I’m in London today as part of the Free Market Road Show, so let’s focus this column on the grim state of fiscal policy in the United Kingdom.
The supposed Conservative Party fell off the wagon of fiscal sobriety starting in 2019 and the Labour Party has followed a similar tax-and-spend approach since taking power last year.
To quantify this bipartisan profligacy, here’s a chart based on the IMF’s data. As you can see, the burden of government spending has grown much faster than GDP or inflation since 2019.
Pandemic spending caused the initial jolt in the wrong direction, but British politicians did the same thing as their D.C. counterparts by never bringing spending back down to the pre-COVID trend line.
At the risk of understatement, Brits are not complying with my Golden Rule.
As one might suspect, bigger government has not been good for prosperity. I also put together a chart showing that there has been no growth in inflation-adjusted per-capita GDP between 2019 and 2025.
To be fair, real per-capita GDP did increase by a tiny amount (about £58), so it has not been totally flat.
But it is safe to say that the country has been suffering economic stagnation. Not as bad as Finland, where the economy has been flat for 18 years, but I wouldn’t be surprised if the U.K. reached that point in 2036.
What’s tragic is that Brexit gave British lawmakers the leeway to dramatically improve policy, but the politicians from both major parties decided to put politics about patriotism.
Margaret Thatcher is spinning in her grave.
P.S. I realize it’s not an economic issue, but the U.K.’s restrictions on free speech are truly Orwellian.
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Image credit: David Iliff | CC BY-SA 3.0.
