Phillipson keeping a major role (she’s now equalities minister), for what they were: the Labour Right stirring the pot and hoping for a reaction. It never came. If nothing else, this has been the slickest announcement of a Cabinet by a Labour PM since Blair. It’s early days, but the narrative has been exceptionally clean — much to the chagrin of those now powerless on the backbenches.

For decades, the default of Labour’s “soft Left” — of which Andy Burnham has, in recent years, been a standard bearer — was to wax lyrical about “broad churches” and bringing people together. As leader, Ed Miliband’s two shadow chancellors were Alan Johnson and Ed Balls. Peter Mandelson was arguably the second-most-powerful person in Gordon Brown’s government. And even Jeremy Corbyn, before the attempted coup against him in 2016, had the likes of Heidi Alexander and Ian Murray in key positions.

This tendency, of trying to fit people who detest one another into the same project, even when they violently disagree, is a major structural deficiency for Labour. Good strategy is the result of saying no, and sticking relentlessly to a plan. For the present party of government, however, the opposite often applies, the general feeling being that giving out influence, and doling out concessions to almost everyone, is the foundation of political success. As should surely be clear by now, the opposite is true.

That’s certainly a lesson our new Prime Minister has seemingly learned. Even before he returned to Parliament, I said Burnham would need to be ruthless with high-profile Starmer supporters. In truth, though, I couldn’t see it happening, partly because of the institutional strength of the Labour Right within the party machine (though not its membership), and partly because Burnham seems like a people-pleaser. On that second count, I may have misjudged him.

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That’s not to say there aren’t disappointments for the party’s Left. Ed Miliband has been moved to the Foreign Office, a shift which may help the PM’s office dump certain aspects of his Net Zero agenda while giving the Doncaster MP what looks like a promotion. It also doesn’t hurt, as Labour tries to win voters back from the Greens, that alongside acknowledging mistakes on Gaza, Burnham has chosen someone to lead on foreign policy who’s trusted by center-left voters. There’s also the fact that Miliband has bags of experience and a sizable personal profile, all useful assets on the global stage.

The biggest shock, though, was surely the appointment of John Healey as Chancellor. While it’s true Healey was at the Treasury more than two decades ago, he’s not especially known for harboring a distinctive vision on the economy. Nor does he have experience in financial services, or even the private sector. But perhaps that’s the point, because rather than an ideologue, or a figure who wants to chart their own path, Healey will be a relatively loyal factotum at the Treasury, as Burnham seeks to re-configure large parts of the British state — not least by moving part of No. 10 out of London. Additionally there’s the fact that John Healey’s greyness — his political brand brings to mind the title of Robert Musil’s novel The Man Without Qualities — is something of a balm for bond markets while Burnham ponders further tax rises and higher public spending. Perhaps, if your prime minister is most comfortable waxing Mancunian about football and the Hacienda nightclub, you need a number two who resembles a bank manager from Wiltshire.

There’s a third aspect to Healey’s elevation though, and perhaps it’s the most important. Because while Burnham has ideas of his own, the economic agenda of his government will be, for the most part, designed by Lord Jim O’Neill (formerly of Goldman Sachs) and former Bank of England chief economist Andrew Haldane. So when Healey delivers his first budget in October, the words he’ll be saying, and the policies he’ll be proposing, won’t really be his. But what are those policies, and why would a former executive at Goldman Sachs be advising Britain’s most Left-wing leader since Harold Wilson?

The answer is that Burnham’s agenda is based on squeezing rentierism in the economy — from outsourcing and privatized utilities to buy-to-let landlords — and in its place investing in the core foundations of success from skills and housing to cheap energy. The two agree on a great deal, not least because Manchester has been the place they’ve most closely examined what works, and what doesn’t. They concur that the state needs to be more active, a critical partner to the market rather than its nemesis.

Still, it’s also true that Healey and Burnham are politically aligned, with the former supporting social housing in a way that was unthinkable for someone like Rachel Reeves. Besides, from his perspective Healey almost certainly accepted the job, with all the unique constraints it will entail, in exchange for more money for defense: the very issue that led to his resignation a month ago and which essentially ended Starmer’s premiership.

