In the mid-2030s, historians may look back and note that, despite numerous COP meetings and agreements like the Paris Agreement, global carbon emissions continued to rise, with significant contributions from countries like India, China, and Indonesia. The world failed to meet the 1.5°C target, making 2°C and even 3°C more likely. In this podcast, Dieter Helm looks at why the COP process has not delivered the desired outcomes, and the immediate imperative to shift strategies to tackle climate change from territorial net zero targets in the UK to more realistic approaches to reducing global emissions.

Renewable energy sources like wind and solar, despite their growth, still contribute a small fraction to global energy supplies compared to fossil fuels. The increasing demand for electricity – in particular, from new technologies and data centres – and the intermittent nature of renewables have led to higher system costs, with nuclear power emerging (once again), but this time as a more viable option for stable and continuous energy supply. Looking ahead, more radical measures, including geoengineering, might be necessary to address climate change effectively. Whatever strategy is adopted, the net zero path being pursued in the UK is unlikely to be successful, as our historians in 2035 will no doubt have discovered.

The UK’s national debt now stands at around 100% of GDP, meaning that the country has borrowed the equivalent of an entire year’s economic output. Under current fiscal rules, the government aims to stop borrowing for day-to-day spending by 2030, but borrowing for investment is exempt from these limits. This creates a loophole: by reclassifying current spending as “investment”, the Chancellor can continue borrowing without breaching her fiscal rules. Even routine maintenance of infrastructure – fixing potholes, school buildings or bridges – is being labelled as investment, when in fact it’s simply capital maintenance. This accounting sleight of hand allows for open-ended borrowing while giving the illusion of fiscal discipline.

Beyond these reclassifications, a deeper fiscal fiddle is the long-standing trend of moving public spending off the government’s books through privatisation and private finance initiatives (PFIs). Infrastructure once funded and owned by the state—like power stations, water systems, and telecoms—has been shifted to private hands, masking the true scale of national indebtedness. While this may reduce the official debt-to-GDP ratio, the financial burden still falls on the public, now as utility customers rather than taxpayers. With rising interest rates and growing infrastructure needs, the cost of this hidden debt is mounting.

What is needed now is honesty, through greater transparency of public finances. Without it, future generations will bear the brunt of the current delusion, and the fact that we are living beyond our means.

The economic outlook for the UK is bleaker than the government would have us believe. The government's ambition to be the fastest-growing economy in the G7 by 2030 faces significant challenges. Starmer and Reeves blame the Conservatives for the current economic mess, citing a £20–£22 billion gap. They argue that, once constraints are addressed, the government will push towards net zero and build 1.5 million new homes, with growth solving public expenditure problems through increased tax revenue. If only…

The IMF predicts 1.1% GDP growth, but even this meagre number overstates the prospects, for three reasons. First, it is flattered by increasing population, with GDP per head lower. Second, borrowing is larger than expected, with a debt-to-GDP ratio already at around 100%, making the cost of debt a significant constraint. Third, the Autumn Budget increased the cost of labour and capital, and savings taxes were increased.

More fundamentally, the government's balance sheet is damaged by consuming capital rather than investing in infrastructure. Core infrastructure is not fit for purpose, and building houses and achieving net zero are not the panaceas they are claimed to be. Accounting ruses such as more PFI-type schemes and treating capital maintenance as if it is investment to push stuff off the government’s books do not make the problems go away. True national debt should add all this back, painting a very different and even more unsustainable picture.

A fundamental rethink is needed to put the economy on a sustainable consumption and sustainable economic growth path, and thereby reduce the burden on future generations.

The economic outlook for the UK is much bleaker than Rachel Reeves, or indeed the IMF, would have us believe. Despite the IMF projections of +1.1% positive growth this year, the reality is bleaker. Adjust for inflation at say 3%, and +1.1% becomes a terrible -1.9%. Adjust for increasing population at around a quarter of a million per year, and the real GDP per head is minus even more.

Government debt is reaching 100% GDP as public spending again overshoots, and that itself is an underestimate, massaged by excluding utility debt, PFI (Private Finance Initiative) and other schemes. Debt interest is now a big drag on the economy. Last autumn’s Budget damaged growth. Raising the cost of labour through National Insurance and now with the workers’ rights legislation, raising the cost of capital by increases in unfunded public spending on the NHS mirrored Liz Truss’s unfunded tax cuts, and increasing the taxes on savings increases reliance on foreign lenders. It's time to face up to this grim reality and make a much more coherent shift to balancing the books and a serious set of economic growth policies.

How have investors managed to turn Thames Water, despite its extraordinary debt, inefficiency and poor performance, into a company that offers rich financial rewards, at least for some? The roots of this began with the privatisation of water in England and Wales in 1989. At the time, the sector was in need of significant repairs to its infrastructure, and privatisation promised renewed assets and improved efficiency. Since then, with weak regulation, practices like gearing up balance sheets and extracting dividends have led some (not all) water companies to undertake financial engineering, without proper regulatory checks on balance sheets and corporate plans. To some, Thames Water appears to have prioritised financial gains, possibly to the expense of capital maintenance and the interests of customers and the environment. It has become the unacceptable face of water privatisation. Regulatory neglect is linked to broader public dissatisfaction and the erosion of the social licence to operate.

