Consciousness of Sheep
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There seemed to be a few more Christmas lights this year than last, reflecting a stabilising of household spending, albeit at a lower level than in previous years. Not that the inflation has gone away, but it has receded from the panic-inducing increases of the previous year. And so, perhaps, having cut back on discretionary spending through 2024, a few more households felt able to power some LED lights outside their homes. Elsewhere though, families shivered in the dark, while planning Christmas meals composed of foodbank donations. Even poorer pensioners – who had previously been cushioned against the rising cost of winter energy – faced hard choices between heating and eating.
Even if, though, Britain’s households managed to find some cheer over Christmas, for most, 2025 will be welcomed with trepidation. As 2024 comes to an end, two dark economic forces, inflation and stagnation have returned, throwing monetary and economic policy into disarray. Not least because the regulators which set energy and utility prices had based next year’s increases on the expectation that inflation would have fallen, allowing the Bank of England to cut rates, and that a degree of economic growth would have returned. Instead, from January 2025, UK businesses and households face another round of rising costs and falling real incomes.
The coming year, then, looks set to see a continuation and acceleration of the trends I set out at the end of 2023. What I referred to as “the Big Take,” is the way in which those bodies so far exempt from the ravages of inflation and falling real incomes – mostly multinational corporations, monopoly utilities, and government – continued to raise prices, taxes and quasi-taxes with no regard to households’ and businesses’ ability to pay. While I stand by my prediction that we are reaching the point at which higher prices and higher taxes translate into falling income, through 2024, the main impact of the Big Take has been in falling discretionary spending as businesses and households adjust to the higher cost of essentials.
This said, two sectors have witnessed precisely the outcome predicted… one entirely unexpected. Among the (many) ill-advised policies of the incoming Labour government was the imposition of Value Added Tax (VAT) on private schools. This was as much a sop to the remaining left of Labour’s supporter base (which has always baulked at the over-representation of old-Etonians in the corridors of power) than as a serious tax-raising measure. And, crucially, it overlooked the trend toward fee-paying schooling further down the income ladder in response to the neoliberal undermining of public education. And while the very wealthy will no doubt take the VAT hit, thousands of those further down the income ladder have already withdrawn their children from school ahead of the January VAT start date. Inevitably, the counterproductive result is that those who can no longer afford private school have been forced to seek places in Britain’s already overstretched state schools, where there are not enough places to go around.
The more obvious response to the Big Take also amounted to another chapter in the decline of the BBC. In the age of subscription TV, the BBC is a hangover from a bygone age when Brits had to put up with just three TV channels (all of which closed on Sundays) and when 95% of us voted for the two main parties. And while it would be heartening to think that the loss of a further 500,000 licence fee payers in 2024 was a revolt against the extreme neoliberal bias of BBC reporting (which manages to equally alienate the political left and right) it is more likely a response to the increase in the fee to £169.00 at a time when households are strapped for cash, and when more and more people realise that no licence is required to watch catch-up TV (other than on BBC’s I-Player).
One – far less reputable – response to rising costs – in this case, quasi-taxes – was the growth in attacks on traffic cameras. So much so, that the authorities are spending more on anti-vandal cameras which will make it harder, but not impossible to break. While not necessarily a response to the Big Take, the political trend that this is signalling is less to do with the vandalism itself, than the public indifference to police appeals to identify the culprits. Like modern-day Robin Hoods, the camera vandals are most often viewed as standing up against illegitimate, Sheriff of Nottingham-style taxation… although it falls to the Americans to take it to the extreme – UK water CEOs will no doubt draw comfort from Britain’s gun laws.
Note that in each of these cases – and the many more which will emerge in the coming year – the attempt to raise income results, one way or another, in lower income and higher costs. This is likely to emerge as a political issue during 2025 as government revenue, corporate profits, and economic growth in general fail to live up to expectations in the face of a consumer/tax base which can no longer afford to pay.
