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As Sir Keir Starmer takes office, ushering in a new era in politics, he should bear in mind one of the most obvious and almost universal features of today’s political landscape. While the

State has all the spending obligations, ambitions and needs, in ever mounting volume, the private sector has the money. Nothing very new about that. This was the economist J.K. Galbraith’s

mantra – “private affluence and public squalor” — in 1958. His then fashionable solution came from the centre-Left: more taxation and more borrowing. On the centre-Right, with  equal and

opposite predictability, it was to cut state programmes, denationalise swollen state industrial sectors  and leave as much as possible  to enterprise and the market. In the 66 years since

Galbraith, the world   has tried both solutions and been happy with neither.  Instead, the great minds have brought us to today’s tangle, leaving the ideologies in a confused and constantly

shifting fog of tension about the State’s functions  and the private sector’s roles. The privatisers of the Thatcher era thought they were dismantling the big state consensus. The Blairites

who followed (“stealing my policies’”, as Margaret Thatcher maintained almost  to her last breath) were swept off their feet in the end by the world financial crisis of 2008-9. The Cameron

era was washed away by Brexit, as was Theresa May.   All along there was a problem, or alleged to be a problem, about what was on the public sector balance sheet and _had_ to be financed by

borrowing. This was the famous PSBR (Public Sector Borrowing Requirement) about which we agonised round the  Cabinet table, as to  what was genuinely in the private sector and what was just

thinly disguised public expenditure. The monetarist true believers did not like this even being questioned. They insisted spending could only be one thing or the other.  Nigel Lawson,

although marvellously flexible  in many areas, stuck to  the same absolutism on this one. There was in the monetarist lexicon _no_ grey area between public spending and private spending, and

no fudging was admissible. This was for them no pinhead issue. Whatever the political pressures and demands, this was sound finance on which the credit, and therefore the entire stability

and prosperity of the United Kingdom, rested. This was the line that could not be blurred or broken. Of course it has been blurred and broken since then — repeatedly. The easiest escape

route, which an incoming Labour Government  seized upon in 1997, was to redefine large areas of public expenditure as “investment”, which was therefore to be financed by prudent borrowing.

It was, of course,  important not to look at that word “investment” too closely. It could cover anything from national security and  long-term national projects, to needs for the longer-term

health of the nation. As long as it was not pushed too far and bond markets did not feel they were being taken for a ride, it was possible to get away with it. But there comes a point where

the limit is reached – although a much disputed one. That point is when the State finds it cannot tax more without killing investment and when it cannot borrow more without  putting up

interest rates. Because it is paying more in debt interest, and it cannot actually pay for the services previously promised, expected or demanded. In turn, this limit erodes the monies

borrowed in the first place. In turn the currency weakens. In turn inflation increases. In turn, real wages fall. In turn wage-earners strike. In turn productivity and total production fall.

This is the doom loop to which references are now so frequent. The State  can pass streams of laws and regulations far beyond either its competences or its resources. But it cannot deliver.

In his book _The Coming Wave_, Mustafa Suleyman sets out his view on where this is going. He believes that, as the world now stumbles from dilemma to dilemma in a tide of angry 

uncertainties, the whole  “grand bargain” between the state and the citizenry – the state will secure and protect, the citizens will  consent, obey the law and  pay their taxes —  is now

coming unstuck. But again, that is not new. Long ago, at the turn of  the century, Robert Kaplan, in  _The Coming Anarchy,_ prophetically saw the whole  democratic process dissolving. Down

goes deliberative democracy, down goes trust in, and respect for, the system of capitalism, all tied together. The middle ground is abandoned, drained of compromise. Almost incidentally,

Plato, Aristotle and Socrates get called in aid to confirm that this is where unanchored democracy leads – to its extremes Now the wind shifts once more. The strong prevailing mood  is now

marked by the triumphant return to power of the Left in the UK, and the flip side of that coin, namely the rise of the Continental European right. Here are  two polar extremes, both bent on

discrediting common ground, old or new. The Left embraces a return to the even bigger state via re-nationalisation, assumption of new social functions, financed by  new magic growth tree.

