Rachel Reeves is reportedly considering changes to the rules around “non-doms” – people who declare themselves to be “non-domiciled” in the UK in order to pay less tax – in response to a protracted media campaign against the policy. On a daily basis, newspapers from the Telegraph to the Independent are warning that the abolition of the non-dom regime is causing an exodus of millionaires. This week, estate agents have protested that the top end of the London property market is now in freefall. The mansions stand empty!

Questions to ask about these reports include: are they bullshit? And why should I care? Does it matter if the non-doms are leaving? New research suggests a surprising answer.

Firstly, these claims have at least a whiff of the farmyard in that they are being made by people who have a clear financial interest in the matter. If I was selling prime central London property, I would definitely use the media to push the narrative that the wildly overpriced houses I was pushing were in fact going for a song.

That’s not to say they’re lies, but they are claims made in the absence of the actual data on non-doms (which will be released by HMRC next month). Fortunately, there is other data that does tell us a verifiable story about what happens when you change the non-dom rules, because these rules have been changed before – by George Osborne, in 2017. The changes Osborne announced in his 2015 Budget amounted to a £1.5bn tax hike on non-doms. Last month, a study was published which shows what happened next.

Immediately after the 2015 Budget, the emigration rate of non-doms rose, peaking in 2018 – but by 2019, it was lower than it had been before the change was announced. So the policy was announced and an “exodus” appeared to follow, but it wasn’t an exodus. It was people bringing forward a change they had been planning to make anyway.

The second conclusion was even more important: the people who paid the least tax were the most likely to leave. The millionaires who left were the fiscally useless, the do-nothing rich.

A common misconception is that rich people are economically similar. But there are two very different species: people who earn loads of money and people who have loads of money. People who earn lots of money typically pay a lot of tax. A banker in London on £600,000 a year should pay about £245,000 in income tax and National Insurance (assuming maximum pension contributions), contributing as much to the state in three years as the average Brit contributes over their whole working life. This makes them very important from a fiscal point of view. But it also means they’re less likely to leave when there’s a tax change, because they have a great job that it would be hard to get elsewhere, and because they demonstrably already tolerate a high level of taxation. And after the 2015 Budget, this is what they did: they stayed.

The other species are different. They are simply parking their wealth here, paying little tax, and leaving when the rules change. Arun Advani, the economist who led this research, told me that under the non-dom regime, the UK had effectively been a tax haven for people who had money here but didn’t earn money here: “Everyone thinks, because they’re very wealthy, that means they must be paying a lot of tax,” he said, but the people who left after 2015 were recognisable as being “not very well connected” to the economy by income  – “but that’s also why they weren’t paying very much tax. So the cost of losing them is much lower.”

It’s very possible that this is what’s happening now: we are losing people whose connection to the economy was fleeting and low in value.

The stateless rich will be missed in some parts of London. Showrooms for ugly, dangerous cars will fall quiet; gaudy clothes with someone else’s name written all over them will go unsold; bad Mayfair restaurants and galleries for gaudy, laughable art will have to reconsider their value propositions. But the rest of us might benefit, thanks to the property market.

Expensive London property drags the rest of the housing market upward, imposing trickle-down inflation on homeowners. It also eats into our housebuilding capacity. When I walked through London’s wealthiest constituency with its MP, Joe Powell, recently we had to raise our voices over the sound of drills: every other property was a building site, an investment being serviced. The UK currently spends around £3bn a month on repair and maintenance of existing housing, more than six times what it spends on building new public housing. If the non-doms leave, housing might become both more affordable, and easier to build, for people who want to live here for reasons beyond their tax bill.

It’s also worth noting that leaving the country – any country – is something the stateless rich do constantly. In a normal year, with no tax changes announced, around a quarter of non-doms who have arrived recently (within the last two years) will leave anyway, and even among long-stayers (up to 15 years), one in 25 will leave each year. Maybe shopping in Harrods and driving a Lamborghini leaves you feeling empty and bored, and forces you to roam the planet seeking a fulfilment money can never buy? Who cares. They’re off to Dubai. Before the government performs another U-turn, it should ask whether anyone will miss them.

