Starmer’s make-believe reality – Mar 17 2026

Good afternoon.

This week, Jeremy Warner argues Starmer’s claims of “national resilience” are nothing more than mere fantasy, whilst Ambrose Evans-Pritchard says Britain’s energy situation is not complete doom and gloom.

Starmer is delusional if he thinks we can afford an energy price bailout

Sir Keir Starmer embraced Trump-esque delusions with his speech on Monday Credit: Brook Mitchell/AFP

Jeremy Warner

Assistant Editor

It has become almost standard practice to mock Donald Trump’s various conceits – among them that the US economy has never been hotter, inflation is tamed, the war is going brilliantly and American hard power is once again the envy of the world.

Yet he’s by no means alone in his delusion. The 47th US president’s make-believe is plainly infectious, because we got a dose of it on Monday from our very own Sir Keir Starmer, even if in somewhat less bombastic form.

Because of Labour, said the Prime Minister, the British economy is well placed to weather the storm.

He said: “Since the election, we have built up our national resilience … we are delivering the biggest uplift in defence spending since the Cold War … we are investing in clean power to boost our energy security … and protect working people from volatile fossil fuel markets.” And so on.

Resilience? Where did he get that idea? Given that he has accelerated the decline in Britain’s North Sea oil and gas resources and done virtually nothing to reduce the nation’s dependence on imports for most necessities? The way things are going, we’ll soon be facing petrol rationing.

But most surprising of all was Sir Keir’s claim that stability has been restored to the public finances, making Britain more resilient to economic shocks. Really? Try telling that to the bond markets.

Unlike most other European countries, where spreads with German Bunds have narrowed slightly over the past year and a half, the difference in yield has widened in the UK.

Since the start of the latest Gulf war, moreover, the yield on 10-year UK gilts has risen all the way from 4.23pc to 4.67pc at the time of writing. Other European sovereign bond yields have risen too, but not as much, and even the Italian equivalent is a full percentage point lower than the 10-year gilt.

These variations may not sound like very much, but they make a great deal of difference to the shape of the public finances. Even a one-percentage-point increase in gilt yields adds around £1.3bn a year initially to the Government’s debt servicing costs, according to estimates by the Office for Budget Responsibility (OBR) and £12bn a year five years out relative to forecasts.

This financial year, the Government will shell out around £110bn to bondholders in coupons, a sum equivalent to more than a third of total welfare spending. Nor is there any relief in sight.

According to OBR projections, this spending will rise to nearly £140bn annually in five years’ time – and that’s assuming interest rates behave in the relatively benign way that ruled before the outbreak of the war. There is no such certainty now.

The idea that all is now fine and dandy in the public finances – so much so that Britain can afford, as implied, to do whatever seems necessary to protect households from higher fuel costs – is pure fantasy.

There is, of course, a perfectly reasonable macroeconomic argument for support of this kind. Sharply higher fuel bills mean less money in people’s pockets for spending on everything else.

Even the anticipation of such a shock might cause households to rein in spending and save their hard-earned money instead. The consequent fall in demand might then become self-perpetuating, triggering a recession and sharply rising unemployment.

But if households know they are protected, they are less likely to alter their spending habits, and the shock is therefore more easily absorbed.

Unfortunately, the UK no longer has that luxury. Three such bailouts in a row – first the financial crisis, then the pandemic and then the energy price shock caused by Russia’s invasion of Ukraine – when combined with the apparent inability of successive governments to impose meaningful fiscal consolidation, have left the public finances in a state of ruin.

As a share of UK GDP, public debt has nearly tripled in the past 20 years, and, on a comparable basis, is double the advanced-economy average.

Since coming to power, Labour has further added to this shameful legacy.

Rachel Reeves, the Chancellor, raised public spending by around £70bn a year in her first Budget in October 2024, or by around two percentage points of GDP, such that public spending is now some four to five percentage points of GDP higher on an ongoing basis than it was before the pandemic.

This has only partially been paid for by increased taxation. Anything up to half of it comes from enhanced borrowing.

What Starmer may mean when he boasts of having stabilised the public finances is the further application of the well-seasoned technique of making the public finances look better than they really are by further loosening the fiscal rules.

This has enabled the Chancellor to claim additional fiscal headroom, an entirely spurious measure of fiscal space based on forecasts that will never be met. It’s easier to get the ball in the back of the net when the goal posts have been widened to virtually the entire width of the pitch.

