Image: Keir Starmer, leader of the Labour party. Via Wikimedia Commons.

On May 22, to everybody’s astonishment, British Prime Miniter Rishi Sunak called an election for July 4, more than four months before the date in November that most observers had pencilled in. Given that the Conservatives are lagging more than 20 points behind Labour, and have been for around 18 months, this appeared a brave decision.

Nobody in Labour’s ranks is overconfident. For a start, the polling organizations were badly caught out in two out of the least three elections (in 2015 and 2017). In addition, Labour has a long-established habit of snatching defeat out of the jaws of victory. Nevertheless, there are solid reasons for expecting the return of a Labour government after 14 years in the wilderness:

  • In a first-past-the-post system, what matters is the gap between the two largest parties. The present gap between Labour and Tories is very wide, presaging major Labour gains.
  • Labour appears to have rebuilt the “Red Wall” that collapsed in 2019. The term Red Wall denoted Labour’s seats in its old industrial heartlands in the North and Midlands. In the 2019 election, the Tories under Boris Johnson targeted working-class voters and won a slew of Red Wall seats. Red Wall voters are largely working-class, living in often decaying towns. They supported Brexit in the 2016 referendum. Polling suggests that most if not all the seats will return to Labour.
  • The Liberal Democrats (LibDems) are making gains where they are strongest: in the southwest of England and “Blue Wall” seats in the commuter belt around London. These are traditionally solid Conservative constituencies. Furthermore, and very worrying for the Conservatives, there is considerable evidence from byelections and local elections of tactical voting among Labour, LibDems and the growing Green Party whereby voters opt for the candidate best placed to oust the sitting Tory MP. This is the first arm of a pincer movement.
  • The second arm of the pincer movement is the recent upsurge of the radical-right Reform Party. Reform is the United Kingdom Independence Party (UKIP), Britain’s anti-European party, reborn as an attractive haven for disenchanted right-wing Conservatives. Rishi Sunak has unintentionally made matters worse. He has been trying to capitalize on anti-immigrant sentiment, a powerful impulse in sections of the British electorate. Hostility to immigration was the principal reason behind the Brexit vote; ironically, 2023 saw the highest level yet of net immigration, around three quarters of a million. The reason for this was that acute labour shortages, especially in the health care and social care sectors, forced the Sunak government to liberalize the rules governing immigration. However, as an election ploy, the Tories have chosen to exploit public fears over the quite different issue of asylum-seeking (about 10 per cent of the net immigration figure) – or more specifically, the bid by thousands of undocumented asylum-seekers who cross the Channel from France in small boats, the legal route for asylum-seekers being almost impossible to access. Many Tory voters feel angry and betrayed.¹ In response, the government has devised the hugely expensive and wholly impracticable scheme of sending undocumented asylum-seekers to Rwanda, largely as a way to keep the issue in the news. The ploy has boomeranged. The government had highlighted a problem which they appeared unable to resolve, and disaffected Tory voters switched in large numbers to the more stridently anti-immigrant Reform Party.
  • The collapse of the Tory vote is due to a slew of serious problems. Two events in particular precipitated the Tory downfall. Wild drunken parties and flagrant rule-breaking in Downing Street under Boris Johnson during COVID, when the U.K. was supposed to be in lockdown, destroyed the party’s moral authority. Even more damaging was the extraordinarily misguided unfunded tax cut budget during Liz Truss’s brief premiership in 2022. She caused turmoil in the bond markets and a steep rise in interest rates, and demolished the Tory reputation for economic competence. Add to this the National Health Service crisis, stagnant living standards, a chaotic housing system, virtually zero economic growth, a poor productivity record, historically high levels of taxation – and much else besides.
  • What of Scotland? The Tories have few seats to lose in this staunchly anti-Conservative nation. Not so for its ruling party, the Scottish National Party (SNP), which has been in power in Edinburgh since 2007 and holds 43 of Scotland’s 59 seats in Westminster. However, since the resignation in March 2023 of its popular First Minister, Nicola Sturgeon, the party has been plagued by numerous problems, culminating this April in the resignation of her successor, Hamza Yousaf. A former SNP leader, John Swinney, has replaced Yousaf, but he is unlikely to reverse the slide in the party’s support. Labour has never won a general election without a solid bloc of Scottish MPs. With only two MPs in Scotland at present, Labour seems certain to gain at the SNP’s expense.

