Category Archives: Government

‘End of Term’ Reflections for Labour

The highs and lows of the first parliamentary year

In its first year since winning the 2024 general election, Starmer’s government has shown intent to implement its manifesto pledges, but whether this has translated into successful policy delivery remains a subject of debate. Ministers have pursued ambitious reforms in areas like trade, education, health, and energy, but they have also faced political turbulence and criticism over policy missteps, particularly around tax, grooming gangs and welfare reform.

Crucially, the government seems to be unable to unlock that elusive growth on which so much of its spending plans depend.  Much of Labour’s policy programme is still in its early stages, with a strong emphasis on structural reform in Whitehall and long-term planning which should be commended. However, this emphasis leaves the government with few immediate wins to show the public and, with key reforms still light on detail and outcomes, questions are already mounting about the government’s effectiveness.

On the international stage, however, the Prime Minister has emerged as a confident statesman. His handling of the Trump presidency, securing of trade deals with the US, EU and India, and continuation of the UK’s support for Ukraine have won praise both at home and abroad. This has helped to re-establish Britain’s role as a serious global actor – although notably absent of any meaningful involvement from foreign secretary David Lammy.

Domestically, there has been modest progress on housing and NHS waiting times, but delivery has been hampered by fiscal constraints. But domestic policy also reveals some of the sharpest criticism. The removal of the Winter Fuel Payment from millions of pensioners, presented as a necessary fiscal decision, sparked major backlash and a messy U-turn. The electorate does not expect these sorts of economic decisions from a Labour government, which has resulted in widespread reputational damage from a policy that seems to contradict Labour’s core identity. The increase in employer National Insurance contributions (NICs) has also been poorly received, with concerns over its impact on jobs and wages. On immigration, growing public unease and the government’s mixed messaging has opened space for Nigel Farage’s Reform UK to gain traction and control the narrative.

Overall, the government has had a mixed first year. There was no political honeymoon, with downbeat messaging on the economy, the early ‘freebies scandal’ and unpopular welfare cuts undermining any prospect of ministers picking up some early momentum. Coupled with a challenging economic backdrop, rising support for Reform UK and the geopolitical volatility exacerbated by Trump’s return to power, the need for a recalibration of political and policy strategy is becoming clear. The government’s commitment to its manifesto is not in doubt, but turning that commitment into visible, meaningful results is the test that now lies ahead.

Labour and the business & investor community: a genuine partnership for growth?

Courting investors and businesses was a key part of Labour’s pre-election pitch. The Prime Minister and Chancellor were keen to demonstrate the party’s credibility on the economy and support investment into the UK as part of its wider growth ‘mission’. However, in government, Rachel Reeves used her first fiscal event – the 2024 autumn budget – to increase employer NICs by 1.2%, representing a £25 billion tax hike on businesses. This came alongside increases to Capital Gains Tax and the National Living Wage. The latter measure has been particularly costly for businesses with a large proportion of low paid workers on their payroll.

While the government argued this was necessary to address the fiscal ‘black hole’ it inherited from the outgoing Conservatives and to boost support for low-paid workers, it has done little to inspire confidence in the business and investment community. Indeed, GK Strategic Advisers and former ministers David Laws and Rob Halfon both warn that the employer NICs rise has been particularly damaging to the government. This is despite early positive decisions on infrastructure and commitments to speed up planning processes. Since last year’s budget, ministers have been playing catch up in their efforts to restore confidence amongst businesses and stimulate private investment at a time when geopolitical uncertainty is threatening to wreak havoc on the global economy.

President Trump’s ‘Liberation Day’ announcement on 2 April, which saw his administration unveil sweeping global tariffs, was a watershed moment and one which Starmer deftly navigated. The US-UK Economic Prosperity Deal sees the UK sidestep many of the Trump’s tariffs and, amongst other provisions, allows UK car manufacturers to sell vehicles to the US at a 10% tariff rate and cuts tariffs on UK aerospace exports to zero.

Despite Starmer’s success on the international stage, challenges lie ahead for the government in its relationship with businesses and investors. The Employment Rights Bill is due to complete its passage through Parliament in the autumn. The legislation introduces a new package of workers’ rights, including day one employment rights, ending the use of certain zero hours contracts and improving access to flexible working arrangements. Many of the measures contained in the bill will be subject to further consultation with businesses over the coming months. It is vital that the government gets the eventual implementation of these reforms right to avoid any further damage to its relationship with the business and investment community.

