Sir Keir Starmer fended off calls to resign as UK prime minister this week after jettisoning key aides on the right of the Labour Party and promising to listen more to left-leaning backbench MPs.
Ministers have privately acknowledged that the shake-up will affect Downing Street’s approach to key policy areas, as the government is forced to pay greater attention to the views of MPs.
“There are a whole load of trade-offs that we will now struggle to make,” said one minister. A person on the right of Labour said: “The ministers who one might have thought of as Blairite reformers have struggled to get much done . . . I can only see them having a harder time now.”
While the left of the ruling party has no set manifesto for government, on a range of issues it has signalled a push for a more interventionist approach or a change of course.
Employment rights
Angela Rayner, former deputy prime minister and potential leadership contender, cited the government’s package of workplace reforms as she backed Starmer last week. Labour was “only getting started”, she said.
With the Employment Rights Act on the statute book as of December, attention has shifted to almost 30 consultations on its implementation.
These include reforms such as creating a single “worker” status which gives all employees the same rights regardless of their contract or gig worker status, a ban on contentious “fire and rehire” practices, the “right to switch off” and stronger trade union rights.
Ministers have so far been willing to accommodate business on the details of implementation, but one ally of Starmer acknowledged that the push to win over leftwing MPs would make this harder.
Trade unions sense an opportunity: the leader of one big Labour-backing union said Starmer must now listen to “people who are from the trade union movement and who are from the left and soft left”.
“Blairite” former advisers had “never understood working people”, the person added.
While ministers have scrapped a measure to give protection against unfair dismissal from day one, businesses still fear day one rights to paternity leave and sick pay could have a chilling effect on hiring.
Jury trials
Starmer last month insisted he would face down protests from Labour MPs about plans to curb jury trials in England and Wales, after nearly 40 backbenchers publicly called for a rethink and one threatened to trigger a by-election.
The prime minister argued that judge-only trials for less serious offences were essential to clearing a backlog of 80,000 cases in criminal courts.
Critics of the proposal, which was based on a report by former High Court judge Sir Brian Leveson, said they now expected Number 10 to retreat.
“On the policy front we need to follow the evidence and not look for things which are going to tear us apart,” said one MP. They added that other reforms recommended by Leveson could be put in place “but not the jury trials. There is a compromise there”.
One option under consideration is to adopt a Leveson proposal to replace juries with a judge sitting with two lay magistrates, rather than a single judge.
Regulation
Starmer has vowed to slash the burden of regulation by 25 per cent by the end of the current parliament, saying this would reduce costs on business by £5.6bn.
Some business executives — who say the pledge is yet to produce significant results — fear that Labour MPs who are keen to see Starmer move to the left will block further red tape cutting.
“The party has been doing a lot of work with the City and business and, despite [raising employer national insurance contributions], it really is getting there. This could all be undone,” said one senior City of London figure.
A senior government figure said there would be pressure not to be seen to be stripping back regulation, but suggested that lower-profile, technical changes might be feasible since they were less likely to antagonise MPs.
Dozens of MPs have urged the government to reject recommendations to ease environmental regulations to make it easier to build. However, one Labour official acknowledged that such changes were now less likely.
Chancellor Rachel Reeves has also backed away from plans to weaken habitat rules to avoid a potential clash with the EU.
Taxation and spending
Andy Burnham, the Greater Manchester mayor who was blocked from returning to parliament by Starmer in January, reiterated his call for the mass nationalisation of utilities and transport in a speech this week.
The approach was not “head in the clouds leftism” but “the foundations of a more productive economy”, said the former cabinet minister, who is also seen as a potential leadership contender.
But allies of Starmer, who warned that toppling the prime minister risked economic chaos, said there was little prospect of changes to the fiscal rules that are closely watched by financial markets.
Business is also wary. One executive said the government’s current policies “aren’t business friendly but we can suffer through. The alternatives are unknown and certainly worse”.
Reeves has told colleagues that after raising taxes by £66bn in her first two Budgets, she will not rush to increase them again. This will severely limit the government’s ability to spend more, risking a flare-up of frustration on the Labour left.
Some colleagues noted a “cakeism” approach by Rayner this week when she criticised the government’s increases in business rates. It was only a year ago that Rayner, inside the cabinet, called for tax rises instead of welfare cuts.
Housing and inequality
Energy secretary Ed Miliband, a standard-bearer for Labour’s soft left, said Starmer’s “burning passion” to end Britain’s “class divide” would characterise the next phase of the government.
Burnham also called for more attention on “underdog” Britain in the form of “lower rents, lower water bills [and] lower energy bills”. Both he and Rayner have singled out housing as central to reducing inequality.
Reeves last June set out a £39bn fund over 10 years for social and affordable housing — which is heavily backloaded towards the end of the current parliament — and government figures expect the chancellor to resist pressure to top it up.
In the absence of more money, Burnham has called for compulsory purchase powers over landlords, while some MPs want restrictions on owners’ ability to list properties on the rental site Airbnb.
“Addressing inequality in where we put our money and how we focus on those communities that have really lost out is so vital,” said one soft left MP.
Welfare
Despite being severely weakened by a U-turn on cost-cutting plans last summer, Starmer and Reeves have signalled they want to make another attempt to reform welfare this year.
Alan Milburn, former Labour health secretary, is leading a review into worklessness among young people and has said he will consider “radical” solutions to cut the numbers — about 950,000 — who are not in education, employment or training in the UK.
Sir Stephen Timms — the disability minister who is leading a separate review into personal independence payments, the main disability benefit — said recently that his plans could end up reducing projected future increases in spending. Government forecasts show spending on Pip rising from £26bn in 2024-25 to £45bn by 2031.
But ministers acknowledge that future reforms cannot be accompanied by a savings target.
While concrete plans have yet to be drawn up, MPs said the government needed to move cautiously to avoid a repeat of last year’s rebellion in the House of Commons.
“We are not against welfare reform, but there has got to be a better argument that isn’t about money,” said one senior backbencher.
Downing Street did not immediately respond to a request for comment.
Additional reporting by George Parker in London