The book provides an accessible introduction to Hayek’s Law, Legislation and Liberty, making one of the twentieth century’s most important works of political philosophy available to a wider audience

Hayek’s warnings about the expansion of government power, the hollowness of ‘social justice’ and the erosion of the rule of law anticipated many of today’s most pressing political debates

The book argues that cultural evolution — not top-down design — produced the institutions on which our freedom and prosperity depend, and that attempts to redesign them wholesale risk profound damage

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Why this book is needed

F. A. Hayek (1899–1992) was one of the most important social thinkers of the last hundred years. Law, Legislation and Liberty (1973–79) is one of his most important books. A polymath with doctorates in both law and political science, and with a keen interest in psychology and evolutionary theory, Hayek received the Nobel Prize for his work on economics and social organisation. Alongside his economic contributions on trade cycles and inflation, he published influential books on political philosophy, including The Road to Serfdom, The Constitution of Liberty and The Fatal Conceit.

Law, Legislation and Liberty is a significant and innovative part of this output. It draws on Hayek’s lifetime study of economics, political theory, philosophy, the history of ideas and information science, weaving them into a new understanding of how society, law and politics function. It presents a hugely original view of the foundation of our social institutions, criticises the very idea of ‘social justice’, rejects all visionary attempts to reshape society, explains our present discontents with democracy and proposes a new constitution to protect our freedom and institutions for the future.

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Dr Eamonn Butler, Director of the Adam Smith Institute and author of Hayek’s Law, Legislation and Liberty: A Guide, said:

“Hayek’s Law, Legislation and Liberty is a great book, but it’s not a good book. It’s great because it completely revolutionised thinking on the sources of human values, arguing that our evolved institutions and ideas of justice are far more important and more durable than any we could think up ourselves. But it’s not a good book because it was written over a long period when Hayek was beset by illness, making it uneven and hard to follow. So I hope my straightforward, no-jargon guide will make Hayek’s important ideas widely available to new generations of readers.”

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Summary

• Since the 2008 financial crisis, environmental policy has shifted away from simply managing negative externalities and gradually converged with regular industrial policy. Various ‘green deals’ have been launched around the world with the aim of achieving a combination of economic and environmental development.

• Economists, such as Mariana Mazzucato, have gained traction among European policymakers, arguing that governments should not only focus on correcting potential market failures but should also formulate and finance comprehensive public missions to steer innovation towards proposed solutions and technologies.

• In 2020, the European Union launched its Green Deal. Six years later, investments in hydrogen-based projects have collapsed, and electricity prices are twice as high as in the U.S. and China.

• The United Kingdom has followed a similar trajectory, with comparable results in terms of declining industrial competitiveness and soaring electricity prices.

• So far, the EU Green Deal has proved to be expensive, fragmented and ineffective. However, this does not mean that there are no alternative ways to reconcile economic development with environmental considerations.

• The green transition should be guided by market price signals rather than by directional industrial policy. Such a framework could be achieved with a) a uniform and comprehensive emissions trading system that in principle covers the entire economy, and b) technology neutrality on the part of government without sector targets, industry support, or industry-specific subsidies.

Britain’s inheritancetax (IHT) is far more punishing than headline comparisons suggest, and should be scrapped entirely, according to a new paper published today by the Institute of Economic Affairs.

The report, A Taxing Inheritance by Rory Meakin, finds that measured on what parents can actually leave their children, the UK has the fifth highest inheritance tax in the OECD. Almost half of OECD members, 18 out of 38, levy no tax on such transfers whatsoever, and a further 10 charge preferential rates.

While Britain’s 40% headline rate sits only moderately above the OECD median, this flatters the UK‘s true position. Most countries treat transfers from parents to their own children as a special category, taxing them at lower rates or not at all. Britain makes no such distinction.

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Summary

• Inheritance tax is levied on the estates of the deceased, including on lifetime gifts made up to seven years prior to death. Roman emperors levied taxes on inheritances, and the British history goes back to the Stamp Act 1694, later modernised by the Finance Act 1894 with the introduction of the estate duty. Rates were initially low with a top rate of 8% on estates worth over £1 million (£116 million in 2025 prices). But they rose precipitously over the 20th century to reach 85% before being renamed as capital transfer tax, applying to lifetime gifts, before reverting back to a tax on death estates only in the mid-1980s and being renamed again as today’s inheritance tax at a single headline rate of 40%.

• Britain’s top headline rate of 40% is only moderately above the median rate among OECD countries which levy a tax, Czechia’s 35%. But 18 out of the 38 OECD countries, almost half, do not levy a tax on bequests to adult children of the deceased, and 10 charge preferential rates. Including these countries and those without a tax at all, Britain ranks fifth highest and is in a small group of high-tax outliers.

• Much policy-expert commentary on the question of inheritance tax being a ‘double’ tax is mistaken, and the general public are closer to the truth. It may strictly speaking not be a ‘double’ tax given all the others that apply, but it is arbitrary, additional and distortionary. The correct lens to consider the question is the value chain from creation to consumption; inheritance tax somewhat arbitrarily introduces an additional point of taxation into the chain. The only way to make an inheritance tax neutral would be to implement a retrospective matching tax rebate for taxed income originally received by the benefactor.

• Inheritance tax is particularly complex and costly to administer, but its effects on savings and investment and redistribution are more ambiguous, as is public opinion on the question of how to reform it. The public considers it to be unfair, and there is a large majority in favour of reducing it, and sometimes of abolishing it. But that opinion appears to weaken significantly when set against alternative taxes to cut instead.

• There is a good case for abolishing inheritance tax entirely due to its arbitrary and distortionary nature, its complexity, its effect on savings and investment, its effect on Britain’s international competitiveness in attracting entrepreneurs and the very rich, and satisfying public opinion. But it is harder to make the case for abolition as a policy priority above other alternative tax cuts which might deliver greater effects on incentives when governments are unwilling to restrain spending enough to allow both.

• More incremental reforms offer significantly weaker tax simplification, neutrality and efficiency benefits but come with smaller foregone revenues for the exchequer and represent a smaller opportunity cost in terms of alternative potential tax reforms.

It argues that The Wealth of Nations remains one of the most important guides to prosperity ever written, and that Smith’s core model has been vindicated by modern evidence Governments today, with their high taxes, sprawling regulation and pandering to special interests, would have horrified Smith as a return to the mercantilism he spent his career dismantling.

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• In the Wealth of Nations, Adam Smith argues that individuals pursuing their own self-interest can promote the public good when channelled through his ‘system of natural liberty.’

• Smith’s ‘system of natural liberty’ depends on three pillars — maximum individual liberty, tempered by justice (rule of law) and robust competition.

• Competition acts as a moral regulator by disciplining greed and channelling self-interest into socially beneficial outcomes.

• Smith strongly opposed mercantilism and governmentgranted monopolies, arguing that economic freedom and free trade generate greater prosperity.

• Modern evidence, such as the Economic Freedom Index, supports Smith’s prediction that societies with greater economic liberty achieve faster growth and higher living standards.

• The Scottish philosopher’s model achieves a hat trick: maximum liberty, individual improvement, and public benefit, all at the same time.

Mark Skousen, PhD, is a presidential fellow at Chapman University, where he holds the Doti-Spogli Chair of Free Enterprise. He is also the Macroeconomist Strategist at the Oxford Club, and author of over 25 books, including The Making of Modern Economics, which makes Adam Smith the hero of modern economics.