As parliament rises for summer recess and we take stock of the government’s first full parliamentary year, it is fair to say that the public-private partnership for growth that Labour first envisaged when it came to power has not yet materialised. As put by GK Strategic Adviser and former Health Minister Steve Brine: “The growth mission, which sits at heart of the government’s plan to get re-elected, has been hampered by uncertainty from the shifting taxation landscape and the many reviews and consultations that are yet to translate into firm policy direction.”

Starmer will need to translate the success he has found on the international stage to his domestic agenda if he hopes to bring businesses and investors back on side and enable them to deliver the economic growth upon which so much of his government’s policy agenda relies.

The ‘ones to watch’

Westminster has been speculating for several months as to whether the Prime Minister will instigate a cabinet reshuffle before the end of 2025. Though it may seem like a distant prospect, many are already keeping an eye on some Labour MPs who could be next in line for promotion.

Peter Kyle MP: With experience as a former Special Adviser in the last Labour government, Kyle is a slightly more seasoned voice in the Labour ranks than other rising stars. Described by Steve Brine as “hugely gifted”, the Science and Tech Secretary has consistently impressed, particularly in his initiative to coordinate a unified cross-government approach to data, digital and AI, and as a talented and dependable ‘Minister for the Morning Round’.

Torsten Bell MP: Formerly the chief executive of the Resolution Foundation and a Labour party aide during the 2008 financial crisis, Bell knows the ins and outs of policy, economics and politics. Though a fresh-faced Labour MP, part of the 2024 intake, he is already holding ministerial positions across both HM Treasury and the Department for Work and Pensions, and is expected to continue to rise through the ranks.

Miatta Fahnbulleh MP: Taking over the seat Harriet Harman represented since 1982 was no small feat, but Fahnbulleh has not disappointed. Like Bell, Fahnbulleh was elected in July 2024 and was immediately appointed to a junior ministerial role. A former Cabinet Office official and CEO of the New Economics Foundation, her experience has made her a capable MP and minister. Her reputation for going above and beyond has not gone unnoticed, with David Laws remarking she is “a bright junior minister who has already impressed her colleagues”.

Josh MacAlister MP: Otherwise known as education and social care’s ‘golden child’, MacAlister entered parliament with a reputation that precedes him. MacAlister was chosen by the Conservative government to conduct an eponymous review of children’s social care in 2021. Now serving as the parliamentary private secretary to Pat McFadden – one of the government’s most instrumental figures – MacAllister has been carefully watching the recommendations of his review being implemented through the Children’s Wellbeing and Schools Bill. He is certainly proving himself to be successful campaigner and capable MP.

The next 12 months, and beyond…

For David Laws, the priority for the next 12 months is “growth”. The Chancellor faces the daunting task of stabilising the public finances while avoiding tax rises in the autumn. However, recent briefings suggest that tax rises, particularly on higher earners, seem inevitable unless economic performance improves. Her Mansion House Speech set out Reeves’ plans to unlock growth in the financial services sector, while trade deals struck signal an important first step towards a more outward-facing agenda. A more pragmatic approach to Europe, while politically fraught, remains a low-cost, pro-business lever available to the government to recover some of the growth lost post-Brexit.

Another priority is the ‘retail offer’ that helped Labour win in 2024: NHS reform. Steve Brine argues that meeting the 18-week waiting time target for NHS elective care would be seen as a real mark of success. Elsewhere, there are the structural reforms underway for planning and devolution that were fundamental to the “decade of national renewal” promised during the election campaign. Deputy Prime Minister Angela Rayner, empowered and ambitious within the government, is quietly progressing with this agenda with little sign of slowing down.

David Laws suspects that we will also see those more talented ministers begin to demonstrate progress in exciting vanguard sectors like technology, AI and clean energy: areas which are vital to enhancing the UK’s economic position.

Measurement of success in May

The real test of success will be the elections in major cities and, significantly, in the Welsh and Scottish parliaments in May 2026. While midterm elections are often tricky for incumbent governments, Labour would not have been expecting to weather such dissatisfaction so soon, and a poor performance at the May 2025 local elections was an early warning sign of this.

The traditional dividing lines of left and right, class and geography, are no longer accurate measures of voter sentiment. Rather, the electorate is split into groups defined less by ideology, and more by attitudes to institutions, cultural, social and economic issues. Steve Brine emphasises that support for the two main parties has always been fluid. However, in 2024, Labour and Conservatives collectively won just 54% of the vote – a post-war low. Recent polling showing double digit support for smaller parties like the Greens suggests fertile ground for insurgent parties that are attracting support from new parts of the electorate that they wouldn’t normally have.

