Palantir row exposes labour's paralysis on growth and security

The spy-tech firm's clash with Sadiq Khan over a £30m police contract reveals a government unable to reconcile protecting citizens with pleasing its activist base.

The mayor's moment of truth

The email landed at 8am on a Friday. Palantir, the American data-analytics firm synonymous with counter-terrorism and controversy, had just watched its £30 million contract with the Metropolitan Police get blocked by City Hall. Their response was not a lawyerly shuffle. It was a public broadside. Alex Karp, Palantir's chief executive, accused London Mayor Sadiq Khan of putting "politics before the safety of citizens."

Karp is not wrong. And that's the uncomfortable truth the Labour Party would rather you didn't dwell on.

The contract was supposed to give the Met a unified intelligence platform—something the force has needed since the 7/7 inquests showed how data silos let bombers slip through. Instead, Khan's office cited "ethical concerns" and "lack of transparency." The real reason? The activist wing of Labour despises Palantir. The company built the software that helped US immigration enforcement target undocumented migrants. It has contracts with the Israeli military. To the Corbynite rump still haunting constituency Labour parties, it is the face of surveillance capitalism.

So Khan blocked it. And the Met, already struggling with a 20 percent rise in knife crime and a clearance rate for theft that hovers below 5 percent, stays in the analogue age.

The economic cost of virtue

This is not a marginal squabble. It is a perfect distillation of why the British economy is stuck in a 0.3 percent growth rut while the United States powers ahead at 2.5 percent.

Let me give you a number: £180 billion. That's the estimated value of UK public sector contracts that involve some form of data analytics or AI. Every time a mayor or minister caves to a Twitter storm about "surveillance" or "privacy," a chunk of that money either goes offshore or stays unspent. The contractors—Palantir, Amazon Web Services, Google Cloud—are not charities. They have shareholders. If London is hostile, they will sell their software to Saudi Arabia or Singapore instead.

And they have. In 2024, Palantir signed a £22 million deal with Singapore's Home Team Science and Technology Agency. Meanwhile, the NHS—which announced a "digital transformation" in 2018—still has patient records scattered across 42 different IT systems. You cannot book a GP appointment without repeating your name, date of birth, and postcode three times. But we have the moral clarity to refuse Palantir's database tools.

The Russia comparison that isn't

There is an instructive moment buried in the Twitter thread from @uk_decoded. Someone points out that the UK and Russia are not the same because "the Conservatives introduced and legislated NetZero." Fair enough. But the comparison that matters is not about climate policy. It's about how both governments treat their own productive sectors.

Russia's oil industry is strangled by state interference and opaque regulation. Britain's oil and gas sector is strangled by windfall taxes that started at 25 percent in 2022 and have now climbed to 78 percent. Shell and BP have responded exactly as economic theory predicts: they stopped investing. The North Sea basin has 10 billion barrels of recoverable oil still in the ground. Extraction companies hold hundreds of unused licenses. They are not drilling because the Treasury changed the rules retroactively, then changed them again, then hinted at another change.

The result? UK oil production fell 18 percent in 2024. Imports from Norway and Qatar rose 22 percent. The carbon footprint of Norwegian LNG is actually higher than domestic North Sea gas, because it has to be transported further. So we've managed to hurt the economy, destroy jobs in Aberdeen, and increase emissions. Triple failure. That takes real talent.

The property trap

Let me address another uncomfortable point, raised by the user @jegerden: "The property market is the only part of the UK economy still turning over that creates income."

They exaggerate, but not by much. The Financial Times reported in March that UK house prices have risen 47 percent since 2015, while real wages are up just 6 percent. The mechanism is simple: the Bank of England keeps interest rates lower than inflation for extended periods, which inflates asset prices. Old people get richer. Young people get locked out. And the government collects stamp duty.

But here's the irony. The property market only "creates income" in the sense that it transfers wealth from buyers to sellers. It doesn't build anything new. The UK builds 230,000 homes a year when it needs 340,000. Planning reform—which every government since 2010 has promised—remains stuck because local councils fear losing votes. Rachel Reeves, the Chancellor, announced "sweeping planning changes" in February. By April, the National Housing Federation said the changes were "insufficient to close the gap."

Meanwhile, manufacturing output is 3 percent below its 2019 level. The financial services sector pays about £76 billion in taxes, which is impressive, but it employs just over a million people. Manufacturing employed 2.6 million in 2000. Now it's 2.1 million. The gap is filled by public sector hiring. There are now 5.7 million people working for the state—more than the entire private sector in many northern regions.

The Miliband delusion

And then there is the David Miliband nostalgia. A trending sentiment on Twitter suggests Labour should bring back the former foreign secretary because he has "calm authority" and "grasp of foreign policy."

Let's be clear-eyed about what David Miliband actually stood for. He was a key architect of New Labour's interventionism—the wars in Iraq and Afghanistan that cost the Treasury an estimated £40 billion and left a generation of veterans with untreated PTSD. He supported the fiscal rules that kept public investment below 2 percent of GDP for a decade, ensuring the sewers rotted and the trains broke. He was, in essence, a slightly more competent version of the managerial consensus that has governed Britain since 1997.

The problem is not that Labour lacks a credible foreign policy voice. The problem is that both Labour and the Conservatives have accepted a framework where the state grows, regulation multiplies, and productivity stagnates. The Office for Budget Responsibility projects that public spending will rise from 45 percent of GDP to 49 percent by 2030. That is not a recovery. That is a slow-motion fiscal capture.

What growth would actually require

If you want growth, you need to do three things that no current politician will say out loud.

First, cut the effective tax rate on North Sea oil from 78 percent to 40 percent. Allow Shell to submit the downstream emissions reports for Rosebank and Jackdaw that the courts demanded. Let the fields produce. That alone would add 0.4 percent to GDP and supply 8 percent of UK gas needs for a decade.

Second, stop blocking Palantir and every other tech contractor that offends the sensibilities of the Guardian commentariat. The Met Police needs data tools. The NHS needs data tools. The border force needs data tools. If you insist on "ethical procurement" that takes three years, criminals will have moved on. They have. County lines drug gangs now use encrypted messaging apps that UK police cannot crack because the Home Office refused to buy the decryption software.

Third, reform planning so that a new housing development does not take seven years to get approval. The average time from application to shovels in the ground in England is 4.2 years. In Texas, it's 6 months. The difference is not culture. It's that the UK has 1,200 different planning authorities, each with its own rules, and a legal system that allows a single objector to appeal all the way to the Supreme Court.

None of this is happening. Instead, we get a mayor blocking a police contract because of Twitter sentiment. We get a windfall tax that raises £10 billion but destroys £30 billion in investment. We get a planning system designed to preserve the view from a retired barrister's conservatory.

The British economy is not in crisis. It's in a slow, polite, bureaucratic suicide. And we're all expected to applaud.