Labour has a mountain to climb. Really?
By Alex Everest House
Sir Keir Starmer has got a mountain to climb. Or has he? The Labour Party will make haste to claim that their inheritance has been the worst of any government for some time, with the economy in tatters, schools crumbling and the NHS on its knees. Indeed, GDP growth remains sluggish (0% in July, according to the ONS), pupils of schools with RAAC issues continue to be largely unsupported and NHS waiting lists are up to more than 7.5mn. Sir Keir argued in an interview with Laura Kuenssberg that his government is “going to have to be unpopular,” perhaps an unusual electoral strategy given reports that the Labour Party has already begun planning for 2029.
But history shows that when the party of government changes, they get the messy stuff out of the way first. People remember Margaret Thatcher for her classic ‘iron lady’ manner and determination to pursue a free-market economy as far as possible, few remember she did not begin these changes until the 1981 budget – two full years after her election – and before that had a cabinet composed of people who were not even fully on board with such ideas. Sir Tony Blair, remembered at least partly for a dedication to domestic social justice and equality, began his premiership with cuts to welfare payments. David Cameron may have wanted to be remembered for social change and progress in education under the coalition government, but his austerity campaign is widely believed to have led directly to the devastation of public services, and a party perceived to be one of the elite.
And so Sir Keir’s moneymoon begins; using a period of heightened optimism amongst the public to hang the dirty laundry to dry and claw back as much money as possible from departments, in the hope that it will not affect the polls too much. Besides, this early into a government, they rarely matter anyway. So is this just the same old same old, will this Labour government eventually pivot to a positive message, or are we stuck with misery for a long five years? Perhaps a look at the issues that will come to dominate the next half decade will give us an insight into what might be to come.
The economy
Rachel Reeves, the nation’s new chancellor, did not waste much time before announcing on 29th July that she had opened the Treasury’s books and discovered a £22bn black hole in the finances. It was a move that was no secret in the halls and corridors of Westminster, with the Labour Party refusing to rule out difficult changes repeatedly during the election campaign, but even party activists were stunned when Ms Reeves duly announced she would means-test the Winter Fuel Payment, by restricting it only to those pensioners who are also in receipt of pension credit, effectively cancelling payments for around 10mn pensioners. It has not been a popular move even within the party, with some 52 Labour MPs abstaining from the vote and a further one voting against the government altogether.
Yet even the Office for Budget Responsibility (OBR) found itself stunned at how several billions of pounds could not be accounted for on the books, with extra costs for asylum claims taking up around £6bn extra. So is the economy really in as bad a shape as the government claims?
Whilst GDP growth has been sluggish, some other factors suggest things could get a bit brighter in the future. Unemployment is much lower than in previous decades, at 4.1% in July, which provides some hope that growth could eventually start to rise again. Similarly, positive signs from business about a renewed relationship with government could release extra growth. But, of course, these are largely just hopes.
There is frustration amongst experts that not enough is being done to make actual economic choices and stimulate growth
Labour may be planning to “fix the foundations,” but there is frustration amongst experts that not enough is being done to make actual economic choices and stimulate growth. Paul Johnson, director of the Institute for Fiscal Studies (IFS), penned a column in The Times which was scathing in its criticism of the government’s handling of its inheritance; he described the situation as a “maelstrom of denial, obfuscation and avoidance” which could only be cleared by being frank with the public and making political choices.
Such political choices may well be on their way, but not ones heard trailed in the election campaign. Ms Reeves was urged in a letter by a number of elite economists and mandarins in the Financial Times that “changes to our fiscal rules” may well be required. Whilst changing the definition of debt or the mandate to reduce it within 5 years may give the new chancellor more breathing room in the short term, many argue that it is hard to see how this kind of so-called ‘Treasury brain’ thinking reflects a desire for longer term fiscal policy. Indeed, whilst this kind of action could theoretically open up more space for infrastructural investment, instead we have seen cuts to capital spending in order to fill the all-encompassing black hole.
So can things only get better with regard to the economy? Whilst they probably cannot get much worse at this point, with inflation having largely recovered to the Bank of England’s 2% target, things do not seem bright either. Whilst the general target of increased growth is widely accepted as the right one, there are few means in the works to achieve it. Without increased investment into transport and communities, Britain’s productivity problem will not solve itself.
Housing and public services
Housing, and the lack thereof, is one of the most pressing issues today amongst younger voters, with 31% of the youngest voters telling YouGov that is one of their top three issues (see chart). With just 11% of the oldest voters saying the same thing, Labour was always going to make it a wedge issue in the campaign, promising to be a YIMBY (‘yes in my backyard’) party, pushing ahead with development on so-called ‘brownfield sites’ that comprise largely old petrol stations, landfill and car parks on green belt land. Yet whilst they do indeed plan on giving ministers the ability to directly approve proposals, the government is sure to face local opposition to plans.
Indeed, whilst their working parliamentary majority may be large at over 150, the vast majority of their opposition have faced claims that they do not support local development; the Conservatives notoriously did not approve planning reforms repeatedly whilst in office, the Liberal Democrats have a name for opposing building given their generally more well-to-do seat base, and the Green Party have been surprisingly opposed to development: their co-leader Adrian Ramsay has voiced opposition to green energy infrastructure citing wildlife concerns, whilst their manifesto was strong on building social housing, but notably vapid about private rentals and sales. With such a makeup of the opposition, and having it represent a large proportion of the vote at the 2024 general election given Labour’s efficient win, it could be difficult to just bypass local anger easily.
It has been mooted too that Labour could abolish the Right to Buy scheme, which allows social housing tenants the ability to buy their properties at large discounts on the market rate, which could help cork the flow of housing stock, particularly for councils in metropolitan areas with long backlogs. It would be an easy way to regain some ground in the area, and one that would be sure to work, but it is unlikely to go without facing stiff criticism, particularly from the Conservatives, who introduced the scheme under Margaret Thatcher in the 1980s.
