Amid a climate of fiscal caution, Rachel Reeves has made a rare pledge to increase spending — with an additional £2 billion offered for affordable housing projects. The Chancellor is being pushed in this direction by several economic winds: the private sector is struggling to deliver the numbers she needs to get close to the Government’s much-vaunted target of 1.5 million homes, and affordable housing numbers have dropped sharply due to the investment pressures facing the councils and housing associations which build them.

But while £2 billion is better than a cut, it also isn’t nearly enough to move Labour towards its target or to make a dent in the housing crisis which remains Britain’s most pressing domestic policy challenge.

This is because of choices made over several decades. The last five-year period in which England built 1.5 million homes ended in 1972. In 1970, in the middle of this boom, private-sector builders turned out 153,440 homes — not far off the 144,910 they turned out in 2022. But this 1970 figure was complemented by 130,180 homes built by England’s local authorities, and by 2022 this figure had collapsed to just 2,360 after decades of disinvestment by Government and sell-offs under the Right to Buy.

If Labour is serious about hitting its magic number of 1.5 million, then, it must find a way to turn the taps of public-sector housebuilding back on. Unfortunately, Reeves’s latest announcement will only release a few drips.

The Government’s mistake is its fixation on the idea that there is a huge, pent-up volume of private homes which will be released as soon as it stops local authorities asking for bat surveys and newt counts.  The real problem, however, is more fundamental. Most British homes are built by the “Big Six” volume house builders, through a model of “speculative” development — where large sums are paid for land up front, and homes are drip-fed out over a number of years to maintain profitability. As the Competition and Markets Authority (CMA) said last year, this “has seen the gap widen considerably between what the market will deliver and what communities need”.

Labour’s planning reforms won’t change this, as the number of homes built will stay roughly the same. What is needed instead is different housebuilding models and — in particular — social housing, which can be built en masse so long as the necessary funding is in place. Reeves’s latest cash boost, which will fund 18,000 homes, is the third injection of money into affordable housing since Labour took power in July, and shows she is serious about the issue despite her fiscal caution elsewhere.

But the money will not go very far. A combination of vast investment requirements and rising costs means that the councils and housing associations which would typically build the affordable homes are financially crippled at present.

The rate Reeves is offering (roughly £110,000 per home) is considerably more generous than what her Conservative predecessors were willing to offer, but it will still require the providers to put in tens or hundreds of thousands pounds to make the sums stack up. What’s more, 18,000 is a very small percentage of the 150,000 homes needed per year to bridge the gap between the Government’s target and the private market’s output.

The Treasury says this extra money is a taste of what is to come, with longer-term affordable housing funding to be set out in the Spending Review in the summer. If the Government is intent on meeting its target, its ambitions need to grow substantially by then. More social housing is the only way to make a meaningful difference to the way people in Britain experience the housing crisis — and not just for those who need a social home. When social housing is widely available, pressure is taken off private renting, which in turn dampens the appetite of private landlords to buy up existing homes. As a result, it’s easier for first-time buyers to purchase a home.

It is also a better route to growth than fiddling about with quangos and arguing over airport expansions. Last week, 40 economists, including four Nobel Laureates, wrote an open letter to the Chancellor asking her to significantly increase the level of investment in social housing.

There are levers Reeves can pull other than cash. The Treasury could release public land for free to social housing schemes, or set aside longer-term funding. But if she wants to make a difference, she will have to become more ambitious.

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Peter Apps is a writer. In 2023, he won the Orwell Prize for his book Show Me the Bodies: How We Let Grenfell Happen. His latest book, Homesick: How Housing Broke London and How to Fix It, is out now.

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China is trying to catch up with America on artificial intelligence. The Wall Street Journal has reported that Zhipu AI — one of China’s six “AI tiger” LLMs — has released a new model that can rival leading US systems, including Anthropic’s Mythos, in cybersecurity tasks such as pinpointing security bugs. While this marks a milestone in China’s drive to catch up with Western AI capabilities, strong performance on a single benchmark does not mean it has taken the lead. Chinese models still lag behind their Western counterparts in broader capabilities, such as autonomous operation. Skepticism is therefore warranted before resorting to hysterical conclusions, but complacency about the geopolitical implications of China’s AI advances would be an even greater mistake.

On the infrastructure side, Chinese AI is still constrained by access to advanced chips, with American labs way ahead in computing capacity as well as investment. Analysis from earlier this year suggests that Chinese models are likely to be at least a few months behind those in the US. But they are still continuing to make progress, or that the geopolitical importance of AI will be decided only by whose LLM has ventured deeper into the technological frontier. The practical applications of AI, countries’ to capture foreign markets, and the application of AI into the real economy will matter just as much.

Here, China may hold an advantage. As with its dominance across many critical supply chains, Beijing may not need to produce the most advanced AI systems — only those that are affordable and widely deployable. In doing so, it could consolidate global influence by supplying functional, low-cost AI at scale.

Beijing seems to be pursuing exactly that path, developing an AI “open-source” strategy that offers affordable, widely available AI models for companies and individuals to use and modify as they wish. The production of the DeepSeek AI model, which matched the performance of Silicon Valley tools such as ChatGPT at a fraction of the cost for users, created goodwill among Chinese models with developers.

The four most popular models on OpenRouter, an AI hardware platform for developers, are now all Chinese. The goal for China is not only to win the frontier-model race, but to make its systems the default layer of AI adoption across industries and global markets. For most economies, the choice is increasingly between an affordable tool they can deploy now and a more robust one that may be out of reach.

And while the countries adopting Chinese models may be exposed to political pressure and cyber threats from Beijing, safer and more capable alternatives matter little if they are unaffordable. American AI companies are already under pressure to monetize products whose operating costs are rising. If Chinese open-source models become the cheap default for startups, universities, governments and businesses across the developing world, then America’s AI lead will be eroded from below.

Perhaps more concerning for America in the long run is how AI can give Chinese manufacturing even more strength, through the ongoing integration of AI as a general-purpose technology. China’s new Five-Year Plan mentioned AI more than 50 times and includes an “AI+” action plan aimed at spreading AI across the economy.

Beijing has been pioneering automation of its critical infrastructure for years, with promising recent results in increasing warplane production capacity. In that regard, China’s open-model strategy and manufacturing dominance will reinforce each other. Cheap, adaptable models accelerate deployment across the real economy while those deployments generate real-world data and use cases that can feed back into further model improvement.

The United States should not dismiss the importance of its lead in the AI race. That lead worries Beijing, not least because a more automated Chinese economy would also become more vulnerable to AI-generated cyber threats. But nor should Washington assume that China cannot catch up with American capabilities over time.

This AI competition represents part of a broader struggle over tech supply chains and geopolitical influence. Decisions over whether to adopt US or Chinese models could produce a more fragmented global reality, with different regions relying on different cloud providers, chips and security structures. The result will likely be a global economy which is divided into competing spheres, rather than one which produces a single winner.

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Miquel Vila is a political and geopolitical risk consultant focusing on industrial strategy, critical infrastructure and global supply chains.

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