• No credible forecast shows UK oil and gas demand falling to zero by 2050, even under net zero scenarios – oil and gas are essential ingredients in plastics, fertilisers, medicines and modern technology

• The 78% headline tax rate is forcing a decline in North Sea production and driving investment overseas, with the workforce forecast to halve to as low as 57,000 by the early 2030s – losing up to 1,000 jobs a month

• Replacing domestic production with imports increases overall emissions by around 50% and risks gas shortages on cold winter days as early as 2026/27

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Protest groups such as Just Stop Oil have agitated for an end to oil and gas production in the UK, arguing that the ‘climate emergency’ makes this a necessity. Even those not clamouring for an end to domestic hydrocarbon production have supported windfall taxes, which may ultimately have the same effect.

But how realistic is it to ‘just stop oil’? Oil and gas are essential, not just as fuels but for everyday life. Most of the things that make modern life (and, in particular, modern medicine, agriculture and technology) possible rely on oil and gas. Oil is particularly useful since it is the raw ingredient for plastics and a whole range of chemicals, from paint to chemotherapy drugs. Oil and gas are also extensively used in agriculture, in everything from fertilisers and pesticides to polytunnels.

Although campaigners argue that a transition to renewable energy will mean oil and gas are no longer needed as a fuel, there are no credible forecasts that do not show some demand for oil and gas in the UK in 2050, even under net zero-compliant scenarios. It is far from straightforward to replace oil and gas in the energy sector, primarily because the main alternative – renewable generation – is for the most part reliant on weather, and this creates a range of challenges that are difficult and expensive to solve. It is deeply misleading to suggest that renewables are cheap. It is necessary to build and maintain equivalent amounts of backup generation or storage to be available when wind and sun are not.

Even in sunny countries it is very difficult to build a viable energy system based on renewables, as the Bihar experiment (described later in this report) demonstrated. More recently, Spain has experienced grid stability problems associated with too much solar generation and not enough conventional synchronous generation to provide voltage control. Replacing oil and gas in the rest of the economy will be even harder since they are integral to modern life. Again, this has been tried, and shown to be easier said than done, as evidenced by Sri Lanka’s disastrous attempt to move away from the use of methane in fertilisers. The Sri Lankan economy contracted sharply when synthetic fertilisers were briefly banned.

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But the UK does not only still need oil and gas, it needs to recover as much as possible from domestic resources. Forcing a premature decline in North Sea production means we must increase imports, which have higher emissions than domestic production. It means the associated tax revenues are lost. It means that supply chain companies close or relocate faster than would otherwise be the case, costing jobs and further tax revenues. And it puts security of supply at risk because the integrated nature of the offshore pipeline infrastructure, which requires certain levels of throughput to be maintained, may be pushed into early closure, stranding viable producing fields, and creating peaks of decommissioning which may be beyond the ability of supply chains to cope with, as well as threatening gas shortages on cold winter days unless new import infrastructure is built.

This report will explore the uses of oil and gas, where they come from, and how much we are likely to need in the future. It will also look at the impact of the new annual North Sea licensing rounds, political pledges to stop issuing new drilling licences, and the impact of the windfall tax.

Meeting our oil and gas needs through imports will almost certainly be more environmentally harmful than domestic production, but the prospects for that production are limited by adverse political rhetoric and the highly damaging impact of the windfall tax. Unless we change course rapidly by repealing the windfall tax and committing to continue developing domestic oil and gas resources, we will be increasingly reliant on potentially dirty imports in the decades to come.

• Governments are constantly tempted to push flexible working because it allows them to support a popular social change without having to pay for it themselves.

• The new, stronger “right to request” flexible working in the Employment Rights Act will be much harder for managers to resist, and even dealing with such requests will impose costs on companies.

• While private businesses may be able to control some of these costs, the widespread strengthening of flexible working rights is likely to damage productivity, slow growth, and undermine wages and employment

• This will be all the more true if unions or workplace rules stop wages adjusting, for example to reflect whether particular jobs can in practice be done remotely. This is likely to be a particular problem in the public sector, reinforcing its existing poor productivity record.

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Changes to our way of life during the Covid lockdown accelerated an existing drive for more flexible working opportunities.

However, the costs of flexible working requirements have rarely been properly assessed and could extend to undermining growth, increasing unemployment and the rise in post-Covid withdrawal from the workforce.

UK employers already offer a wide variety of non-traditional work options. Where this is the result of employers voluntarily offering such options and workers voluntarily accepting them, this is compatible with classical liberal approaches to the employment contract and economic efficiency.

The rationale for the ‘right to request’ flexible working has expanded from concern for economically disadvantaged workers with health issues or caring responsibilities to a belief that all employees should be able to request a change to their working arrangements.

The Employment Rights Act strengthens the ‘right to request’ flexible working arrangements and will make it very difficult for organisations to resist such requests.

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Flexible working arrangements advocated by pressure groups and trade unions include the right to work at home, to work compressed hours or a four-day week, a ‘right to disconnect’ and extended and more generously funded parental leave.

All of these arrangements have bene ts for some employees, and a monetary value can be attached to them. However, as other employees cannot bene t from these opportunities because of the nature of their jobs, pay relativities may need to adjust, and this could present difficulties where pay structures are rigid as a result of union pressures.

Despite claims that flexible working is virtually costless to employers, this is not generally true; otherwise, flexible options would be offered voluntarily. Where employers face significant extra costs, these will be passed on to consumers in the form of higher prices and to workers in terms of lower wages and/or fewer job opportunities.

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A concern is the way in which effective employment mandates arising from tribunal decisions or further regulatory interventions may particularly benefit already privileged public sector employees. The costs fall on the taxpayer, and such mandates may undermine attempts to improve poor productivity performance. They will also make it still more difficult for private employers to compete.

We are not in a position to evaluate the benefits and costs of particular working arrangements. But neither are politicians and civil servants. Employers and employees, negotiating in the ‘particular circumstances of time and place’, are better suited to undertake these evaluations. Government should take its hand from the tiller and allow businesses and employees to come to arrangements that best suit their own needs and requirements.

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• New analysis suggests gross costs of net zero could exceed even the highest official predictions of £7.6 trillion

• Official estimates of the cost of net zero are often driven by “fantasy assumptions”

• Public bodies have consistently underestimated the cost of renewables, heat pumps and electric vehicles, while assuming implausibly low borrowing costs

• New analysis warns that misleadingly low figures risk shutting down serious democratic debate over one of the most expensive policies in British history

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The true cost of the UK’s net zero commitment has been systematically understated, according to a major new briefing paper from the Institute of Economic Affairs.

In The Cost of Net Zero, energy analyst David Turver examines official costings from the Climate Change Committee (CCC), the National Energy System Operator (NESO), the Treasury and the Office for Budget Responsibility. He finds that headline figures have fallen dramatically not because net zero has become cheaper, but because public bodies have changed methodologies and relied on increasingly unrealistic assumptions.

The CCC now claims that achieving net zero between 2025 and 2050 will cost just £108 billion – down from earlier estimates of over £1 trillion. Turver shows this is done by moving the goalposts from measuring gross costs to comparing against a notional baseline scenario. It also relies on implausibly low projections for the cost of offshore wind, solar power, heat pumps and electric vehicles, alongside borrowing costs well below market rates.

By contrast, NESO’s own modelling implies gross cash costs of £7.6 trillion for the transition, or more than £9 trillion once the carbon costs of emissions are included. Even these figures, the paper argues, are likely to be underestimates given recent failures of offshore wind projects and rising financing costs.

The paper concludes that Britain has embarked on one of the most expensive economic transformations in its history without honest accounting or proper scrutiny. If net zero is to command lasting public support, Turver argues, voters must be told the true scale of the costs and trade-offs involved.

