Tag: labour-party

Boring, boring …

One of the more ‘colourful’ habits in the otherwise sensible life of Sir Keir Starmer is that he is an Arsenal supporter, to the extent that he has been quizzed on this in media interviews, and cruelly asked if, like Arsenal, he will ‘bottle’ the premiership. For those non-football fans amongst you, even Arsenal fans like to chant ‘boring, boring..Arsenal’).

Consistent with his devotion to Arsenal, ‘boring, boring’ seems to be the guiding light of Starmer’s policy playbook, launched formally on Thursday in the form of the 23,000-word, 134 page Labour manifesto.

The subset of individuals who peruse political party manifestos is small, and I have heroically dug into it to save readers the trouble. It is worth paying attention to because of the likelihood that Labour will form the next government in the UK.

My first take is that the manifesto is very conservative, with a small ‘c’, in the sense that it emphasises Starmer’s reluctance to change many elements of existing fiscal policy (corporate tax stays at 25% for example) and effectively ventures very little in terms of dramatic policy moves.  The headlines stress no ‘austerity’ but it is also hard to see this package producing a durable expansion and return to productivity. The manifesto is accompanied by a laborious compilation of the costs of the Labour programme, the object of which must be to convince markets that Labour are on top of their fiscal ‘game’.

My sense is that the manifesto is characteristic of a party that wants to avoid any kind of policy hiccup before the election, and confirms my sense that the big policy moves, if there are any, will come in the autumn or early 2025, once the government has been bedded in. 

On balance it is a manifesto for workers rather than capitalists. The message for workers is that income tax, national insurance contributions and VAT won’t change, but we will see small groups (private equity execs for instance) treated more severely. Also, with the abolition of generous non-dom tax status, the international wealthy will feel the fiscal pain, added to which private education fees will be charged VAT. These measures are expected to raise GBP 6bn, which is small in the context of the economy and deficit. More efficiencies in spending are expected to bring ‘new’ fiscal boost to GBP 8.5bn

From the point of view of companies and investors, there is not yet much here to worry about, but neither much to be excited for. 

We also have a little more colour on the landmark innovation of the manifesto, GB Energy – the brainchild of Ed Miliband (one of the most experienced Labour ministers and the most ‘policy ready’ one). GB Energy will be based in Scotland and will invest in renewables (co-invest with the private sector in new green technologies and help scale up startups in segments like solar and wind and help to invest in the installation of green energy infrastructure). It will take on existing state-owned stakes in energy projects like GB Nuclear, and the aim is to capitalise it (likely in 2025 to the tune of GBP 8bn). One element for the energy sector is the flagging in the manifesto of much tougher regulation of the energy sector (in terms of consumer prices).

On healthcare, my first impression is that the improvements flagged for the NHS are not transformative and as a trend, point towards more outsourcing of services, away from hospitals. Finally, there are some interesting comments in the ‘serving the country’ section of the manifesto (reform of the House of Lords and a focus on ethics in public life). My expectation is that Labour will lead with these reforms once in power. 

In more detail, I think Labour will win the July 4th election, their immediate accession to power will be marked by a number of high-profile foreign affairs events (i.e. NATO summit) where Starmer will be able to look ‘presidential’. August will be quiet, and I think the early policy moves will come, as above, in the area of institutional reform.

As we move into the autumn, the focus will turn to economics, and I suspect Labour will lead this with a series of announcements on inward investment. The launch of GB Energy and the national wealth fund will follow.

This manifesto is deliberately ‘boring’ in the sense that it will ease Labour’s passage through the election campaign with little policy friction. Voters’ disdain for the Tories will be enough for Labour to win handsomely, and they may well be helped by the damage that the Reform party will do to the Tories.

With the economy in mind, the absence of chaos that should accompany a Labour government (as opposed to the Tories) should help, and a great deal will depend on international factors. However, the manifesto, in my view, is not a convincing plan in terms of kickstarting productivity in the UK economy. ‘Boring’ will not be enough to satisfy the economic challenge that has been left to Starmer.