All in all, a grim scenario for the Tories. Unless something truly remarkable and wholly unexpected occurs, perhaps as many as half all Tory MPs will be looking for alternative employment: some cite the catastrophe of the Canadian Conservatives, who went from a majority in Parliament to two seats in the 1993 election.

Labour’s Ming Vase strategy

So where does this leave Labour? “I know he’s a good general,” asked Napoleon, “but is he lucky?” So far, thanks to the Conservative government’s extraordinary displays of ineptitude and mismanagement, Labour leader Sir Keir Starmer has been a lucky general. Despite this, Starmer is taking no chances. He has adopted what has been dubbed the “Ming Vase strategy”: proceed very cautiously, take no risks and avoid anything that might trip you up.

Underpinning the Ming Vase strategy is Starmer’s determination to “decontaminate” the party: expunge and extirpate any remnant of the ideas, policies and goals associated with Labour’s radical-left leader from 2015 to 2020, Jeremy Corbyn. Corbyn had plans for much higher spending, steeply progressive taxation and renationalizing privatized industries, some of which Starmer initially supported as a front-bench Labour MP. Much of that agenda has been dropped. Similarly, Corbyn supporters have been systematically removed from all positions of influence in the party, and Corbyn himself has been barred from standing as a Labour candidate in the election.

The two key objects of the Ming Vase strategy are: first, reassuring the voters and, in particular, restoring their confidence in Labour’s capacity to manage the economy competently; and second, wooing the business community, persuading it that Labour would be a reliable partner in government. The two objects have been synthesized in the party’s “ironclad” commitment to its “fiscal rules”: under a Labour government, current spending must be financed by current revenues, and debt as a percentage of GDP must be on a clear downward path. The reasoning runs as follows: voters and the business community alike are apprehensive that in office Labour will be profligate with the public purse, spend too much, borrow too much and, especially, tax too much. To further reassure both voters and big business, Labour has also pledged not to raise income tax, National Insurance contributions, capital gains tax and corporation tax. Equally, it has disavowed any intention of introducing new taxes or levies on wealth, even though the distribution of wealth is marked by huge inequalities.

This has put the party in a quandary. On one hand, the leadership has catalogued in meticulous detail the appalling state of public services and bewailed the fact that a large and growing proportion of the British population has become impoverished and dependent on all-too-meagre social benefits and food banks. Most forcefully, it points to a National Health Service “in crisis, stretched beyond breaking point.”² On the other hand, Labour has promised only a modest rise in public spending. How then can the country’s ills be redressed or even alleviated? In the first place, it argues that efficient reforms “must do the heavy lifting” – though most of the reforms (e.g. “digitalizing the NHS”) will be expensive to introduce. Real resolution lies in larger tax yields as a result of faster economic growth.

Labour’s principal “mission” (it has five missions) is to achieve the highest growth rate in the G7. But how? Step forward the “Green Prosperity Plan,” an interventionist industrial strategy loosely modelled on President Biden’s Inflation Reduction Act. As originally envisaged, an incoming Labour government would make available £28 billion a year to invest in renewables, new electric battery factories, carbon capture and many other environmental projects. Two new publicly owned bodies, Great British Energy and the National Wealth Fund, would be set up to oversee and allocate the funding. The beauty of the idea is that it would advance two crucial goals: rapid progress toward net zero in U.K. carbon emissions and Keynesian-style pump-priming of the economy. The boost to public investment would suck in private financing, greatly improving the U.K.’s poor productivity record and engineering faster economic expansion. The higher tax revenues that ensued could then be used to restore the fabric of Britian’s fading welfare state.