And arguably, Britian’s political class is worst out of the western states in terms of its ability to tackle the coming crises. I was (almost) right in predicting an early election. May 2024 was the obvious date, since it would allow the local elections on the same day. But the Sunak administration held out until June in the hope that some positive economic news might arrive… it didn’t, and the recognition that things could only get worse forced Sunak’s hand. Nevertheless, nobody could have predicted the sheer incompetence of the Tory campaign, which seemed determined to make the satirical Zero Seats spoof look realistic. So much so, that 2024 may have been the fabled “good election to lose.”
As expected, Reform UK aided the Tory defeat. Although Reform also took votes off Labour across the red wall. Indeed, in a quirk of the UK’s antiquated voting system, despite winning 14.3% of the votes, Reform only won 0.8% (i.e., five) of the seats, compared to the LibDems winning 12.2% of the votes but 11.1% of the seats. The big winner (in terms of seats) though, was Starmer’s Labour, who did indeed bore their way to power with just 33.7% of the vote but a massive 63.2% of the seats… effectively making them unassailable before 2029.
Whether this turns out to be the last neoliberal government, we will have to wait and see. Two things that we did learn in 2024 do though, point in this direction. First, Britain had bucked the trend. In a “year of elections” across the western states, neoliberals were defeated by national populists across the board – most notably in the USA, where the abuse of lawfare and several assassination attempts failed to prevent Donald Trump from winning the election… this time securing the popular vote and the majority in both houses as well. Across Europe, in contrast, the political class has opted for the approach taken in the early-1930s (which undoubtedly helped the Nazis into power) of imposing various restrictions and bans on non-neoliberal political parties.
We learned early on that the incoming Labour government in the UK was going to pursue the same neoliberal approach as the outgoing Tories. A few policies might be different, but the broad thrust is the same. Meanwhile, crucial decisions which had to be taken to avoid an economic disaster later on – the closure of the blast furnaces in Port Talbot and the last (mostly reserve these days) coal power station in Nottinghamshire – were ducked, leaving the Uk short of both electricity generating and virgin steelmaking capacity (both essential to plans to ramp up wind generation). The budget which followed in October was neoliberal in tooth and claw, and seemingly designed to spite the working and precariat class voters which Labour will depend upon if they are to win future elections.
That the closure of the last coal power station did not result in power cuts, owes more to the relatively benign (warm and wet rather than dry and cold) weather in 2024. Nevertheless, the early cold snap in October, along with the one in early December, triggered capacity warnings from the Grid operator – both met by increased generation and imports rather than power cuts. Nevertheless, these are a harbinger of things to come, as they usually occur only during the coldest weeks of the winter (January through early February) and as domestic generation declines and dependency on imports grows… imports, by the way, that major generators like Norway and Sweden threaten supplies because of the impact on domestic electricity prices.
What, then, might we look forward to in 2025? (For any IQ-challenged readers who happen upon this post, the following are things I expect will happen, not things I want to happen).
“Just like the 1970s”
With the return of inflation and stagnation, albeit at a low level (for now), it is only a matter of time before establishment media journalists and opposition politicians make a false comparison with that benighted decade. In many ways though, the situation is far worse than it was in those days, even though today’s inflation rate (2.6%) is a fraction of the 24.2% annual inflation in 1975. In my 2023 video, 7 Reasons why Britain will never recover, I set out the key differences between the UK economy at the end of the 1970s and the UK economy today:
- The UK was far less unequal back then, so that the mass of the population still had the wherewithal to consume,
- Debt – state and private – was far lower than today, allowing for the debt-based recovery that finally materialised in the mid-1980s (something that cannot be repeated today),
- Back then, the UK had a manufacturing base that encompassed whole supply chains. Today, “British” manufacturers mostly assemble imported components before re-exporting them,
- A large part of the foreign currency required to dig the UK out of recession in the 1980s was secured through the sale of public assets (North Sea oil receipts being the other source). Obviously, this is a one-time trick, since you cannot sell what you no longer own,
- In the 1980s, the UK had a young population with a high propensity to consume and a greater ability to pay taxes. Today we have an ageing population which is a net drain on public finances and which no longer consumes at anything like the same rate,
- While the Thatcher government – for political reasons – began the process of dismantling the coal industry, it was only able to do so because of the vast quantities of oil and gas arriving from the North Sea (at its height, the UK was producing more than Kuwait). But the North Sea peaked quarter of a century ago, with the UK becoming a net importer of oil and gas twenty years ago. There is simply not enough oil and gas remaining to the UK to power a recovery,
- The decline of government itself also acts as a major barrier to any hope of recovery, since the entire political class lacks the knowledge and skills to even understand the crisis which is beginning to overtake them… still less to take meaningful action to mitigate it.