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Some of the overly optimistic assumptions made include:

- The CCC expect offshore wind to cost £1,500/kW of capacity for projects delivering in 2030. However, Hornsea 3 (2.9GW) expected to come online in 2028 is forecast to cost between £10 billion and £11billion, for a mid-point cost of £3,682/kW, more than double the CCC’s estimate.

- The CCC also expect solar power plants to cost £564/kW in 2025, falling to £403/kW by 2030. However, the recently delivered solar farms of Stokeford and Alfreton spent £952/kW and £995/kW, respectively, nearly double the CCC’s 2025 estimate and more than double their 2030 estimate.

- NESO calculate the cost of offshore wind as £70.10/MWh in 2025, falling to just £53.20/MWh in 2035. In the same 2025 prices, Hornsea 4 won a contract last year at £85/MWh, which was cancelled as uneconomic. Allocation Round 7 (AR7) is offering £118/MWh in September 2025 prices for index-linked 20-year contracts, some 121% above NESO’s estimate for 2035.

- NESO assume Floating Offshore wind will cost £109/MWh in 2035 despite contracts being awarded at £202/MWh in AR6 and £282/MWh being on offer in AR7. They also assume solar will cost just £31/MWh in 2035 despite AR6 contract awards at ~£72/MWh and £78/MWh being on offer in AR7.

- NESO assume the cost of capital for solar and onshore wind to be 5.0% and 5.2% respectively for projects delivering in 2035, which is below 30-year gilt yields around 5.3%.

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David Turver, author of the paper, said:

“The various public bodies responsible for working out the costs of net zero have not been entirely truthful in their analysis. They have made fantasy assumptions about the cost of renewables and low-carbon technologies. The true cost of net zero is much higher than we have been led to believe. If we are to have a serious debate about net zero, the various public bodies need to be more transparent and frankly more honest.”

The Rt Hon Lord Frost, Director General of the Institute of Economic Affairs said:

“Net Zero is already one of the most economically damaging policies in modern British history. We can now see it was sold to the public on the basis of fantasy numbers. This research shows that official bodies have consistently downplayed the true costs by relying on heroic assumptions about the cost of renewables, heat pumps, and electric vehicles, predicting future savings that bear little resemblance to reality. The whole of Net Zero badly needs a proper rethink before it kills off more of British industry and leaves British households permanently subject to unreliable supply and higher bills.”

The Rt Hon Claire Coutinho MP, Shadow Energy Secretary, said:

“It beggars belief that none of our ‘independent’ energy bodies can publish an accurate figure for what Net Zero is going to cost this country. Wildly optimistic assumptions and crippling groupthink in our institutions means we’re flying blind – and the result is the highest electricity prices in the world and our industry fleeing overseas.

“When I was Energy Secretary I had to pull teeth to make the Energy Department carry out an accurate costing of wind and solar – one which factors in all the extra costs of building the grid, paying wind farms to switch off when it’s too windy, and paying for gas backup for when it’s not windy enough. Ed Miliband has since cancelled that work, which tells you all you need to know about how little this Government cares about the cost of Net Zero.”

Andy Mayer, Energy Analyst at the Institute of Economic Affairs said:

“This paper cuts through the fog surrounding net zero costs. It shows that wildly optimistic assumptions and creative accounting have obscured serious economic scrutiny - and that the real price tag of the race to net zero is far higher than the public has been led to believe.”

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• Spontaneous orders – from language to markets – emerge without central coordination and handle complexity better than government planning

• Empirical studies show that spontaneous order outperforms coercive regulation in economic growth, natural resource management, and public service provision

• New report challenges government intervention in climate change, public health, transport, and economic policy, arguing that complex problems require maximum freedom to solve

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A new briefing paper from the Institute of Economic Affairs argues that spontaneous order – the emergence of complex systems without central coordination – provides strong grounds for resisting Government action, especially when proposed to correct market failures or promote efficiency.

The paper, Spontaneous Order: Analysis and Implications, published today by the Institute of Economic Affairs, examines how fundamental human institutions like language, law, morals, markets and money all emerged without deliberate centralised design. Written by Elaine Sternberg, the report argues that these spontaneously ordered systems can integrate dispersed, dynamic and tacit knowledge far more effectively than deliberately constructed orders.

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According to the paper, spontaneous orders are “self-generating, self-organising complex adaptive systems” that emerge from the unintended coordination of intentional action. They exist when a pattern emerges from multiple dispersed individual elements without any coordinator arranging that pattern.

The paper demonstrates that spontaneous order supports individual liberty in three crucial ways:

• First, by their nature, spontaneous orders cannot be coercive, as they emerge from independent individual choices.

• Second, their very existence proves that deliberate organisation is not the only way order can be established, undermining the basic presumption that government regulation is necessary.

• Third, spontaneous orders require freedom to operate properly – their individual components must be free to react to changing circumstances for the system to be adaptive and self-correcting.

The paper draws on empirical evidence and British examples to demonstrate how spontaneous order outperforms government regulation across key policy areas:

• Natural resource management and climate change: Nobel laureate Elinor Ostrom’s research proved that common-pool natural resources like pastures, fishing waters and forests are conserved better by emergent community systems than by state regulation. Her findings on polycentric governance challenge the assumption that complex environmental problems require centralised government control.

• Transport and urban planning: A real-world British experiment on London’s Exhibition Road demonstrated spontaneous order in action. When physical traffic barriers were removed from the major Kensington thoroughfare, road users were required to exercise personal care. Despite car speeds increasing by 21%, no accidents were observed during the subsequent survey. The removal of top-down control improved both safety and traffic flow.

• Economic growth and public services: Ostrom’s research extended beyond environmental issues, showing that polycentric governance proved better at providing public goods and services than centralised government, including in metropolitan police forces. Studies have confirmed spontaneous order works better than coercive regulation at generating economic growth and providing key services.

• Technology and innovation: Advanced examples include AlphaZero’s self-taught mastery of chess in just nine hours through reinforcement learning, without any programmed rules or human instruction. Similar spontaneous deep learning has been used effectively for medical breakthroughs, fraud and disease detection, and translation services.

Sternberg argues that these findings should challenge government intervention particularly in areas where politicians claim extreme complexity requires central control. She contends that in domains like climate change, public health and economic growth, the dispersed and dynamic nature of knowledge actually makes spontaneous order superior to government planning.

The paper concludes that recognising the potential and advantages of spontaneous order should encourage scepticism about popular public policy proposals, as government projects based on command and control cannot benefit from experience or quickly adapt and adjust in the way spontaneous orders can.

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Elaine Sternberg, author of Spontaneous Order: Analysis and Implications, said:

“The possibility of spontaneous order should highlight large arenas where government action is unnecessary and may well be actively counterproductive. Significantly, these are areas - like climate change, public health and welfare, and economic growth - where government is most likely to claim that extreme complexity requires coercive regulation. Recognising the potential and advantages of spontaneous order should encourage scepticism about, and opposition to, such popular public proposals.”

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• Chancellor Rachel Reeves will likely fill the gap with broad-based income tax increases and a ‘dog’s breakfast’ of smaller measures

• Root cause is spiralling public spending – not productivity downgrades or economic shocks

• Tax revenues from multiple small changes are unreliable compared to simpler increases in income tax or VAT

New analysis published today by the Institute of Economic Affairs reveals Chancellor Rachel Reeves faces a financial hole of up to £30 billion ahead of Wednesday’s Autumn Budget, which she will probably attempt to fill through broad-based increases in taxes on income alongside numerous smaller tax changes.

