Labour must hold its nerve if mood sours further in 2025

2025 offers plenty to challenge Labour’s longtermist approach to progress. The government must hold its nerve and plough ahead, says Westminster editor Zoë Grünewald

Prime Minister Keir Starmer has faced significant challenges during his first period in office Pic: UK Prime Minister/Flickr

For many, the New Year heralds opportunities for fresh starts, a chance to leave behind past mistakes and forge new paths. For the six-month-old Labour government, the turning of the calendar offers little respite – and plenty to be nervous about.

Tasked with navigating the wreckage of 14 years of Conservative rule, marked by austerity, Brexit, and political mismanagement, Labour faces no shortage of challenges as it embarks on its first full year in office.

As we enter 2025, The Lead reflects on what could be Labour’s most defining year: a period not just of immense challenge but also significant opportunity. With the chance to reignite its vision, sharpen its messaging, and demonstrate the leadership required to tackle the nation’s most entrenched problems, this year could mark the true beginning of Labour’s attempt to reshape Britain’s future.

The Economy

At first glance, the economy is Labour’s most formidable obstacle, as much of its ability to deliver investment and improvement hinges on economic growth. Unfortunately, the lacklustre performance in the final quarter of 2024 offers little optimism. Labour’s redistributive autumn budget was criticised for unsettling business confidence, while concerns over wage stagnation and a looming recession have sparked fears within the party about its ability to make voters feel better off. Lessons from the recent US election loom large in party official’s minds about the perils of prioritising GDP growth without addressing voters’ individual circumstances.

Labour also confronts a crisis of economic inactivity. Over nine million working-age Britons are currently out of the labour force, with long-term illness and caregiving responsibilities cited as key reasons by those who want to work but can’t. Labour’s strategy hinges on improving NHS efficiency and reducing waiting lists, but critics highlight that an underfunded care system and prohibitively expensive childcare force many, particularly women, out of employment. Ignoring the need for investment in these areas could cause Labour’s broader economic agenda to stall.

Rachel Reeves budget was one of the biggest financial interventions for years Pic: House of Commons/Flickr

Without progress, a stagnant economy could render the next Autumn budget a critical flashpoint, where the government may be forced to hike taxes further, slash public spending or ditch their fiscal rules.

Public Sector Pay

Labour’s early success in breaking the impasse of NHS strikes was an underappreciated victory. Yet debate over public sector pay remains fraught. The most recent proposed 2.8% pay rise for teachers, NHS staff, and senior civil servants has drawn union criticism, with threats of further strike action looming.

Public goodwill towards the NHS played a crucial role in Labour’s election victory, but the government is now under pressure to deliver on waiting list reductions and broader healthcare improvements. Strikes risk exacerbating the very delays Labour seeks to resolve, while increasing pay offers would open the government up to criticism about further public spending and their relationship with the unions. But there is a good argument to be made for paying our public servants more - cutting through various recruitment/retention crises and as an investment in the people who keep the country running – if only Labour want to make it.

The Right

Right-wing challenger party Reform UK has made notable gains in recent months, rising in popularity and winning seven council by-elections since July while Labour themselves have lost 24 seats. With Nigel Farage at the helm, the party have now made clear its intention to now pilfer disaffected Labour voters, having succeeded in dividing support for the Conservatives in the 2024 general election.

The party’s growing profile, buoyed by high-profile backers like Elon Musk, has become a problem for Labour. Immigration has grown as a priority issue for voters across Labour constituencies over the past decade, and many within the party are worried that their loss will become Reform’s gain. However, Farage’s position on low taxes, deregulation, and healthcare privatisation are likely to put off disaffected Labour voters. Rather than meet Farage on conversations about immigration, Starmer would do better to keep his party’s agenda firmly focused on restoring public services and making the economy fairer, whilst drawing attention to Reform’s economic policies.

Meanwhile, the Conservative Party under Kemi Badenoch remains adrift, caught between a rightward shift and a return to centrism. This internal conflict has limited its ability to mount a serious challenge.