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Which leads to the most important question of all. If Burnham intends to end rough sleeping as a matter of urgency — something he said in his maiden speech as PM, and a priority I agree with — and he wants to retain the pensions triple lock, increase defense spending, build council homes and bring utilities back into public ownership — then how, exactly, will he pay for it all? The Prime Minister insists he won’t break the fiscal rules, which means borrowing can’t finance day-to-day spending, and also that the national debt will fall over the lifetime of this Parliament. But that second part, of a falling national debt before 2030, simply doesn’t seem possible given the scale of the commitments Burnham is endorsing.

In any case, there won’t be flesh on the bone until later this year — when Burnham aims to put forward a “10-year plan” for the country that lays “a path from where we are now to where I believe we all want Britain to be”. I’m expecting massive commitments on elderly care, housing, industry and apprenticeships. All important, but the money will have to come from somewhere.

Before then, though, the new government will turn to the cost of living, an issue that Burnham will address in a set-piece speech today. Expect a lower cap on bus fares, and perhaps even a return to the £2 fares scrapped by Starmer and Reeves when they entered government, but which Burnham wisely retained in Manchester. Rent caps and help with energy bills have also been touted, but both would surprise me, not least because they aren’t long-term solutions. For Burnham, Haldane and Jim O’Neill, not to mention voices on the Left such as Matthew Lawrence, the aim must be supply-side interventions that make housing and energy cheaper, rather than government intervention to prop up demand. Rent caps, before building more homes, could well prove counter-productive.

Regardless, Burnham is trying to be the bearer of good news right from the start of his premiership, lightening the load of the median voter. It’s a stark contrast to the gloomy naysaying of the opening months of the Starmer government, when he and Reeves either delivered bad news, raised the prospect of worse to come, or else made headlines for freebies, inaccurate details on their CV and Taylor Swift tickets.

Burnham will benefit from having just fought a by-election in a constituency where Reform romped home in the May elections. He would do well to trust his instincts as a result. Yesterday that meant eviscerating almost the entirety of the Starmer project. A memorable aphorism attributed to Teddy Roosevelt is that you should speak softly while carrying a big stick. Add to that dad-dancing, and wearing retro Everton tops, and you have the political management style of our latest PM. Where Starmer’s nastiness was often performative, perhaps the result of deep-seated insecurity, Burnham’s ruthlessness might be tethered to a modicum of humanity. Whatever the differences between the two men, his colleagues better hope it works.

That itself adds another layer to proceedings. Will the likes of Reeves and Lammy cause No. 10 problems from the outside? That is what would typically happen next. Only they all need Burnham to succeed — otherwise they’ll be looking for new jobs before the decade is out. The PM’s internal rivals will want him to succeed as well. Just not too much.

Until relatively recently, British defense secretaries were much envied by their European counterparts — because they were allowed to conserve as much real combat strength as possible by cutting everything else to conserve money for training and realistic exercises, as well as the continuous maintenance it requires. Typical in that regard was Healey’s namesake Denis, a fiery socialist and decorated beachmaster at Anzio, who served as Labour’s defense secretary from 1964-70. No relation to his 21st-century successor, this elder Healey worked closely with his cabinet colleagues to cut costs on buying warships, aircraft, bases and the like, to focus instead on what really matters: training, munitions and maintenance.

That may seem like mere common sense. But since the post-Cold War drawdown that was underway by 1991, almost every European defense ministry has wasted increasing proportions of their diminishing defense spending to keep increasingly empty bases open — often just to preserve civilian janitors and ground-keepers in a job, and retired NCOs in their attached housing. Also bloated are the officer corps of most European forces, increasingly disproportionate to their shrinking personnel totals. The Spanish army is perhaps the leading champion here. Despite shrinking from 280,000 men in 1990 to just 75,000 today, it has preserved every formation command, and every regional headquarters and geographic command, including one for the Canary Islands, headed by a three-star army general and flanked by navy and air force counterparts.