The briefing paper, ‘2025 Budget Briefing: Tax Policy Preview – Options and Possible Impacts’ by Julian Jessop, explains how this gap has opened up since the March 2025 forecast and assesses the Chancellor’s options for closing it.

The single largest component of the £30 billion hole – approximately £20 billion – reflects a long overdue downgrade to the OBR’s forecasts for productivity growth. However, the remainder results directly from policy decisions made by the current government, including abandoning the £5 billion welfare savings package announced in Spring and spending any favourable economic assumptions rather than banking them to reduce borrowing.

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The Chancellor is expected to extend the freeze on personal tax thresholds beyond 2028, raising £8-10 billion through the effects of fiscal drag. The remaining £20 billion would come from what Jessop describes as a “dog’s breakfast” of smaller measures – potentially including increased Council Tax on higher-value properties, closing Capital Gains Tax loopholes, new taxes on partnerships (LLPs), levying National Insurance on rental income, and increased ‘sin taxes’ on gambling and sugary drinks.

The analysis warns that revenues from such a patchwork of smaller tax increases are inherently unreliable. Behavioural responses mean the actual revenues raised would be much less dependable than those from simpler increases in broad-based taxes like income tax or VAT. The taxation of wealth is particularly difficult because assets are harder to value than cash payments, while ‘sin taxes’ that aim to discourage activities whilst raising revenue from them often end up doing neither.

More positively, the Chancellor is likely to increase fiscal headroom to provide a larger buffer against future shocks, and many tax increases would be ‘backloaded’ towards the end of the forecast period rather than taking effect immediately.

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Julian Jessop, Economics Fellow at the Institute of Economic Affairs and author of the briefing, said:

“This year’s Budget is set to be just as painful as the last. The Chancellor will attempt to fill a new hole of perhaps £30 billion with broad-based increases in taxes on income and from a dog’s breakfast of many smaller measures.

“This hole is not entirely of the Chancellor’s making. Most of the shortfall reflects a downgrade to the OBR’s projections for trend productivity growth, which is arguably long overdue. She will also want to increase the buffer against future shocks by raising the fiscal headroom above the low levels inherited from the previous government.

“Nonetheless, this should have been done by curbing the growth of spending, rather than by increasing the tax burden even further. Relying on a dog’s breakfast of many smaller tax changes is also more likely to backfire.”

• Chancellor Rachel Reeves faces £30 billion ‘fiscal black hole’ by 2029-30, requiring tax rises or spending cuts to meet fiscal rules

• Taxing the rich cannot bridge the gap – each 1p rise in the top income tax rate raises just £145 million in the next year, and capital gains tax hikes would be economically self-destructive

• Public spending has grown 2.5% per year in real terms since 1997, far outstripping population growth of 1% per year and economic growth of 1.8% per year

• Without policy change, public spending on over-65s would increase by 11 percentage points of GDP

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A new briefing paper published by the Institute of Economic Affairs today reveals that Britain’s long-term fiscal crisis is driven by spending growth that has consistently outstripped both demographic demand and economic expansion. The state has grown from approximately 35% of GDP in the late 1990s to 45% today, pushing the tax burden from 32% to 37.5% of GDP whilst still leaving persistent deficits.

In this briefing, 2025 Budget Briefing: The Fiscal Context, Tom Clougherty examines the wider fiscal landscape surrounding the Autumn Budget 2025. It shows that Chancellor Rachel Reeves faces a significant ‘fiscal black hole’ of around £30 billion by 2029-30, driven largely by an expected downgrade in productivity growth forecasts from the Office for Budget Responsibility.

Public spending has grown by 2.5% per year in real terms since 1997, significantly exceeding the 1% annual increase required to keep pace with population growth after accounting for demographic shifts. Over the same period, real economic growth averaged just 1.8% per year. The result is a state that has consumed an ever-larger share of national income whilst delivering persistently unaffordable levels of borrowing.

The research finds that spending restraint is both plausible and necessary. Simply keeping overall spending increases in line with inflation until 2029-30 could improve the fiscal outlook by £40 billion relative to current plans. However, if cuts are focused on departmental spending whilst NHS funding continues to grow at recent rates of 4% per year in real terms, cuts of 14% to non-NHS departmental spending would be required by 2029-30.

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The briefing challenges the notion that simply taxing the rich can bridge the fiscal gap. According to HMRC figures, each 1p increase in the additional rate of income tax only yields £145m in 2026–27, £265m in 2027–28, and £230m in 2028–29. Even dramatically increasing rates would not generate the tens of billions needed. The paper warns that significant hikes to capital gains tax would constitute economic self-harm, particularly given Britain’s already uncompetitive position – nine OECD countries do not tax capital gains at all, and no other OECD country levies a rate as high as 45%.

The report emphasises the looming demographic challenge. The OBR’s 2022 projections suggested that without policy change, public spending on the over-65s would increase by 11 percentage points of GDP over 50 years – equivalent to £260 billion in 2021-22 terms, more than all income tax and capital gains tax revenue combined that year.

Economic crises have played a key role in driving step changes in public spending that prove difficult to reverse. Both the financial crisis and the COVID-19 pandemic saw dramatic spending increases, but whilst the 2010s saw a decade-long effort to return spending to pre-crisis levels, spending post-pandemic has settled at a permanently elevated level. On current plans, Total Managed Expenditure will average 44.5% of GDP from the pandemic to the end of the decade.

Britain must fundamentally reduce public spending, or face a future of perpetually rising taxes. With demographic pressures set to intensify and the state already consuming 45% of GDP, the country faces a stark choice: meaningful reform of public services and the welfare state now, or an ever-growing tax burden that will strangle economic growth and leave future generations significantly poorer.

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Tom Clougherty, author of “2025 Budget Briefing: The Fiscal Context”, said:

“Ultimately, in both tax and spending, we ought to take a long-term view. For tax, that means a genuine effort to simplify and rationalise the system while making it more pro-growth. Our highly politicised budget process makes that kind of policymaking difficult. On the spending side, we need to recognise that our fiscal problems did not appear overnight and will not be solved at a single budget.

“Indeed, putting Britain on a sound fiscal footing – not just for 2029–30 but for the next generation – is a mission that could and probably should occupy a whole government across an entire Parliament. We can put off that day of reckoning, but we cannot avoid it forever.”

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• Low-tax countries now dominate welfare quality rankings while high-tax nations struggle, new analysis shows

• Britain has suffered a catastrophic decline in welfare performance, falling to 22^nd place in life expectancy and ranking just 15^th overall despite a record tax burden and ballooning welfare spending

• The Nordic model has collapsed as a welfare benchmark with Sweden plummeting from 1^st to 8^th in life expectancy as its tax burden soared to 43% of GDP

• Shadow Chancellor Sir Mel Stride: “This report offers a timely reminder that higher taxes, higher spending and higher welfare are not the route to a fairer, more prosperous economy.”

• Richard Tice: “This research confirms what we’ve known all along.”

• The top-performing countries on welfare outcomes are low-tax Switzerland, Japan, and South Korea

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New analysis published today by the Institute of Economic Affairs busts the myth of Nordic-model high-tax welfare superiority that has dominated political discourse for decades, and delivers a devastating verdict on Britain’s welfare performance as the tax burden and welfare budgets have ballooned.

The study compares welfare outcomes across 23 OECD nations using measures covering health, education, unemployment, and social exclusion. The findings present a radical challenge to the common idea that improving welfare outcomes requires higher taxes and more spending. It suggests that ‘welfare state crowding out’ is an increasing problem, where high-tax and spend approaches waste resources and crowds out some of the most essential welfare state tasks, market welfare services, precautionary saving and insurances as well as the role of the family.