We caught a glimpse of these factors in practice last month, when establishment media realised that there are not enough skilled construction workers in the UK for the government to have any hope of reaching its target of building 1.5 million houses by 2029… something I had pointed out several months previously. It is not just skilled workers that the UK lacks though. Construction materials are in short supply. And even the tools required will not be available. Nor, if the UK comes anywhere close to its Net Zero targets (it won’t) will the diesel-powered trucks and machinery that are central to construction – and even if they were, emerging shortages of heavy fuels (like diesel) will render them too expensive to run.
Which brings us back to the core economic crisis now unfolding globally. The UK government’s plans for growth – which include housing and Net Zero projects – simply assume that there is going to be sufficient private finance to pay for it all. However, lending has been declining around the world, as banks search, with increasing panic, for safe collateral against which to extend credit. One result of this is the big increase in demand for US Treasury bonds (as the last “safe” asset available or at least the least smelly shirt in the linen basket). This is potentially disastrous to the UK, since the over-hyped value of the pound is the only thing preventing a run on the currency of the kind briefly witnessed in the wake of Liz Truss’s failed attempt to reanimate the ghost of Margaret Thatcher. Even if bank lending – particularly foreign denominated debt – were not in the doldrums, it is hard to see any advantage in extending loans to build houses that people can’t afford to buy, or electricity capacity that few can afford to consume. So that the offer of high interest rates may be the only thing left to prop up the value of the pound… even though the UK economy desperately needs rate cuts.
This is likely to be the economic quandary for the establishment media in the course of 2025, as growing unemployment and business failures point to a need for rate cuts, while stubbornly high inflation forces the Bank of England to keep rates higher for longer.
Enshitification continues
Remarkably, the UK water regulator, who is supposed to act in the interest of consumers, has decided that if the water monopolies continue to pump shit into our rivers and seas, while simultaneously lowering water quality and security, well then consumers will just have to pay even more. This is literally insane… doing the same thing as you have been doing for 35 years in the hope that this time the result will be different. Everyone knows it won’t. It is just one of many examples of the enshitification of Britain – we all pay more, and things continue to get worse.
From cancelled, delayed and overcrowded trains to dangerously potholed roads, Britain’s transport infrastructure is also coming apart at the seams. And while the UK government has allocated an additional £500m for local councils to repair potholes, this is likely a drop in the ocean when compared to what is needed to reverse 15 years of neglect. To put the extra funding in context, repairs following storms Bert and Darragh in just one county came to half a million pounds… and there seem to be a lot more of these heavy storms these days. In any case, repairing potholes is no substitute for the practice – common before 2010 – of resurfacing roads (asphalt having been the most recycled substance in the UK).
It goes without saying that the local councils tasked with making the roads slightly less shit have been past masters at taxing an ever greater proportion of people’s income while delivering poor and inadequate services across the board… with even statutory services like education and social care falling short of what would be expected of a first world country. Indeed, the most visible result of local government in the UK is its use of high business rates to turn previously thriving High Streets into decaying ghost towns.