Technocrats vs. Populism

GK Strategic Adviser and former Care Minister Phil Hope warns that the rise in populism is the “biggest threat to our democratic institutions”. For No.10, the immediate concern is Reform UK. The Prime Minister’s Chief of Staff, Morgan McSweeney – who is often characterised as the architect of Starmer’s premiership – believes that right-wing populism must be defeated by showcasing competent government. In practical terms, this means delivering real improvements to the way people interact with public services, and being tougher on immigration, to reassure disenfranchised, Reform-leaning voters that their economic and cultural concerns are being addressed.

While Reform grabs the headlines, Labour also faces mounting dissent from the left. Disillusioned, younger voters are drifting towards alternatives that they believe are more convincing and radical on climate, equality and security issues. While 6% of Labour’s 2024 voters have moved to Reform, three times as many have shifted to parties of the left. Recent polling gains for the Green Party and a new party led by Jeremy Corbyn underscore this trend. It is worth remembering that Corbyn secured 40% of the vote in 2017 compared to Starmer’s just 33.7% in 2024. For a Labour leadership that has worked hard to marginalise the hard left, this insurgent left-wing movement could expose vulnerabilities in Labour’s emerging strategy of wooing Reform voters on issues such as immigration and the so-called ‘culture wars’.

Clowns to the left of me, jokers to the right

Labour now finds itself squeezed on both its political flanks, while struggling to articulate a unifying strategy for the broad, fragile coalition it assembled in 2024. Without a coherent narrative, it risks alienating voters whose priorities and values increasingly diverge.

In political terms, there is still a long way to go until the next election. But in the absence of a compelling narrative or delivery on issues such as immigration, Downing Street faces a difficult task to work out who its voter base is and what it wants. As GK’s strategic advisers all note, an economic upturn would relieve much of this pressure. But with that unlikely in the next 12 months, the consequences will be felt at the ballot box in May 2026 – where Labour’s already narrow share of the vote could be eroded further.

Scott Dodsworth // Senior Partner & Managing Director // scott@gkstrategy.com

 

The case for agri-tech in public health

The public health problem

Over one in four adults are obese, with an additional 36% classified as overweight in England. The prevalence of obesity has been steadily rising since 1993, with little evidence to suggest this trend is slowing. This is not solely an adult issue. The sharpest increases in obesity have recently been observed among children. Currently, 15% of children aged 2 to 15 are obese, and a further 27% are overweight. Projections from the Royal Society of Public Health suggest the situation will get worse. 39% of children are expected to be obese or overweight by 2029–30, rising to 41% by 2034–35.

The cost

The government estimates that obesity is costing the NHS £6.5bn a year and is the root cause of diabetes and heart disease and the second biggest preventable cause of cancer after tobacco smoking. Less conservative estimates that account for wider consequences suggest that poor diets cost the UK £126bn a year. There is a strong rationale for public health intervention and the Labour government is demonstrating a willingness to intervene. One of health secretary Wes Streeting’s big three healthcare shifts set out in this week’s NHS 10 Year Plan is a shift from treatment to prevention, and for public health this means intervention.

Government action

Trailing the publication of the NHS 10 Year Plan alongside an obesity strategy, the government has announced a new standard for food retailers to make the average shopping backet of goods healthier. Big food businesses will be required to report on healthy food sales and will be overseen by the Food Strategy Advisory Board. This builds on a government consultation launched in May on plans to tighten the sugar levy by reducing the minimum sugar content level from 5g to 4g and remove the exemption for milk-based drinks. This signals a clear appetite within government for more interventionist policies. Such an approach will undoubtedly incur backlash from anti-nanny state politicos and big industry actors. However, it also creates an opportunity for innovators.

Agri-tech innovators

A contested political environment driven by a firmer stance on obesity and healthy foods by ministers, creates a window for pragmatic, science-driven solutions. Crop biofortification to increase the nutritional profile of foods. Precision fermentation to produce low-fat dairy and bioactive compounds. Modified starches with a lower glycaemic index. The agri-tech sector is well-placed to engage and support the government to achieving public health outcomes. Junk food advertisement bans might grab the political headlines, but ministers will need solutions that measurably change health outcomes and improve the health of the nation.