“The Welfare State Myth” by Nima Sanandaji and Stefan Fölster, reveals that Britain is failing its citizens across virtually every measure of welfare quality despite a record high tax burden. Britain’s welfare crisis is starkest in healthcare, where the country ranks 20^th, despite the NHS being Europe’s largest single employer. With over 7 million people on hospital waiting lists, the UK’s health system delivers outcomes that would be scandalous in successful low-tax countries. Switzerland, with a 27% tax burden compared to Britain’s 33%, achieves dramatically superior health outcomes through efficient private insurance models.

For decades, UK policymakers have looked enviously at Nordic welfare states. Yet Sweden, long held up as the gold standard, now ranks 12^th overall despite a 43% tax burden. Sweden’s decline coincides precisely with its transformation into a high-tax state - it topped life expectancy rankings in 1970 when it had a 35% tax burden.

The research arrives as the government grapples with an unsustainable welfare spending crisis, with Universal Credit and PIP costs continuing to rise and parliamentary rebellions against the welfare bill making reform difficult.

Today’s analysis demonstrates what Britain could achieve. Japan leads global rankings with a 30% tax burden, followed by South Korea (26%) and Switzerland (27%). Australia, Ireland and New Zealand all achieve better welfare outcomes than the UK with similar or lower tax burdens.

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Sir Mel Stride, Shadow Chancellor and former Secretary of State for Work and Pensions, said:

“This report offers a timely reminder that higher taxes, higher spending and higher welfare are not the route to a fairer, more prosperous economy.

“We have to get away from the idea that every problem can be fixed simply by pouring more money into public services or welfare.

“We don’t need bigger government. We need a more efficient state that can deliver both better outcomes and better value for taxpayers.”

Richard Tice, Deputy Leader of Reform UK, said:

“This research confirms what we’ve known all along. Successive Labour and Conservative governments have bloated public spending and burdened us with ever higher taxes, yet we get less and less in return.

Nima Sanandaji, Director ECEPR and co-author of the report said:

“On basic measures of health, Britain is underperforming compared to its rich-world peers. Our data clearly show that in order for the UK to excel in welfare it should shift to a lower tax model. Countries with lower taxes have the same or sometimes better health outcomes, and systematically better outcomes in terms of school results and lower unemployment. High-tax models create poverty traps of welfare dependency, particularly amongst those with immigrant backgrounds.”

Stefan Fölster, Director Better Future Economics and co-author of the report said:

“The idea that the ‘Nordic model’ of higher taxes to deliver better welfare no longer stacks up. Nordic social and economic success was built during periods of low taxes, and stagnated in relative terms after shifting to high taxes.

“Instead, the countries that do better in terms of welfare outcomes are increasingly those with lower tax burdens. Politicians must consider this as they try to address the twin problems of a faltering welfare state and a generational-high tax burden.”

• British women are falling at least 0.4 children short of their own stated family goals, according to fertility data through 2011, with this gap likely widening as fertility now hits record lows of 1.44 while desired family size remains stable at 2.2

• New report shows how pro-natal policies that focus on cash incentives, such as baby bonuses, subsidies, and maternity pay, may have some short-term effect but are often found wanting and prohibitively expensive

• Evidence shows policies affecting economic freedom, including labour market, childcare and housing liberalisation, can have profound effects on fertility through their impact on work-family compatibility

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A new paper, published today by the Institute of Economic Affairs, shows that while the total fertility rate hit a record low of 1.44 children per woman in 2023, women’s intended fertility has remained remarkably stable at around 2.2 children since 1979, suggesting that the ‘fertility gap’ may have grown since it was last measured in 2011.

The report, ‘Mind the Fertility Gap: Why people stopped having babies and how economic freedom can help’, examines the evidence on the best way to close the fertility gap and tackle falling birth rates. It finds that while ostensibly pro-natal policies focused on cash transfers can result in more children, financial incentives have limited success, do not address the root causes of birth rate declines, and are prohibitively costly for most governments.

Instead, research shows traditional pro-natal policies, such as baby bonuses and parental leave, yield near-zero effects on long-run fertility decisions. Instead, evidence from the United States shows that states with greater economic freedom - especially in labour market regulation - tend to have smaller fertility gaps. Work-family compatibility emerges as a crucial constraint, with flexible labour markets naturally providing parents with more options to customise work schedules around family goals.

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Economic freedom shows strong associations with smaller fertility gaps. New research analysing US state-level data reveals that housing and land use regulation significantly impacts family formation. Spacious, affordable housing with multiple bedrooms is what economists call a “child-complement” - couples have higher fertility when they can achieve these conditions.

Yet extensive land use regulations dampen housing supply responses and keep prices artificially high, making the costs of raising children higher than necessary. Studies show a significant negative relationship between land use restrictions and fertility rates, with effects especially concentrated among women in their twenties. Similarly, seemingly minor regulations can have outsized anti-natal effects - stringent car seat requirements in the US reduced total births by 145,000 since 1980 by indirectly requiring families to purchase larger vehicles when going from two to three children.

Dr Clara E. Piano, report author and Visiting Assistant Professor of Economics at the University of Mississippi, argues that the fertility gap represents a growing failure to achieve family goals rather than a decline in the desire for children. If women achieved their stated fertility intentions, the UK’s fertility rate would rise well above the United States (1.62) and nearly every other high-income country.

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Piano makes the following key recommendations to help close the fertility gap:

• Labour market deregulation: Remove rigid regulations that prevent flexible working arrangements, remote work, and independent contracting. Evidence from US states shows that more flexible labour markets are strongly associated with smaller fertility gaps, allowing parents to balance careers with family life rather than being forced to choose between them.

• Housing and planning reform: Reduce land use and housing regulations that keep prices artificially high and restrict housing supply. Spacious, affordable housing with multiple bedrooms enables couples to achieve higher fertility, yet current planning restrictions make the costs of raising children unnecessarily expensive.

• Reform anti-natal public programmes: Audit and reform public pension systems and other welfare programmes that inadvertently punish parents. Parents currently bear all the costs of raising the next generation of taxpayers while the benefits are spread across society.

• Support religious liberty: Allow religious organisations to freely promote pro-natal messages and create supportive communities around parenthood, rather than attempting ineffective and often expensive Government campaigns. International evidence shows this approach can increase fertility at virtually no cost.

• Avoid ineffective policies: Resist calls for expensive baby bonuses, cash incentives, and subsidized childcare schemes, which research shows have minimal long-run impact on fertility decisions and fail to address the root causes of declining birth rates.

Piano also suggests some creative solutions to closing the fertility gap, including giving children political representation by allowing parents to cast proxy votes on behalf of their minor children. This would ensure children’s interests are represented in policy decisions and create a sustainable feedback mechanism where parents themselves signal which barriers to family formation matter most.

The paper warns that without action, the UK faces mounting fiscal pressures, labour shortages, and a growing population of people unable to achieve their stated family goals.

Dr Clara E. Piano, report author and Visiting Assistant Professor of Economics at the University of Mississippi, said:

“Restricting the term pro-natal to explicit transfer policies obscures the broader policy landscape that shapes family decisions. Policies affecting economic and religious freedom, in particular, have profound effects on fertility through their impact on work–family compatibility and personal beliefs.”