[See also: Has Rachel Reeves given in to the non-doms?]

A good columnist is never unintentionally tedious, but this week’s effort is about obsolete telephone directories, binary counter overflow, and the alternating current waveform. The boredom is the point.

Start with alternating current. As most of us once learnt and have since half-forgotten, mains electricity is supplied by an oscillating current whose direction changes rapidly. In the UK, for example, the current flips back and forth 50 times a second.

This system is highly efficient but suffers from a serious downside: if the frequency slips outside a tightly defined target range, both the system and many of the appliances plugged into it can be damaged. That almost sounds interesting, but of course it is boring after all, because electricity is generated by power stations that all but guarantee a stable, reliable waveform: heavy, rapidly spinning hunks of metal powered by steam heated by burning hydrocarbons or a nuclear reaction. Or so it used to be, but thermal generation is rapidly going out of style in favour of wind turbines that do not spin at a predictable rate, and solar panels, which produce direct current instead.

“Thermal electricity generation provided system stability so effectively and so transparently that we forgot it did that,” says Paul Domjan, one of the founders of Enoda, an electricity grid technology company. We are going to have to remember again, and quickly, because we are rapidly moving to grids that are far more prone to wobble off the target frequency, as recently happened in Spain, with dramatic consequences.

We are all familiar with renewable energy’s problem that the wind does not always blow and the sun does not always shine, but only the real nerds worry about the stability of the AC waveform. This is a problem that can be solved, but not if it is overlooked.

Just in case alternating current starts to seem too interesting, let’s move on to obsolete telephone directories, or more precisely to the diocesan directories published by the Catholic Archdiocese of Boston. An up-to-date directory is useful, if hardly riveting. A decade-old directory describing the former addresses and positions of priests seems good only for the recycling bin.

Yet in 2001, investigative reporters at the Boston Globe suspected that the sexual abuse of children by priests was widespread, and realised that the apparently useless old directories provided a vital clue. In the 1990s, after the church had begun to quietly remove offending priests, there was a sharp increase in the number of priests listed as on “sick leave”, “awaiting assignment” or at the “clergy personnel office”.

Carefully combing through the old directories, the Globe’s reporters assembled a list of priests with unexplained movements through the Archdiocese organisation. That list closely matched their growing list of accused priests, strongly suggesting the church’s complicity.

Because outdated directories turn out to be Pulitzer-prize-winning levels of not-boring, we should turn to binary counter overflows, surely a reliably tedious topic. A computer armed with a three-digit binary counter can count from zero to seven: 000, 001, 010, 011, 100, 101, 110, 111 — and then the counter overflows back to zero. A 32-digit binary counter will get you to nearly 4.3bn before overflowing — 4,294,967,295 to be precise.

This is fairly boring stuff, unless you are working at the Los Angeles Air Route Traffic Control Center and your radio system simultaneously disconnects from each of the 800 aircraft flying over southern California. This happened on September 14 2004, and whatever adjectives sprang to the minds of the air traffic controllers and the pilots, “boring” was not one of them.

The culprit? A binary counter overflow in the traffic control computer clock: it was counting down milliseconds from 4.3 billion, which takes just under 50 days to do. When it hit zero the system shut down. Standard procedure was to forestall any problem by rebooting every 30 days, but in the summer of 2004 that evidently did not happen.

As Matt Parker explains in his book Humble Pi, this wasn’t a one-off error. Windows 95 computers would crash for the same reason, while the Boeing 787 Dreamliner had a similar issue and would lose all electronics if somebody left the computers running for more than 248 days.

The boring things in life will shut down your electricity grid, identify paedophiles in the priesthood and crash your computer — or maybe even your aeroplane. Might we attempt a grand unified theory of boring things?

Perhaps. Here it is: smooth, successful operations are uninteresting, and uninteresting matters tend to be neglected. Eventually they stop working well, at which point they become interesting again.

