# Won’t get fooled again

_A new Prime Minister, the same script. If Mr Burnham asked me how to get the UK growing again, here is what I would tell him – keeping everything simple._

Neil Woodford · 23 July 2026 · 11 min read

![World's best boss mug](https://cdn.sanity.io/images/v3acfbvo/production/9a2564be63e2f5c99038eed543e5f6212af38d23-3000x2000.jpg?w=1600&fit=max&auto=format)

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_This is a long post – about the length of “Won’t Get Fooled Again” by The Who. Feels like an appropriate song to listen to while you read… enjoy._

_[Embedded media](https://www.youtube.com/watch?v=Jtb10ZwbReY)_

Not surprisingly, the UK’s political class and the media are very focused on Britain’s new Prime Minister and what his new administration will mean for the country and its future. Moments like this, which by now we should all be accustomed to (given Mr Burnham is the fifth UK prime minister in six years), are accompanied by an onslaught of nauseating hubristic guff which, instead of inspiring normal folk, tends to do the opposite. 

Mr Burnham, whilst being more charismatic than his predecessor, has unfortunately reverted to the same script. Mr Starmer promised change, to kickstart economic growth, to secure our borders, to smash the gangs, to take back our streets, to break down barriers to opportunity and to make Britain a clean energy superpower, amongst other things. 

_[Embedded media](https://www.bbc.com/news/articles/c4gjz907pppo)_

Some of his lesser-known promises also included “the biggest expansion of English devolution in a generation” and a target to build 1.5 million new homes over five years. Mr Burnham, in a partial rehash of this ridiculous wish list of nonsense, has now promised to rewire the economy, to reverse four decades of neoliberalism (what is neoliberalism, by the way?), to deliver devolution, to take control of public utilities including water, energy and transport, and to oversee the biggest council house building programme since World War II.

My guess is that he will not achieve any of these lofty but imprecise goals, just as his predecessor failed to deliver any of his. In fact, this latest shopping list of vacuous nonsense strikes me as being even more undeliverable than some of Starmer’s somewhat more prosaic choices. Given that Starmer’s unpopularity was in part the product of the gap between the rhetoric and the results, I found myself wondering why Mr Burnham decided to fall willingly into the same trap. 

Why has he, for example, promised to “rewire the economy”, or to usher in a “new economic model”? Maybe these aspirations are so deliberately imprecise that he will be able to claim to have met his goals, just as Mr Starmer has today claimed that he has left Britain “stronger and fairer” than it was two years ago, regardless of the outcomes.

Encouragingly, in all the hubris there were some deliverable things that Mr Burnham has promised which, although less grand in scale, will at the margin be positives. For example, ending rough sleeping, or getting on with new oil and gas drilling in the UK’s North Sea, or abandoning the daft digital ID plan. If the second of these were part of a new energy policy that reverses the lunacy of his mate [Ed Miliband’s net zero zealotry](https://www.noisecancelling.co/read/fool-me-once), this would undoubtedly be a positive for the economy, but it is hard to see anything else amongst all the hot air that would also benefit UK PLC.

This ultimately is the principal source of my disappointment with Mr Burnham. Like so many of his predecessors, his politics and his desire to appeal to the echo chamber that is his party prevent him not just from doing the things that he could do to make a real difference to the economy and its citizens but, perhaps more worryingly, even from recognising what they are. 

Maybe I am writing him off prematurely, but the omens are not good. My vain hope is that the people he has chosen to advise him on the economy, who include some pretty sensible folk, might just hold sway against his instincts to carry on increasing spending and tax, but I am not holding my breath.

## What I would tell him

As I was thinking about how best to present what I think are simple yet tough solutions to the economic problems confronting the UK economy, I imagined for a moment what I might say to Mr Burnham if I were advising him, rather than criticising his hubristic list of aspirational but meaningless waffle. Here’s what I would say if I had such a role, with the abiding principle of keeping everything simple.

As the chart below shows very clearly, up until the pandemic the US and UK economies had performed broadly in line with each other over the first two decades of this century. The UK was probably less badly affected by the tech bubble bursting, but the US economy recovered faster after the financial crisis, probably because the finance industry was, and still is, a bigger part of the UK economy than it is of the US economy.  _(Neil in the margin: The dot-com crash of 2000–02, when wildly overvalued internet stocks collapsed. Because London's market skews to banks, oil and miners rather than tech, the UK was less exposed to that particular unwind.)_

However, something clearly went very wrong in the UK in and around the pandemic. Quite simply, the UK policy choices at the time were disastrous, and would have been even worse had the opposition had its way, given it advocated for more government intervention and longer lockdowns, which, amongst other things, would have left the economy with an even greater legacy of debt.

