One of the lesser known parts of a UK General Election are the meetings between the main opposition party and the civil service. In the months approaching a potential change in Government the main opposition party presents it’s programme for government to the civil service. Sometimes, like 1997, this is a detailed programme with ring binders. Sometimes, like 2019, it is less well defined.
Starting in January labour have been meeting with the civil service, the results of which have been a big scaling back of commitments, most notably around investment in the green economy.
It’s not unusual for prospective Governments to have a reality check when they meet the people who will be putting their policies into action, but Labour’s reaction has been dramatic.
The reason for this is pretty obvious – public finances are a lot worse than the Government has owned up to.
With Government spending the numbers are so huge that it can be hard to grasp. Right now the Government is spending c.£120bn a year on interest on Government borrowing. This is an enormous amount, roughly 10% of total Government spending, and more than is spent on pensions or benefits. It is the 2nd highest area of Government spending after Health.
Clearly the increase in borrowing over the last 14 years is a big factor in this, but the bulk of the increase is due to markets charging the Government higher interest rates to borrow money. This got a lot worse after Liz Truss’s brief period as PM when markets were spooked. By comparison in the period 1997-2010 average debt costs were £30bn, and even after the bank bailout during the credit crunch it was still a fraction of what it is now.
This is a huge challenge for Labour, because it squeezes the funds available to transform the economy, and makes it more expensive to borrow.
But there is also a massive opportunity for Labour – if it can bring inflation under control and persuade markets that they are sensible and prudent then there will be a big fall in the interest rates the Government pays for it’s debt, releasing lots of money to spend on the NHS and patching up the welfare state. Just getting interest payments down to the pre-Truss average would release £80bn without the need for taxes rises.
This is why Labour is being cautious – it is aware of the risks of spooking the markets with big spending commitments, but also aware of the upside if they can get it right. The decision not to cap bankers bonuses should be seen in a similar light
But this isn’t the end of it.
Business investment in the UK has been rock bottom since the Brexit vote. There are lots of investment funds sat on huge sums of money waiting for lower inflation, and a more positive business environment. If labour really can win back the trust of investors they won’t need to spend £28bn on greening in the economy – state investment will create opportunities for businesses to invest, not just in the green transformation, but also in ambitious changes to supply chains, reversing decades of globalisation.
If Labour can pull this off, and I think they can, it will have been worth tolerating the howls of anguish from the small core of party supporters for whom the green fund was a key policy. The main complaint about Starmer is that he is too quick to change position to court voters. This was the main complaint about Harold Wilson, who won 4 General Elections.
A lot of the criticism on Starmer is driven by snobbery or racism (his wife and kids are Jewish), but there is an underlying problem. Starmer is an Arsenal fan, and he appears stuck in the era of “boring, boring Arsenal”. He is very cautious and likes to take time to hear all sides of the argument; get decisions right. The problem is that we are locked into a 24 hrs news cycle which demands snap decisions and knee jerk reactions.
Starmer isn’t great at that kind of stuff – he needs to learn to let other players on the team handle difficult situations for him – David Lammy should have been handling the Gaza ceasefire amendment, Anneliese Dodds should have been the one to respond to problems with Labour’s candidate in Rochdale. That way if they need to shift their position Starmer can be seen to be the one stepping in to sort it out. He is not a natural politician, and he needs to learn a bit more about politics and people if he is to Governm effectively.
Postscript
Economics isn’t the only area where Labour have been ultra-cautious. Over Israel and Gaza Labour held back formally calling for a ceasefire, even at the expense of a revolt by their own MPs. They came under sustained pressure this week from the SNP and Tories colluding to try and force a split. They only came through it with some bruising Parliamentary management.
Normally it doesn’t matter what the Opposition say in debates like this – they can showboat all they like – but things are rather different now. Starmer met with US Secretary of State Anthony Blinken last week, and has been met with the French President and Greek PM. Clearly they expect him to be PM in a few months and for Lammy to be For Sec. I think there is quite a lot of positivity towards them both given the shower of shit we have had representing us for the last few years
Starmer clearly wants to be seen to be acting alongside other key partners like the US, France, etc. in order to maximise our influence – he delayed calling for a ceasefire, despite political pressure at home, because he wants people to see that an incoming Labour Government will work with the international community, and not just say stuff to make their own voter base feel validated. The rather messy Labour position in Wednesday’s vote was close to the position of key international partners, and probably leads the way for the US to adopt a similar stance. Incredibly the British Foreign Secretary wasn’t in the debate at all, not even in the House of Lords – he was doing a photo op in the Falklands. More incredibly no-one missed him.
This is clearly the right approach, and he will get a lot of credit from international political leaders for acting like that – for the last decade we have had leaders in Government and in Opposition who would say mad shit about foreign relations just to get some cheap praise from their mates in the press.
Starmer is building up some credit internationally through his approach, credit we desperately need.
Right now there is no way back for the UK with the EU, other than some tinkering around the margins of Boris’s deal, But if it looks like Trump is heading back to the White House, then the EU might decide it wants the UK back in the tent again, particularly if it means sensible politicians like Starmer and Lammy. This doesn’t mean a return to membership – we are a decade away from that debate. But it might mean that a better deal is on the table in the next Parliament.
We may not hold all the cards, but we could be back in the game