The Right calls for state programmes and personnel to be cut back in ways unspecified. But of course there is no magic growth tree in the public sectors’s backyard, anymore than there was or

is a magic money tree to feed it. Socialist economics have been thoroughly discredited world-wide, with the actual  word “socialism” only lingering in the brand name of state-capitalist

China and all-but airbrushed out of history in mafia capitalist Russia. If the great age of  national  investment renewal, so loudly called for, is  going to take off, if the image of a

Britain with potholes, crumbling schools, underpaid social workers, dismal train services, expensive energy, weak defences and underfunded everything else is to be banished — albeit an image

grossly  exaggerated in the media and at the hustings — new ways of paying for these things will have  to be found. One would have expected the great brains and strategists of the political

parties to  be immersed in new thinking of how  the power  and full resources of the modern state could be brought together in the most innovate ways to resolve  the problem and harness

private resources to public needs. But in the recent UK Election campaign not  a squeak of reference to this  epicentral issue of future stability, democracy and social progress could be

heard. The Manifestos were silent. Only a brave few, recognising that there would be no  revolutionary concessions to reality from either  side of politics, have spoken out. In _The Times_

Patrick Maguire has commented that new public-private cooperation is the only possible way Labour can take forward its plans somehow to grow new prosperity and  find a new resource pool for

all its ambitions. He points to other democracies, such as Australia, where new ideas for financing state infrastructure in close weave with private sector finance and implementation are

being vigorously pursued. Matthew Lynn, in _Money Week_,  bravely tries to keep the flag of financial realism flying above the quagmire of vacuous pledges, which, as always, are overwhelmed

by unforeseen  external events (as William Hague reminds us, also in the _Times_) The UK, Lynn  says bluntly and with what some might regard as appalling candour,  “is perilously close to

bankruptcy”. Lord Mandelson, with the tone of authority which he is so good at purveying, restates what party faithful  know but dare not say: that only an alliance of a new texture, made

possible by the miracles of digital technology  and connectivity, between the State (itself requiring deep reform) and private enterprise, can begin to deliver the makeover and the giant

infrastructure repair programme needed by a Britain of talent and brave intent but current weakness. All this might be taken as a sign that at last the penny is  dropping – except for one

thing. The understanding of what is coming is fine, but the details of how we are to find some new vessel to steer between the Scylla of an overmighty yet increasingly  inefficient state,

desperately appeasing populism, and the Charybdis of private money power looking for, but not finding, sound investment, is just not there. As Mandelson points out, the cash certainly _is_

there. The trillions in pension funds which used to back British enterprise, now sit temporarily  in bonds or go elsewhere, leaving the banks to say no again and again to all but the very

big and the very safe.  The same goes  for the giant insurance finds. The Sovereign Wealth Funds look in vain for sensible and investible projects  bringing reasonably reliable returns in a

reasonable time period, and find little or nothing. A classic current example hangs over us in the   area of new civil nuclear capacity, essential to build up to get anywhere near Net Zero

targets. There the  invitation on offer is for private investment in giant gigawatt projects that  take years to build, (far too long for wise private cash), and are full of political risk,

design risk and financial risk. These are white elephants. The obvious alternative, now being pursued vigorously round the world, is the small modular reactor, where eminently financeable

models can be built in a fifth of the time, mostly offsite and in much  more resilient and flexible patterns. Th outcome of this sort of choice is either that nothing gets built at all, or

some vast new project is allowed through and then abandoned later – the worst of all worlds. Did I hear the words HS2? Are we now hearing the words “Sizewell C”? We are stuck with having to

depend on  nervous and costly compliance-dominated banks,  plus equally nervous pension and other funds, still hamstrung by rules and regulations from a past era and an EU legacy.  Shared

prosperity and a  wider capital-owning democracy are goals which seemed to work for everyone (well, nearly everyone) in the second half of the 20th century. These flagship aims of postwar

