UofG Centre for Public Policy

Blog by Dr Maha Rafi Atal

On 22 June 2026, Keir Starmer became the sixth Prime Minister to leave office in a decade. The timing had a certain historical irony, on the eve of the ten-year anniversary of the Brexit referendum, which ended the term of the first of these doomed premiers – David Cameron. That the decade since the referendum has been a decade of unusual political instability is not a coincidence: it reflects the failure of political leaders in both major parties to reckon with the fundamental economic contradictions in the UK economy, which Brexit has exacerbated.

In particular, the British public wants a level of public services that its stated preferences on taxation and immigration cannot sustain. A modern welfare state requires sustained public investment. That investment can be funded in two ways: through taxation, or through a growing economy, which itself depends substantially on labour supply and productivity. Immigration expands the working-age population, increases tax revenues, and fills critical gaps in public sector workforces — including, most visibly, the NHS.

Cutting immigration without raising taxes to compensate removes resources from both sides of the equation simultaneously. Having made a manifesto pledge not to raise the headline rates of income tax, the Starmer administration attempted to raise revenue through more targeted (but less efficient) forms of business taxation, and the results were predictable: public services are not recovering at the rate promised, and public satisfaction continues to fall.

This contradiction did not originate with Starmer. It was baked into the politics that produced Brexit. The Leave campaign drew support from communities experiencing real economic decline — the loss of manufacturing employment and the deterioration of public services. But the anti-immigrant political narrative attached to those grievances has made the underlying economic complaint impossible to address, since immigration is a necessary factor of economic growth in an aging society.

The trade dimension of Brexit has followed a similar pattern. The promise that Britain, as an independent trading nation, would command special terms from partners who previously dealt with it as part of the European single market has not been borne out. The UK is a mid-sized power on the edge of the North Atlantic, and without the combined weight of the European market, its leverage in bilateral negotiations is weak. The trade deals concluded since 2021 have not compensated for the new frictions with the EU, which remains the UK's largest trading partner by some distance. Indeed, regulatory divergence from the EU makes it harder to attract investment into 21^st century forms of manufacturing like green energy infrastructure.

There is a longer historical dimension to this contradiction. Britain emerged as a world power in the 18th and 19th centuries in large part because it found a structural solution to the constraints of its small size and limited domestic market: the construction of a vast, globally integrated imperial trading system. Empire gave British capital privileged access to labour, raw materials, and consumers on a scale that the home islands could never have provided. That market is gone. Yet Britain has never fully absorbed what that means for its structural position. The post-war period was managed through a combination of American patronage and European integration — each of which provided something of a substitute for the imperial market's functions. Brexit was a rejection of the last of these substitutes, without a plan for what would replace it.

The economic options available to a post-imperial Britain that wishes to maintain high-quality public services are not mysterious. They are the same options available to comparable European economies: a large, mobile labour force funded partly through immigration and the taxes that migrants pay, or a higher burden of domestic taxation, or some combination of both. Notably, those European countries that have opted to deliver public services through higher domestic taxation rather than immigration impose that taxation on median earners and not just the most affluent. In other words, schoolteachers and police officers in countries like Denmark pay the tax rates that investment bankers pay in the United Kingdom.

What is not available — and what no competent government can deliver — is Scandinavian levels of welfare provision sustained on American levels of taxation, with immigration simultaneously reduced. Yet since the Brexit referendum, this has been the quixotic demand of the UK electorate.

Andy Burnham is a politically gifted communicator, and so he may prove more durable than the line of premiers before him if he indeed assumes the role in a few short weeks. But the Gordian knot he inherits is the same one that flummoxed each of his predecessors. Until UK political leadership is willing to make an explicit case to the public that they will need to accept either higher broad-based income taxation or higher levels of immigration, the cycle of disappointed expectations and failed governments is likely to continue.

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First published: 6 July 2026