Distressed debt players have taken control, with a £3billion loan to keep Thames Water afloat and at very high interest and associated “costs”. They are planning to sell out the equity to a sole preferred bidder, KKR, for around £4 billion. This move raises serious questions about the terms and the interests of the A-class bondholders versus the public interest, about transparency and public accountability. It is likely to be profitable all round, given the value of the Thames Water regulatory asset base is around £20 billion. The irony is that it probably will not save Thames Water, and there is the possibility that it could lead eventually to the nationalisation the government has been so determined to try to head off.

The recent fire at an electricity substation shut Heathrow Airport for 24 hours, causing chaos in the skies and across international airports. In doing so, it highlighted the broader critical condition of the UK’s major infrastructure and its lack of resilience. “Just in time” and “just enough” have replaced secure, ready and prepared.

The incident at Heathrow prompted calls for inquiries, in the search to find someone to blame – not the more obvious economic regulator of the airport, the CAA, but instead the National Energy System Operator (NESO). The key lesson to be learned from this is that robust systems are needed to support modern requirements, including from all the new data centres that depend on continuous electricity supply, before such failures become normalised.

To ensure the future stability of the economy, proactive measures need to be taken to reinforce these essential systems, prioritising investment and innovation that can cope with the evolving demands of our modern society.

Retreats on manifesto promises (electric vehicles and gas boilers), alongside the plans for carbon-intensive housebuilding and airport expansion, as well as renewal of the DRAX subsidy, are putting the UK’s ambition to achieve net zero electricity by 2030 at serious risk. Additionally, the cost of capital for renewable energy projects has increased, making it more challenging to meet the promised targets for offshore wind, solar, and nuclear energy.

All of the above mean that the UK will almost certainly miss the 2030 target. That is before the big new challenge to net zero – defence. The sector is highly carbon-intensive. Think of all those missiles, submarines, tanks and all the infrastructure that goes with the sector. Decarbonising the defence industry is impractical; it relies on firm power and high-grade materials such as steel – no good if your tank needs recharging in the middle of the battlefield. The UK's energy infrastructure, including offshore wind farms and interconnectors, is also highly vulnerable to attacks, highlighting the need for a robust energy defence strategy.

Achieving a strong defence capability requires reindustrialisation, which will in turn mean more carbon emissions and reverse the UK’s progress towards net zero territorial emissions. Integrating defence costs into the energy sector will significantly increase overall costs, necessitating a reassessment of current energy policies.

The UK government and the Climate Change Committee (CCC), with its 7th Carbon Budget, are keen to portray a "cakeism" narrative, suggesting that economic growth and net zero emissions are easily achievable together, without net costs and us having to change our lifestyles. The CCC even claims that it can reduce electricity bills by £700 by 2050. How would it know the prices in 25 years' time? This misleading narrative downplays the significant costs and consumption changes necessary to really address climate change.

The political framing of the net zero targets on territorial emissions rather than consumption-based emissions pretends that when net zero is attained we will no longer be causing climate change. Politicians claim progress while potentially worsening the overall climate impact by shifting polluting industries overseas. Not only is this approach ineffective but it’s also dishonest, as it avoids confronting the public with the real costs and lifestyle adjustments required.

Time for an end to this spin surrounding climate change. We need to acknowledge the difficult realities of climate change and increased costs. Cakeism, “win-win” narratives and the avoidance of inconvenient truths will not lead to meaningful reductions in carbon consumption.

The UK has very expensive electricity for both the industrial sectors and consumers, despite the government’s policies that are intended to deliver the exact opposite. It’s damaging not only the dwindling remaining energy-intensive industries in the UK, but also any potential future ones, including all the AI and data centres.

A quick look at the existing energy generation assets in the UK, and the high energy costs are perhaps not such a surprise. These assets are relied upon to deliver secure, firm power, but fast-tracking the renewables generation route by 2030 means that all the energy sources become intermittent. While Ed Miliband, Secretary of State for Energy and Climate Change, continues to tell us that renewables costs are nine times cheaper, this is far from the reality of what the true system costs of energy are. If they were, the UK would already be outcompeting the US. It obviously isn’t.

In this podcast, Dieter Helm looks at an alternative approach to setting competitive electricity prices, going back to how energy prices were set in the days of the Central Energy Generating Board, before privatisation.

Economic growth is the government’s new mantra, but what exactly does it mean, and how exactly is it achieved? Who is going to pay for it? The government does not appear to have answers – at least, not ones that are credible and likely to create sustainable economic growth.

Growth involves a more than simply announcing big projects: three new runways and nine new reservoirs and the largest theme park in Europe – the government’s aspiration is to announce 150 projects by the end of this Parliament. Despite Tony Blair’s description of politics as being “and/and”, the reality is that it’s “either/or” – there are always trade-offs to be made.

This podcast explores what really lies being these announcements: the real choices and the trade-offs that need to be made, and what actually causes economic growth.