But none of this fools financial markets, where Britain’s fiscal predicament is judged to be amongst the worst in the developed world. The main reason we remain relatively unpunished is Britain’s impressive record of creditworthiness. Unlike virtually everyone else, the UK has never defaulted. Sadly, there is always a first time.

“My answer is clear,” said Sir Keir on Monday. “Whatever challenges lie ahead, this Government will always support working people. That is my first instinct – my first priority – to help you with the cost of living through this crisis.”

Also clear is that the bond markets will not tolerate a repeat of Britain’s blank cheque approach to the last fuel price crisis three and a half years ago, when nearly £50bn was squandered protecting households and businesses from rising energy costs. It might have been even higher, had not prices quickly come tumbling back down.

The Government can only pray that prices follow a similar trajectory. This is still the most likely outcome – that Trump settles with the Iranian regime, declares victory and moves on to some new way of throwing his weight around. Hello, Cuba?

On the other hand, the US is self-sufficient in oil and gas and is therefore better able to withstand a prolonged closure of the Strait of Hormuz than other major consumer economies such as the UK. There is no way of knowing with Trump.

There was £53m of additional spending announced on Monday to help some of those in hock to cowboy heating oil salesmen, unhindered by the energy price cap. There will also have to be help for energy-intensive industries if they are to survive a prolonged siege. Wrap up warm this winter, because there’s no money left for that kind of thing.

But Sir Keir will not be able to do much to satisfy his “first instinct” even if he thinks it appropriate. Britain’s welfare habit has snaffled the lot.

Britain should max out on both renewables and North Sea oil and gas

The Tories should not have taxed the North Sea drilling industry to near death and Labour should not have indulged in a ban on new fields Credit: Frode Koppang/Alamy Stock Photo

Ambrose Evans-Pritchard

World Economy Editor

Most debate about energy in Britain degenerates instantly into a culture war between conflicting certainties, compounded by the national pathology of clutching at straws.

Electrotech will win the global energy contest and will destroy the legacy system of fossil fuel in the end. It would therefore be fatal for this country to bow to those who want to keep things just as they are – a powerful emotion, one that politicians should handle with care.

But, right now, we are halfway between the old and the new energy order. That leaves us in an uncomfortable position – neither molecule fish nor electron fowl – as Gulf War III hurls another oil and gas shock our way.

The UK has a chronic balance of payments deficit. It is leaking wealth on fuel imports at a pace of nearly 2pc of GDP a year, even in good times. The sane economic choice is to exploit everything we can from our one outstanding energy resource: the North Sea.

That means capturing the superb wind conditions on the Dogger Bank and the Hornsea cluster with a capacity factor reaching 50pc to 60pc. It also means extracting as much oil and gas as the free market will deliver from the remaining – highly depleted – hydrocarbon fields.

The Tories should not have taxed the North Sea drilling industry to near death and Labour should not have indulged in the gesture politics of a ban on new fields.

Labour’s move has backfired badly, feeding a legend that this country is depriving itself of a great energy resource out of Left-wing ideological militancy.

My advice to Sir Keir Starmer is to ditch these restrictions, cut taxes on the UK’s oil and gas industry to a globally competitive level and let the price signal determine whether the cost of production is low enough to make it worthwhile investing..

A study for Offshore Energy UK by Westwood Global Energy estimates that a “no constraints” push could almost triple extraction from the UK Continental Shelf compared to the current agony of terminal run-off, ultimately bringing in 7.5 billion barrels of oil and gas equivalent.

That is a contested opinion. The North Sea Transition Authority has much lower estimates. I suspect that Westwood is right, though we are never going to be like Norway with the crown jewels of the Johan Sverdrup and Troll fields.

The new technologies of 4D seismic imaging, smart drills, longer laterals and AI can give a new lease of life to old fields.

To the extent that this allows the UK to displace liquefied natural gas from the US – with a horrendous CO2 and methane footprint – it is a net benefit to global decarbonisation.

Needless to say, it takes years to revive a moribund industry. Reopening the North Sea would not make any difference to the current crisis, nor any difference to gas and petrol prices in the UK, since the volumes are too small to shift the traded global market.

