Electoral Dysfunction: How big a threat is Galloway and Gaza to Starmer’s Labour?
George Galloway will be back in parliament on Monday with his megaphone and a new platform to rail against Labour.
His theme is Gaza and his menace is clear.
As he accepted victory in the Rochdale by-election at around 3.30am (at a rally in a Subaru car showroom of all places), the veteran left-wing agitator warned Sir Keir Starmer “[his] problems just got 100 times more serious than they were before today”.
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In Mr Galloway’s world, his win was the beginning of an earthquake that would flatten Sir Keir’s Labour.
“This is going to spark a movement, a landslide, a shifting of the tectonic plates in scores of parliamentary constituencies,” he said.
Labour, he said, was “on notice that they have lost the confidence of millions of their voters who loyally and traditionally voted for them”.
On Electoral Dysfunction this week Jess Phillips, Ruth Davidson and I discuss how much this disruptor will damage Labour and how big the electoral problem of Gaza is for Sir Keir.
It is something that Ms Phillips, who has a large Muslim community in her Birmingham Yardley constituency, feels very strongly about.
She resigned from the Labour frontbench last year after deciding she couldn’t support the party over the Israel-Hamas war.
And she is fuming over what she sees as Mr Galloway’s sanctimony as he purports to be fighting for the people of Gaza when all he really wants to do is to sock it to Labour, as he has been trying to do in various seats for various political parties since he was kicked out of the party more than 20 years ago.
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Ms Phillips said: “He is not a legitimate voice for the people of Gaza.
“He’s just trying to attack Keir Starmer.
“Knock yourself out. Attack Keir Starmer. That’s politics. I’m here for that. But don’t pretend to people who care about something that you’re going to change something.”
Mr Galloway would reject the suggestion he is not a “legitimate voice” for the people of Gaza, having campaigned on behalf of the Palestinian cause for decades. Speaking to Sky News in the wake of his victory last night, he said his views on the issue were “quite well known”.
As for whether Labour would have lost this seat to Mr Galloway regardless of whether its suspended candidate Azhar Ali had stood for Labour or not – a view of some in the party – Ms Phillips says she doesn’t know.
But what she does acknowledge is Mr Galloway’s near 6,000 majority is “testament to a broader problem” for the party.
She said: “There is a clear problem with Muslim communities feeling represented currently by the Labour movement.
“Muslim people do not want to be represented by total charlatans.
“They also want to come to you for help and need decent representation and good, good people, both from within and without their community.
“They have been saying for some time, we are losing faith, if only we noticed it.”
Listen to Beth Rigby, Jess Phillips and Ruth Davidson as they unravel the spin in a new weekly podcast from Sky News
I don’t buy Mr Galloway’s assertion that he is triggering a “movement” across “scores” of Labour seats – not least because these divisions have been in plain sight for months, with councillors and activists quitting Labour because of the tensions over Gaza.
In some Labour seats it is undoubtedly a real problem, but what doesn’t follow is that these difficulties lead to electoral failure in a general election across a number of seats.
The by-election swings in all other races tell a very different story, with over half of Labour’s biggest by-election swings ever happening in the last couple of years.
“Rochdale was the anomaly and not any kind of indication of where we are,” says one senior Labour figure.
“At the beginning of the [Rochdale] campaign it was clear that some previous Labour voters had moved away from us on the issue of Gaza but at the same time we were picking up a lot of previous Tory voters.”
While Ms Phillips is clearly frustrated with her party leadership over Gaza, Ms Davidson says she feels “a little bit sorry” for Sir Keir, who she thinks had no option but to be fulsome in support of Israel against the backdrop of a Labour party that had been so badly tarnished by the rows over antisemitism in its ranks during the Jeremy Corbyn years.
“I think what the Gaza situation thing has exploded about is the fact that Keir Starmer had so much work to do off of Jeremy Corbyn to try and rebuild trust with Jewish communities across this country,” says Ms Davidson.
“He had to do that if he was going to be a credible candidate for the prime minister of this country; he had to make that reparation.
“And that is now being used against him. The bit [from Galloway’s election flyers], which was about Starmer being this great friend of Israel, is being used as a stick to beat him with.”
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Australia’s government has introduced a new bill that will regulate crypto platforms under existing financial services laws after an industry consultation saw cautious support for the legislation.
