Labour’s Governing Icebergs #3: Structural Limitations
Labour must utilise and reform the machinery of state in order to achieve its governing agenda.
Catch up on the previous piece in the series on ideological battles here
There remains a third iceberg to contend with as the Labour ship steams into power: the government itself. The British state needs a major update. It is currently a few hundred years out of date, calibrated more to the age of empire than a middling, if important, G7 economy in the shadow of the real players. But tackling this is a tough governing project which could drain political capital and time from a possible Labour government. There are also threats lurking beneath, particularly the spectre of Labour party politics fusing with the great mechanical powers of the state. It will be the test of Starmer’s success if he can navigate reform while avoiding the structural timebombs that lie ahead.
The Need for Reform
It’s rare a prime minister ever gets to achieve structural reforms at the heart of the state. The most successful Labour PM, Clement Attlee, ran out of time to fully implement his executive ideas nicknamed ‘Architectonics’ – whether reforming Cabinet down to four or five ‘Overlord’ ministers, curtailing the power of the Treasury or creating a new Department for the PM. When reform has been attempted it has most often failed, such as Wilson’s Ministry for Economic Affairs, envisioned as splitting No.11’s responsibilities with another department and thereby reducing its and the Chancellor’s power base. It was quietly aborted after only a few years, folded back into the ever-powerful Treasury.
If Labour is to utilise No.10 and the state, however, it is vital it moves methodologically through a steady list of reforms, even at the cost of throwing time and energy at distinctly un-sexy backroom politics. Moving too fast (and in too confrontational a manner, as seen with Dominic Cummings’ failed attempts at civil service reform) will destabilise and alienate the centre of power. Too slow, and without proper backing, and the British state will stolidly, and successfully, defend the status quo. It should start small and build big.
Mere tinkering with No.10 or the Treasury, as seen under Blair and Wilson respectively, will not be enough. Reform must be tackled in the round – with Whitehall in particular need of attention. But, again, this won’t be easy. The civil service is the last British institution willing to accept the need to evolve and change, as Shirley Williams elegantly described:
‘It is a beautifully designed and effective breaking mechanism. It produces a hundred well-argued answers against initiative and change’ (1980, The Decision Makers, p.81)
The service, and its senior leadership will naturally err on the side of inaction for structural change. However, awkward and serious questions must be asked of their performance: whether delivery, procurement, promotion / recruitment systems and leadership over the last eight years. In addition, the entire Cabinet Office must be reevaluated, as well as Number 10. New voices, information streams and external expert insight must be added, as well as shared (but also) empowered responsibility for the key Cabinet leaders and delivery ministers. But one can alter the civil service, Cabinet and No.10 structures all you want. There is one timebomb that must be defused once and for all: the Treasury (HMT).
Money, Money, Money
Here is not the place to devise a completely new way to run the Treasury – or about how it should possibly be deconstructed (though, cards on the table: an Economic Council / Joint-No.10/11 team with specific powers over information sharing and unlocking pockets of sapital spending is the easiest and most necessary fix). The Treasury is Starmer’s most dangerous constraint because it will always aim to control, conceal, manipulate and above all obstruct a Prime Minister – especially one from Labour, elected on a mandate of higher spending, positioning against the previous forty years of economic consensus. The historical comparisons drawn are not to the Blair-Brown alliance, which allied with the Treasury by going with the grain of neoliberal economics. Instead, it is with Thatcher’s anti-consensual economic policy – something structurally resisted by the centre until 1982.
Treasury obstruction is the norm – but the better PMs have overcome this without too much pain. What is fatal for Labour prime ministers in particular is when HMT structural power combines with our second iceberg: internal Labour party politics. If Rachel Reeves, shadow chancellor and the darling of the media, does internalise the Treasury’s rulebook it could be curtains for any change that Starmer wants to enact. If Reeves, being the canny political player she is, combines this structural HMT power with her leadership hopes by openly aligning with the Blairite wing in a proxy war between No.10 and 11, it could be over for the government.
This is especially prescient given the Blairite wing is already preparing for these battles. It is a creature of the previous consensus, ready to obstruct spending departments and left-leaning elements like Ed Miliband, and could therefore be completely destabilising for the government. One can already imagine the vast Tim Shipman-esq articles of cabinet warfare and division. Any reconciliation with the left of the party would also be down the drain pipe. With a large majority concern could be disregarded, but purge and churn is not a sustainable governing strategy even if it rewards factions with a sense of schadenfreude.
