Starmer poised to win key rule changes at Labour Party conference
On 26 August, the government briefed to the media that they intend to bring forward rules changes at Labour Party conference (LPC), which runs from 22 - 25 September, to allow Labour MPs rather than party members to choose the Party’s leader. This followed the 14 August announcement from Transport Secretary, Louise Haigh MP, of a pay settlement in the long running dispute between ASLEF, the union representing rail workers, and the new Labour government. Shortly thereafter, ASLEF went on strike again and several other unions began balloting their members to seek terms that match ASLEF’s settlement.
Our view:
Labour has prioritised union stakeholders to end the strikes plaguing much of the UK’s public services and to soften union temperament ahead of LPC.
Unions have outsized influence, via the National Executive Committee (NEC), over party rule changes. The NEC proposes party rule changes at LPC, which conference delegates then vote on.
The government has made clear that part of the bargain to receive favourable union pay settlements has been support for party rule changes that would entrench Starmer’s power.
The Chancellor’s decision to increase public sector pay for around a fifth of the UK workforce will bake in inflation in the medium-term and take funding away from capital investment, meaning the new Chancellor has chosen to increase inflation rather than invest in long run productivity.
To pay for these spending outlays, the Chancellor will likely raise tax on the wealthy and businesses at the 30 October Budget.
The Conservatives months-long leadership contest is allowing Labour to avoid scrutiny during their first 100 days in power.
Our wider view:
Starmer wants control. Starmer aims to change the Labour Party’s rules so that only MPs choose the party leader. Currently, in the event of a leadership challenge, party members vote on a shortlist of MPs for leader at LPC. Most current Labour MPs owe their positions to Starmer's electoral success, so this proposed change would further consolidate and secure Starmer’s power in the short- and medium-term.
Starmer’s “Oprah Winfrey” government will likely cede to further union demands ahead of LPC. To secure support, Starmer has focused on strengthening ties with unions through favourable pay settlements, more of which are likely to be announced before LPC. Starmer’s strategy hinges on securing enough pay settlements to gain union support without alienating other unions not on the NEC and prompting further strikes. He is more likely than not to win this rule change, or at least a more favourable one, such as a shift to an electoral college vote where MPs, unions, and members each get a third of the vote share during a leadership contest.
Post-LPC and ahead of the 30 October Budget, Starmer will pivot back to the rhetoric of fiscal prudence ahead of raising taxes on the wealthy and business. Following multi-million pound settlements with unions and potentially billions of pounds in spending commitments via government-backed schemes like GB Energy, the re-nationalisation of UK railways, and rising unemployment in the domestic energy sector, Labour will likely raise taxes on the wealthy and businesses, blaming their fiscal inheritance from the Conservatives and pointing to crumbling public services. Labour is unlikely to adequately address failing public services at its first Budget, however, because Starmer and his team are focused on consolidating his faction’s power within the party while laying the regulatory groundwork for its big policy shifts and placating internal stakeholders.
The Chancellor will likely soften the ground for higher spending via the Comprehensive Spending Review (CSR), which apportions government spending by department. Reeves will likely continue to choose any minor spending cuts that disproportionately affect Conservative voters and absorb media attention, such as means testing for pensioners’ winter fuel payments or increasing VAT on private schools. Labour’s leadership will continue to be less sensitive to media scrutiny and criticism, given their 181 seat majority in Parliament, especially while the Conservatives are politically absent during their months-long leadership contest.