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Altogether, these commands absorb a remarkable percentage of the total armed force personnel: all just to keep up appearances, and jobs for generals and admirals. Nor is the Spanish army unique in this self-sabotage; Madrid’s wasted defense spending, which may even reflect the policy preferences of its pacifist government, is merely an exaggerated version of knowingly wasteful policies across Europe. By a remarkable coincidence, for instance, every branch of the Italian armed forces — as well as the civilian police, the customs police, and the carabinieri military police present in every town — buy almost all of their pistols, rifles and machine guns from privately owned Beretta. The French are arguably even worse offenders: all their combat aircraft are slated to come from the privately-owned Dassault Aviation, and for all the lobbying of British firms they are not allowed to become monopolies.

The root cause of John Healey’s complaint is that to preserve those envied British defense practices, to retain a disciplined focus in using taxpayers’ money to buy actually usable combat capabilities, there are minimum funding levels which must be respected. All concerned know perfectly well that spending on “combat readiness” is like buying cut flowers: which must be bought anew each day, at the expense of furniture that can last for decades or even centuries. In other words, doing defense for real is, much more than anything else a government does, like running a restaurant open 24 hours a day, 365 days a year. This is true even when compared with health care, in which the vast majority of patients do not require round-the-clock intensive care.

The real thing, the upkeep of true combat capabilities, has also required other forms of institutional discipline: including avoiding service in UN peacekeeping forces which never in fact carry out their mission to protect civilians if they have to use their weapons. The longest-lived such specimen, UNIFIL in Lebanon, has failed to execute its mission — of keeping Hezbollah from Israel’s border — even for a single day. Yet that has not prevented the participation of numerous Nato officers in over the years, including Lieutenant Colonel Thomas Karremans, the commander of the Dutch battalion meant to protect thousands of Bosnian Muslims gathered in the UN-declared “safe zone” of Srebrenica in July 1995.

We know how that turned out. Yet despite Karremans failing to follow orders and defend the enclave, ultimately allowing Serb fighters to kill some 8,000 men and boys, he was still promoted to full colonel upon returning to the Netherlands. Nato armies continue to retain a great many generals whose only “field” experience was in UNIFIL, to which the British Army formerly sent a single officer, and who was very soon withdrawn (it currently contributes exactly two personnel to the mission).

What have the British people ever obtained from their expensive “cut flowers” armed forces — that cost twice as much to operate as their European counterparts? Well, when asked to fight, they fight. A very recent example was the bombing of Houthi anti-ship missile and drone-storage sites in Southern Yemen by RAF Eurofighters. They flew out of Akrotiri, Britain’s sovereign base in Cyprus, despite being over 1,500 miles from Yemen in the Eastern Mediterranean.

When I asked the chief of another European air force — one that also flies Eurofighters — if his pilots could fly the same mission, he said “no” without a moment’s hesitation. To strike targets at those distances, he explained, you would need an aircraft with a sleep cot and a toilet; a cramped fighter cockpit is apparently not enough. And, in any case, you also need air-sea rescue continuously available along the way. Without it, he said, any flying mishap becomes a death sentence. That is also true of the RAF, of course, but its pilots crave the opportunity to fly real combat missions far too much to indulge their fears.

At the same time, British reluctance to get involved in the Ukraine war has not prevented SAS troopers from helping Zelensky’s government — officially just with training, but in practice with likely more. In sober strategic terms, there is nothing especially important about these examples. But think of the alternative: 3.5 million active Nato personnel, from Canada to Turkey, who eat breakfast, lunch and dinner in uniform every day — almost none of whom is ready to fight in earnest for any reason whatsoever.

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John Healey’s predecessors could count on cabinet support to maintain the British difference, but things are now changing. Not only are many modern cabinet ministers in charge of ever-expanding social and healthcare spending — inevitable with an aging population — they are also increasingly attentive to Britain’s defense industry. The latter generally hates cut-flowers “combat readiness” spending just as much as any pacifist. Why? Because it takes many millions of pounds from their preferred weapon-system “programs”, which are comfortably long in duration, and which can last even longer if they are multinational in nature.