This is certainly true of the AC waveform. It seems boring because it has felt like a solved problem. Yet, as with low inflation or herd immunity from measles, if we allow the foundations of a success story to be eaten away, we find that the problem isn’t quite as thoroughly solved as we assumed.

This is true also of archives. Even celebratory accounts of the Boston Globe team’s use of diocesan directories usually neglect to mention that if those directories hadn’t been available in library archives, the investigation would have hit a dead end.

Archives have a particular problem. If an archive fails — fails to save the right things, fails to preserve old documents or fails to maintain digital information in a format modern computers can interpret — then the fact of that failure may take years or even decades to emerge.

Success leads to boredom. Boredom leads to neglect. Neglect leads to failure. Failure is no longer boring. But if we don’t show more interest in the successful systems we have built, they may suddenly become far too interesting for comfort. By the time these boring topics start seeming interesting, it’s too late.

Written for and first published in the Financial Times on 23 May 2025.

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Five days after his election victory in February, Friedrich Merz’s world collapses. That’s how he will describe it later.

That Friday evening, he steps off the stage at a large conference center in Hamburg’s port, where cruise ships usually moor. He has just been hailed as “the future federal chancellor,” and more than a thousand party supporters have cheered on their chairman at a rally of the local chapter of the Christian Democratic Union, Germany’s main center-right party. At around 8:15 p.m., he shakes a few hands in farewell, then drops into the backseat of his official car for the three-hour drive home. It is February 28, 2025.

Merz checks his phone and notices a message from his spokesperson. He should watch a video, preferably immediately. Merz pulls out his iPad, opens the link, and recognizes a room familiar to anyone who follows politics. Two armchairs upholstered in gold damask sit in front of a fireplace with no fire burning. In front of the fireplace is a table made of fine wood inlaid with an oversized seal. It’s the Oval Office in the White House.

To Donald Trump’s right sits a small, bearded man in a black military sweater embroidered with a stylized trident, the national symbol of Ukraine. It is Volodymyr Zelenskyy, the president of Ukraine, a country invaded by Russia. Merz holds him in high esteem. Merz has visited Zelenskyy twice in Kyiv and, just a few days ago, accepted Zelenskyy’s congratulations on his election victory. Ukraine has high hopes for Merz. The new chancellor is expected to finally provide the Taurus, a German cruise missile capable of penetrating bunkers, which Merz’s more liberal predecessor as chancellor, Olaf Scholz, refused to provide throughout his time in office.

In the video, Zelenskyy looks tired. Tired and helpless. Merz is dismayed as he watches the U.S. president humiliate his Ukrainian counterpart. Trump accuses him of endangering millions of lives and risking a third world war. When Zelenskyy retorts that it was Russian President Vladimir Putin who started the war, Trump interjects harshly. In front of the cameras, Zelenskyy is scolded like a naughty child for several minutes. “Did you ever say thank you?” Vice President JD Vance asks Zelenskyy, hurling this question at him several times.

“That was good television,” Trump says at the end of the meeting. The subsequent talks, which were supposed to be about security guarantees after a ceasefire, are canceled. A fully negotiated raw materials agreement is not signed. The celebratory lunch is canceled. Zelenskyy waits another 20 minutes in an adjoining room. Then, an official appears and simply sends him away.

Merz has just finished watching the nearly 40-minute scene when he posts a solidarity message to Zelenskyy in English on X: “We must never confuse the aggressor with the victim in this war!” He is on the phone nonstop in the car until he arrives in Sauerland and then for half the night. He also speaks with Scholz, who would still be chancellor for another two months.

Scholz and his designated successor agree that something historic happened that day in Washington. The Americans are threatening not only to abandon Ukraine but also all their allies. Is Article 5 of the NATO Treaty, which requires every member to come to the defense of every other member, still to be taken seriously?

Would U.S. soldiers defend Germany against a Russian attack? Are American nuclear missiles still a credible deterrent?