The vast majority of their opposition have faced claims that they do not support local development
So might we finally see some more housing being built in Britain? Well, maybe. Developers have welcomed the arguably long overdue loosening of planning restrictions, but prices continue to rise for young people looking to get themselves on the housing ladder, and despite the best intentions, it seems unlikely that we will see any movement on that any time soon.
Public services too will require stiff changes to make them sustainable in the long-term, with Sir Keir recently saying the NHS will need to “reform or die.” Yet whilst reform may certainly be welcomed by health leaders, it will have very little impact without some kind of extra funding to support it. Labour have consistently thrashed the Conservatives on who is most trusted with handling the NHS, but if they are to win another term in 2029 as they wish, they are going to need to seriously deliver for a health service that the public is acutely aware is not what it once was.
Social care too is another area where Mr Johnson points out that there is little real planning to deal with the issue. He points out that “successive governments” have failed to grasp the acute intensity of the issue, largely kicking the can down the road with repeated reviews and Royal Commissions. The most recent, the Dilnot Commission’s proposals, were initially accepted by Health Secretary Wes Streeting, but then promptly thrown out of a window by Ms Reeves. It may not have garnered the same headlines as the Winter Fuel Payment, but it may well have a far greater effect on people who access the social care system.
Moving down the rungs, local governments are crying out for a rethink. A £4bn shortfall in funding means that councils are having to make serious cuts to their services; some now only provide fortnightly bin collections, school places are harder to reach than ever, and council tax has exploded for those unlucky enough to live in places where their councils have gone bankrupt. It will be a true test of whether this is indeed a “government of service” as the Labour leader wishes it to be; he will have to work directly with council leaders of all parties, to work to find a solution that benefits everyone. So can public services be turned around? It cannot be impossible; but it will be one hell of a mountain to climb, require a strongly coordinated cabinet, and one that the public will be watching intensely after five years in office.
Foreign affairs
As renowned historian Sir Anthony Seldon points out in his new (a bit shorter than usual) judgement on the former Prime Minister’s time in Downing Street, Truss at 10, premiers often savour their international tasks more so than their domestic ones, as they can see their power having real effect on the world stage. Sir Keir has entered global politics at a time of great instability; wars wage across continents in Ukraine, Gaza, Sudan and many more.
His party then can be reassured by comments in an Italian newspaper that he is the “new Tony Blair,” and briefings from European diplomats that they prefer working with this new government. Indeed, the Prime Minister has much suggested cosying up to European allies to help deal with mutual problems, evidenced by appointing Nick Thomas-Symonds as the first true Europe minister since Brexit, and even the remote consideration of former chief Brexit negotiator Olly Robbins to replace Simon Case as Cabinet Secretary when he is expected to leave the civil service in January. But will it actually help?
The war in Ukraine has largely stalled, and Ukraine wants permission to launch long-range missiles into Russian territory in order to help drain Russian supplies, which seem as though they may not be able to last forever. Yet Vladimir Putin has long warned that this would represent a declaration of war by the West on his country, with catastrophic potential implications. Whether Sir Keir and President Biden give the greenlight could be one of the defining moments of his premiership.
The war in Gaza too remains one of the world’s most pressing issues. Whilst hundreds more civilians are killed every day, mostly by Israeli bombing, domestic calls for an agreement to end the campaign continue to grow. Further afield too, the White House will be keen to seek a ceasefire deal before the new year, with the potential for a Donald Trump administration to back Israeli Prime Minister Benjamin Netanyahu unconditionally. In that sense, the British premier has not struck the best initial chord with the Americans; the decision to suspend 30 export licenses to Israel was not met warmly in Washington, whilst it has angered left-wing critics, who argue action should go further, with the suspension of all 350 licences. Yet the electorate seem keen to support the idea (see chart). It shows that this situation is not an easy one to solve; there are no easy answers, as much as some might wish there to be. Yet if Sir Keir wants to make a good first stand on the world stage, he will want to be part of any solution, and fast.
What too to do about Brexit? It may be something that the voting public have been thankful not to have had to think about, but the UK’s current relationship with the European Union surely cannot be described as ideal, with a report authored by economists at Aston University describing the impacts of leaving the EU as “profound and ongoing”; annual exports are down 17%, and imports 23%, from where they would have been without Brexit, the report found. Yet despite this, both main parties were largely silent about the issue during the campaign, clearly keen to avoid drawing the ire of voters. However, Sir Keir and his aforementioned Europe minister are keen to pursue a new “security arrangement,” which could help intelligence agencies cooperate with their European counterparts and the like. Yet if it comes with much alluded deals on aligning standards across a number of different industries, without the sounds of trumpets, they likely will not complain either; if they are so desperate for a boost to growth, they may well need to look again at one of the major dents in the side of the economy.
Are things really that bad? Have we really reached a low for post-war Britain? Sir Keir Starmer has a lot on his plate: a stagnating economy, conflict abroad – the likes of which has not been seen for decades – as well as crumbling public services, and of course whatever events are to be his true tests of stewardship of a nation. His relations with other nations seem to show hope and promise. Domestically, there are plans to fix things, but they lack meat to the bone – it seems that other than vague promises of growth, reform and changing practices, the future of the UK will once again be subjected to reviews, Royal Commissions and reports, which may end up being sat on. These problems are deeply ingrained, as much as the Conservatives wish they were not. For Sir Keir, there really ain’t no mountain high enough.
Graphic credit: Alex Everest House. Image credits: Lauren Hurley/Seargent Tom Robinson RLC/Number 10/Wikimedia Commons