Conservative governance have been replaced by a warped version of modern capitalist society which works, but works  for far too few and far too obviously for those at the top of the  wealth

  pyramid. Have we been in this situation before? Answer: yes, once, in the late 1980s and early 1990s, although on nothing like  the present scale. Now the situation is turbo-charged by the

digital revolution and  populist politics. Attempts were made in John Major’s time to break the spell. In that sense we have been here before, although  not in half so  critical a way as

now. Enter the famous Private Finance Initiative, launched in 1992. Hey Presto,  large areas of capital spending could now vanish off the public balance sheet without a blush. PFI was

clever, and addressed the right key issues. But it seemed too good to be true — and it was. Tory backbenchers deplored this departure from sound finance, but they were swept away in 1997 and

a Blair-led New Labour embraced the PFI idea with enthusiasm, expanding it vigorously. By 2000 an estimated £69 bn of projects were in the pipeline, but not on the PSBR. But the worm was in

the apple and began to emerge. Adroit private contractors and their lawyers started  piling  risks, if projects  went wrong, as they often did, as well as  heavily inflated and very long

term maintenance and upkeep obligations, on — yes — the Government, in other words the taxpayer. Guidance from leading business voices was, as often, opportunistic and naïve. Never pausing

to think that this kind of relationship, if very carefully and honestly handled, could last well into the future, the  private attitude was  too often “grab what you can from the state

sector and leave them with as many risks as you can”. A moment’s refection would have reminded business leaders that this kind of approach would lead to closure of the whole scheme, and this

is what duly occurred – with losers all round. By the time Gordon Brown took over as PM from Tony Blair, PFI was already becoming tarnished. From the incoming Conservative side George

Osborne called for “a more honest and flexible approach”. Can it work again? Is it time to return to the PFI story and see how the best parts can be built on? Despite PFI’s deservedly bad

reputation, a 2009 study confirmed that 69 percent of all PFI-financed projects to that date had been delivered on time, and 65 percent at the contracted price. By the end of Cameron’s first

term it had lost its attraction and was on the way to abolition. Yet the thinking was right. What sounds like a complex and technical issue of finance and public spending was, and remains,

the gateway to national infrastructure renaissance. This is essential to underpin a fully modernised and competitive economy. It decides whether promises of radical improvement, both in

public services,  in living standards for all  and in business conditions – now shorthanded as “growth”, can be delivered. Beyond that, such private investment in public services decides

whether the trust and cooperation needed to make democracy work in today’s conditions can be redeemed. But _WHO_ decides? Here comes  the  final twist or sting at the end of this unfinished

  story. It is at least a sting for the Sir Humphreys. The national Budget decision function may appear to be about economics and budgetary balance, but it is in reality about the entire

political strategy of government and the nation’s overall direction and internal health. > _There will be no  new alliances of State and private finance on > the scale required, no 

unlocking of private sector trillions, > whether from home or overseas, from giant funds or much wider > popular capitalist ownership of shares, (said to be one of the  > former 

Chancellor Jeremy Hunt’s favoured causes) as long as  the > process is under Treasury monopoly control._ Issues about how resources – and not just Government resources that can be

squeezed from tax and or borrowing – but the whole nation’s resources – are to be mobilised and deployed  should be central to the future. They should be decided at and from the top. As the

Ministry of Finance, the Treasury has many crucial functions which it exercises diligently, being in effect the accounts department of the entire State enterprise. But good accountancy,

whilst  vital, is not necessarily, or always,  good strategy or purpose or politics.  Nor does it always produce the best  results on the public expenditure scene overall. Nor does it

reinforce national coherence and loyalty. The State is  expanding and interfering but weak at the same time, and getting weaker at delivery in everyone of its many expanding spheres. This is

also a time when   Parliament,  in an age of transparency, is much better equipped, if it so wishes, to call to account and examine the national resource strategy and both the political and

economic issues underlying it. Balancing national strategy between necessary longer-term plans and short-term fiscal and other restraints has become just too big and central a task for  one

department – in this case the Treasury. In many other democracies, the USA being the best example,  the hyper-political  process  of budget allocation and spending plans management, has

long been split away  from the Treasury’s roles. It has instead been placed right under the central leadership  of government, where it surely belongs, along with suitably strengthened