Have a great week ahead,

Mike

Is Labour Ready?

Rishi Sunak’s sodden, tragi-comic, and surprise announcement of a UK general election was an amusing episode in a so far uneventful ‘year of democracy’.

The announcement was a boon to headline writers, who had fun with phrases like ‘Drowning St’. My attention was piqued by the background music ‘things can only get better’ (D:Ream), which added to the farce, but which British political aficionados will recognise as the song that was also used by Tony Blair’s New Labour party in their 1997 election campaign.

At the time, I was finishing my studies and happened to be in London on the day of the election, and vividly recall walking past Downing St, where the sense of a new era was palpable. Today, the challenge for Keir Starmer is whether he can spura new era of growth and renewal in the UK, or whether his party simply turns out to be ‘not the Tories’.

In the late 1990’s, Blair’s government, bolstered by a very strong front bench, had spent a long time preparing for government, and once in power made a series of dramatic policy moves (see our recent note ‘Does debt smother politics?). By comparison, the most important question for the July 4th election – with the Tories 21 points behind Labour in the polls and destined to be wiped out (some 100 sitting MP’s, mostly Tories, will not stand this time) is, how ready are Labour?

Whilst the election announcement has taken many Tory MPs by surprise, my sense is that Labour would also have much preferred a November election – they still must find candidates for over 80 seats and faces a few awkward spots such as Islington North where Jeremy Corbyn will stand as an independent. Indeed, the fact that both the Tories and Labour are logistically unprepared for a July election might benefit the Liberal Democrats, which opens up a small chance of a coalition government (importantly electoral reform would be the price of this).

To date, Keir Starmer’s Labour has given relatively few details on its program, partly to allow space for the Tories to slip up and partly not to skew the debate on the outlook for the economy. This will be Labour’s greatest challenge.

When Blair came to power in 1997 the British economy was bigger than that of China and India together, the world was under the steam of globalization and debt to GDP in the UK was close to 40%. Today, China regards Britain as a ‘little island’ (nothing wrong with little islands!), globalization has come asunder and debt to GDP is 100%.

I suspect that if there are early, dramatic wins for Starmer, they will be in tax (cutting back exemptions for the wealthy and potentially a wealth tax), corruption (standards in public life), and institutional reform (end of the House of Lords?).

Revitalising the economy will take longer, notably because Labour will initially stick to the UK’s fiscal rules and take pains to avoid any early volatility in the pound and gilt markets. In order to enact its plans for technology and ‘green energy’ investment Labour will most likely have to create partnership with international institutional investors.

Outside of these areas it is not clear to me how Labour can immediately reverse the damage done to educational, social services (NHS) and the fabric of small towns and cities, exacted by the Tories. It will require a level of imagination, funding and policy continuity not seen in British politics for decades.

In foreign policy, Labour’s approach will be a much less contentious one – relations with Ireland (which have deteriorated since Johnson) will be much warmer, and the approach to the EU will most likely be less confrontational and more collaborative. Whilst David Lammy (shadow foreign secretary) has spent a decent amount of time in the US, courting Republicans and Democrats, the scenario of a Trump presidency and a Labour government is a high probability one, but a configuration that would stretch the notion of a ‘special relationship’. 

In defence I expect little headline level changes to Britain’s commitments, but the shadow defence minister John Healey will likely re-organise the military command and HQ, and importantly spend a good deal of time reorganising defence investment and procurement so that it gives ‘value for money’. 

In the next few weeks, Labour faces twin, urgent challenges – mobilising the party across the UK, focusing on making inroads in the south and Scotland, and then preparing for government in the context of a gargantuan challenge.

The good news is that the summer holidays start just after the election which I suspect will mean that the effective policy launch of the new government will kick off in September.

Have a great week ahead,

Mike