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• Expansion of EDI bureaucracy has been fuelled by government regulation, not by market forces or rising prejudice

• Growth of EDI undermines meritocracy, replacing fairness and talent with group quotas and targets

• Previous estimates suggest direct public sector EDI costs of £557m a year, with wider costs to the economy potentially in the tens of billions

• New paper calls for rolling back EDI, including scrapping procurement requirements and outlawing quotas

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The rapid rise of Equality, Diversity and Inclusion (EDI) roles, strategies and mandates is the product of state intervention and government action, rather than consumer or business demand or rising prejudice, according to a new paper published by the Institute of Economic Affairs today.

“EDI Nation: The growth of the equality, diversity and inclusion bureaucracy and its costs, by Alex Morton, argues that legislation such as the Equality Act’s concept of “indirect discrimination”, the Public Sector Equality Duty, and the purchasing power of the state have pushed organisations into EDI bureaucracy regardless of its value.

Quangos such as the Financial Conduct Authority and UK Research and Innovation have embedded EDI requirements far beyond their original remit, pressuring businesses, universities, and charities to follow suit. Companies have been forced to expand EDI by Government mandate rather than choosing to do this to boost productivity or as part of a meritocratic strategy.

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Morton warns that this state-sponsored expansion is damaging productivity, creating division, and eroding meritocracy. While past research has estimated the direct cost of EDI roles and training in the public sector at £557 million a year, with wider costs to the economy potentially in the tens of billions, the paper stresses that the bigger danger is the replacement of merit-based hiring with identity-based quotas and targets.

One assessment found that the number of diversity and inclusion managers grew by 71% from 2015 to 2020 globally.

The paper recommends a reset, including:

• Removing the legal concept of indirect discrimination

• Ending EDI mandates within the public sector and procurement

• Outlawing quotas and targets in hiring

• Reform or abolition of the public sector equality duty

• Clarifying that aims to hire more or less of specific groups is direct discrimination

• Clarifying what charged topics such as racism and bullying consist of

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Alex Morton, author of the report, said:

“Far from reflecting market demand or rising intolerance, EDI has been driven by government policy and quango activism. It is costly, divisive, and undermines meritocracy - one of the pillars of modern economic success. Rolling back state-imposed EDI is essential if Britain is to restore fairness, efficiency, and economic dynamism.”

By Stephen Dnes

• Recent years have seen sharp growth in the number and scale of class actions filed before the UK Competition

• Appeal Tribunal (‘Tribunal’). Pending claims are worth an estimated £134 billion. There are 655 million claimants, that is, ten claims per person. On average, there is roughly one new class action every week.

• The sudden increase in the scope of claims raises questions about their quality. The strong economic case against hardcore cartels applies equally to private litigation, but there are also some more adventuresome cases which stray from true cases of economic harm. Such cases increase costs and could harm innovation.

• Three specific concerns arise: (1) Cases are not getting much money, even against hardcore cartels; (2) Some low-quality cases have crept in, but they are mixed up with stronger ones which ought not to be undermined by reform; (3) Cases are very slow.

• This paper explores five related policy options to address these three issues. They can be used together or in isolation to focus cases onto the stronger ones and away from the weaker ones. The proposals span several major aspects of the cases and would significantly focus their remit.

• There are ten class action claims per person pending in the UK today, with a total valuation of approximately £134bn

• They can provide important recourse to justice, but some cases reward funders and lawyers, not consumers

• Proliferation of cases could cost UK economy up to £18bn, diverting resources away from innovation and undermining growth

• As the Government reviews the system, new proposals are published today that would force funders to make early payouts to claimants, consolidate losses, and focus on economically sound cases

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Britain’s class action regime risks becoming a drag on growth, imposing billions in costs while delivering little for consumers, according to a new paper published by the Institute of Economic Affairs today.

The report – Class Act: The case for reforming Britain’s class action regime by competition lawyer Stephen Dnes – warns that the UK’s opt-out system introduced in 2015 has seen an explosion of speculative lawsuits. Pending claims are valued at £134 billion, with around one new class action filed each week.

Cases often deliver little compensation to consumers but offer big returns for funders and lawyers. In Merricks v Mastercard, at one point a funder tried to offer just 48p each so that funders and lawyers could have £179m of the final £200m settlement.

While strong cases against cartels are justified, the incentives between the parties - including claimants, law firms, and funders - don’t always align under the current system, which can lead to perverse outcomes. There has reportedly been an 'exodus of key lawyers' from the law firm Pogust Goodhead suing in the Fundao dam case, one of the biggest class action cases in the UK, after clashes with third-party funders. Perverse incentives can also lead to weak and speculative claims proliferating alongside stronger ones, and cases dragging on for years.

This is carrying a substantial economic cost by slowing innovation, driving up business costs, and undermining growth. A recent analysis by the European Centre for International Political Economy suggests such litigation could cost the economy as much as £18 billion, including £11 billion in lost market capitalisation for innovative firms. Money that would otherwise go towards innovation, lower prices, or returns on investment for shareholders, is instead set aside for legal costs.

The Government currently has an open call for evidence to look at potential reforms. Today's report proposes a package of tangible proposals to focus the regime on strong, economically justified cases:

• Seed payouts to claimants before certification – filtering out weak cases by requiring funders to put money into claimants’ hands upfront.

• A market for claims – letting rival funders compete to deliver better payouts.

• Sharper economic tests at certification – ensuring only cases that show real market harm proceed.

• Consolidation of losses – preventing wasteful supply chain disputes.

• Hands-off approach to funder returns – avoiding perverse incentives to delay and ensuring money flows to claimants, not lawyers.

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These changes would sharply reduce speculative litigation and ensure class actions deter anti-competitive behaviour without stifling innovation or burdening the economy with unnecessary costs.

Leading competition lawyer and author of the report Stephen Dnes said:

“Class actions can play a vital role in detering anti-competitive behaviour and protecting consumers, but the UK’s regime has gone off course. There is a real risk of friendly fire especially when innovative companies are sued. It is time for a course correction.”

“The system can be fixed, by fixing the misaligned incentives built into the system, to restore focus on genuine harm, speed up justice, and support growth.”

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• Public health academics openly advocate overthrowing capitalism while presenting radical views as neutral scientific research, including claims that COVID lockdowns saved 77,000 lives by "switching off capitalism"

• Influential WHO advisors smuggle anti-business activism into health policy, targeting "social media, banking, insurance, education, transportation, real estate and utilities" as health threats

• Their anti-capitalist agenda demands "fundamental restructuring of the global political and socio-economic system" rather than addressing actual health issues

• Modern public health is a fundamentally political movement, and the hardening of its anti-capitalist stance should be taken seriously, a new IEA paper argues

A new paper from the Institute of Economic Affairs exposes how influential public health academics are using their scientific credentials to promote radical anti-capitalist policies while disguising their activism as objective research.

The discussion paper, "Anti-Capitalism and Public Health", published today by the IEA, reveals that leading figures in the public health establishment openly advocate for the overthrow of the market economy. Author Dr Christopher Snowdon shows how researchers have expanded their focus from traditional health concerns to attacking the entire economic system.

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The research documents how WHO-backed academics describe capitalism as a "pathological system" and argue that addressing health issues "requires nothing short of a fundamental restructure of the global political and socio-economic system."

Professor Gerard Hastings OBE, a former WHO advisor, claimed in May 2020 that China's COVID-19 lockdown saved 77,000 lives - "twenty times more than were taken by the virus" - proving that "switching off capitalism" protects us "from ourselves."

The study shows how these academics have evolved from targeting a few “unhealthy commodity industries” to attacking all "commercial entities" - including small businesses and cooperatives. The list of supposedly health-harming industries now encompasses everything from fossil fuels to social media platforms and food delivery services.

