Why Burnham’s Finnish Fairytale of Public Ownership Is Risky

British politics feels stuck in an ideas drought, so any drip of novelty gets mistaken for rain. That is why Labour MP Clive Lewis’s case for Andy Burnham’s economics attracted attention. Instead of Sir Keir Starmer’s dreary managerialism or another Labour left sermon about greed or austerity, Lewis’s talk about how public control could cure our economic woes felt surprisingly fresh.

Lewis’s case has three parts. First, in today’s world of military, cyber and hybrid threats, a country’s resilience depends not just on defence hardware but on social solidarity. Finland, he says, shows that you can foster a resilient national community by having the state ensure housing is available, energy affordable, services function and institutions command trust.

Second, the British state has spurned this approach, instead subsidising scarcity and failure. That includes vast housing support for high rents, energy subsidies amid international shocks, and huge debt interest payments. The culprit, Lewis thinks, is privatisation, which stripped governments of tools to control important costs.

His third claim is most relevant today. Bond markets should not go into meltdown over plans for higher spending on social services, council houses, or nationalisation, he says, because this will deliver more productive capacity. Burnhamism as economics, then, is apparently about public control of essentials plus an active state helping supply life’s basics.

This is interesting. Labour originally thought simply not being Conservatives would provide a growth dividend and lower borrowing costs. Given growth has slowed to a halt, inflation was stubbornly above target, even pre-Iran conflict, and a sharply higher tax take has not stopped borrowing being revised up in every year before 2029–30, that competence dividend theory is now dead.

In the aftermath of last week’s local election results, though, most other Labour tribes with viable leadership pitches tacked to boring tropes on economics. Starmer advocates bailing out steel companies and deepening EU ties, while Angela Rayner wants a mish-mash of bash-the-rich populism, property interventions and a splash of planning reform. No wonder gilts have sold off amid the turmoil, given inflation fears and investor anxiety about fiscal loosening.

There’s real truth to Lewis’s claim that Britain subsidises scarcity, too. Housing support is now about £37 billion a year. Direct energy bill support since 2022 cost about £44 billion. Childcare support is heading towards £10 billion. Add a growing welfare system increasingly asked to offset weak wages, expensive basics and malfunctioning services, and you have a government forever writing cheques after other policies made people’s lives more expensive.

But the idea that public ownership will deliver both resilience and lower living costs requires huge leaps of faith.

Is the Finnish willingness to defend their homeland really because of a competent, ownership state? Or is it because the country is smaller economically, has conscription, faces an 830-mile border with Russia, and has a significantly more homogenous population? That country’s broad tax base raised 42.2 per cent of GDP in 2024, compared to our 34.5 per cent. This is not “tax the rich and nationalise the utilities”. It is a different high-tax social contract entirely.

Lewis’s bigger mistake is to treat our subsidy bill as proof that Britain lacks public ownership, when it is mostly proof that Britain lacks supply. Housing is expensive in large part because of land rationing. Energy is expensive partly because of net-zero mandates, planning obstacles, grid delays and nuclear regulation. Transport projects are crippled by consultation, compensation, design churn and judicialised planning, as seen with HS2. These are state enforced bottlenecks, not evidence private companies deliberately restrain output or limit investment to raise prices. Most government projects face the very same cost pressures.

What problem, then, does public ownership solve? It changes who receives profits and bears losses. Yet it does not abolish scarcity. A public energy company still needs generation, transmission, consents, engineers and capital. A public housebuilder still needs land, builders, materials, infrastructure and planning permission. A public transport system still needs drivers, rolling stock, maintenance and subsidy discipline. Nationalising a farm does not itself grow more food.

It’s trivially true, I suppose, that public ownership provides more direct levers of control over costs. But does it provide the incentive? Stagnant public sector productivity hardly instils hope that ministers know better than profit-seeking firms how to squeeze costs down.

A survey of privatisation in the Journal of Economic Literature by William Megginson and Jeffry Netter found that private ownership, in general, improved companies’ efficiency. The soft-budget-constraint argument helps explain why. Politically protected enterprises expect rescue, so failure disciplines them less. Ministers hate closing operations, raising fares, or cutting staff after all.

More likely then, public ownership will initially mean subsidising lower prices without sustainable cost savings, thus exacerbating shortages. Delivering more capacity will then require much, much more public sector investment from taxpayers, putting this infrastructure in direct competition with hospitals, schools, welfare and other calls on public borrowing.

Water is a useful warning against Burnhamite nostalgia on this. Today’s private model is a disgrace in several respects. But the pre-privatisation regional water authorities severely underinvested in water quality. Privatisation and regulation were no panacea, as today’s sewage scandals show. But the old model did not deliver the sort of infrastructure abundance Lewis expects.

All this is why I doubt bond markets will shrug at Burnham’s proposals, as Lewis hopes. As fellow columnist Simon French has written for Panmure Liberum, gilt investors will price in expected higher debt issuance to backstop nationalisations and raise public investment, but will surely discount fairytales of better future managerial capability and politicised investment choices boosting growth.

The bigger risk is that what investors hear is money-is-no-constraint rhetoric and dreams of Finnish policy without a mandate. Then they may draw a more damning conclusion, that Burnhamism sees both financial and political constraints as irritants to be cast aside.