The two men agree that given these circumstances, Germany must rebuild its national defenses. As quickly as possible and at whatever cost. And it will cost a lot, between 1 and 1.5 trillion euros over the next 12 years — double the previous amount.

Spending that much money on defense isn’t easy. In Germany, the “Schuldenbremse” or “debt brake” is a fiscal rule enshrined in the Constitution. It is designed to limit the amount of new government debt to a maximum of 0.35 percent of gross domestic product.

Before the elections, Merz campaigned on keeping the debt brake and insisted as chancellor he could do without extra debt. But in the coming days, Merz will flip his position and agree to this new borrowing. The humiliation of Zelenskyy has changed everything.

This account of the election of Merz and his first days as Germany’s incoming chancellor is based on more than 50 conversations with sources, some close to Merz, who were granted anonymity to speak freely.

Merz’s doubts about his prior convictions had been building for weeks. A few days before the general election, Merz met with Vance in Munich. Merz wanted to dissuade the American vice president from publicly urging Germans to vote for the far-right Alternative for Germany (AfD) party. “These are not friends of America,” Merz said, “but partisans of Putin.” Vance nodded in apparent agreement.

Just a few hours later, during his speech at the Munich Security Conference, Vance stunned the audience. He declared that restrictions on freedom of speech in the EU are a greater threat than Russia or China. He called for firewalls to be torn down across Europe and for right-wing populists to be included in politics. The vice president did not mention the AfD by name. However, a few hours later, reports circulated that Vance had met with not only Merz, but also with AfD leader Alice Weidel at his hotel before the speech. He had not told Merz about this meeting.

Even then, two weeks before Zelenskyy’s humiliation in the Oval Office and one week before the Bundestag elections, Merz had begun privately considering the need for Germany to take on additional billions in debt. “What the new American president, Donald Trump, has said in Washington these last few days…” he told the audience from the campaign stage in Hamburg, “Ladies and gentlemen, we are witnessing a fundamental shift in the global political landscape.”

Following the Munich Security Conference, Merz discreetly asked former Constitutional Court judge Udo Di Fabio to explore whether it would be possible to amend Germany’s Basic Law with the votes of the outgoing Bundestag. The “Basic Law” is Germany’s equivalent of a constitution. It can only be changed by a two-thirds majority in parliament. That also applies to the debt brake. Getting a two-thirds vote would be possible with the old Bundestag, but not the new Bundestag that was expected to have a higher representation of AfD and other fringe parties.

Shortly afterwards, Di Fabio sent him his expert opinion. Amendments to the Basic Law with the votes of MPs who had already been voted out of office were possible up to 30 days after the election. That would be March 25, the same day the new Bundestag would be seated. Merz would have less than a month to execute an about-face.

On the day of the election, Merz gave the first public signal that his thinking was changing when he appeared with other candidates on the Berliner Runde, a television program in which party leaders comment on the election as soon as the polls close. “For me, it will therefore be an absolute priority to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA,” he said.

Independence from the USA? Scholz, sitting right next to Merz on TV, could hardly believe it. Until now, European politicians had carefully avoided suggesting that Europe could manage its defense without the Americans. Germany, which has neither its own nuclear weapons nor a robust army, needs American troops and their nuclear umbrella more than anyone. Merz, considered a staunch transatlanticist, was giving up on the USA? “Since U.S. President Donald Trump’s statements last week, it has been clear to me that this administration is largely indifferent to the fate of Europe,” Merz continued. A summit of the transatlantic military alliance is scheduled for the end of June. “Will we even be talking about NATO in its current form then?” he asked. “Or will we then have to establish an independent European defense capability much more quickly?”

The next day, when the election results had been tallied, Merz praised the outcome in a press conference: 29 percent was much less than the Christian Democrats had hoped for, but Merz argued it was a success if you look at the number of votes rather than percentage points. The Christian Democrats gained 2.5 million votes compared to the previous Bundestag election, and the Christian Socialists gained 500,000, he noted.

What he failed to mention is that the AfD gained over 6 million votes. After an election campaign more polarizing than any in decades, more people turned out to vote than in previous years, and the AfD was the beneficiary.