![Growing together, then apart](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chartDoc-wgfa-1-c2d9c906-694c08e2c0f4-light.png)

What’s happened since the pandemic, though, is even more illuminating. Whilst the US economy has recovered strongly, the UK has struggled to grow beyond the initial post-COVID period. What is behind this is revealing, and speaks to what has gone wrong in the UK since the pandemic, and of course to what needs to be done to help the economy regain the growth momentum it used to have. I can think of no better chart to explain what has caused the divergence between the US and the UK economies than the one shown below. I have used it before, but I suspect Mr Burnham has never seen it.

![Households: the missing two thirds](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chartDoc-wgfa-2-f854097d-addf804454af-light.png)

The chart shows how the three main elements of the domestic economy have fared in real terms since the pandemic. Clearly, as we well know, government spending has continued to expand after the bloated, arguably reckless, pandemic period. Investment spending has also grown significantly, but consumer spending, the biggest component of the economy, which accounts for two-thirds of GDP according to the OBR, has barely grown at all.  _(Neil in the margin: Consumer spending is the money households in the UK spend on goods and services, such as food, transport, and leisure. It matters because it is the biggest component of the UK economy.)_ _(Neil in the margin: The Office for Budget Responsibility is the government's independent fiscal watchdog, set up in 2010 to produce the official economic and borrowing forecasts that the Treasury builds its Budgets around.)_

In simple terms, if two-thirds of the economy isn’t growing, then it’s nigh on impossible for an economy like the UK to deliver normal headline growth rates, and of course, since the pandemic, it hasn’t.

## Why aren’t households spending?

Once apprised of this fact, if I were Mr Burnham, I would want to know **why households in the UK aren’t spending money**, because it’s not explained by high or rising unemployment, nor by a lack of real wage growth. 

_Find out how the UK economy actually works_

In fact, during this period employment has grown significantly, as have wages across both the private and public sectors (see below).

![Employment is not the problem](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chartDoc-wgfa-3-ee21c50a-28d9d9dcb840-light.png)

![Neither is pay](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chartDoc-wgfa-4-4c8a7f14-8fdda1d22797-light.png)

If I were advising Mr Burnham, this is what I would be spending my time telling him: UK households have over the last six years been going through an extraordinary period characterised by the pandemic, two wars, a period of high inflation and high interest rates, the highest energy prices in the world, high and rising taxation, with an accompaniment of high levels of political uncertainty. 

Is it any wonder that, instead of spending, UK households have been saving like never before, and at a level way beyond anything seen in the US economy?

## Saving like never before

Here is a chart of the UK savings ratio over the period from just before the pandemic to the latest data, with the equivalent US measure alongside. _(Neil in the margin: The share of disposable income households don't spend. A high ratio means people are squirrelling money away rather than consuming — a drag on growth, since one person's spending is another's income.)_

![Britain saves, America spends](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chartDoc-wgfa-5-1d21bd70-2f9724355f60-light.png)

Whilst US household saving saw a similar spike during the pandemic, and a similar but more extreme collapse after the economy normalised (US savings fell to 2.2% of income in June 2022), what has happened since is where the dramatic difference between the UK and the US has really materialised. 

Whilst saving in the US economy has averaged about 4.3% over the period from January 2023, in the UK saving grew disproportionately, peaked at over 10% in 2025, and is currently well above 9%. (The UK average over the same period is about 8.5%.)

To put this into context, last year’s gross household saving in the UK was £189bn (6.7% of GDP, by the way); it was £186bn in 2024 and £110bn in 2023. If, over this three-year period, UK household saving had been equivalent to that in the US, in other words had averaged 4.3% rather than 8.5%, approximately £242bn of higher spending would have added about 3% to UK GDP per year over the last three years, or a cumulative nearly 9%. 

**£242bn** — The spending that never happened, 2023–25

> UK households have absorbed six years of shock: pandemic, two wars, the world's highest energy prices, and rising tax.

This analysis does assume all the additional spending went on domestically produced goods and services, which is probably unrealistic – some additional spending would inevitably boost imports, which of course would dilute the impact – but the point is clear: normalised saving and higher spending would have delivered a transformationally better UK economic outcome over the last three years. If UK saving over this same period had been in line with the average UK saving rate prior to the pandemic of about 6%, then the additional spending would have added about 2% pa to GDP.

You can also see the effect of this extraordinary period of UK household thrift in what’s happened to the UK banking sector, where deposits now exceed loans by over £500bn. Just after the financial crisis, total loans exceeded deposits by just under £700bn.

![The £1.2trn switch: Deposits now exceed loans by £529bn.](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chartDoc-wgfa-6-d310c60a-65e65c6cc080-light.png)

_This chart also includes non-financial company and “other” deposits, but households account for about three quarters of total bank deposits._

As an aside, the contrast between what’s happened to public and private debt in the UK over the last fifteen years is remarkable. In fact, in a very strange but logical example of symmetry, since 2010, when household bank borrowing peaked, UK public debt to GDP has increased by roughly 30%, from 67% to 97%. The £1.2trn transformation in the above measure of private indebtedness, or lack of it in fact (bank loans less deposits, shown in the graph above), amounts to a rather larger 42% of 2026 UK GDP over exactly the same period. In a very odd way, one might be tempted to conclude that it is a very good thing the government has been borrowing and spending, because without it, and against this backdrop of private-sector thrift, the UK economy would have been in a prolonged and deep recession.