As the election draws near, Rachel Reeves, the shadow chancellor, and a clutch of party strategists have began to have cold feet. The funds earmarked for investment would have to be raised through taxation or borrowing – ammunition for endless stories in Britain’s right-wing press about Labour’s financial extravagance and inevitable tax bombshells to pay for it all.

The Green Prosperity Plan was announced in September 2021. Major unanticipated events have wrecked Labour’s optimistic calculations: the huge costs of COVID, the inflationary impact of the Ukraine war, the jump in the U.K.’s borrowing costs caused by the Truss budget and so forth. Reeves decided that the plan was not compatible with her fiscal rules, which took precedence over growth and tackling global warming. After some hesitation, Starmer swung behind his chancellor: the Green Prosperity Plan was scaled back. The initial £28 billion planned per annum has shrunk to £4.7 billion, not much more than envisaged in the Conservatives’ own plans.

Where does this leave the plan’s two goals? Representatives of the energy industry warned that the cutback would drain confidence in a Labour government’s commitment to net zero greenhouse gas emissions and thus discourage private investment in the sector. Dieter Helm, the U.K.’s foremost expert on energy economics, commented that it is “not a credible energy policy.”³ Initially the plan had been hailed as the “centrepiece of Labour’s economic programme,” investing “in industries that are vital to Britain’s future success.” Now that the sums are much smaller, who or what is to prime the pump of the economy? The Guardian’s economic editor wondered whether the dilution of the Green Prosperity Plan had not left “an ideological vacuum at the heart of Labour’s economic policy.”⁴ Labour has a coherent strategy for winning the election; it lacks one for governing.

Not very popular, but better than the Tories

Only the most diehard of Starmer’s critics would deny the progress the party has made. In the wake of Labour’s disastrous defeat in December 2019, few would have anticipated that, five years later, Labour would be on the brink of power, perhaps with a landslide. When Corbyn resigned, Labour was a scarcely credible force. Under Starmer, the party has been rehabilitated, the fear and alarm aroused by his predecessor dissipated; much has been achieved in a short time.

But there is a paradox. Two consistent opinion surveys find that enthusiasm for Labour is muted, and many people are puzzled about what Labour and its leader stand for. Recent evidence indicates that public approval for the party, its policies and its leader is much the same (or even worse) than it was under the ill-fated Ed Miliband in 2015. What has changed radically is attitudes toward the Tories. Starmer’s net satisfaction rating was -31 (yes, minus) points in April. Not much to crow about, but far better than Rishi Sunak’s -59. On virtually every issue, Labour is rated better than the Tories.⁵ But Labour is not especially popular.

This is ironic since Starmer and his strategists pride themselves on their hard-bitten realism. One party adviser summed up the party’s strategic thinking: “So often, the Labour party has lost elections because it clung to unachievable, pious, ideological purity. Labour wins when its agenda is radical but deliverable in the world as it is.”⁶ The party has tossed aside all the radical commitments which appeal to idealistic party members and instead ensured that its “offer” to the electorate consists of focus-group-tested policies bound to resonate with voters. Labour strategists appear to have concluded that voters will be convinced by its promise to effect major improvements in the public sector without having to raise tax rates.

Recent evidence suggests that a majority do not believe in Labour’s Ming Vase strategy and now accept that higher taxes are required to improve public services, which has become their first priority.⁷ As Sir John Curtice, the U.K.’s leading election expert, observed in April 2024, “I think the question that we should be asking of Labour is whether or not the caution that it is exercising this side of the election, particularly with respect to taxation and spending, is at risk of being its undoing the other side of the election.”⁸