That is the case with the current British-Italian-Japanese jet-fighter project, which will keep many in stable employment — before its inevitable dissolution, when the British will defect to the American jet on offer once their bargaining chip becomes useless. The competing Franco-German fighter project has just died, after Berlin belatedly discovered that Dassault meant to control every part of the project, as befits the French Beretta of combat aviation.

Compared with all this, the first Healey had an easy time of it. The House of Commons was still full of war veterans, many of them working-class talents like himself, who entered the army as privates but soon rose through the ranks. They all knew what combat readiness meant, and were ready to defend it from industry as well as the social-welfare crowd. Evidently, the second Healey chose to resign to issue a wake-up call, because he could not obtain the funding needed to preserve a critical mass of competence in each branch of Britain’s Armed Forces. I well remember the day when my own regiment — the Oxfordshire and Buckinghamshire Light Infantry in which I learned to shoot, carefully, to make each bullet count — was amalgamated into the Green Jackets to preserve funds for “readiness”. If Healey’s sacrifice of his high ministerial position remains unheeded, unpleasant consequences will ensue sooner or later, as they always do.

On the killing fields of Ukraine, an estimated 70% of casualties are now caused by drones. Tactics, techniques, and equipment are evolving at breakneck speed. At high and low altitude, cameras mounted on Unmanned Aerial Vehicles (UAVs) provide constant surveillance, channeling data to human operators and to other drones. In battle, and in the slow attritional grind of the stable front lines, UAVs are used to hunt and bomb the enemy — pursuing individual soldiers and recording footage of their final moments. Close-range combat is disappearing, and artillery is on the way out, too. 

Laden with explosives, kamikaze drones are increasingly used in place of long-distance barrages. Drones, meanwhile, are begetting drones; “mothership” UAVs can now be used to launch drone “swarms”. Jet-powered drones have been developed to bomb cities and airbases at long range. Used at sea, drones have devastated the ships of the Russian Black Sea Fleet; used on land, fighting drones have attacked villages, and act in logistical complement to ground forces. In this highly digital war, the majority of combat is carried out neither through the lens of a gunsight, nor the point of a bayonet, but instead via the videogame-like visual streams of a drone operator’s first-person-view goggles

The greatest innovation of the Russo-Ukrainian war may yet be a battlefield devoid of warriors. Drone power has transformed army tactics, hampering troop concentrations and creating largely stable front lines. Yet drones and drone operators are also vulnerable. UAVs are susceptible to jamming and the vagaries of changing weather; close to the front, their pilots are open to attack. Faced with this reality, militaries are now investing in autonomous weapons — drones able to select, pursue, and attack targets independent of human control. 

The drone era is dawning, and with it has come a great boom in defense spending. As the Defense Secretary, John Healey, recently disclosed, Britain is to mass-produce the drones that will defend Nato’s eastern flank from the incursion of Russian jets: a “drone wall”. And these drones are not just drones. Each of them is an industrial process, a social form, and an economic system condensed into a single item. Each is an artifact of global supply chains, multiple production facilities, cheap robotics, and abundant microchips. Each straddles the physical and digital realm; think of the cameras required to scan the battlefields, the satellites and tooling to transmit the video feeds, the software required to interpret them — and the people, companies, and processes that made each of these in turn. When made for battle, drones represent a fusion of military priorities with dual-use consumer technologies in gaming, AI, and robotics. Through drones, we can examine the digitized, networked, and increasingly automated nature of war. Through drones, we can perhaps see the rise of a new kind of power, and a new kind of politics. Ever since the French Revolution, the force-potential of an organized citizenry has been the central fact of political life, but this age is now passing. It is passing where Napoleon and his generals first birthed it — the field of war.

If anything, Healey is late. Global growth rates in defense spending more than doubled between 2022 and 2024, and in Europe the sector grew by 11.7% in 2024. Trump’s Big Beautiful Act will boost defense spending by $150 billion; billions of this are dedicated to drones and AI. As technology changes, a new generation of defense giants is forming. Helsing, the German provider of autonomous software systems, recently received €600 million in investment, valuing the firm at €12 billion — a mere four years after it was founded. It has just unveiled the “Europa” fighting drone. Another German defense giant, Rheinmetall, is now partnering with US-based weapons manufacturer Anduril to develop and mass-produce autonomous weapons systems.

