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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Since returning to office, Labour have managed to achieve a remarkable double whammy: they have increased the costs born by businesses, presided over falling consumer confidence and rising inflation, hiked taxes and raised borrowing. These are the kind of dubious achievements one might expect and fear from the populist left. Yet this is also a government that has, per the polls, managed to lose millions of voters to that populist left: the Green party now polls around 16 per cent, just two points behind Labour.
For Sir Keir Starmer and those around him, the explanation for this predicament is simple: they are beset to both right and left by populists offering “easy answers”, “grievance” politics and so on.
This has become how the government self-soothes. And as an analysis of Labour’s opponents, it is not bad. But as an account of the government itself, it is highly misleading. Yes, Starmer’s Labour are “more centrist” than the Conservatives, Reform or the Greens — but only in the sense that a BMW is a better submarine than a rickshaw.
This Labour administration displays just one of the important features expected of a party claiming to govern from the centre: a willingness to be sceptical about its own traditions and default assumptions.
The problem is that its scepticism is entirely misdirected. The Starmer government’s most influential ministers and aides distrust Labour’s instincts where they have succeeded in the past, and indulge them where they have traditionally failed.
Consider the history of Labour governments and the times in which they have left the country in a better state than that in which they found it. Almost all of their positive achievements are in social policy. The raising of the school leaving age, the decriminalisation of homosexuality, the repairing of the public realm in the 1990s and 2000s and the fact that no one need be bankrupted by the cost of their medical treatment — these are all achievements that made the United Kingdom a better place.
It’s certainly true that Labour have sometimes pursued those aims in an overly statist manner. For example, there are other ways to provide healthcare to everyone than the NHS. But nonetheless these are achievements that belong on the “positive” side of the ledger.
Now let us consider the negative side. These are almost all related to economic policy. In the past, when a Labour politician announces that they have a novel idea about how to run the economy, it is often a sign that people are about to lose a lot of money. For almost all of its history, the party has bet against the profit motive and the power of markets. They’ve ignored thousands of years of economic history, and then been surprised when this does not work electorally or economically.
This is how the Attlee government failed in the 1940s, Wilson’s in the 1960s and Callaghan’s in the 1970s. There have been some positive Labour contributions on the economic side — think of central bank independence or the national minimum wage. Having said that the present government is now so addicted to using the latter that they have managed to make the wage floor ever more costly for business, while at the same time doing less and less actually to improve the condition of the working poor.
It’s not a coincidence that Labour’s most successful period in office came when they embraced Conservative economic ideas, displaying the intellectual humility to look at John Major’s economy and decide not to fiddle with it.
Now, it’s true, of course, that Rishi Sunak’s economic bequest to the current government was not good. But it is also true that almost everything Labour has done since has only made that inheritance worse. One reason why the party is shedding support to all sides is that no one voted in 2024 for the proposition that Britain’s problem is that the economy is insufficiently dynamic while the state works just fine. Yet to all intents and purposes that is how Labour have governed, other than when they have been dragged to a more radical position either by their backbenchers or to head off political defeat.
The government’s biggest blind spot is revealed by its preferred slogan: that we should “buy, make and sell” more in Britain. The reality is that while making and selling is all very well, no one owes us their custom or a living. The belief that they do helped doom previous Labour governments, and repeating it at a time when voters are ever more willing to shop around at the ballot box is ending up with the worst of all worlds: a government that is not pro-growth, whose major breakthrough in terms of “increasing competition” has been on its own left flank.
