The tragedy of the Starmer government

Following poor election results and low poll ratings Victor Anderson stresses the urgent need to change course to make real change and avert electoral disaster

Much of the blame for what is going wrong with the Starmer Government rightly belongs with Liz Truss. Her “mini-budget” felt at the time like a gift for the Labour Party. It smashed the undeserved Tory reputation for sound economic management. All Labour needed to do was promise not to do what she had done, in fact, to do almost the opposite. Starmer and Reeves therefore emphasised the strictness of their “fiscal rules”, especially as regards government borrowing.

At the same time, Labour needed to get rid of its reputation for raising taxes. As the general election came closer, it firmed up its promise that (in the words of the manifesto) “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.” Other statements went beyond that, implying a general reluctance to bring in any additional revenue at all, except through economic growth.

The classic idea of “tragedy” is not just something bad happening, but that the bad outcome is baked into the situation from the start. Things just unfold to their inevitable conclusion. In that sense, the Starmer Government is a tragedy. The promises on borrowing and taxation that helped win the landslide of parliamentary seats (though without a landslide of votes) have severely limited the choices the Government can make now in office.

Despite the Tories running down the quality of public services, creating backlogs for school building repairs, hospital appointments, court cases, immigration applications, grid connections, the fixing of potholes, and flood defenses, the Starmer Government has been prevented from dealing with those problems because of its self-imposed limits on tax raising and borrowing. This is the result of election campaigning completely predominating over preparations for government (symbolised by Morgan McSweeney predominating over Sue Gray).

But the situation is far worse than just this, because the Government has made two further choices in an attempt to escape the way it has boxed itself in. One way is reliance on inward investment as a substitute for government spending and straightforward sales of government debt. Investors have needed to be reassured of a good rate of return and, therefore, the absence of too-strict regulations. Hence, the national scandal of the water and sewage system cannot be properly addressed on the grounds that it would frighten off overseas investors who might otherwise be persuaded to put money into other parts of the UK infrastructure.

The other route out of the self-imposed limitations is economic growth. In the context of Donald Trump, growth has become more difficult to achieve than usual. In any case, growth in GDP is not the panacea Starmer claims, because as a measure of total national income, the additional income can simply go to the richest part of the population, and so does nothing to guarantee that living standards for the majority will rise at all. There is also a whole series of anomalies and problems about the way it is calculated, as a whole economic literature over more than 50 years has pointed out, something Starmer and Reeves appear blissfully unaware of.

However what GDP growth does deliver is higher government revenue, because as incomes rise, income tax revenue will rise as well; as expenditure rises, VAT will bring in more money; as company profits increase, revenue from Corporation Tax will go up. It is easy to see why, for any government with limited capacity to raise tax rates and to borrow, there is an attraction to growth in Gross Domestic Product.

This leads on to the next difficult problem: how do you get GDP to grow? Many of the ways of doing that take time. For example, the best way to improve the quality and skills of the labour force is to invest in education and health services, but the benefits from that will take many years to fully come through.

What can be done far more quickly is to deregulate private company activities and reduce constraints imposed by the planning system. So now we are on to a further phase of this disappointing Labour Government. Regulations on companies are often protections for the public. The Grenfell Tower fire was largely a result of deregulation and the running down of resources for enforcing what regulations remained. Deregulation may boost GDP growth but at an enormous cost.

Similarly, the planning system is there to protect the public interest, and in particular to protect the green space needed for nature to thrive, for recreation and play, good public health, and water management. Dismantle parts of that – the Orwellian language in the Planning and Infrastructure Bill is “nature restoration levy” and “environmental delivery plans” – and we are on our way to a land use system entirely dominated by market forces, which is what the Adam Smith Institute and others have been arguing for all along.

The Government says that, as well as boosting GDP, reducing planning controls will increase the supply of housing. But in a situation of reliance on the private sector for housebuilding, the natural tendency is bound to be the building of more profitable homes and still the underproduction of affordable and social housing. Unless the Government is prepared to fund council house building, and bring in other policies to make more efficient use of the housing stock that already exists (such as the abolition of Stamp Duty), we will find the countryside trashed for no good reason. 

