The year 2023: when Keir Starmer must answer hard questions about Labour in power

We have as yet little idea of what the priorities of a Labour government might be, and how they might differ from those of a government led by Rishi Sunak

The coming year will be the year that The Question changes. Until now, the question that opinion pollsters ask, “How would you vote if there were a general election tomorrow?”, has meant, “Is the government doing a good job or a bad job?” As the election approaches, the question begins to mean, “Which of these two alternative governments would do better?”

That means 2023 is the year when Keir Starmer will have to start answering some detailed questions about what he would do as prime minister, rather than simply criticising the Conservatives. In 2022, he proved that he was an effective opposition politician; over the next year he has to persuade the voters that he would be the leader of an effective government.

His supporters claim that Labour’s commanding position in the opinion polls at the turn of the year is not simply the product of Tory failure, but of Starmer’s decisions. He was ahead of the government in advocating a windfall tax on oil and gas companies; and again in pushing for gas and electricity prices to be frozen. He took a calculated risk in saying he would resign if he were fined by the Durham police for breaking coronavirus law, and he takes some satisfaction from having promoted the team he wants in the shadow cabinet.

I am told that the faces he expects to see on TV in the run-up to the election are Rachel Reeves as shadow chancellor, Yvette Cooper as shadow home secretary, Wes Streeting at health and Bridget Phillipson at education. He thinks they pass the test, which is that he doesn’t want people to look at the TV news and say: “I don’t want them running the country.”

Starmer is said to be proud of Reeves for winning “Chancellor of the Year” at The Spectator parliamentary awards last month, and pleased to have been named “Politician of the Year” himself, seeing the awards as evidence of Labour’s broad appeal.

But we have as yet little idea of what the priorities of a Labour government might be, and how they might differ from those of a government led by Rishi Sunak. The windfall tax and energy price freeze were taken up as government policy; Starmer’s clean sheet contrasts with Sunak’s fixed penalty notice for turning up early to a meeting, but that is hardly likely to shift a lot of votes. It may be that the Tory shambles of 2022 is enough to persuade the voters that the party cannot be trusted to govern competently whoever is leading it – because Sunak’s ratings are higher than his party’s – but Starmer needs to pretend at least that there would be positive reasons for voting Labour next time.

Over the past year, and with the exception of a seven-week holiday from reality taken by the Conservatives, the policy differences between government and opposition have narrowed. On taxing and spending, there is still one big remaining difference, to which we shall come in a moment, but otherwise Labour has only two revenue-raising policies: one is to abolish non-dom status (it was the main surprise of Jeremy Hunt’s autumn statement that he didn’t steal the policy then), and the other is to increase taxes on private schools. Neither would raise significant sums, but they have some symbolic weight and they allow Labour to claim that its plans to recruit more NHS staff and teachers would be funded.

If Starmer is to present himself as the leader of an alternative government, however, there are three questions he and Reeves will have to answer over the coming year (there are obviously more than three, but these are three of the more pressing ones). One is what Labour’s policy will be on tax. At the last election, Labour proposed to “ask those who earn more than £80,000 a year to pay a little more income tax”. Paradoxically, that was a promise partly delivered by Hunt in his autumn statement in November, by lowering the threshold for the top rate of tax from £150,000 to £125,000.

As Starmer’s line during the debate over how to pay for coronavirus spending and for the energy price guarantee has consistently been “now is not the time to raise taxes”, we may assume that Labour’s pledge in its next manifesto will be like the Tories’ in their last one: “We promise not to raise the rates of income tax, national insurance or VAT.” (This was the promise, on national insurance, that Boris Johnson and Sunak broke, but which Liz Truss and Kwasi Kwarteng restored.)

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It seems unlikely, then, that a Labour government would be able to rely on much extra revenue. And it would be bound by “a target to reduce the debt as a share of our economy”, to which Reeves committed the party more than a year ago. Which means that there is a contradiction with her promise to borrow an extra £28bn a year for green investment – including, presumably, the £8bn start-up capital for Great British Energy, a new state-owned company. That is the second question a Labour Party serious about becoming a Labour government would have to answer.

And the third question is what its view of Hunt’s new fiscal rule is. In the autumn statement the chancellor set a limit of 3 per cent of national income on annual government borrowing. This was the old Maastricht rule, required of countries wanting to join the single European currency, which John Smith supported as prudent when he was shadow chancellor and Labour leader.

I suspect that we know what Labour’s answers to all these questions are going to be: Starmer and Reeves will hug the government close and stick to its rules in the name of fiscal responsibility. The Truss interregnum was a salutary lesson not just to the current government but to a future Labour one. Sunak and Hunt have done a good job of removing what was known as the “Kwasi premium” – the extra interest demanded by the markets to compensate for the risk of the British government rendering its finances unstable.

Starmer needs to ensure that, as the next election approaches, the markets don’t demand a “Labour premium” on similar grounds. Starmer will know well that Harold Wilson, his hero, mocked Harold Macmillan, the chancellor, in 1956, for failing to control the public finances, which prompted “all the little gnomes in Zurich” to sell the pound – only to find his own government at the mercy of the same markets a decade later.

As Paul Dales, an economist at Capital Economics, said in the Financial Times of Truss’s 49 days: “If there’s a positive to come out of the whole embarrassing affair it may be that politicians should now understand that there is no magic money tree. That’s important for the current government, perhaps a future Labour government and governments overseas.”