There is nothing new, nor necessarily fatal, about making a poor start in government. Margaret Thatcher had a torrid first couple of years in office, set back by galloping inflation and mass unemployment, before she found her direction. Those who assume that Keir Starmer is doomed to be a one-term prime minister thanks to his plunging popularity are speaking too soon. The resignation of Louise Haigh over a historic fraud conviction will swiftly pass. The mini-scandal of freebies accepted by government ministers, which kept Fleet Street occupied over the summer, has already been largely forgotten.
Starmer is good at setting targets, rather less good at coming up with any realistic means of attaining them
The acceleration of the news cycle has presented governments with endless opportunities for embarrassment, but also means that the bad news tends to blow over much more quickly. Ministers who resign are now often back in office within a year; it is a fair bet that Haigh will not be scrubbing the floors as a volunteer at Toynbee Hall, as John Profumo was still doing many years into his long rehabilitation.
Yet as the Prime Minister attempts his first government ‘reset’, he has serious reasons to worry. The contrast with Thatcher’s poor start could not be greater. In her case she suffered the consequences of a hard-nosed economic and monetary policy which caused acute short-term pain, but that was a necessary condition to control inflation and create the calmer conditions in which enterprise could thrive. Trade union reforms and the retreat of chronically unprofitable nationalised industries caused pain and anger, but by the time she was asking voters to elect her for a second term her policies were beginning to show their worth.
It is hard to detect Starmer being on any kind of journey to realise his ambitions. He is very good at setting targets, rather less good at coming up with any realistic means of attaining them. Take his ambition to have Britain’s economy growing sustainably at the fastest rate in the G7. So far his policies could not have been better designed to achieve the opposite. To grow the economy, he should be shifting resources from an unproductive public sector to the private one. Yet Labour’s unconditional pay rises for public-sector workers seems certain only to lessen productivity. At the same time, a rise in employers’ national insurance contributions is taxing job creation in the private sector. The results are already there to be seen in the form of declining business confidence: the S&P Global Purchasing Managers’ Index for manufacturing, which had been rising, indicating a growing sector, this week took a sharp downwards turn. Retail sales, too, have sharply reversed gains earlier in the year. Starmer’s economic achievement to date has been to snuff out a promising recovery.
On targets to cut waiting lists, Starmer has told the NHS it needs to reform or die. So far, however, we have little idea as to what those reforms will be or how they will help to achieve their objective. Indeed, government policy seems to be pulling in both directions: Wes Streeting came into office promising to bolster the primary healthcare system and keep people out of hospital; but now Starmer seems to be concentrating resources on hospitals. The government has promised 1.5 million homes, and has pledged planning reforms to help defeat what it regards as ‘nimbyism’ – without doing much to address the other problems which are thwarting house-building, from obstructive environmental laws to a lack of tradespeople.
One target, though, does stick out because it is far from clear what it helps to achieve: the plan to decarbonise the national grid by 2030. Cleaner, low-carbon energy is a worthy ambition, yet to try to rush it by 2030 promises great expense and poor decisions. That consumers last year were forced to spend £1 billion in ‘constraint payments’ to compensate wind-farm owners ordered to switch off their turbines when it is too windy for the grid to cope shows what is wrong with the government’s hurried target. Subsidies have been thrown at renewables while the transmission and energy storage infrastructure required to process a massive input from intermittent sources of energy has lagged well behind.
Not everything Starmer has done is wrong. Although the ending of the winter fuel payment created anger, it is just the beginning of what will be necessary to prevent an ageing population from bankrupting the nation. At some point a government will have to be brave enough to abandon the triple lock on pensions, too. Those battles will be bitterly fought, but eventually many of their opponents will be forced to concede that cuts were necessary.
So far, however, this government shows little urgency in its attempts to cut the yawning gap between government revenue and expenditure. Rachel Reeves’s efforts to close the ‘fiscal black hole’ have merely made it blacker and even more voluminous. Her tax rises, while painful on their victims, look certain to bring in a good deal less revenue than she hopes. Public sector pay rises, on the other hand, are certain to increase public spending long into the future, as the salary expectations of public-sector workers will only continue to grow.
Starmer promised that the themes of his government would be fiscal responsibility and promotion of economic growth. Yet he is failing badly and there is little reason to think that this week’s reset is going to make any difference. There is little point in trimming the sails if the wind is already blowing you in the wrong direction.
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