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A Challenging Start for Keir Starmer’s Government

As Saturday marked 100 days in office for Keir Starmer and his administration, the atmosphere surrounding the government remains fraught with challenges. From far-right riots to internal disputes among senior officials in Downing Street, and controversies over perceived partisanship in governance, these initial days have been anything but smooth. Starmer has referred to this tumultuous period as “choppy days,” dismissing the recent controversies as mere “side winds” that he insists will not derail his agenda.

Ministers from departments that rely on significant funding have expressed growing frustration since their electoral victory on 4 July, primarily due to delays in unveiling the government’s budget. Historically, new governments, such as Labour in 1997 and the Tory/Lib Dem coalition in 2010, have quickly presented their first budgets to establish clear directives and assert their purpose. However, Starmer’s Labour government plans to announce its inaugural budget nearly four months into their term, scheduled for 30 October.

This delay can be attributed to Labour’s commitment to fiscal transparency in the wake of disruptions caused by Liz Truss’s administration. The Office for Budget Responsibility has been tasked with reviewing financial data, producing forecasts, and ensuring that the figures are coherent, all while ambitious cabinet members grow increasingly anxious about the wait.

Concerns over accessibility have surfaced, as sources indicate that Rachel Reeves, the Chancellor, has largely secluded herself in the Treasury, wrestling with budgetary decisions that have left other ministers feeling sidelined. “We can’t get anywhere near her,” one cabinet colleague lamented, referring to Darren Jones, the chief secretary to the Treasury and Reeves’s primary aide.

The mounting tension within the cabinet is palpable. Ministers are eager to announce new initiatives or at least share ideas but find themselves hindered by uncertainty surrounding budget allocations and the looming spring spending review. “We are all rather constrained. It has been a problem,” one minister remarked, reflecting the broader frustrations circulating within the government.

Reeves’s upcoming budget announcement is particularly significant; it marks a historic moment as the first female chancellor to present a budget in the UK’s history. Yet, she inherits a landscape rife with challenges, including a staggering £22 billion deficit, a situation many attribute to years of Conservative governance. Furthermore, Labour has also faced self-imposed constraints as it tries to navigate its policies.

Prior to the election, Labour assured voters of its fiscal awareness by committing to strict fiscal rules regarding expenditure and future investments. They pledged to avoid tax hikes for working individuals, ruling out increases to income tax, VAT, or national insurance. Starmer has consistently emphasized a commitment to growth and a promise to avoid a return to austerity, which has laid a complex foundation for economic planning.

With just 17 days until budget day, the government must find a way to fulfill its growth promises and rehabilitate public services without imposing further financial burdens on everyday workers. A former Conservative cabinet member expressed skepticism about the government’s ability to adhere to its financial commitments while fostering public service recovery. “They are going to have to find the money from somewhere,” he stated, highlighting the potential difficulties ahead.

Analysts suggest that Labour might seek to adjust its fiscal policies to accommodate necessary long-term borrowing for investments, but this could potentially alarm financial markets unless clearly delineated. Many believe that a significant change could involve increasing employers’ national insurance contributions, a possibility that Starmer did not dismiss during a recent parliamentary exchange with Rishi Sunak.

It appears that the Treasury may also contemplate raising funds through increased national insurance on pensions for employers, alongside possible increases in capital gains tax and inheritance tax adjustments. These measures could send mixed messages just as the government prepares for an investment summit aimed at attracting international business leaders

“The timing is questionable,” remarked an insider, suggesting that imposing new financial burdens on businesses while simultaneously seeking investment and growth could undermine the intended economic revitalization efforts. “The real impact will ultimately fall on workers, who may see stagnant wages and potential job losses.”

Yet, the challenges facing this government extend beyond fiscal realities. A former Treasury official commented on the administration’s apparent lack of preparedness as it assumed power, contrasting it with the more advanced planning witnessed in past governments. “They really did not have much of a plan,” the insider noted, advocating for a comprehensive reset and strategic overhaul that could be initiated during the budget. However, significant financial challenges will inevitably lead to difficult discussions and decisions ahead.

Source
www.theguardian.com