Although it is difficult to find a coherent alternative to “neoliberalism” in the work of public health academics, Snowdon shows that they are consistently opposed to free trade and economic growth. He concludes that they may see costs to business, employment and growth as features, not bugs, of public health regulation.

Dr Christopher Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs, said:

“Anti-capitalist rhetoric is far from uncommon in academia, but the field of public health has become rabidly opposed to free markets and free trade in the last decade. Public health has become more of a militant political enterprise than an evidence-based, scientific movement.”

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• Mandated employment benefits function as a ‘stealth payroll tax’ that ultimately reduce workers’ wages, not employers’ profits

• £5bn cost of new mandates in the Employment Rights Bill will be passed on to employees through smaller pay rises over time

• New union powers could revive 1970s-style militancy, and the whole package will reduce economic growth

The Employment Rights Bill returning to parliament today (Monday 14th July) will impose a £5 billion stealth tax on British workers, according to a new report published by the Institute of Economic Affairs. The analysis warns that employment mandates, sold as helping workers, really function like hidden taxes that reduce their wages over time.

Professor J.R. Shackleton, the report’s author, argues that politicians exploit public misunderstanding about who really pays for employment rights. They often only benefit certain groups, but the costs are passed back to all employees through lower wage increases than they would otherwise receive.

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The Employment Rights Bill’s measures – including day-one unfair dismissal rights, restrictions on zero-hours contracts, and enhanced union powers – will also make employers more risk-averse in hiring decisions. This will put a brake on the growth the government seeks to achieve.

The report, Liberating the Labour Market, reveals how Britain’s labour market freedom score has already plummeted from 81% on the Heritage Foundation’s Economic Freedom Index 20 years ago to just 63% today, undermining what was previously a key competitive advantage for the UK economy.

In addition, Shackleton warns that new union powers could trigger a return to 1970s-style industrial militancy, allowing unions to “put the public through the wringer” and “extort more pay from the government – which means, of course, the taxpayer.” The Bill makes strike ballots easier to organise and extends strike mandates to a full year without re-voting.

To prevent this scenario, the report suggests Britain could eventually have to follow international examples by banning strikes in essential services. Germany bans civil servants, university staff and many teachers from striking, while the US prohibits all federal employees from taking industrial action.

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Other key reform options to liberalise the labour market include:

• Scrapping the failed apprenticeship levy system – The tax has reduced rather than increased apprenticeship numbers since 2017, with many businesses unable to access funds due to bureaucratic complexity

• A comprehensive review of occupational licensing, currently covering 20% of jobs – Government certification is now required for estate agents, private detectives and social workers, often reflecting successful lobbying rather than genuine public protection needs

• Refocusing discrimination law on direct discrimination only – Abandon complex “equal value” comparisons that force employers to pay warehouse workers the same as retail staff, and end mandatory pay gap reporting that leads to counterproductive hiring decisions

• Introducing no-fault dismissal with guaranteed compensation – Replace the current complex tribunal system, currently involving 25,000 unfair dismissal claims a year, with a simpler approach where employees receive predetermined compensation without lengthy legal processes, giving both sides greater certainty

• Reforming university funding to link institutions’ income to graduate employment outcomes – Universities should bear some financial risk if their graduates struggle in the job market, incentivising institutions to focus on employability rather than just recruitment numbers

Professor Shackleton, Editorial and Research Fellow at the Institute of Economic Affairs and Professor of Economics at the University of Buckingham, said:
“Politicians love to announce new employment ‘rights’ because they think employers pay the bill – but that’s an illusion. Every mandate, from parental leave to holiday entitlements, acts like a stealth tax that gets passed back to workers through smaller pay rises than they would otherwise receive. The only difference is that no money is raised for the Exchequer."

“The Employment Rights Bill will make this much worse, imposing billions in hidden costs that workers will ultimately bear themselves. The Government is not protecting workers – it is harming them and undermining its own alleged number one priority to boost economic growth.”

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• Modern economics education has "forgotten its own history", focusing on mathematical models rather than understanding different approaches to economic problems

• A new book explains how ten major schools of thought offer different solutions to economic challenges

• It reveals how Austrian School economists predicted government policy failures decades before they occurred, while Keynesian approaches dominated discourse despite systemic flaws

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A new book from the Institute of Economic Affairs argues that economics education has become a "sterile and lifeless endeavour" that has forgotten its intellectual heritage, leaving students with mathematical formulas but no real understanding of the fundamental debates that shape economic thinking.

An Introduction to Schools of Economic Thought, published today and authored by Eamonn Butler, traces the evolution of economic ideas from Ancient Greece to modern Behavioural Economics. The book demonstrates how different schools of thought, including the Classical School, Austrian School, Chicago School, and Keynesian approaches, offer radically different explanations for how economies work and what governments should do about economic problems.

Butler argues that the mathematical, model-based approach that dominates university economics courses "crowds out many other things" and has created a generation of economics graduates who know formulas but understand little about the intellectual battles that created modern economic policy. The book shows how these different approaches led to vastly different policy prescriptions, from Adam Smith's "invisible hand" of free markets to John Maynard Keynes's call for government intervention.

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The primer reveals how Austrian School economists like Ludwig von Mises and Friedrich Hayek warned as early as 1920 that central planning would fail because governments lack the price signals needed to allocate resources efficiently. These predictions proved accurate when Soviet-style economies collapsed decades later.

Meanwhile, it shows how Keynesian economics became dominant after the Great Depression, despite what Public Choice School economists later demonstrated were systematic flaws in how governments actually implement economic policies.

The book explains how the Chicago School's Milton Friedman used extensive empirical data to show that the Great Depression was caused not by market failures, as Keynesians claimed, but by government monetary authorities allowing the money supply to shrink by over a third. This research helped shift global economic policy away from activist government intervention toward more market-oriented approaches in the 1980s and 1990s.

Economics students should learn about the various different schools of thought.

Eamonn Butler, Director of the Adam Smith Institute and author of An Introduction to Schools of Economic Thought, said:

"No one view of economics, nor of any part of human life, explains everything. But by understanding past economists’ viewpoints, we can enhance our own understanding of how economics works—and how what our students get from their teachers is so often very flawed. I hope this book will be of value to lay readers who want to learn about how modern economics has evolved. But even more, I hope that students will read it and bring their own new ideas to bear on our economic problems."

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• New space race between the US and China already started, and Governments should embrace private enterprise.

• Private companies, such as Elon Musk’s SpaceX, now account for 82% of space industry revenues, with government and military sectors making up the remainder.

• Regulatory and bureaucratic obstacles remain the biggest threat to further expansion.

• A more liberalised policy framework is paramount to competing with China.

A new review of literature on the space economy, published by the Institute of Economic Affairs (IEA), highlights the rapid expansion of private enterprise in space exploration and its potential to outpace traditional government-led initiatives.

"Exploring the Space Economy", by Dr. Rainer Zitelmann, outlines how market-driven innovation is lowering costs, accelerating technological breakthroughs, and making space more accessible than ever before. With estimates suggesting that the space industry could be worth $1.8 trillion by 2035, the report argues that regulatory barriers must be minimised to allow competition and entrepreneurship to flourish.

The second space race, between China and the United States, has already begun, but there are two key differences to the last space race. It now encompasses tangible economic and military interests. And above all, this time the private sector will determine the outcome.

