We now know the Labour Party’s agenda in power. With little sense of their plans, and extreme caution in their messaging going into the election, people were free to project what they wanted onto Starmer and his party, for good or ill. Shortly after getting into power, dramatic riots and an alleged “fiscal black hole” kicked up enough dust to confuse matters, but the direction of travel is now increasingly clear. The Labour government has one, very clear mission: to save the public sector at any cost, even at the expense of the public itself.

The pattern is now undeniable. The huge handout to public sector unions can be spun as “getting people back to work”, but the loosening of restrictions on strike action, and the total lack of concessions on the union side told the real story. Alongside the cutting of the winter fuel allowance, and tight restrictions on spending in other areas, it was clear to whose benefit “tough choices” were being made. 

But this was much more than a one-off payment to Labour’s political clients. It’s part of an emerging strategy to defend the institutional status quo, whilst passing on the costs to taxpayers. The NHS, rocked by scandal, drastically underperforming European public insurance systems, and with mounting delays in vital care, is not going to be reformed. Instead, as a raft of mooted measures from alcohol pricing hikes, to pub opening hours, junk food ad bans and further smoking restrictions reveal, it is we, the great sinful public, who must save the NHS by acts of collective penance and fasting. 

And in the latest disgraceful capitulation to our dysfunctional public sector, Keir Starmer is proposing to increase tuition fees in line with inflation. Alongside a recent reduction to the repayment threshold, and the differential effects of interest payments on those unable to pay off loans quickly, this will add up to a regressive de-facto graduate tax, one that falls most heavily on those who have benefited least from their education. He is doing this (and going back on his word) because he refuses to allow British universities to fail, just as he refuses to let any part of the public sector fail. 

If a private corporation does badly, failing its customers, or expanding too quickly, it suffers, it cuts back, it goes bankrupt. New managers are brought in, it is restructured, and if it is unsalvageable, it is broken up and sold off for parts. But despite running a service in which nearly half of trains are late, rail staff are getting a pay rise. When the NHS lets mothers die in childbirth, or fails to diagnose cancer in time, we’re told it’s our fault for going to the pub on a Friday, not that the NHS needs to fundamentally change. And when universities recklessly expand, with 40 per cent expected to be in deficit by the end of this year, they expect to be saved by imposing still more debt on the nation’s youth. 

… the truth is that the government is a victim of a system that resists reform and narrows politicians’ options in practice

One can attribute venal motives to the Labour Party for all this if you want — and certainly public sector unions and workers hold huge power over a Left that relies on their cash, door-knocking and votes to stay in business. There’s ideology too of course — and Starmer’s party is not short of true believers in the cause of the big state, and its ability to effect positive change. But the truth is that the government is a victim of a system that resists reform and narrows politicians’ options in practice. It’s no coincidence that Cameron and Osbourne’s supposedly small state agenda ended up decimating the small state (local spending cuts reached nearly 50 per cent), whilst leaving the big state, in the form of centralised Whitehall departments, largely intact. 

The problem with large institutions, as we discovered with the banks in 2008, is that they’re “too big to fail”. When things go wrong, they do so all at once, and the ill effects metastasise to every part of the country. Every crisis becomes existential, and vast resources have to be mobilised to rescue them. For the same reason they’re big to fail, they’re also too large to reform. It’s a deadly combination. Not only is failure off the table as an impetus for adaptation, it’s also difficult to replace leadership and middle management on a large scale, or introduce new structures without incurring massive disruption and expense. 

It isn’t merely the scale of large institutions, it’s the centralisation that comes with it. The NHS employs 1.3 million people in England alone — that’s 1 in 25 of every working age adult in the country. You have to start citing organisations like the Chinese Army before you find anything of comparable scale anywhere in the world. Similarly, UK universities employ over 400,000 staff. And it is incredibly hard for any government to disrupt this massive source of employment.

There is a direct inverse correlation between the regional share of public sector employment and regional per-capita GDP. The poorest nations and regions, like Wales and the North-East, also have some of the highest shares of people working in the public sector. Meanwhile London, the wealthiest area in the UK, has the lowest share of public sector workers. 