The winds of change are blowing, and titans of consumer technology are responding. Daniel Ek, the Swedish founder of Spotify, first made his money through providing people with music recommendations; as chairman of Helsing he has now become a key figure in European defense. OpenAI boasts that its mission is to “ensure artificial intelligence benefits all of humanity”; as of June, that noble aspiration will encompass supplying $200 million’s-worth of AI services to the US armed forces. Meta, which aims to “build the future of human connection”, will now be doing so by supporting weapons systems; it has offered a major AI model to military developers, and as it partners with Anduril, it will be creating virtual and mixed reality devices for US military use. Changes at the level of corporate strategy are reflected in personnel; alongside Palantir executives, senior staff from Meta and OpenAI have been sworn in as reserve officers of the US military.

One may well wonder why these companies are making these choices — how Facebook friendships, song-streams, and chatbot use each connect to defense investments. To understand this, one must consider what lies behind them — the vast social and technological infrastructure of data and AI, an infrastructure now being converted to military ends. AI is a dual-use technology, trained with and used upon vast pools of data. Tools used to analyze social media users can be used to assess giant streams of intercepted communications. Systems developed for autonomous cars can be used to animate autonomous military vehicles. Voice recognition software can be converted to acoustic detection tooling, and thus into air raid warning systems. Software and hardware developed for games can be used to direct drones. AI-enabled tools thus can be used in intelligence, surveillance, and reconnaissance, to recognize targets, and in navigating unmanned weapons systems. 

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In this respect, AI is the culmination of a long-running union. Intelligence and information have always been crucial to war; AI deepens this. Turing laid the theoretical foundations for AI while cracking Nazi cryptography; at today’s GCHQ, his successors use it to provide insights to Britain and its allies. Grizelda, a Ukrainian equivalent to Palantir, is developing a data fusion platform to improve battlefield making & awareness. In Gaza, Israel’s “Lavender” system aggregates and analyzes data to select targets for assassination; using AI, it identified as many as 37,000 targets in Hamas and other terrorist groups. Such programs sit at the highest levels of state policy. At the center of China’s drive to modernize its military are the goals of “informatisation” and “intelligencisation” — an emphasis on the collecting and pooling of data, combined with the increasing use of intelligent weapons and systems.

As AI advances, so too does the machinery that houses it. Physical hardware created for peaceful ends can easily be repurposed for war. Drones used by hobbyists and farmers have already become weapons; so too could the next wave of consumer hardware. Elon Musk claims Tesla will be producing one million Optimus robots per year by 2030, and Chinese manufacturers are already moving humanoid robots into mass production. With bi- and quadripedal robots advertised for use in elder care, disaster recovery, and manufacturing, we can expect to see them also being used in warfare; indeed, more primitive robots already are. UAVs gain much of their military utility from their role as delivery platforms for interchangeable tools, equipment, and weaponry; conjured into existence for commercial use across every sector of the economy, the robot fleets of the future may similarly be platforms for the creation of drone armies.

These machines will enter a world increasingly focused on the creation of autonomous systems. AI agents — algorithms empowered with decision making abilities — are infiltrating our daily lives, playing a deepening role in everything from financial trading to corporate sales to the booking of holidays. This is further reflected in military priorities, where purchasing decisions, technology trials, and the stated aims of policymakers now evoke the replacement of the human soldier. Faced with high casualties and a smaller population than their enemy, the Ukrainian military aims to remove warfighters from direct combat. In 2024, Ukraine ordered 10,000 fully autonomous UAVs; although only a fraction of their overall drone production, it illustrates the trends ahead. Britain too seeks to reduce the role of humans — its last strategic defense review expected a 20%-40%-40% lineup between human, manned, and autonomous systems.

