Starmer Honeymoon Ends as Tax Warnings, Riots Expose Challenge

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(Bloomberg) — Keir Starmer’s Labour Party likely hoped their first UK election win in almost two decades would yield a political honeymoon at least through the summer. But in less than a month, the challenges of governing a brittle nation have rapidly dispelled any lingering sense of euphoria.

Chancellor of the Exchequer Rachel Reeves delivered the first reality check on Monday, warning that tax rises would be needed in the Budget in October to plug a £22 billion ($28 billion) she said she’d found in the public finances. Some in Labour saw that as risking claims of a betrayal, after the campaign promise not to inflict surprise tax rises on people reeling from a cost-of-living crisis.

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The mood darkened again when riots led by far-right activists flared up in parts of England, after false information spread on social media that the suspect in the fatal stabbings of three girls in northwest England was a Muslim asylum-seeker. With authorities bracing for further violence this weekend, Starmer held a press conference Thursday to set out a more robust police response.

The turbulent week left some Labour members of Parliament, who were jubilant on taking office, nervous about what may come next — and how Starmer and Reeves would respond. The public disorder also laid bare what some Labour officials worried about even as the party basked in its landslide election victory, that growing agitation on the political right would cause problems.

“Between the riots seen in Southport and elsewhere, and the suggestion of tax hikes around the corner, Keir Starmer is already facing his fair share of political problems,” said Scarlett Maguire, director at the pollster JL Partners. “Without clear delivery on the economy, NHS and immigration, the pervasive mood of anti-politics in the country could become even harder to redress.”

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During the six-week election campaign, Starmer and Reeves made no secret of the economic and political mess they expected to inherit. According to an ally, the prime minister didn’t want or expect a honeymoon, viewing what he called the “chaos” left by the Conservatives as requiring immediate action. A realist and not a romantic, was how another ally described Starmer.

Reeves’ intervention was also part a calculated move to demonstrate her seriousness and willingness to take difficult and unpopular decisions, according to Labour aides who spoke on condition of anonymity. Voters in the political center, who Labour targeted in the election campaign, want responsible government and not impossible promises, one adviser said.

The first rate cut by the Bank of England since early 2020, more upbeat economic forecasts and strong performances by British athletes at the Olympics in Paris also gave the government something to cheer.

Nevertheless, the reaction to Reeves’ speech has tarnished the mood among some Labour MPs. She insists her complaints about undeclared overspending by the last Tory government are legitimate, and is privately shocked at the actions of predecessor Jeremy Hunt. Yet the questions she faced during her broadcast round on Tuesday focused less on whether there was a Tory cover-up, and more on whether she had been dishonest with voters over Labour’s tax plans.

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Some lawmakers are also concerned about her decision to remove help on winter energy bills from about 10 million pensioners, to fund pay rises for junior doctors. One MP said rather than targeting such a key voter demographic, her first revenue raiser should have been aimed at the wealthy. 

Labour aides were alarmed to see journalists dig up past comments by Starmer and Reeves suggesting they wouldn’t raise taxes or remove pensioners’ winter payments. One said the chancellor should have come up with a more elegant position on tax during the campaign so she couldn’t be accused of dishonesty afterward. An ally of Reeves said she genuinely had no specific plans to raise taxes before taking office, and still hoped that any rises would be limited.

To be sure, some of the reaction to Reeves’ speech is a byproduct of Labour’s landslide win and the spread — geographical and economic — of districts it now holds. One adviser said the speech struck the right tone and was consistent with a strategy to expose the problems left by the Tories, though they also expressed surprise at how many policy changes were announced at once.

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There is a debate among aides about whether Reeves should telegraph her strategy more clearly to prevent surprises.

Some in Labour think criticism of Reeves would have been more intense had the fallout from her speech not been knocked off the newspaper front pages by the killings in Southport and the far-right violence that followed.

In his press conference, Starmer accused “thugs” from outside the community of hijacking families’ grief for political purpose. Police, he said, would start sharing intelligence to “restrict their movements before they can even board a train, in just the same way we do with football hooligans.” 

The risk to Starmer and Labour goes beyond the scenes of burning police cars, brick-throwing rioters and the view pushed in some areas of social media that the government has already lost control.

Labour built an election campaign strategy focused on centrist voters, and it worked. But the implosion of the Conservatives also left the right-wing Reform UK party led by Nigel Farage in a strong position to make life difficult for Labour with populist, anti-immigrant messaging that appeals to some voters including in areas that have seen some of the recent riots.

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Starmer’s reference to the “understandable fear” some people have about social tensions was a nod to that risk. Though distinct, some of the far-right activists have expressed support for Reform — and Farage posted a video on X where he repeated online conspiracy theories about the Southport killings.

In Labour, concerns are growing that some of the government’s early policies risk playing into Farage’s hands. A plan to release some prisoners early due to overcrowding — a situation Starmer has blamed on the Tories — has the potential to backfire in the current political climate, aides said. They are exploring how it can be managed in a way that reduces the chances of violent re-offending.

While improving the economy was the fundamental measure of success for Starmer’s government, the successful handling of crime and borders would be almost as important, one of the aides said.

Starmer’s strategy of blaming the Tories for the unpalatable choices he’s having to make won’t change any time soon, and most in Labour agree it’s still the right approach to take. But this week also illustrated that the problems are now the government’s to solve, and the premier will ultimately be judged on the political decisions he and Reeves make, too.

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