This all adds up to a potent danger for a Starmer government looking to create lasting change, or even one that lasts more than one term. Just look at Reeves’ seeming indifference to Labour’s few eye-catching policies, with Great British Energy seemingly already blocked from adequate funding in the name of a reputation for fiscal responsibility and growth – while the New Deal for Workers has reportedly been watered down as the party continues to flirt with businesses. While there remain many regulatory, pro-business and supply-side changes to unlock growth, it cannot be generated purely through these old-school avenues. The true regeneration of the British economy will likely come from a dual approach of core investment and strategic supply-side change. Reeves’ belief in globalised capitalism and using its revenues to fund public services may have held water in the booming 2000s economy, but it certainly doesn’t in our present crisis. Starmer’s recent rejection of purely London-generated growth and redistribution should turn heads, and alert everyone to possible incoming showdown with Reeves. What may well prove to be the end of Starmer is this strong faction within the party resistant to change. Returning to the Thatcher comparison, the Blarities are strikingly similar to the 1970s/80s Heathite faction who were intent on preventing change at every stage without much plan of how to run the economy in vastly changed circumstances.
Pre-emptive strike
It is unfair on Reeves to argue that her Chancellorship will inevitably end up like this. There is every chance Reeves could become the foundational partner in a successful government. But history tells us there is every chance her head may be turned by the ladder of power – utilising, like Callaghan did against Wilson over In Place of Strife, the guns of ideology to mute her leader. Starmer will then, sooner or later, have to entertain firing Reeves in order to enact his policies. While this is an option, a PM only gets that option once or, if they’re lucky, twice. An ex-Chancellor of a dangerous faction can be just as fatal as keeping an obstructionist one. Weakening the powerbase of Reeves and / or ensuring she allies with Starmer wholeheartedly in a healthy Chancellor-PM relationship is a must if he is to avoid the structural iceberg of many ex-Labour PMs. This won’t be easy: Secretaries of State don’t like having power taken away from them, especially considering the often fractured relationship between No.10 and No.11: just look at Sajid Javid’s resignation at the prospect of greater Prime Ministerial control over Treasury operations.
If Starmer is forced to fire Reeves it would be evidence that his reforms of state have failed, or not been enacted quick enough. Rather than fighting Reeves through the party, he must utilise the powers of the state. The prime minister is the First Lord of the Treasury and has de jure near-limitless power. Reforming the Treasury, fundamentally – and spreading its vast informational and budgetary power across Number 10 and the centre is a key tenet for a Starmer premiership. While he might squeak through without reform, he risks giving his opponents routes through which to destabilise him. It is Reeves who could hurt him the most if she so chooses.
Into Government
Overall, a strong Chancellor, allied with the Treasury, that is perennially risk-averse, even when the greatest risk is standing still, may well ruin the project of a Labour government: either electorally, as with MacDonald, or in terms of lasting change, as with Wilson and Blair. State reform, not just in the Treasury, is difficult – but it might just be Starmer’s best hope of overseeing radical change given Britain’s current squeeze.
As this series has shown, there are major difficulties facing a Labour government. One hundred years ago the first Labour prime ministers struggled to govern effectively, pursuing a strategy of restraint when action was needed. Post-war Labour history was packed with leaders fighting several costly ideological battles. Attlee showed what could be possible with utilising creativity and difference of thought. Wilson showed how it could go wrong, while Blair illustrated the pitfalls of reductionist uniformity. And finally, structurally, the government is hard to run and even harder to reform – especially one which hasn’t changed much since 1854. For Labour this threat is even more pressing – with the Treasury averse to consensus-changing economics and keen to ally with ideologically limiting chancellors – which Reeves may be only too happy to embody.
So, TPI’s three core strategic problems for Labour are: action vs inaction, creativity vs homogeneity and structural change vs status-quo danger. There are obviously several more issues Labour will face. However, these three dualities are the most broad based, difficult, historically recurring and important to resolve. While they have specific flashpoints, whether over policy or personnel, they can only be tackled in the round and over several years, likely requiring a decade. In the future we will return to them.
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Writers:
Tom Egerton is a political writer and researcher, his new book ‘The Impossible Office?: the history of the prime minister’ is now out, published by CUP and co-authored with Anthony Seldon. Follow Tom on X / Twitter here and email him at tom.egerton.003@gmail.com.
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