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The competitive logic of warfare will lead to a continued reduction in human control. Mass production of cheap, high-attrition drones drives human warfighters away from the battlefield; their slower reaction times, and their emotional and physical needs, put them at an increasing disadvantage. As autonomous tools develop further, this dynamic can only deepen; in only six months, Helsing moved between conceptualizing, designing, producing, and testing an AI-powered fighter jet. Military theorists conceptualize an increasingly autonomous progress of targets through the kill chain. In some scenarios, humans may not be involved at all. In digital warfare, milliseconds can matter — and thus the pressure of military competition could even drive us away from command itself. We will become ghosts in our own machines. 

The more we remove humans, the more we remove the capacity of human actors to hinder, moderate, and alter the systems that surround them. If we lose control over the guns, we may not be able to stop them from firing. If we no longer even make guns, then we will lose the capacity to stop their production, and to influence those who want them produced. Strikes, walkouts, and shutdowns have all enabled humans and human organizations to exercise control over industrial capital, and with it the priorities of owners and policymakers. Things may soon look rather different. China is now building “dark factories” — places of production so fully automated, so entirely without the need for human supervision, that they do not even bother to keep the lights on. To return to Chairman Mao — we could soon lose not just power over the gun, but also the power to make the gun.

Guns and industrial systems matter, for warfare is the engine of history. The rise of the West was largely driven by the competitive effects of warfare in Europe. Princes needed to defend territory against their neighbors, and to do so they needed ever-better armies. To feed, fund, and organize these armies, states looked for ways to deepen their tax bases, raise capital, and to mobilize their resources. Tax reforms, capital markets, and modern bureaucracies were created as a result. Spurred by and shaping these innovations came new ideologies; it is no accident that nationalism, socialism, communism, and fascism accompanied evolutions in mass warfare. The need to sustain the social, economic and technological base for war drove the modern world into being; herding conscripts into battle birthed mass politics.

Automated production, data aggregation, and the rise of autonomous systems brings a new era into focus. If humans no longer fight wars, more power will accrue to the owners of these autonomous systems — the owners of capital, the owners of hardware, and those who control or can own the data infrastructures that power them. If humans no longer make weapons, or control the factories that make weapons, or generate the economic activity that provides the revenues with which to make these weapons, then we are in a new reality: disempowerment for the many, hyper-power for the few. If this technical capacity is not decentralized, then economic and civil life will be decided neither by the will of the people, nor of their chosen representatives. It will be dictated instead by the systemic power and fabulous wealth of hyper oligarchs and a smattering of dictatorships, the wielders of an algorithmic power untrammeled by the need for human collaborators. Historians write of the fiscal-military state; soon we may see the agentic-military state. Time will tell what that means. 

At home and abroad, the struggle for power will be won by those who control the robots. Nations must consider their choices. Britain is prepared neither for the drone age, nor the changing nature of power. Lacking a strong industrial base and sufficient local tech champions, we buy our weapons and our software from others, mainly in the United States. This creates vulnerability, for digitization and AI impose new layers of influence and control, layers that may one day circumscribe the independence and freedom of British policymakers. Sellers of hardware can refuse to provide new models; sellers of software can refuse to provide new licenses and upgrades. Indeed, the integration of digital and physical systems means software providers could use kill switches to render hardware platforms inoperable from afar. One day, our weapons may be turned against us: for there are no permanent friends in international affairs, only interests. It is in Britain’s interest that it acquire functional sovereignty over its military strength. 

If we wish to remain an independent country, British leaders, British companies, and British citizens must understand and control the autonomous systems that will wage its wars and grow its economy. A robust tech sector and technically competent population helped Ukraine maintain her freedom, and it is this that Britain must build. If we develop a population that can understand and control the technologies around them, we can resist disempowerment. For national defense, and to build the tech giants of tomorrow, Britain must embrace its geeks. History can guide us; ARM’s success was born in the BBC Micro, a computer distributed to schools to accompany a BBC computer literacy program. The BBC should now launch a drone literacy program, focused on how physical robots will change our world, and selecting British consumer drone companies to be marketed alongside it. Hacker houses, tech foundries, and maker spaces should be geared to help people understand and innovate with robots. In the era of AI, the best defense to liberty will lie not in bearing arms, but in maintaining the power to shape them. France birthed the levée en masse; Britain must prepare for the levée en drone.