Rebellion is in the air. Starmer will struggle to calm it
Labour is not enjoying power. When I recently asked a first-time Labour MP if she and colleagues were planning a party to celebrate July's one-year anniversary of their first election, she replied: 'What is there to celebrate?'
Getting hammered in the polls by Nigel Farage while being told to vote for welfare cuts isn't what new MPs were dreaming of when they celebrated their landslide win last year. 'This isn't what I came into politics to do' could be the official motto of the welfare rebels.
The prospect of more than 100 Labour MPs rebelling over welfare reforms doesn't just matter because of its potential impact on the public finances. It raises questions. Can a gloomy Parliamentary Labour Party stomach the messy business of governing? And Keir Starmer's plan for government in particular?
Whereas Conservatives tend to see government as their natural habitat, Labour often finds the experience troubling. When Starmer struck his trade agreement with Donald Trump, the PM's team got more messages of congratulations from Conservatives than from their own side. 'We find the purity of opposition more comfortable than actually doing things,' one Labour MP concedes.
Meanwhile the job of being an MP has become even more pressurised. New-intake Labour MPs were chosen by local associations expecting them to be local champions, responsive to every local whim. Slaves to their inboxes, some MPs report getting hundreds of emails a day – and feel obliged to answer them all, for fear of grievances aired on social media. Add in antisocial hours, family dislocation and real fears for personal safety and you have the perfect recipe for discontent.
Then there's the fundamental disjunction of this Labour government, between the voters who put it in power and voters some Labour MPs instinctively want to please.
To over-simplify, the first group of voters tend to live in towns, not cities and the north not the south. They work and might own their own home but still feel economically insecure. They have previously voted Tory, or not voted at all, and they are now open to voting Reform. They gave Labour a chance in 2024 not because Starmer inspired them, but because they were sick of the other lot and wanted a change.
These voters' views explain Starmer's moves to cut aid spending and boost defence, trim welfare bills and talk tough on immigration and crime. Weekend headlines about 'making convicts fill potholes' are laser-guided to this audience.
All those things are popular with the electorate as a whole and with Starmer's swing voters in particular. Yet they still meet resistance from Labour MPs challenging No 10's electoral maths. Even as Starmer declares Reform is his party's main opponent, some Cabinet ministers argue that Labour's biggest electoral threat comes from the second group of voters 'progressives' who might defect to the Greens and Lib Dems.
Some say this reflects the power of the postbag. 'A lot of our MPs are much more likely to hear from Guardian-reading liberal graduates than from potential Reform voters on estates – that's who the members are, that's who sends emails about Gaza,' says a minister. The persistent Labour belief that the real threat is on the Left is what psychologists call 'motivated reasoning', constructing arguments to suit your beliefs – often to avoid painful, contradictory truths. Here the avoided dissonance is that Labour is a Left-wing party that won power with the votes of people who lean Right.
Or at least, Right on social issues such as migration and crime. On the economic issues that are likely to be the biggest test of Labour discipline later this year, things are more complicated.
The Treasury last week justifiably celebrated quarterly growth figures that were above expectations. But much of the economic outlook is now decided outside the UK – trade deals and Trump tantrums could determine whether the Autumn Budget sees Rachel Reeves raising yet more money to try to balance the books.
Could the parliamentary Labour Party really accept more welfare cuts, as some Government advisers are advocating? Many MPs say absolutely not, and there are already signs that No 10 is preparing to compromise with the rebels – talk of concessions on winter fuel payments and child poverty is a sign that the PM can't just steamroller over scores of unhappy colleagues.
All of which increases the chances that the Treasury will have to go looking for more cash later in the year. If so, where? Intriguingly, some senior Labour figures now talk about an 'emerging consensus' between Labour and Reform voters favouring Left-wing economic policies. That's less surprising than it might sound. Farage has shifted Left on economics this year, praising trade unionists, traditional industry and even Jeremy Corbyn.Apella Advisors polling shows that many Reform voters actually lean Left on some economic issues, favouring state protection for key industries and even nationalisation of utility companies. Could Reform's rise move Labour leftwards on economic policy?
Here, the financial services sector is on tenterhooks, waiting for whispered cuts in cash ISA allowances and possibly to tax breaks for higher-earners' pension contributions. Some Labour economists also see scope for a populist kick at the Bank of England to pause the 'quantitative tightening' process that pushes up Government borrowing costs. In a similar vein, Reform wants the Bank to charge high street banks interest on overnight reserves, a technical-sounding tweak that would extract billions.
Magicking up money by annoying wealthy savers and bankers might just allow the Chancellor to please both Labour MPs and Reform voters at the same time - but Labour can't afford to take the City lightly. Bond investors say the gilt market wants higher taxes or additional cuts at the Autumn Budget. And if they're not reassured? Goldman Sachs last week warned that the gilt market is now 'susceptible to damage' where skittish investors demand higher interest rates on Britain's loans. Ask Liz Truss how that story ends.
Labour hasn't taken much joy from its first year in power, but there may be worse to come. The message from the centre of government to unhappy backbenchers will have to get tougher: You won't save your seat by complaining about the government – but you might spook the markets into a crisis that guarantees you lose it.
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