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 * What to expect from the UK’s new government


WHAT TO EXPECT FROM THE UK’S NEW GOVERNMENT

Tue, 23rd Jul 2024

Article tags EconomyElectionsForecastingGeopoliticsPoliticsUnited KingdomCountry
Analysis



--------------------------------------------------------------------------------

 * Since the Labour Party leader, Keir Starmer, became prime minister after
   winning the general election on July 4th, there have been no major surprises.
   Mr Starmer appointed his previous shadow cabinet to almost identical roles,
   and policy announcements have broadly mirrored Labour’s campaign manifesto.
 * Mr Starmer’s large majority in parliament and the high level of experience of
   his new ministers means that he is well placed to make legislative progress,
   even on more controversial bills regarding North Sea energy policy and
   planning reform. 
 * Tackling ailing public services (particularly the National Health
   Service—NHS) will be trickier, partly because there is little consensus on
   how to make improvements, and partly because the prevailing political view is
   that there is no fiscal space for a large-scale increase in funding for
   public services.
 * Labour’s foreign policy will be more pro-EU than that of the Conservative
   Party, while maintaining strong support for NATO and Ukraine.


NO MAJOR SURPRISES SO FAR UNDER STARMER

Mr Starmer’s first cabinet is one of the best-prepared of new governments in
recent decades. Three of the new secretaries of state have previous experience
leading departments, while five others are former government ministers. Most
junior ministers are members of parliament (MPs) who have previous ministerial
experience, senior parliamentary experience or deep specialist knowledge. The
prime minister’s support team is composed of seasoned political advisers and
experienced civil servants, most notably his chief of staff, Sue Gray, a former
permanent secretary at the Cabinet Office, the department that drives
cross-government operational efficiency. The experience of Mr Starmer’s cabinet
and advisers should allow Labour to effectively implement policies.

In order to show that Labour is “making change happen”, Mr Starmer will first
tackle policy areas in which no internal opposition is present. This will aim to
maintain momentum and to differentiate Labour from the Conservatives. He will
also focus on policy areas where failure can be pinned on the Conservatives,
such as reversing the effective ban on onshore wind farms—a policy that prior
Conservative governments upheld after vociferous lobbying by MPs, constituents
and party members. Critical to Labour’s plan to tackle growth in the UK is
planning reform. In order to address the UK’s housing shortage, Mr Starmer wants
to reform the National Planning Policy Framework in order to increase
development, as well as reintroducing housebuilding targets for councils and
re-addressing building on the green belt. Achieving the institutional changes
needed for this should be feasible, but we expect Labour to undershoot its
ambitious targets outlined for new housebuilding.


HUGE MAJORITY WILL SUPPORT THE PASSAGE OF LEGISLATION

The King’s Speech on July 17th outlined Mr Starmer’s legislative agenda and
revealed his priorities for the parliament. The legislation, much of which had
already been made public, focuses on institutional reform in areas like planning
and energy policy, with a large share of bills aiming to help boost economic
growth, in line with Labour’s manifesto. Although broadly supported by the
electorate, many areas are complex to regulate and change. With 200 Labour MPs
new to the job, Mr Starmer will probably seek to capitalise on their relative
inexperience–and the government’s natural honeymoon period–to push through much
legislation as early as possible.

He will be helped by the fact that other political parties’ attention is focused
elsewhere. The Conservative Party will be licking its wounds after its election
loss and will be focused on a leadership campaign to replace the former prime
minister, Rishi Sunak. Labour is also likely to face little immediate opposition
in parliament from the Liberal Democrats. Although they hold a significant
number of seats, one of their main campaign issues (sewage in UK rivers) will 
be tackled as a matter of priority by the Labour government. Therefore, Mr
Starmer should be able to easily pass his initial legislative package relatively
unamended.


PUBLIC SERVICES AND PRISON REFORM WILL FACE CHALLENGES

The key policy challenge for Labour will be improving public services,
especially in healthcare and education, which have been squeezed by many years
of austerity. We expect this to be difficult given the modest scale of spending
planned, and anticipate only moderate progress here. Prison reform will also
present difficulties given the UK’s overcrowding issue, which led to the
Conservative government releasing 10,000 prisoners early. Although this only
applied to prisoners who had served a minimum of 50% of their sentences, Labour
justice secretary, Shabana Mahmood, is set to reduce this to 40%, which could
meet with public opposition. The move is in line with Labour’s pledge to “take
back our streets”, which includes plans to build new prisons, as well as better
co-ordination for prison leavers and probation to reduce reoffending.


LABOUR SET TO IMPROVE EU RELATIONS

Mr Starmer’s foreign policy will look remarkably similar to that of the former
Conservative government. Mr Starmer was gifted two foreign policy set pieces in
the form of a NATO summit and a European Political Community meeting to
establish himself as a pro-NATO, pro-Ukraine and pro-EU prime minister. Labour
was thus able to promptly show support for Ukraine and meet with the US
president, Joe Biden. Mr Starmer will also seek to reset relations with the EU.
The foreign secretary, David Lammy, spent his first week in power visiting EU
capitals and meeting his counterparts in an attempt to put the UK on a more
favourable footing with its largest nearby trading and diplomatic partner. This
trend will continue, as Labour is more pro-EU than the Conservatives.


MAKING CHANGE HAPPEN WILL TAKE TIME

Labour will have an initial honeymoon period, on the back of a big win and with
a large intake of new and enthusiastic MPs. The euphoria of victory will soon be
tempered by the need for Mr Starmer to better articulate his plan for the
country and to start taking difficult decisions. However, given that he has a
working majority of more than 170 seats, even some erosion of party unity will
not slow policymaking. In 2025 a degree of public disappointment can be expected
as the realities of making progress on long-standing and intractable problems
become clear. Expectations for Labour are high, after 14 years of Conservative
government, but achieving quick wins in priority areas such as reducing waiting
times in the NHS will be difficult. However, we see a strong chance of powerful
changes to planning and investment policy that will help to lift economic
growth, with the positive impact of these being felt later in the government’s
term.

The analysis and forecasts featured in this article are accessible through
EIU’s Country Analysis service. This comprehensive solution provides unmatched
global insights covering the political and economic outlook for nearly 200
countries, enabling organisations to identify potential opportunities and risks
effectively.

Tue, 23rd Jul 2024 Article tags
EconomyElectionsForecastingGeopoliticsPoliticsUnited KingdomCountry Analysis

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