A brief analysis of Labour’s first year in government – A story of economic struggle and foreign policy success

Economic woes

Labour’s first year in office has been marked by moments of both success and struggle. In economic terms, their tenure has been quite traditionally left-wing, as exemplified by policies such as the introduction of VAT on private school fees. With measures included in Rachel Reeves’ 2024 Budget – such as the capital gains hike, the rise in national insurance for business, and the removal of some inherited farming exceptions – showing a plan of gradual tax increases. These are aimed at restoring public finances in a way that does not spook the markets – particularly the bond market – or lead to capital flight. The results have not been as inert as some media outlets claim; indeed, the UK had the fastest growing economy out of the G7 in Q1 this year, and is set to be the second fastest over the whole year. However, these small victories have done little to change the economic wellbeing of the electorate, and now Rachel Reeves must produce another budget that reinvigorates the stalling job market, fund public services, and stimulates foreign investment in the UK economy. 

Labour have had the difficult inheritance of a stagnant global economy – which is plainly not their fault. However, whilst economic success and failure are pegged to the wider global economy, the British people mostly care about their own personal economic positions, not percentage-point comparisons between the UK and other countries. Statistics such as the higher than expected 5% unemployment rate announced this week, 3.8% inflation rates, and 4.7% inflation on groceries are the headlines that stick in the minds of voters. Factor in the proposed cuts to welfare and PIP, which triggered a massive rebellion in the Commons, and journalists comparing the current economic state, especially unemployment, to the early days of covid-19, the public perception of Labour is not positive on the economic front.

This could be exacerbated by a potential property tax, which many believe would further stagnant the housing market, and credible rumours that they will raise personal taxes such as income taxes, breaking election promises. Changes that may be necessary in the eyes of Labour but will undoubtably but unpopular with the people, as they feel their budgets tighten further. Meaning that economically, Labour are likely to continue to struggle with their economic policy, and face strong backlash for breaking promises giving more ammunition for Reform to attack them with.

Social policy decisions 

Beyond economics, Labour is also struggling with some social and foreign policy issues. Keir Starmer’s history as a lawyer and prosecutor leads him to favour legal remedies to social issues that could be better dealt with in other ways. For example, the kneejerk decision to proscribe Palestine Action as a terrorist organisation has exposed the government – and the country – to civil disobedience, as people challenge and disregard Starmer’s laws. Regardless of one’s opinion on the ban, this situation makes his government look weak, with thousands arrested for none violent offences in the capital. 

It is not just Palestine Action. The Online Safety Act, a Conservative policy adopted and implemented by Labour, has also faced excoriating scrutiny in the media and widespread circumvention by the public. If law is designed to follow the moral and social values of the time, Starmer’s policies are clearly missing this mark for many Britons. As is the case with the migrant boat issue, Starmer proposes answers that do not go far enough for voters on the right and are considered inhumane by those on the left – pleasing no one. Allowing Reform to court voters on the right of the political spectrum with little to no competition, and the Green Party to massively increase their popularity on the left as one of the only forces in British politics willing to openly stand up to Reforms rhetoric. Leaving Labour to fight it out with the Conservatives for a silver of votes in the centre, a poor strategy for winning the next general election. 

Foreign policy success

Labour has been more successful in global diplomacy, fostering good relationships with the US and EU. Starmer’s ability to work with US President Trump has undoubtably helped the UK’s economic position, securing lower tariff rates compared to European counterparts. And their new deal with the EU to allow for young people to move and work in the EU, is a feat of diplomacy, easing some of the pains felt within younger generations who did not get a chance to vote on Brexit, however still feel its impacts. A rare moment where Labour have managed to appease younger voters who feel disenfranchised with the modern UK political system. 

The decision to tighten relations with Europe also comes alongside continued UK support of Ukraine under Labour. Starmer has remained committed to sending aid, attending summits with EU leaders, and has joined the coalition of the willing – who have proposed potential boots on the ground peace keeping after the war concludes. It seems to be that Starmer is showing more mettle in his foreign affairs with Europe compared to his domestic affairs, something that is useful for both the protection of the UK and the strength of its alliances across the West.

Indeed, he plays a different game with the EU and US, standing arm in arm with his European allies, presenting a unified approach against Russia. Compared with his approach to Donald Trump which relies much heavier on appeasement, and camaraderie, something which has led to criticism from some UK commentators, but is undoubtably worked in Starmer’s favour. When it comes to foreign policy his approach has been measured, strong, and successful, something he must attempt to replicate at home. 

Looking forward 

Despite some success, the British public cares much more about domestic policy than foreign policy – and Starmer’s government is underdelivering domestically. It seems as though Labour believed that the previous government failed due to fundamental inadequacy, but they are likely now learning that it is simply very difficult to govern.

Rachel Reeves budget will soon set out the future of Labour’s government, likely focusing on a mix of personal taxation and corporate and wealth tax hoping to balance the economic burden between the people and business. Something which may work, but will undoubtably break election promises, a risky political move. With option polls so low for the current government, Labour must find a way to appeal to the electorate and inspire them, instead of offering weak solutions that plaster over long term problems this country has, and the economic hardships that linger due to  covid debt and conflict in Ukraine. 

It is not just economically where Labour have to change, social issues regarding Gaza, and immigration control the media narrative, and Labour’s weakness and indecision on both these matters remains a very difficult reputational problem for them. They need to take genuine stances on these matters and propose new legislation to deal with the social and economic implications they have on the UK, instead of trying to stay neutral and court both sides. Labour’s tenure is far from over, and change is possible for this government, however if it does not come soon Labour will likely continue to see their voter base disappear, drawn in by parties with stronger convictions and messaging.

Lauren Mason is a Regional Policy Fellow – Europe Programme at the Sixteenth Council