Merz was genuinely outraged by the scene in the Oval Office. But he also knew he could use this indignation to his advantage. After all, he would need a credible narrative to justify the political turnaround, the astronomical increase in defense spending, that will take place under his leadership.

The election results meant that, for the first time since World War II, centrist parties no longer have a two-thirds majority in Parliament. Without a two-thirds majority, centrist parties cannot elect judges to the Federal Constitutional Court, declare war on an invader or amend the Basic Law. For example, to reform the debt brake.

The situation is reminiscent of the late phase of the Weimar Republic. At that time, the National Socialists and Communists together held over 50 percent of the seats in the Reichstag, preventing the Social Democrats, Liberals and Christian Democrats from governing effectively — thus fueling growing frustration with democracy. This created a vicious circle that led to the collapse of the first republic at the beginning of the 1930s.

Is this a bold comparison? The AfD and other fringe parties already control a blocking minority in the state parliaments of three German states: Saxony, Thuringia and Brandenburg. The same will be true in the Bundestag when the new MPs are seated March 25.

Scholz also played a role in urging Merz’s turnaround. In meetings unnoticed by the public, Scholz and Merz met several times in the chancellor’s office after the Bundestag elections, sometimes with other center-right politicians present. At one of these meetings, Scholz presented intelligence service findings on the immense scale of the Russian arms buildup. Despite the enormous losses in Ukraine, Putin would have considerably more tanks and missiles in just a few years than before the invasion. The intelligence suggested he is preparing to wage another war, this time against Europe. Scholz, who campaigned as a peace chancellor, advised his successor to do the opposite: to massively rearm.

Germany’s new government coalition joined Merz’s Christian Democrats with Scholz’s Social Democrats. In the days after the election, the coalition partners convened private negotiations to reach a spending plan they could implement before March 25. In those talks, the sums involved increased by the hour.

On March 4, when the partners reappeared in public to announce their deal, there was great astonishment. There were no longer any limits to rearmament. Merz secured special funds for a defense build-up over the next 10 years that were five times larger than an increase Scholz negotiated just three years ago. An additional special fund of 500 billion euros had been agreed upon for rebuilding the country’s infrastructure.

Why was Merz, the avowed debt hawk, now so willing to push Germany so deep into debt?

“In view of the threats to our freedom and peace on our continent, the same must now apply to our defense: Whatever it takes!” Merz said at a press conference. The saying was a quote from Mario Draghi, the former head of the European Central Bank, who used this slogan in 2012 to scare off speculators who wanted to bet on a breakup of the eurozone. Now Merz used the same quote to explain his rearmament plan.

At a parliamentary group meeting later that day, Merz reported that he would be traveling to Brussels to take part in the meeting of the heads of state and government of the EU Council. And then he said something curious: “If Trump announces his withdrawal from NATO tonight, then we, the Federal Republic of Germany, will be the first to have reacted correctly in advance.”

There was horror among the MPs. Merz was deadly serious. The total turnaround in financial policy began after the shock appearance by Vance at the Munich Security Conference. Merz justified it by pointing to the humiliation of Zelenskyy at the White House. But now he was talking about an imminent U.S. withdrawal from NATO. How did Merz get this idea?

Trump was set to give his first speech to a joint session of Congress that same night. Merz explained to close allies later that he had received information from an American source indicating that Trump would use the speech to announce a U.S. withdrawal from the Western defense alliance. He had reason to trust his source. Two weeks earlier, the source had provided him with advance information on Vance’s speech at the Munich Security Conference. Merz held a conference call the night before the speech and warned Christian Democratic leaders that Vance would shake the transatlantic friendship and launch a rhetorical attack on Europe. That is exactly what happened. Merz and his allies were prepared.

Warned once again, Merz expected the worst from Trump’s speech to Congress. During conversations and phone calls with confidants, he made it even clearer than he had in the parliamentary group meeting that if Trump announced a NATO withdrawal that night, Putin might react immediately with an attack on the Baltic states.