It is not though, and despite the siren songs of right-leaning media, just government and private monopolies that have made life more miserable than it need be. The private sector is equally contemptuous of the needs and wishes of the people it calls “customers.” This is most obvious in “tech,” where “innovations” like automated telephone systems and online chat bots which are supposed to “enhance” customer service do the exact opposite… as anyone who has attempted to contact HMRC or even get a doctor’s appointment can testify. And don’t get me started on Microsoft’s decision that I should store my files somewhere other than on my computer, or Google’s often factually inaccurate AI search.
Journalist Ed Zitron has a term for this… The Rot Economy:
“At the center of everything I’ve written for the last few months (if not the last few years), sits a cancerous problem with the fabric of how capital is deployed in modern business. Public and private investors, along with the markets themselves, have become entirely decoupled from the concept of what ‘good’ business truly is, focusing on one metric — one truly noxious metric — over all else: growth.
“’Growth’ in this case is not necessarily about being ‘bigger’ or ‘better,’ it is simply ‘more.’ It means that the company is generating more revenue, higher valuations, gaining more market share, and then finding more ways to generate these things. Businesses are expected to be – and rewarded for being – eternal burning engines of capital that create more and more shareholder value while, hopefully, providing a service to a customer in the process.”
It is not only tech. The UK’s banks, for example, have returned a great deal of shareholder value via the simple act of closing all of their branches and forcing customers to use apps to conduct their transactions – a particular problem for the many people who dislike and/or distrust smartphone technology. In a similar manner, most UK supermarkets have derived some temporary shareholder value from firing checkout staff and forcing customers to use self-checkouts (the one advantage of which, if nobody is looking, is that a bottle of scotch weighs about the same as a bag of potatoes).
“Dunkelflaute” enters the lexicon
With the closure of the last coal power station in 2024, and with the UK dangerously exposed to imported gas and electricity, the UK is increasingly reliant upon wind turbines to keep the economy running. However, as is patently obvious to anyone who isn’t a politician or a climate activist, depending on a diffuse energy source which is periodically unavailable is a far from optimal economic strategy. Particularly since government policy is based on modelling which assumes more windy days, even as climate scientists predict fewer windy days and lower wind speeds in future.
Nor is this a problem unique to the UK. Indeed, in the current race to economic suicide, Germany is in pole position, having decommissioned its nuclear plants in response to the wholly irrational fear of tsunamis, and more recently having decided to disconnect itself from cheap Russian gas too. One result of this is that Germans have come up with a word – dunkelflaute (“dark wind lull”) – to describe an increasingly serious situation in which the wind stops blowing and the sun stops shining:
“a phenomenon that can occur in late autumn or during the winter months for several days or weeks due to a decrease in wind and increasingly cloudy skies. This can lead to a decrease in the overall contribution of renewable energy to the electricity grid, posing challenges for maintaining a stable and reliable energy supply for an energy system that is powered solely by renewable resources.”
With the UK set to face similar challenges, and given the general laziness of establishment media, they will most likely import the German term rather than make up an English equivalent.
The decline of the uniparty
The myth of the 100-days was tested and found wanting in the UK in 2024. According to the myth – developed by the incoming Kennedy Administration in the USA – a new government enjoys a 100-day honeymoon during which it can push through whatever measures it chooses. After that, events begin to overtake it, so that its fortunes are increasingly down to fate. The obvious truth behind this is that an election is a far better test of public opinion than polling, establishment media pontification, or listening to your favourite YouTuber. So that a new government enjoys widespread support for its program even as its defeated opponents retreat to lick their wounds.
This, of course, does not apply as easily to re-elected administrations –Theresa May, for example, was far less popular in 2017 than “Call me Dave” had been in 2015. Nor does it apply where election results are close – Harold Wilson’s 1974 and John Major’s 1992 governments had to contend with small majorities, for example, forcing them to abandon partisan policies in favour of measures broadly supported in the polls.