accountability to Parliament.  This was the recommendation of some of us in 1970 (_The New Style of Government_), dismissed by the mandarins, and has been revived by Lord Maude of Horsham in

his recent excellent  _Review  of the Civil Service and Government Accountability_ (November 2023). While the subject  sounds technical it is in fact  fundamental. Pinhead or theoretical it

is not. With the end of ideology goes the end of rigid economic doctrines and theories being applied to fluid and fast-changing social conditions. Past practice  drew a heavy boundary line,

as forbidding and deterring  as any real life barbed-wire-covered and heavily policed frontier, between the PSBR and its borrowing requirement and the private sources of capital. Against

this barbed wire, while some bigger expenditures got through, many a good long term project died. Either the business model didn’t add up, or circumstances in the short term had changed, or

there just was not the money in government coffers, or it was all too difficult politically. From my own time as Energy Secretary I cite the great gas gathering trunk system project, blocked

by the Treasury,  which would have considerably  helped the nation   with  world gas shortages and astronomical  prices since 2022. I cite, too, the 1979 new nuclear power programme of nine

reactors, of which  the Treasury sank all but one, Sizewell B  — which has worked well ever since. In the end, well beyond Treasury bean-counting horizons, those other eight unbuilt

reactors, and that unbuilt gas gathering trunk system, would have saved the nation billions, and much suffering to boot. Until this  key feature of  Government and national, strategy,

social, industrial, technological and global,  is handled (that is, analysed, formulated, presented and decided) not predominantly by one Department, nor by  Cabinet Office advisers   cowed

by Treasury warnings, nor by  outdated economic theory, but  by the highest and most central “mind” of all government, UK prospects  will continue to wither. And with withering comes

fracturing of the nation, disorder and much worse. Whatever the hopes and ideals of those in power at Westminster, so also will the UK’s prospects for a stable political, and more settled 

economic future be indefinitely delayed. Generalisations about the need for a changed relationship  between the public and private domain, between State and private sectors, may be 

plentiful but they are  insufficient. It is the mindset behind which matters. Links of the socialistic kind – “we are the masters now” – have to be left behind. But so do relations which

start from a basic hostility to the State’s changing role. We should be looking for methods and mechanisms which pull state and society together in new (and inevitably highly complex)

linkages. The ideological antiquities of the 20th century have ceased to provide any useful guide. As Abraham Lincoln declared in another turbulent age, the stale dogmas of yesterday are

useless in facing today’s main issues. As Peter Hennessy, our master analyst in the development of Cabinet Government,  has observed, they should be put in a dogma  home. A de

Tocqueville-like insight into the way society now works, and the way this most intricate area of capitalism works,  is badly needed, before it brings the whole  process into disintegration,

both political and social, as many already predict.  But so far the opening and promoting of that kind of insight is either hidden, or missing, especially in academia. A key exception is

Frank Vibert, deep-thinking associate at LSE, whose ideas on “Comity” – the reconciliation of different sets of rules between bodies and societies – points one  way through the maze. So

pioneering  and original, but also practical,  thinking is around. But it is ignored by the bien-pensant, and by a mandarinate which believes in repeating what has been repeatedly tried,

even when it repeatedly fails. Until this procedure is changed, the UK’s prospects and national vitality will continue to wither, and so will the prospects of a return to the nation’s

stability and coherence  purpose, both political and social. Deep in Whitehall sits the Infrastructure and Projects Authority. Once concerned with PFI issues, this is the body which should

now be working night and day to resolve the  central dilemma of public investment in the entirely new ways the digital age may make possible.  It has been curiously shy in its work. The time

has come for it to  shed its shyness and take the intellectual lead which has been lost, asking for full political authority and support  from the Prime Minister, Sir Keir Starmer, to do

so.  This is no pinhead matter of theory or ideology or even a technical matter of Government machinery. It is _the_ barrier in the path of progress for our nation. Lifting that barrier will

be the risorgimento for the UK to a new age of investment. A MESSAGE FROM THEARTICLE _We are the only publication that’s committed to covering every angle. We have an important contribution

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