Five new strategic battles that could shape the first six months for Labour

1. A ruthless focus on growth

If the one word strategy for Labour in opposition was ‘change’, the one word strategy for government is ‘growth’. Labour’s entire political strategy depends upon exceeding the forecasts for growth. They will inherit a financial straitjacket; if they exceed the forecast, they won’t be free from the straitjacket but they will have some wiggle room; if they don’t exceed the forecast, then there will be no choices, only deep cuts to public spending and higher taxes. For Labour to achieve the things that people are voting for, they have to secure growth.

Labour’s strategy for growth is simple: present stability and competence, and remove the barriers to planning, in the expectation that investment will be unlocked. There won’t be tax cuts to attract investors – if anything, quite the opposite.

An important factor that will determine Labour’s success is the mission clarity of government. Without focus, Prime Ministers achieve nothing. Whitehall will default to the status quo. Of course, politicians cannot create growth just by wanting it badly. But if the direction from the top is fierce and clear then gradually the public sector starts to adjust. Through the clarity and consistency of their argument David Cameron and George Osborne were successful in demonstrating their commitment to seeing through austerity (even if you disagree with it) and that in turn had an impact on the markets. In the same way, the markets will be watching to measure the conviction of Labour to its growth agenda. This does not just mean putting growth at the centre of the Prime Minister’s rhetoric in his first speech outside Downing Street but consistently prioritizing growth ahead of other considerations. One example would be facing down NIMBYS over planning reform, including new Labour MPs in marginal green belt seats. More unpopular cases could include letting failing businesses go to the wall instead of propping them up. Like Cameron and Osborne, Starmer and Reeves will need to repeatedly make and win the big argument – that Labour must secure growth first in order to achieve its goals for public services and tackling poverty. The King’s Speech and the key fiscal moments will need to put achieving growth ahead of doing the long list of things that Labour MPs might prefer to do. This will be perhaps the most important early test for Starmer and Reeves but if they can show that they are ruthless in pursuit of growth in the first six months then it will be critical to achieving their goals of ‘a decade of renewal’.

2. The backlash over net zero and the rise of Netzit

There is an assumption in the Westminster policy debate that the net zero argument has already been won and that the public are supportive. This complacency will be rudely awoken in the next Parliament. There are three major factors that will combine to threaten net zero ambitions and plans for GB Energy:

• Global investors are starting to balk at the scale of the expectations being placed on them by politicians around the world to invest in green energy infrastructure and innovation. A green investment crunch should be anticipated, and the UK will need to compete to attract investment in such a scenario, not expect it to flow inevitably.
• The political opposition to net zero is becoming more serious. Labour must not dismiss Reform’s arguments on net zero in the same way it disregarded UKIP’s arguments on Brexit. Reform has tapped into concerns among lower income households about the pace and costs of net zero. These households don’t get the perks of net zero – such as the lower running costs of electric vehicles – and instead they fear they will be punished with the higher costs of running petrol cars and old boilers. Labour will need to find ways to share the benefits – not just the costs – of net zero with lower income households. Labour must take nothing for granted in its drive for net zero, including its democratic mandate. If Reform wins seats and a double-digit share of the vote, Labour should anticipate that the next Conservative leader will follo­­w Farage and back Netzit: a referendum on net zero.
• Demand for energy around the world is growing faster than forecasted, driven at least partly by demand for data centres to power AI. Industries that have competed to demonstrate their green credentials may appear to backtrack if necessary to secure the supply of energy that they need.

These three political and economic forces will swirl and create a challenge for Labour’s plans.

3. A new battle over Europe

If the MRPs are right, the sheer scale of Labour’s victory will create a problem. There are 650 MPs but there are only 160 government jobs and maybe another 10 Select Committee Chair roles for backbenchers. Starmer has made it clear he doesn’t intend regular reshuffles so there are going to be over 200 Labour MPs without a job or the prospect of promotion.

