Sir Keir Starmer needs to level with voters – concrete change may only come in a second Labour term
It may have been Labour’s local election launch, but it was used by Sir Keir Starmer to roll out his national campaign messaging ahead of the general election later in the year: “The country needs change and we are the change.”
It is, if you like, a dry-run for the general election as Labour strategists target areas in their battleground seats around the West and East Midlands and Tees Valley. They will talk up Sir Keir‘s “national missions” and test out Tory attack lines.
There is no doubt that Labour is expected to win big as political watchers look to see if there will be a repeat of the sort of huge gains Sir Tony Blair saw in the 1996 local elections before his 1997 landslide.
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Labour strategists might mutter that in every general election year, the government gain seats in local elections even when there’s a change of government, but the expectation is that Labour could win hundreds of seats from the Conservatives and perhaps take the scalp of the Conservative West Midlands mayor Andy Street – while Sir Keir will be looking at this as an important staging post on his path to power, his opponent Rishi Sunak is just trying to survive.
But beyond the drama of the Conservative fortunes and the prime minister’s fate, what is also emerging in this election campaign is the secondary strap of Sir Keir’s ‘change’ message.
When he says change, what he really means is patience, and that is perhaps the national conversation we are going to be having much more in the run-up to this general election.
Because while Sir Keir likes to make long speeches diagnosing the maladies brought about in Britain after 14 years of Conservative rule, he’s less good at giving us remedies.
On Thursday in Dudley, when he laid into Mr Sunak for “strangling” levelling-up “at birth” and accused Boris Johnson of “preying on people’s hopes” and not delivering, his own answer is greater devolution of powers to local leaders to better deliver local growth and level up communities.
A (possible) solution that is a very slow medicine indeed at a time when local councils across England are struggling to provide basic services let alone more opportunities for their communities.
The more immediate issue for towns and cities across the country is the funding crisis in local councils.
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Levelling up ‘unforgivable’ failure
One in five council leaders said in December that their councils are “likely or fairly likely” to go bust in the next 15 months.
Birmingham effectively declared itself bankrupt earlier this month and was forced to lift bills by 21%, while cutting services.
With more on the brink, the Local Government Association says an emergency £4bn will be needed just to maintain basic services in the next two years.
When I asked Sir Keir if he would be able to commit this funding, he told me he “can’t turn on the spending taps” (and also said tax increases were not an option given the country’s tax burden – many Labour voters might disagree, but he and Rachel Reeves are immovable on this).
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What he did say was this: “At the end of an incoming Labour government councils will be better funded, more sustainable, able to deliver their services than they are now,” and when asked again to clarify whether looking again at funding settlements could involve an upfront cash injection, he was unequivocal: “What it means is not a lump sum cash injection”.
In other words, you’re going to have to wait for perhaps five years for better funded councils and better public services.
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So in the coming weeks, as you watch Labour try to manage expectations for what could be a May local election landslide, watch too for more of what I got more of a glimpse of in Dudley: a Labour leader desperately trying to manage expectations of what an incoming Labour government can do.
With the decisions he and Ms Reeves have made on fiscal management of the economy – effectively sticking closely to Conservative fiscal rules and eschewing any commitment to tax rises or spending increases – this will only become a bigger part of this change story as we get closer to deciding who should take power later this year.
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Sir Keir is going to campaign on the promise of change.
Where he needs to level with voters more is that they might have to wait for a second Labour term for concrete change to come.
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Rachel Reeves has told Sky News she is looking at both tax rises and spending cuts in the budget, in her first interview since being briefed on the scale of the fiscal black hole she faces.
“Of course, we’re looking at tax and spending as well,” the chancellor said when asked how she would deal with the country’s economic challenges in her 26 November statement.
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Ms Reeves was shown the first draft of the Office for Budget Responsibility’s (OBR) report, revealing the size of the black hole she must fill next month, on Friday 3 October.
She has never previously publicly confirmed tax rises are on the cards in the budget, going out of her way to avoid mentioning tax in interviews two weeks ago.
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Chancellor pledges not to raise VAT
Cabinet ministers had previously indicated they did not expect future spending cuts would be used to ensure the chancellor met her fiscal rules.
Ms Reeves also responded to questions about whether the economy was in a “doom loop” of annual tax rises to fill annual black holes. She appeared to concede she is trapped in such a loop.
Asked if she could promise she won’t allow the economy to get stuck in a doom loop cycle, Ms Reeves replied: “Nobody wants that cycle to end more than I do.”
She said that is why she is trying to grow the economy, and only when pushed a third time did she suggest she “would not use those (doom loop) words” because the UK had the strongest growing economy in the G7 in the first half of this year.
What’s facing Reeves?
Ms Reeves is expected to have to find up to £30bn at the budget to balance the books, after a U-turn on winter fuel and welfare reforms and a big productivity downgrade by the OBR, which means Britain is expected to earn less in future than previously predicted.
Yesterday, the IMF upgraded UK growth projections by 0.1 percentage points to 1.3% of GDP this year – but also trimmed its forecast by 0.1% next year, also putting it at 1.3%.
The UK growth prospects are 0.4 percentage points worse off than the IMF’s projects last autumn. The 1.3% GDP growth would be the second-fastest in the G7, behind the US.
Last night, the chancellor arrived in Washington for the annual IMF and World Bank conference.
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The big issues facing the UK economy
‘I won’t duck challenges’
In her Sky News interview, Ms Reeves said multiple challenges meant there was a fresh need to balance the books.
“I was really clear during the general election campaign – and we discussed this many times – that I would always make sure the numbers add up,” she said.
“Challenges are being thrown our way – whether that is the geopolitical uncertainties, the conflicts around the world, the increased tariffs and barriers to trade. And now this (OBR) review is looking at how productive our economy has been in the past and then projecting that forward.”
She was clear that relaxing the fiscal rules (the main one being that from 2029-30, the government’s day-to-day spending needs to rely on taxation alone, not borrowing) was not an option, making tax rises all but inevitable.
“I won’t duck those challenges,” she said.
“Of course, we’re looking at tax and spending as well, but the numbers will always add up with me as chancellor because we saw just three years ago what happens when a government, where the Conservatives, lost control of the public finances: inflation and interest rates went through the roof.”
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Blame it on the B word?
Ms Reeves also lay responsibility for the scale of the black hole she’s facing at Brexit, along with austerity and the mini-budget.
This could risk a confrontation with the party’s own voters – one in five (19%) Leave voters backed Labour at the last election, playing a big role in assuring the party’s landslide victory.
The chancellor said: “Austerity, Brexit, and the ongoing impact of Liz Truss’s mini-budget, all of those things have weighed heavily on the UK economy.
“Already, people thought that the UK economy would be 4% smaller because of Brexit.
“Now, of course, we are undoing some of that damage by the deal that we did with the EU earlier this year on food and farming, goods moving between us and the continent, on energy and electricity trading, on an ambitious youth mobility scheme, but there is no doubting that the impact of Brexit is severe and long-lasting.”
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