During those hours when he agreed Germany should take on a trillion-euro debt, Merz was acting on the belief that a new war in Europe was possible and NATO was on the brink of collapse. His vote in favor of the record debt came against this dramatic backdrop.

As we know, things turned out differently. Trump delivered his congressional speech but did not mention a withdrawal from NATO.

To this day, Merz does not believe that his Washington source misinformed him. The NATO withdrawal announcement had been prepared, he believes. Trump changed his mind at the last minute.

(POLITICO Magazine asked the White House to respond to the assertion that Trump had considered using his March 4 speech to a joint session of Congress to announce a U.S. withdrawal from NATO. In an emailed statement, White House spokeswoman Anna Kelly said, “Such an announcement was never included in any draft of any speech.”)

In the Middle East as in Ukraine, the president is discovering that simple bullying tricks don’t resolve complex international crises

It was as close as Donald Trump might get to a lucid statement of his governing doctrine. “I may do it. I may not do it,” the president said to reporters on the White House lawn. “Nobody knows what I’m going to do.”

The question was about joining Israeli air strikes on Iran’s nuclear facilities. Days later, US bombers were on their way. Some expected it to happen. Others, including Keir Starmer, had gone on record to say they didn’t. No one had known. The unpredictability doctrine wouldn’t have been violated either way.

Rafael Behr is a Guardian columnist

Dalibor Rohac is a senior fellow at the American Enterprise Institute in Washington, D.C.

As the transatlantic alliance braces for this week’s NATO summit in the Hague, its defenders are caught between a rock and a hard place.

On the one hand, anyone can see that relations with Washington are as bad as ever — from U.S. President Donald Trump’s musings about Russia at the hastily shortened G7 summit in Alberta to the vacuous so-called trade deal with the U.K. that still hits the country with 10 percent tariffs.

It is increasingly hard for Europeans to find common ground with the Trump administration. But saying it out loud carries the risk of worsening relations and turning it into a self-fulfilling prophecy, much like when France’s President Emmanuel Macron called NATO “braindead” back in 2019. However, to feed false hopes and unrealistic expectations of constructive engagement with the second Trump administration is both dishonest and irresponsible.

What the British and the Europeans need is less talk and more action: on defense, on Ukraine, on trade, and other priorities, without either waiting for strategic direction from Washington or agonizing about Trump’s possible reactions.

Clarity about facts is a necessary first step. With shrewd diplomacy, the upcoming NATO summit may avoid being a complete embarrassment. But that will not change the fact that as community that shares a common strategic perspective, the alliance may not be braindead yet — but it is certainly on life support.

To be fair, due to recent — and ongoing — increases in defense spending by allies, NATO’s joint capabilities are becoming impressive. But what matters for the alliance is the collective willingness to use them. There, U.S. leadership is acutely failing. The planned withdrawals of U.S. troops from Europe will inevitably cast a long shadow on the summit’s proceedings.

Worse yet, at a recent congressional hearing, U.S. Secretary of Defense Pete Hegseth struggled to answer a simple question about the U.S. commitment to NATO’s Article 5. Likewise, he failed to rule out planning for a U.S. invasion of Greenland. Even the debate about increasing defense spending to 3.5 or 5 percent has to be read against the background that the United States is unwilling to increase its own defense budget to such levels — quite the contrary.

Then, there’s Ukraine. We are past the two-week deadline set by President Trump to assess Russia’s willingness to engage constructively in peace negotiations, to which the Kremlin responded by pounding Ukrainian cities and civilian infrastructure with massive drone and ballistic missile attacks. The “coalition of the willing” appears to be sitting in the sidelines, waiting for Washington to make a move. That’s a mistake.

No disinterested observer, after all, can avoid the impression that the administration’s preferred policy is — well — to do nothing. “I’m very disappointed in Russia,” Trump said at a press conference earlier this month, before adding that he was also “disappointed in Ukraine” and appearing to give credit to Vladimir Putin for Russia’s sacrifices in World War II. The same day, June 12, Secretary of State Marco Rubio congratulated Russia on its National Day — a step not taken by a U.S. administration since 2022. Meanwhile, Hegseth assiduously dodged answering the question of whether Russia is the aggressor in the war.

