In 1976, as Harold Wilson announced his surprise resignation, Labour was wracked by questions over its future direction. A vivid new play, The Gang of Three, depicts the fate of a trio of modernising candidates: Denis Healey, Roy Jenkins and Anthony Crosland. Even five decades on there are parallels with our own time: a chancellor seeking to impose spending cuts on a wary cabinet, tensions over European integration and an energy secretary regarded by some as a progressive hero and by others as a dangerous radical (Tony Benn/Ed Miliband).
Back then it was the spectre of Margaret Thatcher that loomed, a free marketeer intent on breaking the social democratic consensus. Today it is that of Nigel Farage (who likened himself to Thatcher as recently as last year).
Before the local elections, Labour strategists remained uncertain whether the Conservatives or Reform would be their main opponent at the next general election. Now they readily identify Farage as the principal threat – in what Labour believes will ultimately resemble a traditional two-party contest. One senior Starmer aide accuses the Tories of “giving up” on the Runcorn and Helsby by-election in order to damage Labour and of lacking any vision of recovery. “When we did badly in 2021 we had an explanation and a plan, the Tories don’t have one other than ‘it’ll take time’.”
Yet the question that now confronts Starmer, as it did after defeat in the Hartlepool by-election four years ago, is whether he has a plan. The clichéd defence of “midterm blues” has not been deployed by No 10 – and with good reason. Labour didn’t just lose its 49th safest constituency, it lost two thirds of the council seats that it held in the fraught year of 2021. Only under Gordon Brown in 2009, after over a decade in government, did Labour’s projected vote share fall so low (20 per cent). No, this isn’t midterm blues; it’s a first-year nightmare.
As Jake Richards, one of the leaders of the Red Wall group of Labour MPs, has identified, Reform represents a challenge to Labour’s “moral purpose” rather than merely its electoral majority. Farage’s party won 85 per cent of the most deprived wards (its best performance coming in Thornley and Wheatley Hill in Tony Blair’s former Sedgefield constituency with 65.1 per cent of the vote). More than Boris Johnson’s Tories, Reform threatens “Clause I Labour” – its self-identification as the party of the working class.
Last Friday morning, in the immediate aftermath of the Runcorn defeat, I wrote that Labour MPs would respond by demanding a “reset”, principally over the economy and immigration. That’s precisely what has happened. Jonathan Hinder, a Blue Labour MP, has urged Starmer to effectively freeze net migration through a “one in, one out” policy. Jo White, the chair of the Red Wall group, has demanded the introduction of digital ID cards to tackle illegal immigration (the government’s long-promised immigration white paper is due to be published next week).
But it is economic arguments that are dominating. When Labour first entered power, public criticism of its approach was largely confined to the radical left. But the party’s previously quiescent soft left is now finding its voice. Louise Haigh, the former transport secretary sacked by Starmer, has called for the government to abandon its “self-imposed tax rules” and embark on “a serious programme of investment and reindustrialisation” (No 10 says it has no intention of breaching Labour’s manifesto tax pledges). Clive Efford, who leads the large centre-left Tribune group of MPs, has declared that it is “madness” for the government to “keep doing the same thing and expecting a different outcome”.
Their interventions reflect what MPs from all wings of the party found on the doorstep – no government policy is more toxic than the winter fuel payment cuts (a fate some cabinet ministers privately warned of last summer). Labour’s “original sin” is how internal critics now refer to the measure announced by Rachel Reeves weeks after the party’s victory, while others liken it to Thatcher’s poll tax. “Our traditional voters don’t see this as something that a Labour government should be doing,” a minister tells me, calling for an “economic reset”. “Cost of living is a visceral issue and they think we’re making the problem worse.”
One criticism from senior Labour figures last July was that Starmer – the First Lord of the Treasury – had outsourced the government’s economic policy to Reeves. The healthy tension that should exist between No 10 and No 11, they complained, was absent. No one was marking the Chancellor’s homework.
Yet there are increasing signs that this is changing. A Downing Street that continues to identify the cost of living as the defining electoral issue is now exploring ways to mitigate the impact of the winter fuel cuts. Starmer, who MPs note has forged an independent identity on the global stage, will soon hire his own economic adviser (a move the Treasury says it would welcome).
Last month I wrote that Starmer and Reeves’ relationship would be tested as never before. That’s certainly the case now. From one side, Blue Labour – a group regularly hosted at No 10 – calls for the outright abolition or division of the Treasury (a permanent obstacle, it believes, to reindustrialisation). From another, soft-left ministers demand looser fiscal rules (to prevent cuts to unprotected departments in the Spending Review), higher taxes on wealth and a reversal of the most divisive welfare cuts.
Two groups hardly renowned for their affinity now form an increasingly powerful pincer movement against the Chancellor. “The overlap between Blue Labour and the soft left on the economic offer and winter fuel is a problem for Rachel,” observes one Starmer ally. “Because the only people not in that place are the real die-hards.” To govern is to choose. How will Starmer respond?
The Gang of Three ends with a disillusioned Jenkins plotting the creation of the Social Democratic Party in the wake of Thatcher’s election victory. Inside No 10 they hope that Starmer’s fate will more closely resemble that of Anthony Albanese, the Australian Labor prime minister, who defied early unpopularity to win re-election last weekend. Whether Starmer does so may hinge on whether he can – yet again – reset his leadership.
[See also: Why Labour shouldn’t shift right]
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