Companies will decide whether to invest based on futures prices, not on Gulf War III prices. Europe’s benchmark gas contract for the winter of 2028 is €25 per MWh, or £21, less than half the current levels. Brent oil futures contracts for 2028 are just over $70, roughly the average for the last half-century in real terms.

My guess is that Britain could meet most of its oil and gas needs for another 20 years from the North Sea, provided that we also cut consumption, and it all helps to avert economic decline. It would force the pro-fossil culture warriors to put up or shut up.

Meanwhile, Britain’s switch to home-made renewable power is going tolerably well – you might even call it a success story – and the country is already a notch less vulnerable than it was four years ago when Russia attacked Ukraine.

Britain is better shielded against the full shock of the Iran war than most of Asia and parts of Europe, though you would hardly know this from the catastrophist hollering in British politics.

Natural gas accounted for just 27.7pc of the UK’s power generation over the 12 months to March, down from 41.8pc in early 2022. The figure will fall to around 10pc by the end of the decade as wind and solar are rolled out at a galloping pace.

Donald Trump may hate offshore wind, but the latest AR7 renewable auction is regarded in global circles as something of a coup. It won bids of 14.7 gigawatts at a strike price lower than critics had foretold: £89-£91 per MWh for offshore (2024 money), £72 for onshore and £65 for utility solar.

Gas set the price of UK electricity 97pc of the time in 2021. The marginal setters were often the least efficient old clunkers with sky-high costs. The UK Energy Research Centre estimates that this figure was down to 90pc last year and will be near 60pc by 2029.

This will level off the egregious spikes that have cursed our system, ending an anomaly that has made the UK the sick man of Europe’s electricity network. We will need gas plants for winter wind doldrums, but in diminishing volumes.

The four interconnectors from Scotland to England will ultimately tackle the absurdity of paying wind farms in the North to curtail power while paying gas plants in the South to fire up, sometimes paying through the nose twice to the same utility. No wonder these bandits love the status quo.

Britain started its nuclear revival earlier than some of Europe’s latecomers and will see the benefits earlier, though nobody should fool themselves that Hinkley Point or small modular reactors will make cheap electricity.

They offer reliable baseload power. They reinforce our energy independence. They create jobs and technological spin-offs in this country rather than in Texas or on the wrong side of the Strait of Hormuz.

Essentially, the UK is already well on the way to an autonomous electricity system that is largely insulated from anything that happens in the Gulf, or, for that matter, in Trumpland.

We are not doing badly in road transport. There are now 1.9 million electric vehicles (EVs) on the roads, displacing a net 75,000 barrels a day of oil. EV sales reached 24pc of the market in February despite incessant propaganda from one big manufacturer struggling to compete.

The UK’s giant and inexplicable failure has been to impose endless levies on electricity bills while protecting gas consumption, artificially making it four times as expensive. This has been to rig the price signal against electrification.

That is a key reason why the UK still relies so heavily on gas for home heating and why it missed the heat pump wave sweeping developed Asia and Europe, where there is a near-exact correlation between heat pump take-up and the electricity-to-gas ratio. Ed Miliband has been running energy policy for almost two years and has still done little about it.

But the overall picture is that Britain is no longer at the full mercy of episodic oil and gas supply crises. It does not need another £80bn energy bailout, thankfully, given that the gilt market will not fund further indiscriminate subsidies at a viable borrowing cost.

The US arguably faces greater political difficulty, even though it is a net global exporter of oil and gas.

Brent crude at today’s price of $103 may enrich the oil belt, but it is further pauperising tens of millions of Americans already facing a cost-of-living squeeze, and the price could soon be $150 if Iran keeps the Strait of Hormuz closed for another two or three weeks, leading to permanent damage to Gulf oil fields.

Americans drive twice as far. Their cars have half the fuel efficiency. The average price of petrol at the pump was $2.90 in mid-February and is heading for $4.20 in short order.

Trump could ban the export of US crude to try to force down prices – and he may well do that to punish the world for refusing to clean up his war – but all informed analysis is that this would make matters even worse for the US itself.

Schadenfreude is a base emotion, and war should never be trivialised, but it is a condign punishment for Trump to learn that the real world will not bend to his senile fantasies.

The best of Jeremy and Ambrose this week

Prices at the pumps are rising, threatening another cost of living crisis Credit: Paul Ellis/AFP via Getty

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