Keir Starmer plays fast and loose with public trust in UK budget

LONDON — Keir Starmer will stretch and break a series of solemn campaign promises this week — all in the name of building trust.

The United Kingdom budget, delivered Wednesday, marks the biggest moment of the new Labour prime minister’s time in office so far — and the first such statement overseen by his party in 15 years.

When it comes on Wednesday, Chancellor Rachel Reeves’ budget will finally set out Labour’s concrete priorities after a stuttering start in office in which it has made a series of unforced errors and watched its poll ratings plummet.

Reeves, Britain’s top finance minister, will seek to plug what she terms a £22 billion fiscal “black hole” left by the previous government through a set of “tough” spending cuts and tax rises which have been well-advertised in the months since the election.

But ministers have also rolled the pitch for a host of announcements, which seem to go dead against promises made by Labour during July’s election campaign.

Casting aside manifesto promises is a risky business for any government. Yet Starmer and Reeves appear to be gambling that voters will forgive them if the government can show it’s making progress on fixing the U.K.’s creaking public services.

Speaking to POLITICO on a trip to Washington, D.C. last week, Reeves insisted that she is “a different sort of chancellor” and contrasted herself with “previous governments [which] have made promises and then have not delivered.”

Wednesday will put that theory to the test.

A very spooky budget

Despite Labour’s landslide election victory in July, the government finds itself approaching the budget — held a day before Halloween — with little goodwill in the bank. 

MPs faced a severe backlash in the wake of Reeves’ only other major measure so far this year, removing universal cold-weather payments to pensioners. That move was not trailed in the party’s election-winning manifesto.

Meanwhile the “freebie-gate” scandal — a row over government ministers accepting lavish corporate hospitality — served to take the shine off the new prime minister and forced an early reset of Starmer’s No. 10 Downing Street operation.

The prelude to the budget itself has hardly been trouble-free, with Labour already facing claims it will break its own preelection pledge not to increase taxes on “working people.”

The government maintains that a teased rise in national insurance contributions paid by employers does not break this promise as it hits firms rather than workers. But research by watchdog the Office for Budget Responsibility suggests the cost of the change could simply be passed on to employees.

Reeves is also reportedly considering a freeze in income tax thresholds, which will drag more people into higher tax bands over time because of inflation.

Rupert Harrison, an adviser to then-Conservative Chancellor George Osborne, said Labour should junk manifesto commitments at its peril.

There is, Harrison said “a long history of this being extremely damaging,” as he highlighted the example of Conservative tax rises in 1993 which led to their own “loss of trust.”

Harrison added that, as prime minister, Conservative David Cameron had been “obsessed” with keeping manifesto pledges after witnessing the damage done to his Liberal Democrat coalition partners in the 2010s. That party reneged on a promise to scrap university tuition fees, and suffered greatly at the ballot box.

Starmer’s government has stumbled into another political quagmire in recent days as he grasps to define “working people,” variously arguing that this term should or shouldn’t include people with assets and shares.

As Luke Tryl, director of polling firm More in Common, sums it up: “Not raising taxes on working people leaves you with a very small group of people who wouldn’t describe themselves like that.”

Separately, Reeves confirmed last week that she will reform the U.K.’s fiscal rules to free up tens of billions of pounds in extra investment spending over the course of the parliament: something she explicitly ruled out doing in opposition.

An ally of the chancellor, granted anonymity to discuss sensitive matters, said Reeves’ move was trailed in advance last week to allow “the markets to get used to the idea” as the government seeks to avoid the chaos sparked by short-serving Tory Prime Minister Liz Truss’ infamous 2022 mini-budget. 

Yet it is undeniably a change to the advertised service and government bond yields — the interest rate on government debt — have increased significantly over recent weeks.

All part of the plan

Starmer and Reeves are hoping that all will be forgiven if they can show they are taking meaningful steps toward repairing essential public services and providing help for the worst-off.

Funding boosts for the National Health Service and crumbling schools have both been trailed, alongside a boost in the minimum wage for the country’s lowest earners.

Jonathan Ashworth, a former Labour MP and now director of the Starmerite think tank Labour Together, predicted the budget would reflect that “the two big factors driving a Labour victory were the concerns over the National Health Service and the cost of living.”

“This is the moment where they start to put the pieces back together again,” he stressed.

Ministers looking for reassurance about their plans may reach for recent research carried out by polling consultancy Persuasion UK with left-of-center think tank IPPR, which suggested tangible progress will be rewarded — even if it comes with unpopular trade-offs.

“People elected a Labour government to fix the public realm,” said Steve Akehurst of Persuasion UK, “and they’re pretty happy to give Labour some space to do that — perhaps more than is sometimes reflected.”

Jim O’Neill, a former Treasury minister who advised Reeves in opposition, said he was sure opponents would “have a go at [Reeves] about changing manifesto commitments” but changing borrowing rules was justified as “it’s what the U.K. has been crying out for for the past 25 or 30 years.”

He described the move as “the most positively consequential fiscal move since the early days of Blair and Brown,” referencing the double act that took Labour to power in 1997.

Blind spot

Starmer’s plan to fix the economy while jettisoning a few inconvenient commitments is all the more striking because he sees boosting trust in politics as one of his key jobs as prime minister.

The Labour leader came to power after a host of Conservative scandals and a rapid-fire succession of prime ministers. He has tried to lay the groundwork for unpopular announcements in the budget by painting them as part of his quest to govern with greater integrity than the Tories.

Speaking in Birmingham ahead of the budget Monday, he vowed to “level with you honestly about the trade-offs this country faces” and “stop insulting your intelligence with the chicanery of easy answers.”

However, some close observers of Downing Street complain of a blind spot when it comes to confronting ethical questions, as demonstrated by Downing Street’s slowness to deal with freebie-gate. 

“They genuinely believe they’re better than other people,” said one long-serving Whitehall official, “and that’s how they get themselves into trouble.”

Harrison, the former Conservative adviser, said Starmer’s government is “clearly hoping that in four or five years’ time, people have forgotten” about breaches of the manifesto and “are focused on whether they’ve been able to actually improve public services in a noticeable way.”

The open question is whether better public services will be enough to offset the impact of changes, such as a 50 percent increase in the cap on the cost of bus fares, which will directly hit voters in the pocket.

Labour MPs are already privately expressing nervousness about how this move will go down after the poor reception for the government’s cuts to the winter fuel payment.

One new MP who is generally aligned with Starmer said: “There is a feeling, especially among the new MPs, that this isn’t what we were sent here to do.”

Emilio Casalicchio and Andrew McDonald contributed to this report.