As the second week of 2023 draws to a close, it’s clear the year ahead will be rife with economic and political challenges.
WA Partner Rhoda McDonald was joined by WA Senior Adviser, broadcaster and journalist Steve Richards to discuss the issues that will dominate 2023.
Here are our key takeaways from the event:
Labour finding it’s feet
The Labour party enters 2023 with renewed enthusiasm. Starmer is keen to whip the Party in to shape and prove they are a Government in waiting. As he prepares for an offensive, there will be high expectations for his cabinet to perform, and with reshuffle rumours circling, there will be no room for idlers.
His team has largely been moulded by a new New Labour era, with some Blair flair, and it is clear that top of his agenda is modernising central government, stimulating economic growth, and reforming the British energy sector.
One of the key policy differences between the Conservative Party and Labour is around industrial policy – Rishi Sunak shows no great interest in an overarching Industrial Strategy, whereas Labour’s looks potentially very substantial, extending to light manufacturing, transport, and even retail, to underpin their ambitions for higher productivity and growth.
A Tory Party divided
Meanwhile the Prime Minister is tending to a wounded Tory party and attempting to rebuild political and economic stability. With wavering Tory voters, and the threat of a new Reform Party poaching his MPs, Sunak needs to be constantly appealing to the public and his backbenchers if he is to retain control.
Although Sunak appears to be relishing the challenge and leaning in to his role as the peace maker of the party, it is unlikely to be smooth sailing as the year kicks off with headlines dominated by strikes and pay disputes.
It’s all about the economy
The country’s economy is top of the inbox for the current Government and the Opposition alike. As Sunak’s forte, he is busy emphasising his brand as the fiscally minded Prime Minister who can stabilise the markets and bring public spending under control.
For Sunak the pivotal moment will come in the March Budget. The Prime Minister had prepared a draft budget during the leadership campaign, which was very business focused – looking at tax rates, business needs, and how to get people back into the workforce. As Corporation Tax rises take effect this year, against a background of a dire economic environment, the message of ‘growth, growth, growth’, and delivering the incentives needed to shape company and labour market decisions, are likely to be at the forefront when the Chancellor stands up at the Dispatch Box on 15th March.
On the other side, Labour are in the midst of deciding whether they follow a New Labour approach and stick to Tory spending plans, or to reinvent the fiscal wheel and risk further unease. Either way, the position they take will be determined by Shadow Chancellor Rachel Reeves.
Fixing the NHS
With the NHS hitting the headlines every week, healthcare reform will be a prominent issue throughout the year. The Government cannot shy away from the mounting pressure to act.
Having already passed the 2022 Health and Social Care Act, the Conservatives are unlikely to introduce new reforms this side of the election. However, talk of how to use the private sector and discussions of outsourcing are starting to snowball, with Labour saying they would consider this approach to relieve demand on the NHS.
While the energy crisis continues and with geopolitical factors such as the war in Ukraine determining future supply issues, the Government is facing further spending pressures. The clock on household support is running down, and businesses are already feeling the pinch.
The risk for Sunak is inaction should the energy crisis become more acute. Although he has been avoiding Government intervention, he will be forced to change tact and avoid taking heavy fire from Labour as they seek to differentiate themselves.
The Deregulation agenda
With growth set to be the buzz word of the year, the regulatory landscape remains a battle ground yet to be won. As the realities of an EU regulatory bonfire threaten chaos, the Government is looking at lighter regulatory initiatives.
With businesses calling for clarity over the regulatory landscape, there are opportunities for both the Conservatives to make their mark and for Labour to carve out fresh ground for putting the UK on the front foot.
All eyes on GE2024
2023 is set to be the tell all year. Sunak and Starmer are facing the toughest set of challenges any leader, especially a newly incoming Prime Minister, have faced for decades. How they respond to and address the economic turbulence and address the nation’s discontent will ultimately determine their fate at the ballot box.
While Labour may be 20 points ahead in the polls, Sunak’s momentum over the summer appears to have closed a once-gaping gap. However, unless either party makes marked progress on the issues of the year, the prospect of a hung parliament with a minority government will become a looming possibility.