What next

The NHS 10 Year Plan and the obesity strategy will feed into Defra’s set piece item due for publication later this year: the national food strategy. Broadening access to healthy foods dominates the political discourse around this food strategy. Improving public health and tackling obesity have shot up the political agenda and joining this up with food and farming policy is the key to successfully achieving these policy aims. Aligning with the government’s thinking and offering solutions to public health priorities will strengthen the agri-tech sector’s positions to shape policy and work alongside ministers and policymakers.

Barriers to the Reform-quake

GK’s James Allan assesses some of the barriers of populism in British politics and explains why the political hype about Reform UK might be overstated

‘Campaigning is different than governing’ – so said President Obama to reporters on Air Force One in a targeted message to Republicans looking to gridlock his legislative agenda on Capitol Hill. The same goes for any political organisation that looks to exploit grievances and stir up public anger to secure votes and electoral support. It was a dynamic at play in the 2016 Brexit referendum and Reform UK is reviving the grievance playbook in the lead up to the next election.

How the Labour government, and the Conservative Party in opposition, respond and deal with the challenge posed by Reform UK is undoubtedly shaping the course of this parliament. The government published its immigration white paper only moments after the local election result and the so-called ‘Reform-quake’ that saw 677 Reform councillors elected. As noted in last month’s newsletter, the government’s political objectives were clear: to appear tough on immigration, shatter the public perception of Labour being pro-asylum and pro-migration, and outflank Kemi Badenoch and Nigel Farage.

With all the subsequent political and media crystal ball gazing about the future of Reform UK, it is unsurprising that investors and businesses are curious. Importantly, the next election is likely to take place in the second half of 2028 or at some point in 2029. It is too early to predict the outcome meaning current polling warrants cautious interpretation. Amid the uncertainty, it is worth stepping back to consider why the political hype about Reform UK may be premature.

Four reasons why the Reform panic is overblown

1. The UK is bucking the global populist trend

The year 2024 was mega for elections across the globe. It was a year that largely saw incumbents punished for achieving marginal levels of economic growth, governing during a global health pandemic, and a cost-of-living crisis. This created opportunities for the ring-wing populist parties that sought to challenge to status quo, capitalise on grievances and promise radical change without providing credible plans for doing so. However, unlike most swings experienced in other western developed democracies, the UK swung to the left. The election of a Labour government brought an end to 14 years of Conservative governments.

The UK’s anti-incumbent sentiment at the election meant that one in four Conservative voters in 2019 went to Reform UK and one in five went to the Labour Party. This indicates a more fragmented split in the national vote and the UK’s first past the post electoral system means that Labour’s majority should be understood as broad but thin. It reflects a characteristic of our electoral and constitutional DNA that makes it harder for third, fourth and fifth political parties to perform well and win seats at general elections, including a right-wing populist challenger party. The bar is therefore high for Reform UK. It would need to overcome this fragmentation and more comprehensively supplant the Conservative Party to succeed.

2. No party has ever lost a 174-seat majority in modern British political history

Starmer’s majority is the third largest landslide win since the turn of the 20th century. From 1945 onwards, history would suggest that majorities such as this typically endure at least one more election before the colour of government changes. Labour’s majority of 145 in 1945 survived one other election before being unseated and its majority of 179 seats in 1997 endured for two more elections. The Conservative majority of 144 in 1983 also endured for two more elections and was whittled down to a majority of 21 before the party was catapulted out of power.

Historical precedents should be taken with a pinch of salt. The third-party challenger in all these elections were typically the Liberal Democrats (or its predecessors). A more fragmented electorate and Reform UK could challenge this historical precedent but even its predecessor UKIP never won any seats in the House of Commons at its peak in 2015 despite holding a number of seats in the European Parliament elected under a proportional representative system. This further underscores the difficulty these challenger parties face.

3. Grievance politics only gets you so far

Reform UK’s playbook of grievances is blunt and polarising: immigration and borders; issues of national identity and community cohesion; taking on establishment orthodoxy and perceived elite indifference; and underscoring the cost of net zero policies. Playing on grievances can mobilise discontent, and without credible solutions, Reform UK will struggle to translate its momentum into enduring political support.

The coming years will be a test of Reform UK’s operational effectiveness, party discipline and credibility in local government. Its success at the May local elections is significant. It won 677 council seats out of roughly 1,600, took control of ten local authorities and successfully elected two mayors. But beyond the grievances espoused by its candidates, Reform UK’s credibility is now at stake and already showing early signs of dysfunction. For instance, Reform UK-controlled Kent County Council recently suspended a councillor and nine of the 22 council meetings have been cancelled within the first nine weeks of them gaining control. These are meetings where important decisions, such as budget allocations and service provisions were expected to be made.