The Trump administration might be constrained by the fact that many of the sanctions against Russia are mandated by Congress and thus hard to reverse. The Russian rhetoric indicates the direction of travel is toward normalizing the U.S.-Russian relationship, not toward Senator Lindsey Graham’s punitive bill penalizing countries buying Russian oil with a de-facto trade embargo.

All of these facts are unpleasant — but they are part of the reality that the U.K. and Europeans have to deal with. The best way to do so is with stoicism and determination — and with a European version of Teddy Roosevelt’s dictum about being quiet and carrying a big stick.

The EU is a $20-trillion economy. The U.K. adds another $4 billion, give or take. With a leadership that understands what is at stake — and it appears that Macron, Germany’s Friedrich Merz, Poland’s Donald Tusk, Italy’s Giorgia Meloni, and Commission President Ursula von der Leyen do, among others, do — it can re-arm itself and bankroll Ukraine to eventual membership in the European bloc.

Both the U.K. and the EU should be also pursuing, jointly, an ambitious agenda of trade liberalization, working around America’s arbitrary protectionism rather than trying to accommodate Trump’s every whim. Talk of “special relationship” notwithstanding, Trump’s commitment to protectionism should provide a straightforward impetus for likeminded and geographically close economies to huddle.

On all of those fronts, the British and the Europeans need action – and definitely fewer high-stake summits at which Trump tries to épater les bourgeois. The current moment in transatlantic relations shall pass and we will see a day when the United States will be ready to be a constructive partner again, one hopes. Until then, however, both the U.K. and the EU are committing an act of self-harm by letting the parameters of the American political debate frame the conversations on security, Ukraine, and trade that the old continent needs to have.

Once upon a time, the phrase "classical liberal" meant something other than "racist crank". In that idyllic era, those liberals loved to point out how their opponents were failing to understand Econ101. I yearn for those happy days, because our government is actually committing just this failure.

Giles Wilkes points to one way it is doing so. In her Spending Review, he says, Reeves did not tell us what programmes were being cut to finance her pet projects such as Sizewell C or Transport for City Regions. This, says Giles, means it's impossible to say how much (if at all) the Review will boost economic growth, because we don't know (and I suspect not does Reeves) how much the green-lighted projects will boost growth relative to the projects not undertaken. She is ignoring opportunity cost.

A more egregious example of this lies in the government's promise to raise military spending to 3% of GDP. This, of course, means that almost a percentage of GDP less will be spent elsewhere - on either private sector capital spending, other public services, or private consumption. All these cuts (relative to what would otherwise be the case) carry costs - one being that they risk continuing the visible symptoms of economic decline such as pub and shop closures that have fostered support for the far right.

Maybe these costs are worth it, maybe not. My beef is that Labour isn't trying to show that they are costs. That's a failure of basic economics.

And it's not the only one. Another is an apparent reluctance to recognize the concept of comparative advantage, the notion that countries (and indeed regions or people) should specialize in what they are least bad at.

Like it or not, much of the UK's comparative advantage lies in higher education and the creative arts. But Labour is restricting these by imposing a levy on income from foreign students; making it hard for musicians to earn a living by red tape on EU tours or by allowing nimbys to restrict music venues; or by allowing the theft of writers' work. By contrast, the government is supporting less competitive industries such as steel, even though it makes little sense for this to be produced in a country with some of the highest energy costs in Europe.

There's another way in which this government, like its predecessors, are ignoring Econ101: transactions cost economics. Why do companies exist? Why not instead just pick up workers to do specific tasks (as with TaskRabbit) or buy all inputs on spot markets from suppliers? The answer, wrote (pdf) Ronald Coase in 1937, is that it is sometimes expensive and difficult to use the price mechanism as the buyer often cannot specify in advance (or even verify after the fact) precisely what he's getting:

Owing to the difficulty of forecasting, the longer the period of the contract is for the supply of the commodity or service, the less possible, and indeed, the less desirable it is for the person purchasing to specify what the other contracting party is expected to do. It may well be a matter of indifference to the person supplying the service or commodity which of several courses of action is taken, but not to the purchaser of that service or commodity.

