Last July, Keir Starmer may have secured a victory in the UK general election on a scale comparable to what Tony Blair achieved with New Labour in 1997, but that is where the similarities end.
Blair inherited a growing economy and a benign global backdrop, which ensured an extended honeymoon period for his party. Starmer took on an economy that was already struggling due to the fall-out from Brexit and a highly uncertain global backdrop. This meant the briefest of honeymoon periods.
In last October’s budget, Rachel Reeves, the Chancellor of the Exchequer, raised £40 billion in taxes, mainly through a £25 billion rise in employers’ national insurance and hikes in capital gains and inheritance taxes. Her critics warned that these measures would weigh on growth. If there is one thing that the UK needs, it is growth.
However, next October’s budget is shaping up to be even more contentious. Earlier this month, Reeves unveiled £300 billion in spending increases to cover the remainder of the parliamentary term to 2029. She claimed that will be fully funded based on current growth levels, which would obviate the need for further tax rises, particularly on working people. But this is looking increasingly unlikely and pressure is building ahead of the October budget.
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Starmer has caved in to pressure from 120 rebel Labour MPs who had vowed to vote against the Welfare Reform Bill in parliament this week. The Bill had aimed to save £5 billion annually through changes to disability and sickness-related benefit payments, but the cuts will now only apply to new applicants. This means limited savings, meaning cash will have to be found elsewhere.
It had been assumed that the size of the Labour party’s win would give it at least two terms in government, but this is no longer a certainty. The biggest beneficiary of its woes has been Nigel Farage’s Reform Party with its uncosted populist policies. A prolonged period of political instability looks likely, which will have much wider consequences, particularly for Ireland.
