Why Keir Starmer just can't govern
This government's perma-crisis is down to one fundamental fact above all others...
This government is in crisis. Perma-crisis. Every week a new disaster. After the resignation of his Deputy Prime Minister, being forced to reshuffle his entire cabinet, and losing his Washington Ambassador too - the Prime Minister seems like a man lost at sea.
Governance has become clumsy; bad excuses, constant personnel changes, and the unmistakable chaos of U-turn after U-turn.
Across Whitehall, fiasco has become routine. The Treasury is in disarray: pre-budget planning is now being run by the rapidly promoted Torsten Bell, and the Chancellor herself looks undermined.
July saw zero percent GDP growth. Nothing but stagnation. Perhaps that’s why Number 10 has begun wrestling economic control from Number 11. At the start of the month the Prime Minister took on a former Bank of England Deputy Governor as his own personal economic adviser, and a top Treasury mandarin as his Principal Private Secretary. On the same day, then Treasury Chief Secretary Darren Jones was shifted to Sir Keir’s camp with the new and peculiar title of Chief Secretary to the Prime Minister.
With all of these economic appointments to Number 10, you begin to ask yourself: what is there left for Rachel Reeves to do?
Wherever you turn your head in the Starmer ministry there are admissions of failure - the Agriculture Secretary and Farming Ministers losing their jobs, economic reorganisation within Government, and the dodgy decisions made over Mandelson...
Mandelson as a symptom
When things are going well for the Prime Minister, scandals can be ridden out. David Cameron was able to survive the departure of Andy Coulson, Tony Blair was able to weather not one but two resignations of Mandelson - as well as ministers like Keith Vaz, Stephen Byers, and Robin Cook - because other things were going well for him.
In his early years Blair enjoyed the confidence of the markets thanks to his sticking to Tory spending rules. He enjoyed a booming economic inheritance with the World Bank measuring GDP growth of 4.9% in 1997.
It’s when growth is at zero and your back is against a wall that people are less forgiving of mistakes - and that mistakes are more easily made in the first place.
Let us for a moment take at face value Peter Kyle’s defence of the shoddy appointment process of Mandelson. That the UK was in a perilous economic position. He told LBC on Sunday that “people have to understand that at the point of his appointment, our country was facing some really really existentially challenging moments, the whole economy…”
He went on to say that the appointment of Mandelson was a ‘risk worth taking’ in order to deliver the best deal for Britain. Rumours swirl that the man Number 10 was desperate to ram through as our man in Washington had not passed full MI6 vetting.
Despite the furore around the ‘birthday book’ revealed by the House Oversight Committee, despite a ten page message in that book from Mandelson to his Best Pal Epstein - including a picture of the infamous island above which Mandelson wrote the words ‘yum yum’. Despite Downing Street knowing about emails in which Peter Mandelson defended Jeffrey Epstein in 2008 after his first conviction of procuring a child for prostitution, the weakened Prime Minister stuck by his man.
Keir Starmer knows how potent paedophilia is in our politics. It’s why he was so outraged by Boris Johnson’s statement that he himself failed to prosecute Jimmy Savile when he was Director of Public Prosecutions. It’s why Number 10 approved the soundbite that Nigel Farage was on the side of predators like Jimmy Savile over the Online Safety Act.
To risk a similar charge against his own government smacks of desperate times. The behaviour of a desperate Prime Minister. Government of crisis, for crisis, by crisis.
Sloppy desperation
In no way would the problems Mr Starmer now finds himself paralysed by be quite so numerous, compounding, or politically damaging - had people begun to feel better off in their pockets. But we don’t. An entire generation has never known real productivity growth.
Britain is today no longer a rich country.
Last week I learned, 34% of American families now take home more than $150,000 (£115,000) each year. By comparison just 2-3% of British households earn £115,000 or more. What’s more British income tax at 45% kicks in at just £125k. In the US, the same income level is federally taxed at 24%.