Assistant Treasurer Daniel Mulino introduced the Corporations Amendment (Digital Assets Framework) Bill 2025 on Wednesday, which would require crypto companies such as exchanges and custody providers to obtain an Australian Financial Services License (AFSL).
“Across the world, digital assets are reshaping finance,” Mulino told the House on Wednesday. “Australia must keep pace. If we get this right, we can attract investment, create jobs and position our financial system as a leader in innovation.”
The Treasury launched a consultation over a draft of the bill in September, which Mulino told crypto conferencegoers was “the cornerstone” of the Albanese Government’s crypto roadmap released in March.
The local crypto industry largely supported the draft legislation, but many told the consultation that the bill needed further clarity and simplification.
New bill to include safeguards for crypto held for clients
Mulino told the House it’s currently possible for a company to hold an unlimited amount of client crypto “without any financial law safeguards,” adding the risks of scams or frauds like FTX “cannot be ignored.”
“This bill responds to those challenges by reducing loopholes and ensuring comparable activities face comparable obligations, tailored to the digital asset ecosystem,” he said.
Currently, crypto platforms that simply facilitate trading only need to register with the Australian Transaction Reports and Analysis Centre, which has 400 registered crypto exchanges, many of which are inactive.
The legislation would focus on the companies that hold crypto for customers, “rather than the underlying technology itself,” Mulino added. “This means it can evolve as new forms of tokenisation and digital services emerge.”
Crypto bill adds two new license types, exempts small players
The bill amends the Corporations Act to create two new financial products, a “digital asset platform” and a “tokenized custody platform,” both of which will need an AFSL.
The license will register the platforms with the Australian Securities and Investments Commission. Currently, only exchanges that sell “financial products,” such as derivatives, must register.
Mulino said anyone “advising on, dealing in, or arranging for others to deal in” crypto will be treated as providing a financial service that requires a license.
Related: Australia risks ‘missed opportunity’ by shirking tokenization: Top regulator
Under the bill, crypto and custody platforms must meet ASIC’s minimum standards for transactions, settlements and holding customer assets. They must also give a guide to clients explaining their service, fees and risks.
Mulino said the bill exempts “small-scale” companies from licensing, those with less than 10 million Australian dollars ($6.5 million) in transaction volume in 12 months, along with those that deal or advise on platforms “incidental to their main, non-financial activities.”
The bill outlines an 18-month grace period on licensing, which Mulino said gives “relief for businesses trying to do the right thing.”
The bill is likely to quickly pass the House, where Prime Minister Anthony Albanese’s center-left Labor Party holds a 94-seat majority. It will then head to the Senate, where Labor may need the support of the crossbench and opposition to pass it.
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Politics
‘Sticking to Labour manifesto pledge costs millions of workers’, Resolution Foundation says
Sticking to Labour’s manifesto pledge and freezing income tax thresholds rather than raising income tax has hurt low- and middle-income earners, an influential thinktank has said.
Millions of these workers “would have been better off with their tax rates rising than their thresholds being frozen”, according to the Resolution Foundation’s chief executive, Ruth Curtice.
“Ironically, sticking to her manifesto tax pledge has cost millions of low-to-middle earners”, she said.
Chancellor Rachel Reeves announced in her budget speech that the point at which people start paying higher rates of tax has been held. It means earners are set to be dragged into higher tax bands as they get pay rises.
The chancellor felt unable to raise income tax as the Labour Party pledged not to raise taxes on working people in its election manifesto.
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Budget: What does the public think?
But many are saying that pledge was broken regardless, as the tax burden has increased by £26bn in this budget.
When asked by Sky News whether Ms Reeves would accept she broke the manifesto pledge, she said:
“I do recognise that yesterday I have asked working people to contribute a bit more by freezing those thresholds for a further three years from 2028.”
“I do recognise that that will mean that working people pay a bit more, but I’ve kept that contribution to an absolute minimum”.
Welcome news
The Resolution Foundation thinktank, which aims to raise living standards, welcomed measures designed to support people with the cost of living, such as the removal of the two-child benefit cap, which limited the number of children families could claim benefits for.
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The announced reduction in energy bills through the removal of as yet unspecified levies was similarly welcomed.
The chancellor said bills would become £150 cheaper a year, but the foundation said typical energy bills will fall by around £130 annually for the next three years, “though support then fades away”.
More to come
This budget won’t be the last of it, Ms Curtice said, as economic growth forecasts have been downgraded by independent forecasters the Office for Budget Responsibility (OBR), and growth is a “hurdle that remains to be cleared”.
