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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In retrospect, the Budget that Rachel Reeves gave last autumn was almost a firing offence. Britain’s chancellor of the exchequer was warned not to put so much of the increased tax burden on business. She was told that super-rich people weren’t bluffing about moving their affairs elsewhere. But she knew better, and of course didn’t.
A couple of things have saved her. First, a change of finance minister might have communicated panic to spooked investors, even if her own borrowing had done much of the spooking. Second, there are more than 400 Labour MPs who would be worse at the job. Through default, Reeves survives.
On balance, this is right. But can we at least drop the pretence now that Labour wants economic growth above all else? This was the party’s line before and after its landslide election win last summer. You hear it less and less as time passes. The data — which shows a weakening jobs market, among other problems — makes a regular mockery of it. So does the government’s own actions.
This week, Sir Keir Starmer announced a plan to reduce immigration. Some of it is sensible. The trouble is that it entails another round of burdens on employers, who already face a rise in national insurance costs. In other words, growth is the government’s number one priority, but so is beating Nigel Farage.
Last month, Tony Blair warned about the economic cost of Britain’s carbon emissions targets. Downing Street scolded the former prime minister without quite establishing that he was wrong. In other words, growth is the government’s number one priority, but so is net zero.
Soon, in what may go down as its worst misjudgement, Labour will throw a pile of extra workplace regulations on business, aside from the migration-related ones. Unlike the tax rises, which were drawn up with some genuinely bleak public finances in mind, there isn’t even an express need for the added red tape. In other words, growth is the government’s number one priority, but so is keeping the trade unions sweet.
This is a government with half a dozen number one priorities. If growth is no longer paramount, the problem isn’t that Starmer and Reeves lied to the nation. Each meant what was said at the time. Like all parties that spend a long time out of power, Labour “just” underestimated the trade-offs of government.
No, the blame attaches to those who ever took these people at their word. I have not seen a less scrutinised incoming government than Starmer’s. Labour was never going to choose growth over short-term political pressures or its favoured interest groups, at least not when the crunch moments arrived. Because the Conservatives tend to govern for so long, and to disgrace themselves near the end, it is understandable that Labour’s own cultural defects never quite fix themselves in the national mind. The main one is an incomprehension of life outside the public sector, the union movement and the quango world. The number of businesses that live on small margins, which the NI rise will erase, really was news to even the worldlier bits of Labour’s centre-left.
In the end, British politics is a choice of consolations for stagnant living standards. National sovereignty and unbuilt-on countryside? For that, vote Conservative. A better-funded public sector and a sacrosanct climate agenda? Labour offers those balms. Even the “pro-business” Reform UK really trades on migration and other cultural causes.
At some point, we have to conclude that voters want it this way. Their “revealed” preference for things other than growth is not unique to Britain. Look at most of western Europe. It might even buy a social peace that we wouldn’t notice until it disappeared. (The US has been a growth phenomenon, with little obvious benefit to its politics.) But let’s at least be clear-sighted about it. This government should be the last one that promises to put growth first without arousing a national chuckle.
Stagnation forever, then? Well, there is one trace of hope. Starmer often arrives in the right place, late. He removed Jeremy Corbyn from the Labour movement, having campaigned for several years to make him prime minister. On gender and other cultural questions, he is willing these days to defy the hard left, now that it is losing anyway. During the peak woke era, you couldn’t find him with a floodlight.
Allow me, then, to predict another eleventh-hour conversion. Near the end of this parliament, which promises to be an economic flop, Starmer will make drastic reforms to improve growth. These will include some or all of the following: a softening of net zero, a profound step towards the EU, a tax change to bring mobile wealth back to Britain, a host of exemptions from the new workplace laws, and perhaps even a quiet undoing of the same immigration curbs that he has just announced.
These policies might excite enough animal spirits to see Labour through the next election. Or, as I have suspected since before Starmer was elected, this is just one of those pockets of history when a major change in public sentiment is coming, but not yet come. In such times, the most a leader can do is prepare the ground. The first stirrings of Thatcherism happened under the Labour government that preceded her. A lot of what we think of as Reaganite began under Jimmy Carter. Starmer has that kind of historic role written all over him. He may yet put economic growth above all else — but too late for him, and for a lost generation of his compatriots.