Local government plays a vital role in the operational delivery of frontline local public services that most of the electorate use and engage with. From adult social care and children’s services, to bin collection and public protection, a lot is at stake for Reform controlled local authorities. Political leaders in Westminster will be watching closely to exploit any opportunity to batter Reform’s credibility. Added to this is immense pressure on local government finances, meaning that any misstep will be amplified. Reform UK not only has to prove it can win votes but also that it can govern responsibly under intense scrutiny and fiscal constraint.

4. Expect mid-term blues

It is reasonable for voters to flirt with protest parties between general elections and Reform UK is likely to maintain its momentum in local elections over the course of this parliament. Local elections offer a safe outlet for public frustration, but general elections are different. Not only will voters who are less politically engaged (or enraged) turn out to vote in a general election, but the national conversation will shift from registering voter discontent to who can govern the country effectively. It was a dynamic in 2024 and a key part of Starmer’s pitch to voters, citing his record of restoring Labour’s credibility from the Corbyn era of Labour leadership and criticising the Conservative’s mismanagement of the economy.

While Reform UK may have reshaped the political conversation, structural barriers and historical precedents mean that translating this discontent into enduring electoral support that can survive the test of a general election will be a significant challenge for the populist right-wing party.

Push to raise foreign taxes on US assets a risk for foreign investors

By Lizzie Wills, Senior Partner & Head of Private Equity

A bill making its way through the US Congress could present meaningful new taxes on US holdings of investors domiciled in the UK, as well as several EU member countries – another in a series of new risks to emerge from the newly fraught relationship between America and its historic allies. While passage of the bill is not guaranteed, potentially impacted parties should begin to think now about how to react to potential changes.

The effort in the US Congress to impose new taxes on many foreign investments in the US is part of a broader tax and spending package that recently passed the US House of Representatives and is currently being debated in the Senate. The bill would be passed under a legislative vehicle known as reconciliation, which allows a bill to pass under restricted circumstances with simple majorities of both the House and Senate, circumventing the usual requirement to secure 60 Senate votes.

The foreign investment tax package is known as Section 899 for the new section of the US tax code required to implement it. Section 899 would impose incremental taxes above current rates on the value of income or sale proceeds of many US holdings (US Treasury securities would be exempt) held by institutional investors, individuals and governments domiciled in countries that have imposed what the bill characterises as “discriminatory” taxes on the US. The discriminatory threshold would automatically include countries that have levied Digital Service Taxes (DSTs) on US-based technology firms – which includes the UK, France and Spain – as well as taxes imposed under the Undertaxed Profits Rule, a standard developed by the Organisation for Economic Co-operation and Development (OECD) to attempt to impose minimum tax rates on multinationals.

Since the House version of the reconciliation bill passed on 22 May 22, critics have dubbed Section 899 the “revenge tax”, predicting that if passed the provisions would hurt US asset prices, cause interest rates to rise and the US dollar to tank considering the US$30 trillion in US assets held by foreigners. The Tax Foundation, a US think tank, estimates the new taxes would impact some 80% of the foreign direct investments into the US. Yet US policymakers appear to be largely unmoved thus far by the opposition. The Senate Finance Committee has released draft language pegging the incremental taxes at 15% (5% per year for each of three years) starting in 2027, watering down the House version but keeping it largely intact. The notion of raising taxes on foreign investors is completely consistent with the “America First” mindset of the Trump administration and Republican congressional leaders. The Congressional Budget Office (CBO), a non-partisan body that estimates the fiscal impact of proposed legislation, has forecast that the House version of Section 899 would raise US$116 billion over the 10-year budget forecast window, important considering the CBO’s forecast that the bill would add trillions to the already yawning US budget deficit. The Senate’s version of the bill would raise less, given the 15% maximum (versus 20% in the House bill) but would still be expected to generate meaningful revenue.

The broader reconciliation bill has drawn opposition from multiple factions of the Republican party. However, the bulk of the criticism has focused more on the bill’s proposed cuts to the Medicaid health-insurance programme (for moderates) and the projected further widening of the federal budget deficit (for conservatives). By comparison, criticism of Section 899 has been muted. And even if the current version of the bill is scaled back, the temptation for a party that controls the White House, Senate and House to pass a bill through reconciliation is huge – the vehicle was used to pass the tax-reform bill in Trump’s first term, in 2017, as well as the Inflation Reduction Act (IRA) under President Joe Biden in 2021.

