It isn't going well for Sir Keir, he needs a real reset

Deregulation, open trade, cheap energy, privatisation and lower taxes from a Labour government. Go on Sir Keir, make that U-turn, be Roger Douglas not Justin Trudeau

“On taking office the new Labour government quickly embarked upon a macroeconomic stabilization programme, combined with the most wide-ranging set of microeconomic reforms undertaken in any OECD member country. The latter reforms included the deregulation of the financial sector, the removal of various forms of assistance to producers, particularly in the agricultural sector, some acceleration of the pace of import liberalization, radical tax reform, a major overhaul of the public sector and the privatization of several state enterprises.”

We can but dream. Instead, Britain’s Labour government seems fated to get everything wrong. Not merely because it is wedded to a terrible state-centred ideology but also because it seems to have attracted some form of curse. What we have is a combination of unforced error, sub-optimal policy and bad communications resulting in the prime minister essentially saying ‘it’s always darkest before the dawn’ and that, as Mr Micawber would say, ‘something will turn up’.

In the run up to the election last July people joked that Keir Starmer had captured a genie such was the nature of his good luck. Some, perhaps foolishly, claimed this wasn’t the case and Labour’s success was down to Sir Kier’s political genius:

“I do not believe in genies.

Though Starmer has been incredibly lucky, and over the last few years has found himself with the right politics at the right time in history, his astonishing victory today is not because of a genie.

It’s due to an incredible amount of political skill on his part.”

I’ll leave you to judge whether or not Sir Keir possesses an “incredible amount of political skill”, but you’ll agree that almost since he first parked his bum on the Downing Street sofa, things have gone badly for Sir Keir and his government. And while the folklorist in me would like to believe that the Labour leader offended a fairy princess or hideous but self-important hag, it is likely that the failings of Britain’s labour government rest more on the vanity of its leader than on any curse bestowed in vengeance for some unknown slur.

Arriving in office with a historic majority, Sir Keir and his team believed that they could do no wrong. So they didn’t have a plan, just a collection of well-honed phrases that had helped win the election. The new government was going to focus on growth, stabilise the economy, cure the NHS, and put an end to Tory chaos. The problem was that Labour simply had words, and while words have power as every Magus knows, they are not enough on their own to get results. Saying ‘stabilise the economy’ lots of times doesn’t in itself achieve that stability but Labour genuinely seemed to believe that having a different name on the door of 11 Downing Street was all that was required to get that mystical stable economy. As we have discovered.

As a result the chancellor, who once told us proudly she is an economist (a ‘serious economist’ according to Mark Carney, the former Bank of England boss), now resorts to running around asking for ideas about how to grow the economy. And then rushes off to China where obviously the Communist Party will be only too happy to give Rachel Reeves advice on the economy. The problem is, however, that under President Xi, China is making all the same mistakes as a previous communist empire, the Soviet Union. A rapidly slowing economy, a collapse in fertility, and accelerating borrowing all mean that China, once expected to zoom past the USA as the world’s biggest economy, is falling behind the much richers and cleverer USA. Reeves should be headed to see Donald Trump except that we know what advice Donald will give her and it wouldn’t be to her liking.

Everyone recognises that Britain’s economic problems lie with the lack of economic growth since 2008 when, as we were told by the Labour Party, Gordon Brown saved the world. But Labour, instead of seeing the sclerosis as down to net zero policies, an over-regulated economy, and the strangling of private investment, have decided that the problem is down to the lack of an “industrial policy” or “strategic planning” and something they call “austerity”. Labour’s mindset was cruelly exposed when Reeves wrote to regulators asking for ideas about growth. We can safely assume that none of the regulators will respond with ‘close us down’. And meanwhile, the government has created a new regulator to slam the brakes on one of Britain’s most successful export industries, Premier League football.