Coase's work inspired a massive field devoted to the question of when things should be allocated by the price mechanism and when by companies. And it's a field successive governments have ignored in contracting out services that are subsequently badly or expensively done. It might be easy to tell if your office is cleaned well, but can you really tell whether a child is well brought-up or an old person well cared-for? And if you can't, then you can't enforce the contract. (I strongly recommend Sam Freedman's Failed State on this.)

If you're beginning to see a pattern here of ignorance of basic economics, you'd be right. Here are five other examples:

 - Competition. Strongly competitive markets don't just help customers get a better deal. They also improve productivity by forcing bad companies out of the market and enabling good ones to expand. Rachel Reeves, however, seems to be weakening the Competition and Markets Authority in an attempt to "attract investment" by permitting more takeovers.

 - Free trade. Econ101 advocates this for the same reason it likes competitive domestic markets. Of course, global free trade is impossible whilst the orange abomination is in the White House, but the government's remaining outside the Single Market - whatever other case there might be for it - is unjustifiable by conventional economics.

 -  Balance sheets have two sides. Rachel Reeves has said that nationalizing utilities "just doesn’t stack up against our fiscal rules”. But in acquiring a company the government would get an asset that pays a higher return than debt. That would actually strengthen the government's balance sheet. Reeves ignores this obvious fact because the fiscal rules look only at debt but not at assets, as if a home-owner focused only on his mortgage and ignored the value of her house. Which of course makes no sense. 

 - Regulatory capture. "Regulation is acquired by the industry and is designed and operated primarily for its benefit" wrote (pdf) George Stigler in 1971. And this is true of Ofwat and Ofgem, who offer regulators the prospect of well-paid jobs, thereby acquiring the freedom to pollute and overcharge. To its credit, the government is aware of the "failure of regulation and governance" in the water industry. But it has been slow to change this, and seems unaware that this is a systemic problem with regulation.

 - The tragedy of the commons. Back in 1968, Garrett Hardin pointed out that commonly-owned assets were in danger of becoming worthless as people over-exploited (pdf) them - for example as herdsmen overgrazed common land, or fishermen depleted fish stocks or (we might add) as polluters put too much carbon into the atmosphere. In many ways, Hardin overstated his case because as Elinor Ostrom showed (pdf), people devise ways of conserving the commons. But there's one way in which he was right. The public sphere is a common asset that is being degraded. The media pushes an agenda which squeezes out many issues; dishonesty often prevails over honesty; and politicians are selected sometimes for incompetence and often for a distorted view of the world. And yet the government shows no sign of wanting to do anything about this.

In all these respects, what we have is a government largely detached from economics. Not that this is true only of the Labour party: almost all I've said applies equally or more so to the Tories and Reform 2025 Ltd.

You might reply that this is a good thing, because Econ101 is wrong. True, it sometimes/often is. But this doesn't explain or justify Labour's ignorance of it, any more than can Trump's tariffs be justified by the errors of basic trade theory. In fact, the opposite. The government is most deferential to Econ101 in just those areas where it is wrong - for example in not recognizing the many imperfections in labour markets, or in equating a high wage with high social utility.

The question of whether one subscribes or not to heterodox or orthodox economics is logically if not sociologically largely independent of one's politics.

In terms of policy recommendations, I'm not making an especially leftist point here. Yes, Econ101 might oppose privatization in its current forms and urge restictions upon those media which produce intellectual pollution, which is as much a negative externality as environmental pollution. But wanting competition and free trade were once conservative principles.

In another sense, though, I am posing a radical question. Why is it that our politics has become so degraded that it has abandoned basic economic reasoning? Might it have something to do with the nature of UK capitalism?