The incoming Starmer government defies gravity in this respect, because while its majority in parliament allows it to railroad through any policy it wishes, there is no underlying public support following an election where “a pox on all your houses” (i.e., people so fed up they didn’t bother voting) beat Labour into second place. For a brief moment, while the government went on holiday in August, there was a hope that the incoming government might usher in a change from the previous 14 years of Tory neglect and mismanagement. But it wasn’t to be. While the Tories (impossible to achieve) “levelling up” was replaced by several (equally impossible to deliver) housing, energy and NHS reforms, the October budget proved that Labour was picking up where the Tories left off – more borrowing to cover day-to-day spending, more tax increases to (fail to) fund it, and no idea how to conjure up the mythical “economic growth,” without which the whole charade comes tumbling down.
At the end of 2024, Labour’s support has plummeted. The only saving grace is that the Tories are still considered toxic by a large part of the electorate, while Reform UK continue to struggle to translate support into seats. According to the latest polling, if there was an election tomorrow, Labour would be forced to form a coalition with the LibDems to remain in government, while there is an outside possibility that a Tory/Reform coalition could garner enough seats to form a government.
What is clear is that Labour insiders understand just how precarious their position is… but seem powerless to do anything about it. Sue Gray, the former civil servant who skewered Boris Johnson over “partygate,” was expected to be a more competent version of Dominic Cummings – forcing the new government’s program through an increasingly dysfunctional permanent state. But within weeks she was ousted by those who believed they could do better. They couldn’t. Labour’s – and especially Starmer’s – standing with the electorate continued to plunge. Ah, but the budget would turn things around… until it didn’t, the electorate were rightly sceptical. And so, at the beginning of December, Starmer launched a (botched) “reset.” And to cap the year off, just as we were recovering from the holiday hangover, news emerged that in desperation, Starmer and Reeves had turned to monopoly regulators (the very last people to ask) to see if they knew where the mythical economic growth was hiding.
Here is what I expect to happen on the political front in 2025:
Labour fail
The easiest prediction to make for 2025, then, is that the fortunes of Britain’s Labour government will go from bad to worse… particularly if (as expected) the various tax, minimum wage, and energy price increases on UK businesses result in widespread closures and unemployment. That said, and despite considerable right-leaning media speculation, (barring some yet to be revealed scandal) Starmer will remain at the helm at the end of the year… albeit with increasing talk of a leadership challenge in 2026.
Tory doldrums
Notably, despite Labour’s growing loss of favour, the Tory party is no more popular than it was in July (when its own candidates were hiding their party affiliation from the electorate, implying instead that they were local independents). And while the election of a Nigerian woman as leader has seen off some of the “woke” attacks that might otherwise have come from the Labour benches, one cannot help wondering if a racist core among the Tory electors might baulk at voting for a black woman when the time comes.
The rise and rise of Reform UK
Although labelled far right™ by much of the establishment media, Reform UK are a socially conservative but economically neoliberal party, similar in many respects to the MAGA Republicans in the USA. And just as a large part of the US professional-managerial class (albeit reluctantly) turned to Trump (as the least bad option) in November, so a similar rehabilitation of Farage and Reform has been taking place in the UK for much the same reason. This, I would argue, is because despite previous comparisons to a certain failed Austrian painter, both Trump and Farage are essentially neoliberal when it comes to an economy which has been on life support since 2008.
From the earliest days of my blogging, I have viewed Trump and Farage as essentially safety valves for a western empire whose economy is in terminal decline. That is, far from being literally Hitler (as many on the left would have it) the possibility of a Trump presidency and/or a Farage premiership is intended to prevent a disgruntled and hostile electorate turning to a genuine fascist alternative to the neoliberal order.
