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What to expect from the new UK government

Posted on by darion

EconomyElectionsForecastingGeopoliticsPoliticsGreat BritainCountry Analysis

  • There have been few major surprises since Labour leader Keir Starmer became prime minister after winning the general election on July 4. Mr Starmer has appointed his previous shadow cabinet to almost identical positions, with policy announcements largely reflecting Labour’s election manifesto.
  • Mr Starmer’s large parliamentary majority and the vast experience of his new ministers mean he is well placed to push ahead with legislation, even on the more controversial bills on North Sea energy policy and planning reform.
  • Tackling the problem of ailing public services (particularly the NHS) will be more difficult, partly because of a lack of consensus on how to make improvements and partly because of the prevailing political view that there is no fiscal space to significantly increase funding for public services.
  • Labour’s foreign policy will be more pro-EU than the Conservatives, while maintaining strong support for NATO and Ukraine.

There have been no major surprises so far under Starmer’s leadership.

Mr Starmer’s first cabinet is one of the most prepared in recent decades. Three of the new secretaries of state have previous experience of leading departments, and five others are former cabinet ministers. Most of the 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 made up of experienced policy advisers and seasoned civil servants, notably his chief of staff, Sue Gray, a former permanent secretary in the Cabinet Office, the department that drives cross-government operational efficiency. The experience of Mr Starmer’s cabinet and advisers should enable Labour to implement the policy effectively..

In order to show that Labour is “making a difference”, Mr Starmer will first tackle policy areas where there is no internal opposition. This will aim to maintain the momentum and distinguish Labour from the Conservatives. He will also focus on policy areas where failure can be attributed to the Conservatives, such as reversing the effective ban on onshore wind farms – a policy that previous Conservative governments maintained after vocal lobbying from MPs, voters and party members. Central to Labour’s plan to tackle the UK’s growth problem is planning reform. To address the UK’s housing shortage, Mr Starmer wants to reform the National Planning Policy Framework to increase development, as well as reintroduce housing targets for councils and re-engage with green spaces. Achieving the institutional changes necessary to do this should be feasible, but we expect Labour to fall short of the ambitious targets set for new housing.

The vast majority will support the adoption of the bill

The Queen’s Speech on 17 July set out Mr Starmer’s legislative agenda and revealed his priorities for parliament. The legislation, much of which has already been made public, focuses on institutional reform in areas such as planning and energy policy, with much of it aimed at helping to boost economic growth, as outlined in the Labour manifesto. Although widely supported by the electorate, many areas are difficult to regulate and change. With 200 new Labour MPs in the role, Mr Starmer is likely to seek to use their relative inexperience – and the government’s natural honeymoon period – to push through most of the legislation as early as possible.

He will be helped by the fact that the attention of other political parties will be elsewhere. The Conservative Party will be licking its wounds from its election defeat and will focus on its leadership campaign to replace 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 the main campaign issues (sewage in Britain’s rivers) will be prioritised by a Labour government. Therefore, Mr Starmer should be able to easily pass his original legislative package without major amendments.

Public services and prison reform will face challenges

A key political challenge for Labour will be improving public services, particularly health and education, which have been squeezed by years of austerity. We expect this to be difficult given the modest scale of the planned spending, and we anticipate only modest progress. Prison reform will also be a problem because of the overcrowding in the UK, which led to the early release of 10,000 prisoners by the Conservative government. Although this only applied to prisoners who had served at least 50% of their sentences, Labour’s Justice Secretary, Shabana Mahmood, intends to reduce this to 40%, which could face public opposition. The move is in line with Labour’s pledge to “reclaim our streets”, which includes plans to build new prisons, as well as better coordination for people leaving prison and probation to reduce reoffending.

Labour Party set to improve relations with EU

Mr Starmer’s foreign policy will be very similar to that of the previous Conservative government. Mr Starmer was given two foreign policy gifts in the form of a NATO summit and a meeting of the European Political Community to establish himself as a pro-NATO, pro-Ukraine and pro-EU prime minister. Labour was able to quickly show support for Ukraine and meet US President Joe Biden. Mr Starmer will also seek to reset relations with the EU. Foreign Secretary David Lammy has spent his first week in power visiting EU capitals and meeting counterparts in an attempt to put the UK on more favourable terms with its biggest nearby trading and diplomatic partner. This trend is set to continue, with Labour more pro-EU than the Conservatives.

It will take some time to implement the changes

Labour will have an initial honeymoon period, after a big victory and with a large number of new and enthusiastic MPs. The euphoria of victory will soon be tempered by the need for Mr Starmer to better outline his plan for the country and to start making difficult decisions. But given that he has a working majority of over 170 seats, even some erosion of party unity will not slow down policymaking. In 2025, some public disappointment is to 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 rule, but It will be difficult to achieve quick wins in priority areas such as reducing NHS waiting times. However, we see significant opportunities to deliver significant changes to planning and investment policy that will help boost growth, and the positive impact of these changes will be felt later in the government’s term.

The analyses and forecasts in this article are available via EIU Country Analysis service. This comprehensive solution provides unparalleled global insights covering political and economic perspectives for nearly 200 countries, enabling organizations to effectively identify potential opportunities and threats.

EconomyElectionsForecastingGeopoliticsPoliticsGreat BritainCountry Analysis