Will Labour learn the lessons of government in 2025?
Paul Montague-Smith, senior counsel – public affairs at MRM, looks at some of the lessons Labour should be taking from 2024 into next year, and some important trends to keep an eye out for in Westminster in 2025.
Well, that’s nearly a wrap for 2024. Another fascinating year in politics with the occasional unexpected twist and turn to keep us on our toes.
Here are a few takeaways from the last year – a couple of which hold true beyond the world of politics – and a few things to look out for in 2025.
THE TAKEAWAYS
MPs beware – voters are an increasingly fickle and disloyal bunch
In the 1960s, voter loyalty was strong. You were quite likely to be either blue or red for life. In 1964, 48% of Conservatives described their party identification as “very strong”; for Labour supporters it was 51%.
In 2017, it was 14% and 23%, respectively. The UK electorate has become more volatile and willing to switch allegiance. In this year’s election the Conservatives lost nearly half of their 2019 voters to other parties. Labour lost nearly a third.
The LibDems saw half of their supporters change too. 2024 was also the first UK election where four parties won over 10% of the vote and Labour and the Conservatives received their lowest combined vote share.
What has been a long-term trend seems to have intensified and may be here to stay. It may partly reflect our changing society – increasingly less deferential to authority and institutions, more demanding and willing to express dissatisfaction.
Telling people what they want to hear, to get what you want, can come back to bite you
Labour’s election strategy was essentially to avoid scaring the horses at all costs. Core to this was a promise not to pull the three biggest tax levers available to them: income tax, VAT and national insurance.
Rachel Reeves also promised not to change fiscal rules to make life easier for herself. The tax raising measures included in the manifesto to fund their spending commitments were widely considered to be inadequate, not least given the pressures on the public finances.
Respected commentators such as the Institute for Fiscal Studies (IFS) said their plans were not credible and they were not being honest with the electorate.
Whoever you believe about the apparent £22bn black hole in the public finances, Labour’s £40bn tax raising budget and changing the rules to allow big borrowing and spending, have contributed to a sharp drop in the approval ratings of both Keir Starmer and the Government more widely.
If you say you’re different, make sure you’re different
The other thing that’s contributed to the sharp drop in public approval for Labour is the furore over freebies. If there’s one thing voters really hate, it’s hypocrisy.
Labour’s election platform placed great emphasis on cleaning up Westminster after Boris Johnson, ‘Partygate’ and Covid cronyism. Keir Starmer’s pitch was to put government back into the service of the people.
If you take a ‘holier than thou’ position, you need to make sure you can live up to it. No surprise then that the revelations of free wardrobes, concert tickets and other goodies went down like a cup of cold sick with the public.
Similarly on cronyism and parachuting your buddies into the heart of government. Perhaps too when saying that you’re going to be the most pro-business and pro-growth government in history, but then hit businesses with higher taxes at the first hurdle.
Whatever the reality and however unfair, the perception of broken promises and double standards has marked the early days of the Labour Government as being not so different from its predecessors. It could be a long haul back to forgiveness.
LOOKING AHEAD
Looking ahead, here are a few thoughts about the landscape for 2025:
- While they’ve been trying to row back on the Chancellor’s comments at the CBI, Labour have boxed themselves in on business and taxes for this Parliament. It will take a big and unexpected knock to the public finances to justify them ‘coming back for more’. Hopefully, business will now have a stable basis on which to plan.
- Labour’s ‘zero-based’ spending review probably won’t be radical (in the sense of changing what the state does or doesn’t do and what it spends our money on). But everything will be geared more towards achieving Keir Starmer’s latest ‘milestones’. Businesses that contract with the public sector will need to be aware of this and how to frame their offerings accordingly.
- The Government’s industrial strategy, due in the spring, which will include a strategy for financial services, will be a key moment and will shape the activity of Government for the rest of the Parliament.
- While Labour’s central mission is to spur economic growth, the forecasts are that it will remain meagre. Labour’s success will rest on outperforming the forecasts. They are likely to become increasingly desperate for ideas that could spur growth and secure their re-election, which presents an opportunity for businesses with innovative ideas.
- Despite the Government giving inflation-busting public sector pay awards to bring strikes in the health and transport sectors to an end, all the indications are that its current proposal to increase pay by 2.8% from next year (in line with expected inflation) is likely to be unacceptable to unionists and lead to renewed industrial action, with knock-on effects for the economy. Only time will tell if Labour will be able to hold firm on their position that any further pay increases need to come from improved productivity.
I hope you’ve had a good 2024 and have an even better 2025 and wish you and yours a peaceful and happy Christmas!
p.s. Ever wondered where your hard-earned tax money goes? According to when I last logged in to my personal tax account on gov.uk, here’s how the Government currently spends most of it:
| % | |
| Health | 19.8 |
| Welfare | 19.6 |
| National debt interest | 12 |
| State pensions | 10.3 |
| Education | 9.9 |
| Business & industry | 7.6 |
| Defence | 5.2 |
| Public order / safety | 4.1 |
| Transport | 4.1 |
| Government admin | 2 |