A real “far right”
The 2024 election was the last in which the baby boomer generation was key. By 2029, the last of the boomers will have retired, the millennials will be in middle age, and a new Gen Z will be raising its own political perspectives. And it is, of course, Gen Z which has been most damaged by (and is thus less loyal to) neoliberalism – unable to secure high-paid work, no way onto the housing ladder, receiving ever shittier services, unlikely to have a pension in old age, but still taxed to the hilt to pay for today’s public sector wages, social security, and pensions. Crucially, despite the boomer dream that each generation would be more “progressive” than the previous generation – based on the myth that each would be better off – Gen Z seems to be forming a national populism which would be considered far to the “right” of Reform UK (although there is far greater support for state intervention in the economy). Notably, while Farage talks about limiting immigration, the younger generation is already debating forced deportations (something which will gather support in the event that Trump is able to deport a significant number of illegal migrants from the USA).
As Labour fails, the Tories cease to be relevant, and Reform UK moves closer to the Overton Centre in 2025, these younger voices will get louder. Although it may be several years before they coalesce into a single movement or party. They may, however, act as a brake on any Reform UK attempt to move to the centre or to enter electoral pacts with the Tories.
Trumpist neoliberalism
The US establishment will look even more ridiculous in 2024, having portrayed Trump as the devil incarnate, when the reality of a Trump administration will be neoliberal economics coupled to no more than a handful of conservative reforms designed to keep the MAGA base on side. Indeed, with the removal of restrictions on oil drilling on Federal government land, there may even be a brief, energy-based revival in American economic fortunes (which will continue to benefit the very wealthy far more than ordinary Americans).
And a big dragon king?
Just as generals fight the last war, so economists tend to anticipate the last crisis. Thus, the biggest concern in 2024, and looking ahead to 2025, is a repeat of the 2008 banking crisis. Banking, however, has taken steps to insulate itself from a repeat performance. Measures are in place, for example, for big banks to swallow up distressed smaller banks. And if the big banks are threatened, rules have been changed to allow banks to commandeer their customers’ money to plug holes in their balance sheets. This doesn’t mean that a banking crisis won’t happen… it just makes crises elsewhere more likely.
The term “dragon king” – like “black swan” refers to something entirely unexpected… only much bigger. So, I am obviously speculating here, and what I think may happen may take far longer to unfold. That said, the most unstable part of the western financial infrastructure at the beginning of 2025 is a massively overvalued network of stock exchanges, each propped up (until now) by national central banks.
Just as in the twentieth century, Wall Street lies at the core of these stock bubbles. And fuelling Wall Street are just two letters… A.I. That is, almost all of the increases in share indexes are in corporations which either provide machine learning software or supply the machinery and infrastructure on which it runs. So that, in the (very likely) event that so-called AI proves to be a lot less useful than it has been hyped to be, investors will run for the exits, only to find that Warren Buffett got there first.
If this movie seems familiar, it is because we’ve seen it before… 25 years ago to be precise. Back then, it was the world wide web which attracted the hype and the investment frenzy. But unlike tulips and sub-prime mortgage-backed securities, there was some essential value in the emerging web… the problem was that journalists and investors were too IQ-deficient to separate the wheat from the chaff. And so, at its height, websites which had never earned a cent were being bought for thousands and even millions of dollars in what came to be known as the DotCom bubble.
After the bubble burst, a few websites did go on to make millions. Uber, famously, emerged as a global taxi firm which didn’t own a single car. In the same vein, Deliveroo emerged as a fast-food outlet without a kitchen, and Amazon became a global department store without any products of its own. Some AI will no doubt emerge to be genuinely useful and to make money accordingly. Nevertheless, the hype and the over-valuation of AI stock – along with the many assurances that “this time is different” – tell us that we are at the height of DotCom 2.0. And while, famously, markets can stay insane longer than you can stay solvent, 2025 might just turn out to be the year when the bubble bursts. If so, the only question left to be answered will be just how exposed the wider banking and financial system is… and whether governments and central banks have sufficient ammunition to prevent the entire system breaking down.
As you made it to the end…
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