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Sooner or later all prime ministers remember that their official title is first chief of the Treasury. No matter how agreeable the relationship is with their chancellor, there is always a moment when the leader decides that not all things can be left in the Whitehall economy. For Sir Keir Starmer, the moment is overdue.
If there's a trend to watch for next year, it's the first sign of a row between Starmer and his chancellor, Rachel Reeves. Moreover, this is the way it should be. The prime minister and the chief minister have different functions. The latter exists to manage public finances and the economy; the former must see the wider picture and intervene when necessary.
To be clear, I am not suggesting an impending split between Starmer and Reeves, if you have lost confidence in him or are wavering on Labour's growth plan. The two are tightly aligned and Reeves remains one of his most trusted and important allies. The fault lies with Starmer. In part, his driving style reflects his overall leadership style. He believes in delegation and, colleagues say, apparently does not like being called upon to judge among his ministers.
But “I have a wife who takes care of me” is not an effective method. For all those who trust Reeves, those close to Starmer worry he is handing too much control over to the Treasury. A number of senior Labor figures are now regretting the huge political cost of the move to test winter fuel payments for pensioners. They feel it shows that Number 10 needs to be more proactive in looking at common sense, not just disagreeing with the Treasury's ideas. There were arguments about the move. It has shown to both the market and Labor MPs a willingness to take tough decisions. But the backlash has eroded support and confidence.
Given the central position of economic growth in his policy platform, Starmer's Downing Street is surprisingly ineffective. Treasurer filled the gap, as he always does. Part of the problem is that the prime minister does not like economic policy. He has shaken up his political career but apart from Labour's long-standing and broad-based policy director, Rav Athwal, there is no significant economic adviser in Downing Street. His most important officials, the new cabinet secretary among them, are also light on Treasury experience. No government wants the instability of competing camps in Nos 10 and 11 but the prime minister should be able to challenge decisions. A good prime minister improves their chancellor.
Successful prime ministers have to offer less to the machine. With close partnerships – David Cameron and George Osborne are often mentioned – they need a leader who can push back on the orthodoxy of the Treasury and inject a bit of politics into the decisions. This will become even more important as the Treasury finalizes its spending biennium. Trustees should be able to get an interview at Number 10.
Greater political engagement and economic brainpower at Number 10 seems essential. Between worrying data and unpopular tax increases. While there is much to be applauded for the Workforce planning and pension reforms, they provide little short-term revenue. Reeves says the first year is supposed to be tough and people need to be disciplined. Another colleague argues: “It's only five months.”
However confidence has been dented not only by the winter fuel decision but also by huge increases in employer's national insurance contributions, employment and business tax. Meanwhile, the bulk of new investment is going to public services instead of sectors that can boost growth. This is all understandable given the legacy, but it doesn't make for a solid story to sell the business to investors. Taxes have gone up. The Brexit reforms sound more like mood music. While Starmer expressed frustration at financial and environmental regulators stifling growth, he increased the regulatory burden on employers.
There is no immediate prospect of a major rethink but key figures may see the need for more immediate action to boost business confidence and persuade foreign investors to look again at the UK. Even friends are worried. Sir John Kingman, a City veteran and former Treasury official, was this week appointed to Business strategy council for workerswrote last month that “We're gonna need a big bazooka”.
Workers do not feel they can cut taxes and their instincts are not in control. A change of pace and focus will be needed if the ministers are to raise the bar and attract foreign investors. Kingman's recommendations include more ambitious measures develop the Oxford-Cambridge arcand great commitment to laboratory space, homes and infrastructure. This would be a sign of a country investing in its energy.
A “change of tone” is promised in the new year. Starmer, Reeves and others will do more to talk about the country. But it takes more than words to change the sentiment of a business.
This is not about undermining or breaking Reeves but about the effective use of the role of prime minister, to push, to challenge, to demand more. Starmer is fighting ready to hold his nerve but sometimes you have to be patient. This issue more than any other will determine the future of his government and the country. Sometimes that means being more prepared for the title.