Starmer will inherit far worse than Blair – and will do nothing to improve it

Keir Starmer

By Mark Buckley

The US war effort is destabilising the world economy with a combination of inflation, slow growth and intensified US protectionism. Although the immediate target is Russia, and the strategic objective is regime change in China, the entire world is suffering to a greater or lesser extent.

US allies are not immune – this includes Britain

All political forces in the world will have to adjust to this fundamental fact. The Labour leadership under Starmer has decided to pitch for the role as the most subservient follower of US demands in Britain, and may even aim lower, offering to become its most faithful servant in a Europe chock-full of increasingly right-wing political subordinates.

Labour has heavily signalled this new Atlanticism. First, shadow Chancellor Rachel Reeves flew to Washington to unveil Labour’s new economic policy.  Sycophantically, she claimed it would be ‘Bidenomics on steroids’. This is impossible as Britain has neither the resources to establish new industries within national borders, as Biden hopes through the misleadingly titled $379 billion Inflation Reduction Act, nor the US’s global dominance which can block potential rivals. The Act itself has come under fire for starting ‘a global arms race on subsidies’, one which the US’s rival cannot hope to match.

Reeves also scrapped plans for a digital services tax after US tech giants lobbied Washington. Now Labour’s shadow trade secretary Nick Thomas-Symonds is back in Washington, offering a deal to exempt the US from Labour’s own planned protectionism. The effect is to seek US approval for a Labour government by offering the US preferential status on key aspects of trade. It is not clear whether Labour has asked for anything to be reciprocated.

These seemingly technical discussions have wider implications for a Starmer government. Starmer is frequently compared to Blair, who maybe something of a mentor and whose followers form the core support for Starmer. But Starmer’s economic inheritance will be very different, and much worse than Blair’s.

In 1997 when Blair was first elected the UK economy grew by 4.4%, consumer prices were rising at under 2% a year and real wages were growing at a rate of 1.5% a year. It is generally acknowledged that Starmer’s economic inheritance from 14 years of Tory economic policies will be far, far worse.

Starmer supporters even use this grim outlook to justify a policy of continuity Conservatism, where nothing substantial at all will be changed in terms of economic policy.  This applies to both structural change in the role of the state; public ownership or even tighter regulation is ruled out, but also at the micro level where all the main headline tax and spending policies will be unchanged.

The much-touted policies of removing non-dom status for high earners and charitable status for private schools are wholly unobjectionable. But they are sops, which will yield very little and alter less. Removing the huge level of state subsidies to business (‘corporate welfare’) or increasing the corporate tax rate are never even mentioned.

The economic outlook for a Starmer government was already grim.  Subservience to US interests will only damage the economy further, even before there are greater US pressures to increase the military budget. The US is set on a war path but wants others to pay for it.

Starmer has also ruled out using every possible lever that might even marginally improve either the general economic outlook or the position of the poorest. There will be Storm Shadow missiles to Ukraine and the inflation effect on the £200 billion Trident renewal programme will simply be absorbed. But there is no money left for free school meals and public sector pay will continue to be cut in real terms because decent pay is ‘unaffordable’.

Above all there is no plan, and no public money to help tackle the dearth of investment in the British economy, which has led to low growth and to low productivity growth. This is ruled out because it would entail a larger role for the state in the economy, which neoliberal economics forbids.

As a result, the British economic crisis is not going to end under Starmer. Depending on trends in the global economy it may even get worse. A continued refusal to borrow to invest in developing productive capacity combined with a rejection of any policy to tax big business and the rich appropriately to fund decent public services is a recipe for stagnation and growing misery.

War, austerity and authoritarianism will be the dominant features of a Starmer-led government, as he has already signalled. Yet we are still in the midst of the biggest strike wave in this country for a generation, with more to come. And that is before the inevitable anger that the election of a Labour government is not producing any major improvement.

Popular resistance to that economic and political settlement seems almost inevitable. Quite what form that resistance will take and which forces will lead it cannot be foretold in advance. But it would be exceptional if it did not take place.

Image: Official portrait of Keir Starmer. Picture by Chris McAndrew, licensed under the Creative CommonsAttribution 3.0 Unported license.