The Tories remain a fractured party Pic: House of Commons/Flickr

May’s local elections will test whether voters are being brought back to the party by Badenoch, and whether Reform UK can sustain its momentum. Labour is likely to have a bad run, as it banks on its policies paying off mainly in the long-term. The challenge will be in keeping the party away from its tendency toward factionalism in times of crisis and unpopularity.

Foreign Policy

Keir Starmer at a G7 meeting Pic: UK Prime Minister/Flickr

The international stage presents its own uncertainties. As President-elect Donald Trump prepares to retake office, Labour faces the challenge of navigating a transformed geopolitical landscape, with more hostility between allies than ever before.

Trump’s inclination to end the war in Ukraine, potentially by ceding territory to Russia, and his disdain for NATO could destabilize Europe’s security framework. Labour may be forced to choose between strengthening ties with Europe or preserving the “special relationship” with the US, a choice certainly not without its political contentions.

Trump’s protectionist trade policies could further strain UK economic recovery, potentially driving Labour to seek closer European trading relationships. Domestically, such moves would reignite contentious Brexit debates - a surefire way to evoke the ire of legacy media and the political opposition.

Meanwhile, conflicts in the Middle East and Israel’s escalating actions in the region demand a nuanced response, particularly as Trump’s unwavering support emboldens Benjamin Netanyahu’s policies. Keir Starmer must anticipate heightened scrutiny on Labour’s stance and its implications for the UK’s global standing.

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The Media

Of course: Labour’s most persistent adversary remains the right-wing media. Legacy newspapers have launched relentless campaigns against the government, attacking policies such as ending tax breaks for private schools, reducing winter fuel payments, and closing inheritance tax loopholes. These criticisms, though framed as scrutiny, often serve as thinly veiled efforts to undermine the government while stoking the interests of large, often wealthy portions of the electorate.

But while traditional media still wields significant influence among older portions of the electorate, its dominance is waning. Labour must hold its nerve, communicate the long-term benefits of its policies, and explore alternative platforms to engage voters directly. Developing a clear, compelling narrative that connects its economic and social reforms to tangible improvements in everyday lives will be vital in countering the media hostility.

Labour’s road ahead is riddled with challenges. From reviving the economy and addressing public sector discontent to countering the rise of the far-right and navigating complex foreign policy dilemmas, the government’s resolve will be tested at every turn. Success will depend on Labour’s ability to deliver measurable progress and tell a convincing story, while withstanding fierce opposition from entrenched interests. The coming year will reveal whether Labour can translate its electoral mandate into meaningful change or whether it risks squandering its hard-won opportunity to bring grown-up decision-making back to British politics.

What do you think will set the agenda in 2025? What would you be telling Starmer and co? Let us know in the comments below

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Away from Westminster…

Here are two big reads from our Teesside and Lancashire editions we think are worth your time. A reminder, we have The Lead North with titles and in-depth reporting in communities across

The Lancashire Lead

,

The Blackpool Lead

,

The Teesside Lead

and

The Calderdale Lead

with another to launch soon (more on that next week).

First up,

Leigh Jones

dug into Teesside International Airport’s accounts over Christmas. This is particularly fascinating because Tory mayor Ben Houchen - whose Tees Valley Combined Authority owns the airport - had crowed earlier in the year that the airport had made its first profit in a decade.

Spoiler for the piece: it hadn’t.

Teesside Airport reports £6.6m loss despite Houchen claims of profit

In Lancashire, our big feature over the Christmas period was a look at whether the area could sustain an arena of its own.

There are big challenges involved in this. Touring artists are regularly sticking to more dates at fewer locations, venues are often loss-making, the proximity to big venues in Manchester and Liverpool.

But then Labour MP for Blackpool South Chris Webb suggested one for Blackpool and, talking exclusively to The Lancashire Lead, Preston City Council quickly chucked their name in the arena-shaped hat.

Suddenly something that Lancashire had all-but given up on feels like it could happen. We got Blackburn-born culture writer Fergal Kinney to dig into the topic for The Lancashire Lead and The Blackpool Lead.

Expert view on viability of a new state-of-the-art arena in Blackpool

Thanks for reading and we’ll be back in your inbox on Tuesday. If there’s anything you think we should know in the meantime then email ed@thelead.uk

Ed, Zoe, Luke, Sophie, Natalie and Leah