The new government is banking on stability and growth but with a mandate more limited than it appears. Ian Taylor reports
Labour’s landslide general election victory would appear to promise a period of political stability in the UK.
That was certainly the conclusion of financial markets after Labour secured a 174-seat majority in Parliament and the Conservatives recorded their lowest-ever number of MPs (121).
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The business newspaper the Financial Times reported analysts’ and investors’ belief that “Sir Keir Starmer’s resounding win draws a line under a tumultuous period”.
It noted “Labour’s promise to overhaul the UK’s planning system could give the UK economy a boost” and suggested the big majority increases the likelihood of a second term, enabling long-term policy making.
Miles Celic, chief executive of financial services group TheCityUK, expressed hopes for “a new era of policy certainty, stability and predictability”.
But Starmer’s victory was less of a landslide than it appears.
Labour won 412 seats with almost 34% of the vote but received no more votes numerically than in December 2019 when defeated under Jeremy Corbyn and considerably fewer than the 12.8 million, 40% of the total, received in 2017 under Corbyn.
Election commentator Professor John Curtice noted that, were it not for Scotland where the Scottish National Party’s vote collapsed, Labour’s vote would have been lower than in 2019 and said: “Enthusiasm for Labour was muted. Never before has a party formed a majority on so low a share of the vote.”
Nonetheless, Starmer will have time to deliver on policy and the means to do it.
New chancellor Rachel Reeves promised a “pro-growth Treasury, working hand in glove with business” while sounding an alarm on the state of government finances.
Faced with tight spending and borrowing constraints, and with the Bank of England forecasting the economy will grow only 0.5% this year, Labour’s plans rest on boosting economic growth.
Deloitte UK chief economist Ian Stewart noted: “Labour’s opportunity is that it comes to office after a period of exceptionally poor economic performance and as the economy is finally turning up.” But he warned: “Every government aspires to faster, more stable growth. Few achieve it.”
This should at least be a government preoccupied with getting things done, as opposed to its polls rating.
For the travel industry, that should mean progress on Atol reform and the review of the Package Travel Regulations. Labour has promised a ‘road map’ on business taxation and to replace the business rates systems in England, which would be welcomed by the sector.
The King’s Speech on July 17 will set out the government’s legislative plans, likely to include employment law reforms, plans for a state-owned energy investor, and a programme to progressively renationalise the railways.
A European summit on July 18 should signal a reset on relations with the EU before a shortened summer recess and a comprehensive spending review and Budget in October.