The problem is that Labour’s chosen ideology (Rachel Reeves has a cute term for it, ‘securenomics’) believes that economic growth is the result of government action not the creativity and industry of business people, investors and entrepreneurs:

“By forging a new partnership between an active state and dynamic open markets.

And by fostering a new era of global partnerships between nations with shared values and interests.”

I do hope, by the way, that Reeves doesn’t see China as one of those nations with “shared values and interests”. It is certainly the case, however, that Reeves’ active state is modelled on the Biden administration’s use of large scale public borrowing to invest in selected industries. And, as we see in the USA, this simply fuels inflation:

“Mr Biden’s stimulus did, however, put a rocket under inflation. In April (2023) “core” consumer prices, which exclude energy and food, were 13.4% higher than when he came to office. They have risen more than in other g7 countries, and their acceleration coincided with the introduction of Mr Biden’s stimulus. Research suggests that, even by September 2022, the largesse was pushing up core inflation by about four percentage points.”

In Britain we have seen this strategy of increased public borrowing introduced without the associated investment in industry. Instead the extra money has gone to junior doctors, train drivers and buying kids breakfast. At the same time Labour has chosen to trash one of the few successes of the last 15 years, Britain’s improved educational outcomes. All the magic words that Sir Keir and his team used to get elected have achieved nothing. Worse, everything that the new government has done seems to satisfy and some of the decisions seem, to put it mildly, perverse.

We have a new tax on education which isn’t going to raise any money as parents of private school children move back into the state system. We have the removal of the winter fuel allowance resulting in stories of freezing pensioners and comparisons with wealthy ministers getting their dresses and spectacles paid for by a political sugar daddy. And we saw a budget that looks set to be the final blow for struggling pubs, restaurants and shops. Plus economic growth completely stalling.

Labour set out a series of what it calls ‘missions’ but none of these (and they are, I assume deliberately, vague and imprecise) appear to have a plan as to how the mission might be achieved. Or indeed that the mission of an accelerated programme towards net zero makes the mission of faster growth more difficult, if not actually impossible. The result of this has been that Sir Keir and his ministers now don’t speak of specific missions but rather of a thing called “mission-led” or “mission-driven” government.

Labour expected an easy ride. Indeed their friends in the media sat back after the election and told them they’d have an easy ride. Unsurprisingly, once things started to come unstuck, the media started to report (often mildly, even kindly) that things weren’t going quite as well as expected. Ministers found themselves defending unforced errors like unnecessarily paying Mauritius billions to take over some islands for no good reason, or explaining rude and unpleasant things ministers, and the politician chosen as ambassador to Washington, had said about the incoming US administration.

Sir Keir and Labour thought everything would be easy, simply a matter of sitting down with civil servants and getting on with the process of government. But the civil servants, it seemed, asked ministers difficult questions like ‘what do you want us to do’ and the new ministers hadn’t a clue. The plan had been for this smooth process of government to be accompanied with lots of terrible tales about just how bad the Conservatives had been. But the reality was that the previous government wasn’t really all that awful, at least not so bad that incoming ministers couldn’t simply pick up and run with the ideas, some of them really stupid, put in place by that government.

The Labour campaign strategy (do some tough stuff and blame the Tories) is in shreds. Their hope that Reform would take the new Tory leader’s eye off the main prize seems to be wishful thinking. And everything they do finds another group of angry and annoyed voters. Labour had hoped that Conservatives, used to being in power, would struggle with opposition but this now looks less likely as Kemi Badenoch and her front bench get used to the task of holding Sir Kier’s feet to the flame. The only way out for Labour is going to be a complete u-turn on its economic strategy - perhaps something as radical as ‘Rogernomics’ might be needed to get economic growth required. Which is where we started - deregulation, open trade, cheap energy, privatisation and lower taxes all from a Labour government in New Zealand, the very opposite to what we’re getting from a Labour government in Britain. Go on Sir Keir, do a u-turn, be Roger Douglas not Justin Trudeau.