UK Prime Minister Keir Starmer, surveying the poor Labour local election results and by-election loss, assures the country he “gets it”. He plans to go faster with the change people want.
We should expect some new policy initiatives and maybe a cabinet reshuffle to improve performance and highlight priorities. The elections took the Labour Party down to an estimated 20% for a nationwide vote. The official opposition Conservative Party fared even worse, tumbling to 15%. The relatively new challenger party, Reform, leapt to 30%.
This performance, if repeated in a general election, would see many Labour MPs lose their seats, the government’s majority eliminated and a Reform government. As the election may be four years distant, the government has plenty of time to do things to change the outcome.
For the time being, the UK has five national parties struggling for popularity, with the Lib Dems and Greens also in contention. The SNP as a dominant force in Scotland lost 39 of their 48 Westminster seats in the 2024 general election and has to face the electorate for the Scottish Parliament next year, with the polls pointing to a rise in challenger parties.
A cabinet reshuffle?
Downing Street wisely refuses to make comments on when or whether there will be a reshuffle, but there is speculation in the air that one is coming. The press has three Cabinet members on their list for the sack or demotion, all of them women. There would likely be a wider reshuffle with more balance.
Lucy Powell, Leader of the House is vulnerable after her unfortunate comments that people raising the issue of rape gangs were adopting dog-whistle politics. As Leader of the House, she needs to appear more understanding of opposition concerns, even though the government has plenty of votes to do as it wishes.
Bridget Phillipson is said to be vulnerable at Education. Her adverse changes to academies may have pleased the unions but they did not seem to please the prime minister. Some see them doing damage to reforms originally pioneered by the Blair government. The possibility of teacher strikes this autumn is also not helping her cause.
Then there is the briefing that the Department of Culture Media and Sport may be broken up with its work transferred to the Science Ministry, Business and the Treasury, removing Lisa Nandy’s cabinet role.
Whilst the Foreign Secretary and the Chancellor of the Exchequer have their critics within the ruling party as well as outside, the prime minister has said he will not move either of them this parliament. He should stick with that view. The economic policy Rachel Reeves has laid down reflects Treasury and Bank of England thinking and is unlikely to change much even if he changed his mind. Yvette Cooper for example, with past Treasury Ministerial experience would probably stick to similar guidelines.
It is unlikely we will see major policy changes due to any cabinet personnel changes. The changes will be more about finding a team with which the prime minister is comfortable. Moving Ed Miliband would be necessary if Sir Keir wanted to go for cheaper energy and allow domestic fossil fuel more of a role in transition. As Mr Miliband is popular in the party, he would need to be found an important post and there are no reported rumours about this.
What changes of policy?
The first big change is likely to be a new policy on migration, probably next week. This has been in the planning for some time but will now be toughened and speeded up. The success of Reform was led by their wish to take much stronger measures to stop illegal migration, and to curb the much more numerous legal migration.
The government is seeking further ways of using enforcement to stop the flow of boats across the English Channel but has faced a surge in arrivals with calmer weather. It could announce improved enforcement against UK employers hiring illegals for jobs like delivery. It could improve cooperation with France. It could examine the current criteria for gaining legal access and reduce the categories or tighten the terms. It could, for example, make it more difficult for legal entrants with work visas or student visas from bringing in dependents. It could shorten the time they can stay and do more to ensure they leave. It could raise the minimum wage needed to gain a work visa, or the skill level. It could stop students staying on to do jobs after their courses.
Whatever it does it will reduce the supply of people coming to work and to study. It is likely to continue to allow substantial numbers of work and student visas.
The second is to revisit the whole economic and benefits strategy with a view to improving living standards and persuading more people they are or will be better off. The government is having some regret that it took the fuel allowance away from most pensioners in the first budget but is unlikely to restore it. The prime minister has ruled this out, although many in his party would at least like more people to receive the means-tested fuel benefit that remains. Polling says the removal of the pensioner allowance and the National Insurance increase and farms taxes were the three most unpopular things the government has done. It is unlikely they will revisit the business taxes as they see them as essential to their budget arithmetic.
The third is to present a defence deal with the European Union (EU) as the UK providing leadership for Europeans to make a bigger contribution to their own defences. With more money to be put into the UK defence budget, and with the expansion of budgets on the continent, the government will also be able to point to more work and jobs in the weapons factories.
The fourth is to extend action over so-called rape gangs where some Labour figures think there should be a national enquiry with powers to require witnesses to appear. Others think at least there should be more local enquiries and more urgency in establishing the truth and prosecuting the offenders.
Trade developments
The government can claim a success this week in reaching agreement with India over trade relaxations. There are some improvements, giving UK services more access and allowing UK companies to bid for Indian government contracts. There are tariff reductions particularly helping UK whisky and car makers.
The opposition is concerned about the exemption from UK National Insurance for Indians coming to the UK on short-term assignments for their companies. The government points out this is a common provision in Treaties to avoid double taxation, as the company and employer are paying Indian social security charges.
We are promised a trade deal with the US today, with an Oval Office press conference scheduled for 10 am Washinton time. It is said to be a limited deal, not a full draft Free Trade Agreement. The 25% steel and cars tariffs into the US are clearly an issue the UK would like to see resolved, whilst the US side is concerned about taxes and regulations on US digital companies and about UK subsidies to the film makers. Any kind of deal will be welcome to markets and the president is likely to call it the first of many. It remains to be seen how much detail there will be and when we might get a legal text.
The government believes the main thing it needs to do is to deliver higher living standards for the many.
The EU summit on 19 May is unlikely to agree a revised trade treaty between the two. It may set out a timetable for further talks The EU is pressing for a Youth Mobility scheme, for continuing access to a substantial proportion of the fish caught in UK waters, for the UK to adopt EU regulations and standards for traded goods, and a budget contribution on defence.
The dispute about the UK ban on fishing for sand eels in UK waters emerged from arbitration with both sides claiming a win. The UK lost on one count, the proportionality of their action, whilst winning on the others. Some in the EU think the UK needs to compensate them for damage to continental fishing interests from the UK fishing ban.
The UK thinks the ban was proportionate and the EU just needs a better explanation. It remains a contentious issue hanging over the fishing chapter of any agreement.
Conclusion
The government believes the main thing it needs to do is to deliver higher living standards for the many. That requires keeping price rises down and running the economy to deliver more and better-paid jobs. Their message of seeking economic stability makes radical changes to the fiscal rules or the institutional architecture of the Bank of England and Office for Budget Responsibility (OBR) unlikely.
Keeping to the rules will mean difficult choices over tax rises and spending cuts in the weeks leading up to the summer Spending Review and the longer run up to the tax-setting budget in the late autumn. The government may seek more off-balance sheet ways of financing public sector led activity and will want to speed up public investment and housebuilding further. It also sees overseas trade as an opportunity, so will want to reach agreements with both the EU and the US over trade matters.
It is difficult to see these measures making a major difference to the reduced growth most forecasters now expect for 2025 and 2026. Good trade deals can add 0.1% to 0.3% to GDP when they roll out. Whilst they should increase exports, they will also increase imports. They take time to complete and to implement so they will not assist this year or much of next.
Increased public investment would add to gross domestic product (GDP) and help create more jobs. The aim of 1.5 million new homes over five years is proving difficult to achieve and will now require a very fast growth rate in building in the second half of this parliament.
Nothing on this website should be considered or taken as personal advice, and it is not based on your personal circumstances. No news or research item is a personal recommendation to deal.