They are not going to be content to sit on their hands for five years. Instead they will take up arms on issues that they care about and where they can build a reputation for their future career. They care about issues like inequality, including totems like the two child cap on benefits. They are also strongly pro-Europe and, just as backbench Conservative MPs formed into groups around Europe, so will those on the Labour side.

If Labour wins 400+ seats, the opposition is only 250 at best. For the government to be defeated on anything, it would require 70 Labour MPs to rebel. A rebellion on this scale is highly unlikely – but Europe is historically one of those issues where MPs have split in large numbers from their party. One can anticipate that a mirror image of the European Reform Group will develop and create headaches for the government, with a small but significant rump of backbench MPs prodding and pressing for more realignment, or even reintegration. Procedural motions and opposition amendments, designed by Reform and Conservatives to test the strength of anti-Brexit feeling on Labour’s backbenches, are very likely to become a strategic headache for Labour in its first term.

4. The new local politics of Foreign Affairs

All Prime Ministers face tough geopolitical decisions but Russia’s invasion of Ukraine, the war between Israel and Hamas, and the standoff between the US and China are some of the toughest any Prime Minister has faced. Regarding China, Starmer will face early tests with a decision to be made about tariffs on Chinese electric vehicles and another regarding the IPO of Shein, the fashion retailer with a mooted $50bn valuation. On the Shein IPO, Starmer’s instinct would probably be not to meddle in what is essentially a business decision but the US government may not see it that way.

More broadly, the domestic political pressure on Rishi Sunak on foreign affairs came from the right of his party, such as the European Reform Group and the China hawks. For Starmer it will come from both the left and the smaller parties.

There are no signs of the Israel-Gaza conflict being alleviated soon. The Green Party, who will likely win one or two seats, the Liberal Democrats, who may win many, and the SNP have all taken a harsher line against Israel than Labour. With 200 backbench Labour MPs, the pressure from the left will get stronger post-election, not dissipate.

Although it won’t make a big difference to the overall outcome in this election, there may be a handful of unusual results, where Labour fails to win seats because of independent pro-Palestine candidates. The consequence of these results may be more significant if a wider group of Labour MPs, particularly those in new marginal seats, start to worry that Labour’s foreign policy position is costing votes.

Meanwhile if Donald Trump becomes US President, as seems likely, Starmer will need to be pragmatic and diplomatic in his engagement, while his opponents in the small parties and on the backbenches will attack him for doing so.

5. Ethics and propriety bite back

Labour has promised ‘a reset in our public life; a clean-up that ensures the highest standards of integrity and honesty’. In particular, Starmer is committed to ‘ensure ministers are held to the highest standards’ with ‘a new independent Ethics and Integrity Commission, with its own independent Chair.’ This is a popular and bold step to try to rebuild trust between the public and politicians but, as a senior civil servant said to me: ‘It is back to basics all over again – and look what that did to John Major.’

It is surprisingly hard for ministers to follow the letter of every rule (House of Commons Code of Conduct; Register of Interests; the Ministerial Code; the Electoral Commission and the PPERA 2000). Indeed, Starmer himself has accidentally breached the rules eight times. It is inevitable that one of his ministers will do so in government and because he has made this a question of character, Starmer will be forced to fire them, probably for something relatively trivial. It is just a question of who, and when.

Even though he may end up firing overall decent ministers, this level of great probity may still be the right course to take. It is 30 years since the cash-for-questions affairs; 15 years since Gordon Brown’s government nearly collapsed under the expenses scandal. If you believe in the grand cycle of politics theory, Westminster is due another takedown. Perhaps this time it will be the open secret of corporate hospitality. Starmer may be right to anticipate another scandal and to position himself as the ruthless executioner, even if it means cabinet ministers’ heads are on the chopping block.

This commentary was also in our final edition of Campaign Chronicles (GE 2024 newsletter series). You can sign up to more from SMF here: Sign up for updates from the Social Market Foundation (confirmsubscription.com)