Sample countries that have imposed Digital Service Taxes (DSTs) on US Firms

Austria Denmark Belgium
Canada Hungary Turkey
France Italy Peru
India Poland Colombia
UK Spain Kenya

Source: Tax Foundation

What can non-US investors with US holdings do in response? Both the Senate and House versions of the bill specify that the new taxes will only be imposed on entities with greater than 50% equity ownership outside the US. Jointly held funds with divided US/non US ownership could shift majority control back to the US partner. Other strategies will surely emerge to adapt to the new rules should they come to pass. But investors would do well to start thinking about them sooner rather than later.

If you’re interested in discussing this in more detail please be in touch with Lizzie Wills on lizzie.wills@gkstrategy.com.

Key Takeaways from the Spending Review: A future that is less generous than the past

GK had the pleasure of hosting former Treasury and education minister David Laws and the Financial Times’ Economics Commentator Chris Giles in our latest webinar on Thursday (12th June) to discuss the winners and losers from the government’s spending review, and what it means for business.

The spending review is a significant moment in the political calendar. The settlements it confirms set departmental day-to-day budgets for the next three years (2026-27, 2027-28 and 2028-29) and capital expenditure for the next four (until 2029-30). It is also the moment when No.10 and the Treasury must publicly commit the funds to support their political objectives – in essence, we get to see where spending is going to be prioritised and where it is not.

In the webinar, David and Chris detailed what the spending review means for overall public spending, where the government could come undone, and the possibility of future tax rises. You can read a summary of their key takeaways below:

The spending review is not about making new money available or introducing new taxes.

Spending reviews are all about the allocation of a pre-determined spending envelope which, in this instance, the Chancellor set out in the October budget last year. It does not introduce any new taxes or make new money available. Instead, it confirms what areas of public spending the government wants to prioritise, and which departments will have to be squeezed.

The departmental settlements do not represent a return to the austerity years.

While the overall spending envelope is tight – especially given growing pressure on public spending across health, pensions and defence – day-to-day spending is still rising by 1.2% per year in real terms (i.e. accounting for inflation) over the spending review period. This means it is broadly in line with the departmental spending settlements put forward by various governments since 2019.

A lot of the spending assumptions depend on public sector productivity improving, which is no guarantee.

Public sector productivity has declined since the Covid-19 pandemic and in 2024 it fell by 0.3%. The Office for Budget Responsibility (OBR) has historically assumed quite generous improvements in public sector productivity each year which is a key component of its overall economic growth metric.

If the OBR significantly revises down its assumptions about improvements in productivity, this could seriously impact the funds it is projecting the government will have to work with over the spending review period. This increases the likelihood of the government having to do introduce large tax rises at the autumn budget.

Defence will continue to put pressure on the government’s overall spending envelope.

Since the end of the Second World War, successive governments have used cuts to defence as a means of boosting other areas of public spending, most notably health. Persistent global instability and geopolitical uncertainty means that higher levels of defence spending are likely to continue for the foreseeable future. No.10 and the Treasury will have to contend with this new spending pressure as demographic challenges continue to pile up and economic growth remains sluggish.

The NHS is the big winner from the spending review, albeit with a smaller settlement than it has historically received.

Health secretary Wes Streeting will undoubtedly be the happiest around the Cabinet table following the confirmation of the Department of Health and Social Care’s settlement, with spending on the NHS set to grow by 3% per year in real terms. However, this is below historic average rises of approximately 4-5%. With a growing elderly population and people living with complex conditions for longer, the funding put forward in the spending review settlement is unlikely to significantly move the dial on the performance of the NHS.

Small tax rises are likely at the autumn budget to meet the Chancellor’s fiscal rules.

The government has committed to meet day-to-day expenditure through its own revenues by 2029-30. This means its current budget will have to be in balance or surplus by the end of the decade, and any money the government does borrow will be to invest. If the OBR projects that the government is not on course to meet this fiscal rule (or any of its others), then Chancellor Rachel Reeves will be forced to come back for a second round of tax rises or decide to break a fiscal rule. Either look fairly unpalatable to the government given where they currently are in the opinion polls.

A cabinet reshuffle should be expected in the second half of 2026 as the government begins to ramp up to the next general election.

2026 is projected to a big election year in the UK. Elections are due to take place for the Scottish Parliament and Welsh Assembly, along with a series of newly created unitary authorities. Should the results prove poor for Labour, as current polling indicates they will, then Prime Minister Keir Starmer is likely to reshuffle his cabinet to get his top team in place as the No.10 machine starts to think about the next general election in 2029.