The Inflation Reduction Act (IRA) is probably the biggest thing that President Joe Biden has done in office. But don’t be fooled by the name — it’s not about reducing inflation but, rather, about directing a massive package of subsidies to American industry.

The EU isn’t happy about this at all. Its own industries are already suffering the consequences of Putin’s war, so the last thing that Europe needs now is a wave of unfair competition from the United States. 

In all of this the UK has been strangely quiet — until today, that is. Writing for the Times, the Chancellor of the Exchequer, Jeremy Hunt, appears to side with the Europeans. Referencing Biden’s IRA he insists that Britain’s approach will be different — “We are not going toe-to-toe with our friends and allies in some distortive global subsidy race.”

In effect, Hunt is accusing Biden of stabbing Europe in the back. However, his arguments are both hypocritical and incoherent. Far from rejecting the use of subsidies, the Chancellor is promising to use state investment to “back the industries of the future”. In other words, the difference between the Biden policy and what Hunt talks up as “the British way” is largely semantic. Like terrorists and freedom fighters, one man’s “distortive subsidies” are another man’s “strategic public funding”.

What the Brits and Europeans are really objecting to is not the nature of Biden’s subsidy programme, but its scale. While UK and EU credit cards have been maxed out, the US is taking full advantage of the dollar’s status as the world reserve currency — and borrowing to invest. 

Hunt claims that the British model is about “clearing the path” so that private capital can flow into the “green industrial revolution” — but that’s what the Americans want, too. Indeed, what Europe fears is that the world’s private capital is going to flow to the US instead — levered in by a clearly higher level of ambition. Hunt’s “British way” looks like an awful lot of cope. 

Further, his argument is contradicted by what he says about nuclear power. “Last year I announced the first state-financed investment in nuclear for a generation,” he boasts. But that’s not an achievement: it’s desperation. This is an outdated technology that is so notorious for its cost overruns that the market won’t touch it with a bargepole — unless, that is, the taxpayer is put on the hook should anything go wrong. This is exactly what the UK Government has now agreed to on our behalf. We’ll also have to pay a premium price for the electricity generated. Nevertheless, the Chancellor has the cheek to complain about distortive subsidies. 

If there’s one thing less convincing than Hunt’s free market rhetoric, it’s his patriotic language: “We will target public funding in a strategic way in the areas where the UK has clear competitive advantage,” he promises. But if the UK has an advantage in nuclear power plants, then why haven’t we built one in a generation? And why call the UK Government delivery body “Great British Nuclear” when the technology is French? 

Say what you like about Joe Biden and his subsidy programme, at least it’s been deliberately designed to support homegrown innovation. If only we had a government that was as ruthlessly focused on the British interest. 

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Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.

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