Aware of the fact that there will be public resistance to these policies when they come to be implemented, the partial dismantling of the planning system is to be accompanied by the dismantling of actually local government, which otherwise the public would turn to in order to have a say over the future of their areas. A whole series of mergers and abolitions is being proposed, with the stated aim of no local government unit of less than 500,000 people surviving, which is a higher figure than some whole counties, such as Herefordshire and Northumberland.

There is more to this tragedy. Despite a promise to restore the Tory cut in the overseas aid budget, Labour cut it a second time. Along with sensibly arguing that the welfare benefits system can be improved, the need for reform has been used as an excuse for major overall cuts in the welfare budget.

One of the most positive aspects of the Government has been that one of the “five missions” is “Make Britain a clean energy superpower”. This is much-needed but at the same time shows the limitation of mission-led government, because the shift to green energy and emissions reduction is being undermined from outside the mission by other parts of government policy, such as the plans to expand Heathrow and other airport capacity, expected soon in a new National Policy Statement on aviation.

We are less than one year into this government. There is time for new dynamics to unfold, as is already starting to happen, seen particularly clearly in the local election results and responses to them. There is a restlessness building up, amongst Labour MPs, Labour Party members, and in the general public. 

The more people see Labour MPs actually representing them, the less need there will be to turn to alternatives outside of Labour. We therefore wait and see if the Labour Left will get its act together and do more to challenge the Government. If it is too slow, too disorganised, or too timid, people will look elsewhere, as has already started happening with increased support in England and Wales for practically every party other than Labour and the Tories.

Again, there is a tragic element to Labour’s strategic choices. The firm discipline Starmer has imposed reduces the “gene pool” of the party and makes it less able to adapt to changes in circumstances. Jeremy Corbyn remains excluded from the parliamentary party, John McDonnell is still without the whip, Rebecca Long-Bailey was sacked from the Shadow Cabinet with very little justification, some left general election candidates were vetoed at the last minute, and “antisemitism” allegations have been used to silence or expel party members speaking out against Israeli war crimes and continuing UK arms sales. All this makes it harder for Labour to regenerate itself through a stronger Left that could persuade the Government to change course. The consequence is bound to be that discontent becomes expressed and represented elsewhere, not only through stronger support for Reform, but also for the Liberal Democrats, Greens, and Plaid Cymru, and potentially also for socialist groupings to the left of Labour.

In the next general election, support for Labour is likely to be greatly reduced unless there is a change of course. That, together with the rise of Reform, would give us a multi-party political system operating in a First Past The Post electoral system. FPTP really works only with two major parties plus some minor parties with highly geographically concentrated support, which is how things used to be a long time ago.  

The way FPTP handles a multi-party system is through automatically encouraging cross-party alliances, agreements, and tactical voting, creating again a choice between two blocs. That is already starting to emerge on the Right, where the logic of the situation obviously points to some sort of accommodation between Reform and the Tories. The same logic also applies on the centre-left, although Labour’s traditional reluctance to share power may well result in handing victory at the next election over to the Right.

So what would an effective Left campaign to shift the Government’s approach look like?

It would focus on the need to –

• Accept the logic of some sort of Progressive Alliance politics at the next election, even if only in the form of tactical voting.
• Accept the need for limits to government borrowing, as a proxy for likely market responses which would otherwise force interest rates up (as the Liz Truss mini-budget did) – but allowing more scope for borrowing than the Government’s current rules.
• Seek out sources of tax revenue other than those ruled out in the election manifesto. This should include putting up the highest rate bands of Council Tax, as a step towards a more thorough Wealth Tax.
• Stop undermining the “clean energy” mission through anti-green policies for aviation and other forms of transport.
• Plan for the consequences of climate change, including through local authority-led Local Adaptation Plans.
• Clear up public service backlogs and urgently address public priorities such as the water system, potholes, and dentistry.
• Restore cuts in overseas aid and lead global efforts to establish a substantial “loss and damage” fund to pay for some of the consequences of climate change internationally.
• Stop selling arms to Israel.