To unlock the $1.8 trillion potential of the space economy and compete with China, we must dismantle existing regulatory barriers. When SpaceX submitted its launch application, the FAA received 18,000 public comments on the environmental impact. As argued by Dr Zitlemann, “opponents of progress understand they can ‘paper’ a project to death in America, but regulatory delays and public concerns will not delay China’s Starship clone.”

Private investment has already revolutionised satellite technology and launch services, with companies like SpaceX slashing costs by over 80%. The next frontier, asteroid mining, commercial space stations, and a lunar economy depends on a pro-market approach free from excessive government interference.

The paper also examines the geopolitical implications of the new space race. While China and the U.S. compete for dominance, the real drivers of progress are private firms seeking commercial opportunities beyond Earth.

Zitelmann notes that the space economy stands as perhaps the only sector where the private sector has bucked recent international trends, stepping into a crucial role previously dominated by governments and military bodies.

Privately driven space exploration is not just a recent phenomenon. The paper points out how private businesses and individuals drove and funded observatories in the early twentieth century, so recent developments in space are as much a reversion to the original approach.

Companies in the space economy have consistently delivered extraordinary scientific advancements and pioneering innovations. By fostering an environment of market-driven innovation, these companies have not only reduced costs but have also accelerated the pace of technological progress, making space more accessible than ever before.

Rainer Zitelmann, report author and historian, said:

"Private enterprise has transformed space exploration, driving innovation and slashing costs where governments once dominated. To unlock the $1.8 trillion potential of the space economy by 2035, we must dismantle regulatory barriers and let competition soar.

“Manned space flight has stagnated for decades since the end of the Apollo program because politicians interfere too much. Projects such as the Space Shuttle and the ISS saw costs explode, and these were out of all proportion to the benefits. So-called ‘cost plus’ programs created completely wrong economic incentives. With Government space programs, we haven't made it to Mars in the last 50 years and wouldn't get there in the next 50 years either. The only hope lies in private space travel."

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Nanny State Index 2025

• The UK is now the 7th worst place in Europe to eat, drink, smoke and vape, up from 11th place in the 2023 edition of the Nanny State Index.

• Freedom in the UK has decreased at a faster rate than almost anywhere else in Europe over the past two years.

• Germany, Luxembourg and several southern European nations remain the most liberal environments for consumers, while Turkey, Lithuania and Finland continue to top the table for state paternalism.

The UK has re-entered the top 10 of the Nanny State Index 2025, published today by the Institute of Economic Affairs (IEA) and the European Policy Information Centre (EPICENTER). Edited by Dr Christopher Snowdon, Head of Lifestyle Economics, it gives 29 European countries a score out of 100 according to how it regulates lifestyle choices.

The sixth edition of the Index reveals that the UK has made a significant leap in nanny state intervention, driven by high taxes, growing restrictions on food and drink advertising, and draconian anti-smoking policies. The UK now ranks 7th overall, making it one of the most heavy-handed regulators in Europe.

Various heavy-handed measures have pushed the UK toward the top end of the Nanny State Index, especially on food and tobacco:

• Very high tobacco duty – the UK has the second highest taxes on cigarettes when adjusted for income

• Tax on sugary drinks

• Punitive alcohol duty - the UK has the fourth highest taxes on alcohol when adjusted for income

• Indoor smoking ban – including in all pubs and restaurants, and inside vehicles with children

• Plain packaging and a retail display ban for tobacco products

• New restrictions on product placement for ‘less healthy’ foods

• Minimum unit alcohol pricing (Scotland and Wales)

Britain is set to climb even higher when the next index is published in 2027, as new policies such as a ban on disposable e-cigarettes, a generational tobacco sales ban, a new tax on vapes and an unprecedented ban on “less healthy” food advertising, come into force.

Read the full Nanny State Index 2025

Despite ever-increasing restrictions, the report finds that there is no correlation between stricter regulation and better health outcomes like life expectancy, lower smoking rates, or reduced alcohol consumption. A higher score on the Nanny State Index does not correlate with higher life expectancy.

The report is a stark reminder that nanny state policies are not only ineffective, but are often regressive, raising living costs, fuelling black markets, and disproportionately harming low-income households.

Christopher Snowdon, report author and Head of Lifestyle Economics at the Institute of Economic Affairs, said:

“The UK is sinking ever deeper into the quicksand of heavy-handed government paternalism. The idea that adults should be free to choose is fading away and there will be politicians who see the UK’s position on the Nanny State Index as a badge of pride rather than a mark of shame. As in other areas of the economy, high taxes and draconian regulation are impoverishing us all and benefiting nobody.”

Read the full Nanny State Index 2025

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• Public health academics claim industry tactics are uniquely harmful but provide no control groups or comparisons to non-industry actors.

• The same political strategies are routinely used by public health campaigners themselves.

• The 'corporate playbook' is a rhetorical device, not a meaningful contribution to political science.

A new paper from the Institute of Economic Affairs challenges the idea that “unhealthy commodity industries” like tobacco, alcohol, food and gambling follow a uniquely manipulative ‘corporate playbook’. The discussion paper, The Corporate Playbook: A Self-Serving Myth, argues that the tactics these industries are accused of using, including lobbying, coalition-building, media engagement and legal threats, are standard across all sectors, including NGOs and public health groups themselves.

Dr Christopher Snowdon, report author and Head of Lifestyle Economics at the Institute of Economic Affairs, says that the so-called ‘corporate playbook’ is not distinct to controversial industries, but reflects standard public affairs strategies.

Drawing on over a decade of public health literature, the paper critiques its most common framework — the Corporate Political Activity (CPA) taxonomy — and finds that it fails to demonstrate how these strategies differ at all from those used by non-industry actors.

According to the landmark study by Savell et al. (2014), the tobacco industry used six policy-influencing tactics between 1990 and 2013:

• Information (direct and indirect lobbying; commissioning research; collaborating with government)

• Constituency building (forming alliances with other sectors; media advocacy; creating front groups)

• Policy substitution (developing alternatives to regulation, e.g. voluntary codes of conduct)

• Legal (using or threatening legal action)

• Constituency fragmentation (neutralising or discrediting opponents)

• Financial incentives (gifts, inducements and promising future employment to policymakers)

The report includes examples of how public health campaigners routinely use the same six strategies ascribed to industry. These include lobbying policymakers, building coalitions, working with the media, collaborating with government departments, and discrediting opponents.

For example, the 2007 indoor smoking ban, campaigned for by the pressure group Action on Smoking and Health, used five of the six strategies listed in the “tobacco playbook” framework.

As argued by Dr Snowdon, “There is nothing special or unique about the political strategies attributed to the tobacco industry, let alone the other ‘unhealthy commodity industries’.”

The paper points to a double standard in the way political activity is described: “In this literature, it is common to see industry lobbyists described as ‘corporate actors’ or simply ‘lobbyists’ while public health lobbyists are ‘advocates’, ‘professionals’ or ‘experts’.”

Snowdon concludes that the ‘corporate playbook’ framing is not a serious analytical tool, but a rhetorical device designed to exclude certain stakeholders from the policy-making process. It is best understood as an activist tactic, not a serious attempt to advance our understanding of political science.

Dr Christopher Snowdon, Head of Lifestyle Economics at the free market think tank the Institute of Economic Affairs, said:

“Every industry from infant formula to mobile phones has been accused of using the so-called ‘tobacco playbook’ over the years. It is a fatuous insult that has lost all meaning. Academics who have tried to put some beat on the bones of this jibe have only succeeded in providing a definition of normal political activity. Phrases like ‘corporate playbook’ and ‘commercial determinants of health’ should be seen as a red flag for dogmatic activism.”

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