The problem here is that Labour seems to have locked itself in with fiscal rules whose main purposes are political and electoral, not economic. The economist Paul Johnson, Director of the Institute for Fiscal Studies, describes the Ming Vase fiscal rules as “basically silly.” Lord O’Neill. formerly a Tory minister and now a Reeves adviser, calls the rules “petty and arbitrary,” and the leading macroeconomist Simon Wren-Lewis sees them as “economic illiteracy.”⁹

The critics’ major complaint is that following the debt-to-GDP rule seems to restrict borrowing for capital investment. The real measure for the affordability of capital spending should be whether it improves productivity and expands the economy’s capacity to provide goods and services, in which case it more than pays for itself. Wren-Lewis summed up Labour’s predicament: “In a rational world it would be obvious to ditch the bad fiscal rule to enable desperately needed green investment. In the run up to an election, with the media we have, we are very far from a rational world.”¹⁰

Labour has steered away from too many tangible promises, and has made a virtue of claiming that by limiting itself to a relatively small number of fully costed pledges it would avoid raising expectations which it will be unable to satisfy. Though the Tories will make their usual wild and unsubstantiated accusations about Labour’s policies, the truth is that in terms of fiscal policy not a great deal divides the two parties, with Labour hemmed in by its fiscal rules and extremely cautious stance on taxation. But it is in fact inevitable that expectations will be raised since most of Starmer’s fire will be directed at the Tories’ deplorable record – with the implication that he will do much better.

Labour will probably have, at most, a year of grace before the voters start anticipating tangible improvements, most of which will cost money: better pay in health care, social care and education to alleviate severe staff shortages; desperately needed investment to repair the dilapidated state of Britain’s public infrastructure; action on intensifying levels of poverty and social deprivation. It will not have helped that, as Curtice pointed out, Labour has “not tried to clear the ground by saying: ‘Well actually, we think we may have to do some difficult things.’”¹¹ How will the voters respond when these “difficult things” become unavoidable?

Notes

¹ Most voters are muddled about the difference between (legal) immigration, about 90 per cent of the total, and asylum-seekers.

² Denis Campbell and Anna Bawden, Next Government Should Declare NHS a National Emergency, Experts Warn, Guardian, January 31, 2024.

³ George Parker, Rachel Millard, Attracta Mooney and Rafe Uddin, Labour’s Political Credibility Questioned After Green Spending U-turn, Financial Times, February 9, 2024.

⁴ Larry Elliott, By Ditching Its Green Plan Labour Reveals Its Ideological Vacuum, Guardian, February 12, 2024.

⁵ Ashley Kirk, Labour Are Ahead in the Polls, but Have They Won Hearts and Minds? These Charts Suggest Not, Guardian, April 23, 2024.

⁶ Toby Helm and Michael Savage, The Mother of All U-turns: After Labour’s £28bn Green Policy Climbdown, What’s Left?, Observer, February 11, 2024.

⁷ John Curtice and Alex Scholes, Role and Responsibilities of Government: Have Public Expectations Changed?, British Social Attitudes 40 (London: National Centre for Social Research, 2023), pp, 20, 22.

⁸ Katie Neame, John Curtice Warns Labour’s Pre-election Caution Could Be Its ‘Undoing’ in Power, Labourlist, April 30, 2024; for a fuller discussion of this see Matthias Matthijs and Mark Blyth, Don’t Bet on a British Revival: How the Labour Party Might Win the Election – but Still Lose the Economy, Foreign Affairs, April 30, 2024.

The Observer View: Labour’s Green U-turn Has Threatened its Plan for Growth, Observer, February 11, 2024; Owen Jones, Abandoning a Wealth Tax Is a Ruinous Labour Strategy. It’s ‘Blairism Without the Cash’, Guardian, August 29, 2023; Simon Wren-Lewis, What Does Being an Iron Chancellor Mean?, Mainly Macro, October 17, 2023.

¹⁰ Simon Wren-Lewis One Rule to Bring Them All, and in the Darkness Bind Them, Mainly Macro, February 6, 2024.

¹¹ Curtice and Scholes, Role and Responsibilities of Government.