As Keir Starmer returns from his summer break in Europe, and Labour MPs head back to Westminster for the new parliamentary session, the government will be hoping to get on the front foot after a tumultuous few months.
The recess has given ministers time to think, and to plan, but also the chance to study the polls. This week, YouGov put Labour on just 20% – the lowest level in more than five years – and eight points behind Nigel Farage’s Reform UK.
Already bruised by internal rows, public criticism and a failure to get a grip of big issues such as the economy and migration, Starmer’s government desperately needs to reassert itself and gain some momentum. But there are lots of difficult moments ahead.
The budget
When Labour’s former shadow chancellor Anneliese Dodds told the Guardian at the start of the summer that the Treasury should consider a wealth tax to close the growing gap in the public finances, Rachel Reeves was unequivocal. “I think we’ve got the balance right in terms of how we tax those with the broadest shoulders,” she said, citing higher levies on private jets and second homes, and increased capital gains tax, as well as scrapping non-dom status.
Yet the chancellor is now in a trickier predicament, with experts suggesting the government spending gap is on course to reach more than £40bn after a slowdown in economic growth and higher-than-expected inflation. With extra borrowing likely to spook financial markets and ministers already struggling to stay within departmental spending limits – and Reeves determined to stick to her own fiscal rules – the chancellor returns to work pondering which tax rises would be the least unpalatable option.
Labour has already ruled out putting up income tax, national insurance or VAT – which could have potentially raked in billions – in order to stick to a manifesto pledge. The Treasury has spent the summer flying kites to test different options, including raising more money from inheritance tax and putting up capital gains tax on expensive homes. But wherever she lands, Reeves has a tough task explaining tax rises to the public. The chancellor is already considering delaying the budget until November to give her more time.
Party discipline
After a bruising few weeks during which angry Labour MPs fronted up to Downing Street over welfare cuts, forcing the government into a dramatic climbdown, and Starmer came under pressure from his own cabinet to immediately recognise Palestine as a state, both backbenchers and the government were in need of a break. “We’re all totally frazzled,” one No 10 adviser told the Guardian before recess. “We went straight from the election campaign into government and haven’t had a day off in months.”
While the lack of announcements and press conferences over the summer alarmed some MPs, who feared it created space that was occupied by Farage, it also gave Downing Street an opportunity to reflect and reset. Starmer has used it to shake up his top team, including bringing in a new chief economic adviser to challenge Treasury thinking, and more internal changes are expected.
The prime minister is also expected to reshuffle his junior ministers, to reward the rising stars of the 2024 intake and speed up delivery, as well as punishing those who plotted against the welfare plans and replacing his homelessness minister. Sources suggested, however, that the cabinet will remain intact for now. The political side of No 10, chastened by the welfare debacle, intends to put greater emphasis on the relationship with MPs, including making sure they get face time with Starmer himself.
With more potentially divisive issues coming up – including Send reform and the government’s child poverty strategy – they are desperate to avoid further parliamentary battles. But Labour MPs are anxious about being squeezed by the new Jeremy Corbyn-led party on the left and Farage’s Reform UK on the right, and have shown themselves willing to flex their muscles.
Trump state visit
When Keir Starmer handed over a letter to Donald Trump in the Oval Office in February, with an invitation from the king for a second state visit, there was a muted response back home.
While the US president remains unpopular in the UK, there is an understanding that it is in Britain’s interests to have a good relationship with the White House. So far, and despite the odds, Starmer has achieved that. Trump has even stated that he likes the prime minister “a lot” even though, with Starmer being a “liberal”, the two men have very different politics.
Yet as both that meeting in Washington and Trump’s subsequent talks with Starmer at his Ayrshire golf course showed, any visit with Trump is also a diplomatic nightmare. Often played out in front of the world’s media, the US president has no qualms about dipping into sensitive domestic issues such as free speech, tax rises or his friendship with Farage.
While he may well be on his best behaviour as he enjoys Charles and Camilla’s hospitality at Windsor Castle, it could easily go wrong elsewhere. If the whim takes him, Trump could unpick the economic deal already agreed with the UK or even decide to impose further tariffs. The two governments are already at odds on the Gaza crisis, with Starmer planning to formally recognise the Palestinian state at the UN, while Trump gives the Israeli prime minister, Benjamin Netanyahu, cover.
Starmer will also push for the US to (finally) offer firm security guarantees for Ukraine, after Trump’s talks with Vladimir Putin emboldened the Russian president. Starmer will be walking a diplomatic tightrope on multiple fronts. Brace, brace!
Migration
By Westminster standards, this was a quiet summer recess, yet while government ministers settled into their sun loungers, a vacuum emerged. It was quickly filled by Nigel Farage.
Against a backdrop of rising small boat crossings and protests outside hotels that house asylum seekers, getting a grip on Britain’s borders is now one of the most pressing issues facing the government. While ministers blame the irregular migration crisis on the mess they inherited from the last Tory government, it is now Labour that is getting the blame. Starmer’s incremental approach – speeding up asylum processing, reviewing article 8 of the ECHR, striking a returns deal with the French – is not, thus far, satisfying the public clamour.
To the discomfort of many on the left, polls show that immigration is now regarded as one of the most important issues facing the country. It doesn’t look likely to get any easier for the government, with further protests expected at asylum hotels after the court of appeal decision on the Bell hotel in Epping, and Reform intent on exploiting community tensions – and frustration with the government – to its political benefit. Labour will try to take the fight to Farage at its autumn conference, but it could backfire. And it only has a few months until next spring’s local elections – the party’s first big electoral test since it came to power – to show it can get on track.