Cities and regions left behind by deindustrialization and a service and finance-based economy concentrated in the South-East are kept alive by the public sector. Universities, schools and hospitals sustain a regional middle class that would otherwise dwindle out of existence. It’s an economic model already familiar to ex-industrial towns elsewhere, such as Philadelphia’s post-steel reinvention as an “eds and meds” centre. But whilst the public sector keeps regional Britain on life support, flatlining public sector productivity means that this is a recipe for stagnation, not recovery. And although British universities provide valuable research and training, without a private sector capable of scaling innovations, most of our regional universities are failing to achieve the synergistic gains they ought to be. 

This sets up an incredibly dangerous dynamic. On the one hand, public sector employment isn’t enough to kick-start a cycle of sustained GDP growth outside of the London orbit, but on the other hand its loss could send regional economies into a death-spiral. They soak up public spending that could be going on higher productivity areas like defence, housing, energy and transport, whilst creating a massive special interest group heavily invested in resisting reform. Our current model locks us into stagnation and managed decline, seemingly without hope of escape.

So what’s the way out of the bear-hug with Goliath? The answer, as ever, is a nimbler David wielding some heavy artillery. We have to kill off our centralised public sector, and do so for good. The answer to big government isn’t less government, it’s local government. But local has to mean really local. Replacing our current command and control top-down system with dozens of local replicas will just reproduce the problem all over again. This means internally decentralised and pluralised services, directly accountable to public service users, not just local councils calling the shots.

Goodbye NHS. Organisations like the Dutch nursing body Buurtzorg in the Netherlands, where they have eliminated most of the administration, brought back the “family doctor” principle, and organised medical personnel into self-organising teams, show how health and social care can be revolutionised when we make them small enough to succeed. Buurtzorg has saved millions in medical costs, and cut the needed hours of care in half, by empowering patients and healthcare providers, and involving the local community. Since its inception, it’s already grown to employ two thirds of the Netherlands’ neighbourhood nurses, and reports suggest that its reforms, if introduced more widely, could save the Netherlands €2 billion a year. There’s no reason we can’t apply these lessons to our own healthcare system, but it means breaking with our Soviet-scale national healthcare machine.

In education, there’s already plenty of evidence from America that more vocationally and locally focused institutions do better for graduate earnings than traditional elite academic universities, all whilst charging a lot less for local students. Whereas in the UK poorer regions see a brain drain of the best students away to elite universities, lowering tuition fees for local study could keep talented people circulating locally, whilst making education cheaper and more accessible. Connect regional universities to regional employers, and universities really could become engines of growth. But it means making them more than Oxbridge outposts that mete and dole academic education unto a savage region. Likewise, spiralling tuition fees are creating middle class jobs at the cost of harming the prospects of those trying to join the middle class. Higher education needs to be treated as a local investment, funded from taxation, and assessed on whether it generates more in local growth and tax receipts than it takes out. 

All of this requires a different sort of local government than the feeble, Whitehall clients that currently govern the regions. Welfare, education and health should be almost fully devolved, with Whitehall departments in these areas drastically stripped back. Along with new responsibilities, real tax and borrowing powers must be put in the hands of localities, so that they’re free to succeed and fail on their own terms. Because local governments and services will be small enough to fail, they’ll be small enough to learn and evolve from failure too. Britain will again become a laboratory of democracy, and innovation and productivity can start to flourish in the public sector. 

Both public and private sectors in our regions are starved of capital, and will need the ability to raise it without going begging to Whitehall, or depending on overseas investors. Regional investment banks are the crucial game changer in this equation, and represent an important first step in decentralising our financial sector in general, and putting it to work supporting British business. Rather than a system of national handouts, we need regional networks of finance, research and industry, working together, meeting the needs of local people.

The road to both public and private sector recovery is there to be taken, but standing in its path is the Whitehall Leviathan. We need a government with dragon-slaying courage, but based on current evidence, it probably won’t be Keir Starmer’s.