“Until that challenge is taken on, we can expect plenty more bracing budgets,” she added.
It comes despite Ms Reeves saying as far back as last year, there would be no more tax increases.
Ultimately, though, the foundation said, “The great drumbeat of doom that preceded the chancellor’s big day turned out to be over the top: the forecasts came in better than many had feared.”
Over and over again, in the run-up to the election and beyond, the prime minister and the chancellor told voters they would not put up taxes on working people – that their manifesto plans for government were fully costed and, with the tax burden at a 70-year high, they were not in the business of raising more taxes.
On Wednesday the chancellor broke those pledges as she lifted taxes by another £26bn, adding to the £40bn rise in her first budget.
She told working people a year ago she would not extend freezing tax thresholds – a Conservative policy – because it would “hurt working people”.
Budget latest: ‘It can only lead to the death of us at the general election’
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Beth Rigby asks Reeves: How can you stay in your job?
On Wednesday she ripped up that pledge, as she extended the threshold freeze for three years, dragging 800,000 workers into tax and another million into the higher tax band to raise £8.3bn.
Rachel Reeves said it was a Labour budget and she’s right.
In the first 17 months of this government, Labour have raised tens of billions in taxes, while reversing on welfare reform – the U-turn on the winter fuel allowance and disability benefits has cost £6.6bn.
Ms Reeves even lifted the two-child benefit cap on Wednesday, at a cost of £3bn, despite the prime minister making a point of not putting that pledge in the manifesto as part of the “hard choices” this government would make to try to bear down on the tax burden for ordinary people. The OBR predicts one in four people would be caught by the 40% higher rate of tax by the end of this parliament.
Those higher taxes were necessary for two reasons and aimed at two audiences – the markets and the Labour Party.
For the former, the tax rises help the chancellor meet her fiscal rules, which requires the day-to-day spending budget to be in a surplus by 2029-30.
Before this budget, her headroom was just £9.9bn, which made her vulnerable to external shocks, rises in the cost of borrowing or lower tax takes. Now she has built her buffer to £22bn, which has pleased the markets and should mean investors begin to charge Britain less to borrow.
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Reeves announces tax rises
As for the latter, this was also the chancellor raising taxes to pay for spending and it pleased her backbenchers – when I saw some on the PM’s team going into Downing Street in the early evening, they looked pretty pleased.
I can see why: amid all the talk of leadership challenge, this was a budget that helped buy some time.
“This is a budget for self-preservation, not for the country,” remarked one cabinet minister to me this week.
You can see why: ducking welfare reform, lifting the two-child benefit cap – these are decisions a year-and-a-half into government that Downing Street has been forced into by a mutinous bunch of MPs.
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With a majority of 400 MPs, you might expect the PM and his chancellor to take the tough decisions and be on the front foot. Instead they find themselves just trying to survive, preserve their administration and try to lead from a defensive crouch.
When I asked the chancellor about breaking manifesto promises to raise taxes on working people, she argued the pledge explicitly involved rates of income tax (despite her pledge not to extend the threshold freeze in the last budget because it “hurt working people”).
Read more:
Budget 2025: The key points at a glance
Why Labour MPs may like Reeves’s budget
Trying to argue it is not a technical breach – the Institute of Fiscal Studies disagreed – rather than taking it on and explaining those decisions to the country says a lot about the mindset of this administration.
One of the main questions that struck me reflecting on this budget is accountability to the voters.
Labour in opposition, and then in government, didn’t tell anyone they might do this, and actually went further than that – explicitly saying they wouldn’t. They were asked, again and again during the election, for tax honesty. The prime minister told me that he’d fund public spending through growth and had “no plans” to raise taxes on working people.
Those people have been let down. Labour voters are predominantly middle earners and higher earning, educated middle classes – and it is these people who are the ones who will be hit by these tax rises that have been driven to pay for welfare spending rather than that much mooted black hole (tax receipts were much better than expected).
This budget is also back-loaded – a spend-now-pay-later budget, as the IFS put it, with tax rises coming a year before the election. Perhaps Rachel Reeves is hoping again something might turn up – her downgraded growth forecasts suggests it won’t.
This budget does probably buy the prime minister and his chancellor more time. But as for credibility, that might not be recoverable. This administration was meant to change the country. Many will be looking at the tax rises and thinking it’s the same old Labour.
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