I digress; back to the main point, which is that if I were advising Mr Burnham, I would point out that additional household spending, in the absence of excessive saving, would have resulted in more people in work, better productivity and better tax revenue which, in this parallel universe, would have meant that Rachel Reeves didn’t need to put up taxes to fund additional government spending, and would have led to lower inflation outcomes too. 

This scenario would also have delivered lower bond yields and lower debt interest payments for the government, as the gilt market’s concerns over excessive government borrowing would not have materialised. _(Neil in the margin: Gilts are UK government IOUs; their yield is effectively the interest the state pays to borrow. When markets fret about excessive borrowing they demand higher yields, which is the 'risk premium' Neil refers to elsewhere.)_

## The simple, tough answer

So, quite obviously, the key to delivering all this good stuff, Mr Burnham, is to do all you can to catalyse a shift in household saving behaviour, and the release of pent-up household spending will deliver the rest. 

If Mr Burnham was still listening, I would tell him that the way to achieve this would be to **start cutting taxes**, facilitated by **cutting government welfare spending and waste**. This would have the immediate effect of helping to reduce the risk premium in UK gilts but, more importantly, would boost confidence in the household sector by demonstrating that workers would in the future hang on to more of the money they earn than they were expecting. 

Along with lower inflation and lower interest rates, which I believe will follow the end of the war in the Persian Gulf, this combination of fiscal and monetary policy stimulus would deliver the growth outcomes he could only now dream about.

## Why he won’t do it

Tragically, the chances of Mr Burnham doing any of this are close to zero. 

My sense is that, like his predecessor, and despite umpteen lessons of economic history, he harbours a religious-like belief in big government, and the bigger the better. 

This naïve faith in the competence of the state over the private sector is, for me, the hardest thing to fathom, given its long track record of incompetence and inefficiency in pretty much everything: Defence procurement, high-speed rail infrastructure, the infamous £221mn bat tunnel, Hinkley Point C, energy policy, planning, potholes and the NHS all come to mind as recent examples. I also learned today that the Department for Work and Pensions has had its accounts qualified for the 37th successive year due, yet again, to material levels of fraud and error, which resulted in £10bn of overpayments in 2025/26 – that’s about £345 for every household in the UK. Can you imagine anything like that ever being allowed to happen in the private sector? _(Neil in the margin: A 'qualified' audit opinion means the auditor — here the National Audit Office — won't sign the accounts off cleanly, in this case because fraud and error are too large to vouch for. Thirty-seven years running is a remarkable run of failure.)_

Mr Burnham’s regulatory instincts are pretty troubling too. The economy is widely recognised as being excessively regulated, which any objective analysis shows harms growth, but according to the shiny new PM we now desperately need rent controls. I wonder if his new Chancellor might have the minerals to tell his boss that rent controls drive down the supply of rental properties, just as higher minimum wages lead to more youth unemployment. _(Neil in the margin: The standard economic objection: caps below the market price make letting less profitable, so landlords exit or don't build, shrinking supply and worsening shortages over time — the opposite of the intended effect.)_

My fear is that Mr Burnham’s politics will overwhelm any initiative that would help the UK economy to grow and prosper. His blind faith in statism will only increase the harm a bloated, unproductive and inefficient public sector is already inflicting on the private sector and, as a result, UK growth outcomes over the remaining three years of this government will be well below their potential. 

Whilst I welcome the decision to start oil and gas drilling in the North Sea, I am totally exasperated by his appointment of Miatta Fahnbulleh as Secretary of State for Energy etc, who is an avowed climate activist and who previously pushed for the UK to hit net zero on an even more ludicrous timetable than her predecessor wanted. 

The omens are unfortunately not good. That does not mean my faith in better than expected growth outcomes is faltering; it’s just that this opportunity for genuine and positive change will once again be totally missed.

## Meet the new boss

So, no, Mr Burnham is not the Messiah, far from it. In fact, disappointingly, in economic terms he is at best a _very naughty boy_. 

Consequently, all the vacuous guff we are currently being bombarded with will amount to no more than a barrage of meaningless word salad – “re-wiring the economy”, “bringing back hope” or, my current favourite, “usher in a new economic model”. 

Nothing material is going to change. These are just an assortment of words that don’t actually mean anything to ordinary people. I am afraid Mr Burnham is the new boss but, very disappointingly, he is exactly like the old boss, and I suspect will end up just as forlorn and just as loathed.

> Meet the new boss
Same as the old boss
>
> — The Who, Won't Get Fooled Again