It’s a stunning statistic. By comparison, you have to go down to around £55,000 a year to find the income floor of the top 34% of British households. To put it another way - today earning $150,000 or more in America is equivalent to earning around £55,000 or more this side of the pond.
Britain is no longer a rich country.
But this statistic didn’t come out of nowhere. As I have written in these pages before - America has enjoyed impressive growth in the wake of the financial crisis. Cheap energy, a dynamic labour market, and easier access to finance have helped the US soar, while Britain has enjoyed a flatlining economy and persistent knobheadery.
This low to no growth leads to desperate politics, and sloppy mistakes. July’s reported zero per cent GDP growth is just yet another piece in a wider stagnant puzzle of despair.
The government was elected on the watchword of economic growth. Growth was to be the aim they put above all else, the solution to the country’s universally acknowledged doom loop, the cornucopia to allow lower taxes and higher spending… and yet here we sit. Stagnant, with nothing growing, nothing moving.
Necessary animosity
It is the lack of growth and dynamism that delivers the perma-crisis we live in today. People on the economic left or ecological green side of politics often talk about a post-growth economy. Well, you’re looking at it.
When a country is growing economically, politicians can have win-win solutions. A country can spend the spoils of economic growth on making sure more people have more. The spoils of growth can even buy off political opposition to economic reform, allowing for more growth. A positive anti-doom loop. You can cut taxes, you can increase spending, you can avoid painful tax rises.
Conversely, when there is no economic growth, politics becomes a zero-sum game.
If you want to spend more in one place, you have to take from another. Whether that's cutting departmental spending here or raising taxes there. For any more money to be spent by the government, people will necessarily feel worse off. For any promise to be made money has to be taken from somewhere. New wealth is not being created in the system. Post-growth politics is by definition the politics of envy, the zero-sum political game. It creates losers.
When rights become traps
This all leads to further policy blunders. Take the debates over rights at work. Proposals for government-guaranteed rights from day one of employment, or curbs on casual labour contracts, only become salient because the economy is stagnant.
In a buoyant economy, businesses compete for your labour with generous packages of remuneration. If you don’t like one job offer you take your labour elsewhere. Zero-hours contracts aren’t traps because abundant full-time jobs are available to those who want them. People feel trapped when the economy isn’t growing.
Ironically, however, the very measures that are being desperately introduced to attempt to make people feel better about the miserable state of this stagnant economy are so often the very agents of stagnation themselves.
Restrictions on business practices - whether around contracts, hiring, or day one rights - become the very agents of stagnation. They make employers more risk averse, and employment too sticky. Dynamism is shot. Regulations entrench malaise, drive investment away, and deepen the slump. And perversely, that stagnation then fuels the political case for even more restrictions. The doom loop continues.
Trapped
This Prime Minister is in a profoundly weakened position. It’s hard to process the fact that he has been in office for just 14 months. The level of crisis feels like that of 14 years. Britain feels like it is chewing through Prime Ministers faster than Italy. This does not happen to a country where things are going well. This happens to a country mired in crisis. Bogged down in the stagnation club of nations.
This is how an upstart party can soar to lead in the polls, and take on serious defectors - like the intellectual Tory Danny Kruger, who joined the Reform Party today. In a world where all was well economically, it’s hard to see the parties of old collectively polling lower than 40%.
People can feel what is wrong with this country. The bad decisions that have consistently left us in the dust. In the 2024 election Keir Starmer deployed to great effect a cutting quote from Ronald Reagan’s successful campaigns: “do you feel better off than you did four years ago?” It got to the core of a fact most Brits don’t need growth statistics, inflation figures, or international comparisons to know. They can see it for their own eyes. We are not better off than we were four years ago. We’re barely better off than we were in 2008.
The trouble for the Prime Minister is that, today - with his own hand on the national tiller - Reagan’s old quote can now be deployed against him.