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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In an alternative universe, Britain’s Labour government might this week have been celebrating a year in office during which it had translated its whopping majority into a string of reforms in its quest to rekindle growth and repair public services. In the real world, Sir Keir Starmer’s administration has rather little to cheer about.
The year since its electoral landslide has been marked by plodding progress — except in some limited areas such as planning reform — and a catalogue of mis-steps. The latest has come only weeks after the government U-turned on its mishandled but fiscally necessary plan to means-test pensioners’ winter fuel payments. Even after it essentially gutted a flagship welfare reform bill last week in the face of a backbench rebellion, Starmer’s government was still battling on Monday to ensure it had the numbers it needed. The prime minister’s authority is badly damaged. For the rest of this parliament, passing any difficult legislation will require vexed negotiations with his own MPs. And the scale of the tasks means almost all of its legislation will be difficult.
True, the welfare bill was flawed from the outset, and toughened late in the day to save more money and keep chancellor Rachel Reeves within her fiscal rules. After more than 120 Labour MPs balked at plans to tighten eligibility for disability benefits, the government said last week the rule changes would only apply to new claimants from November 2026. Together with the £1.25bn cost of the winter fuel U-turn, the concessions will create a £4.25bn budget hole that makes further tax rises even more likely in the autumn.
Yet this was an extraordinary lapse in party management. Cutting welfare payments for the disabled will always be a very tough sell for Labour MPs. But Downing Street failed to anticipate the extent of the mutiny — which included mainstream Labour figures — and do enough to contain it. Starmer chose to cave rather than make it a confidence issue. Once a party’s MPs have lost their fear of Number 10, it never returns.
Much of the blame for the party’s broader woes must rest with the prime minister and his chancellor. Despite his diplomatic deftness on the international stage, Starmer’s domestic political instincts have proved lacking. His claim that his “full attention really bore down” on the welfare bill only last week, given his recent focus on world affairs, will cut little ice; voters expect prime ministers to be adept multitaskers. Unlike Tony Blair two decades ago, moreover, Starmer has failed to set out a vision compelling enough to rally his party and keep the Labour left in check. His government’s paltry 12-month progress has made the dozens of Labour MPs who have Nigel Farage’s hard-right Reform UK breathing down their necks especially restive.
Starmer and Reeves combined a vague promise of “change” with a commitment to fiscal discipline aimed at reassuring business and investors. But they spent months in office emphasising the dire budgetary inheritance from their Conservative predecessors, damaging confidence along the way, without articulating a convincing plan to improve things. Their manifesto promise not to raise the three main rates of tax forced them instead to pile tax increases on business and wealth creators, slowing hiring and squandering investor goodwill. Their fiscal rigour, meanwhile, collided with the Labour base’s desire for higher spending on public services.
A year in, Labour’s biggest failing is that it has still not figured out what it wants to be as a party of government, and how to reconcile the competing pressures it faces. Its long overdue 10-year plan for health later this week is a potential opportunity to persuade voters it is grappling with their priorities. But the damage Starmer’s latest U-turn has done to his authority to push through hard but necessary measures will only make its task more difficult.