When Sir Keir Starmer and his wife went to watch the races at the St Leger Festival in Doncaster last month, he bet on the horse widely expected to win, only for it to withdraw after prematurely bursting out from its stall and suffering a cut to the mouth. Its name, ominously, was Chancellor.
A month on, Starmer and his own chancellor, Rachel Reeves, cannot afford any more false starts.
After a first 100 days in power overshadowed by controversies about donor Lord Alli’s largesse and simmering tensions between the prime minister’s closest aides Morgan McSweeney and Sue Gray — the former emerging victorious — both teams accept that this week’s investment summit and the budget at the end of the month are opportunities that cannot be squandered.
They must offer the vision for Britain that a curiously subdued conference failed to provide, and demonstrate that Reeves’s rhetoric about investment is matched with action.
On Sunday evening, Jonathan Reynolds, the business secretary, will kick off the investment summit with a glittering reception for hundreds of the world’s largest investors at one of London’s most historic homes. The event is expected to be attended by senior members of the royal family.
Over the next few days, the guests, thought to have combined assets of £40 trillion, are expected to announce new investments in the UK worth roughly £40 billion.
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Yet despite months of careful planning, the summit was plunged into disarray after the logistics group DP World pulled out of the conference and withdrew a scheduled announcement of £1 billion investment in its London Gateway container port. The move came in response to an interview in which Louise Haigh, the transport secretary, criticised the company’s employment practices, calling its subsidiary, P&O Ferries, a “rogue operator” for firing 800 crew without any warning in 2022 and replacing them with low-paid agency staff.
Last night, the damaging row appeared to have been resolved, with DP World’s chairman Sultan Ahmed bin Salayem expected to attend the event on Monday, where an announcement about the investment will be made.
However, the controversy has been deeply embarrassing for the government and is the latest in a series of missteps.
The cheering crowds of supporters waving Union Jack flags outside No 10 when Starmer entered on July 5 have become a fond, distant memory.
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His premiership has been dogged by rows over freebies, cuts to winter fuel payments, a backbench rebellion that led to seven MPs being suspended for voting against the government to scrap the two-child benefit cap, and the resignation of Rosie Duffield, the MP for Canterbury, who left the party because of “sleaze and nepotism.”
Last weekend, after months of No 10 infighting, Starmer was forced to begin a reset, taking the decision many of his closest aides had long advocated: to sack Gray, his embattled chief of staff, who had been engaged in a year-long battle with McSweeney, and make McSweeney her replacement.
Gray, who was in Ireland when the story broke, has told friends she was not enjoying the role and believes she has been used as a scapegoat to mask wider problems in No 10. A number of her key lieutenants, including Danny Coyne, who was brought in to handle hostile briefings against her, have also left. Coyne is expected to go to Angela Rayner’s housing department.
Allies of Gray believe McSweeney had formed a powerful partnership with Paul Ovenden, the No 10 director of strategy and one of Starmer’s speechwriters, who previously ran the party’s successful attack unit.
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“Morgan and Paul are just effective,” said one special adviser in a senior government department. “They offer direction and know how to get stuff done.”
Both men are popular with special advisers across government and together they became increasingly influential within No 10 as Gray’s star waned.
As part of the wider shake-up, Vidhya Alakeson and Jill Cuthbertson have been promoted to deputy chiefs of staff, while Nin Pandit has been made principal private secretary (PPS) to the prime minister.
James Lyons, who was director of communications at NHS England and then TikTok’s head of policy communications for Europe, will head up a new No 10 strategic communications team. Lyons, a former Sunday Times journalist, is understood to have had meetings with Gray before her departure and has been working with Labour behind the scenes during its first difficult weeks in office.
He is now expected to take over the No 10 grid — the list of media-worthy announcements the government intends to make — and will try to fill the vacuum that led to weeks of negative headlines.
But he will have his work cut out if he is to transform the narrative and reverse the fortunes of the government. Some of Starmer’s allies are now concerned that Reform UK could overtake Labour in the polls by the time of local elections next year.
Polling by the More in Common think tank today delivers a devastating assessment of Labour’s first 100 days in power. According to the survey of more than 2,000 people, Labour’s poll lead has evaporated and the party is now tied with the Tories on 27 per cent each, with Reform on 21 per cent.
Starmer’s net approval rating has fallen almost 50 points to an all-time low of -38 per cent since his post-election all-time high. A third of Labour voters say Starmer has underperformed expectations.
More than a third (34 per cent) of those polled said they preferred the last Conservative government to the current Labour one (31 per cent). The public were also three times more likely to say the government has had a bad start (65 per cent) than a good one (19 per cent).
Axing the winter fuel payments for all but the poorest pensioners was overwhelmingly seen as the government’s biggest mistake (49 per cent), followed by releasing prisoners early (32 per cent) and not reducing illegal migration (22 per cent).
Asked about the biggest achievements of the new government, the largest numbers of respondents (27 per cent) said “none of the above”, followed by 14 per cent who said they did not know and 13 per cent who said the handling of the summer riots.
Luke Tryl, director of More in Common UK, said: “From a public opinion perspective, the first 100 days of a Labour government could be described as disappointing at best.
“The public are fairly united in saying the government has had a bad start, and rate the government’s performance as a D minus. Meanwhile their poll lead has evaporated and Keir Starmer’s approval sits in the doldrums.
“Starmer and Labour will have to hope that the changes in Downing Street and a positive budget narrative give them the opportunity to turn public opinion around, because in an age of increasingly impatient and volatile electorates, the public mood could soon crystallise against them.”
In her budget, Reeves is expected to announce she has found billions of pounds to invest in infrastructure and public services, having adjusted the way the government records debt on its balance sheet.
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This will allow her to borrow without breaking either her fiscal rules or her pledge not to raise tax on “working people”.
With bond markets already pricing in an expected sharp increase in borrowing, she is still keen for the private sector to do much of the heavy lifting, which is why the investment summit, attended by Gulf states and US asset managers, assumes such significance.
As part of her drive to attract their money, she will announce plans to adopt proposals in Lord Harrington of Watford’s review of foreign direct investment. This will include plans for a concierge service to act as a one-stop shop for foreign investors, to make doing business in the UK easier, as well as upgrading the Office for Investment, a joint Department for Business and Trade and No 10 unit. The crossbench peer and former Conservative minister is expected to get a name check in Reeves’s keynote speech.
This weekend, in an article for The Sunday Times, Reeves gives the clearest signal yet that the government is pushing ahead with plans to borrow tens of billions of pounds extra for infrastructure spending by changing the way it calculates the fiscal rules. She writes: “I have been clear as I finalise the budget that it is time that the Treasury moved on from just counting the costs of investments, to recognising the benefits too. Because after 14 years of decline under the Conservatives, we cannot afford not to invest.”
Reeves is understood to have been buoyed by her meeting on Wednesday last week with the chief executives of Barclays, HSBC, Lloyds Banking Group, NatWest Group and Santander, who urged her to make the proposed change. One told her: “What is the alternative? More decline.”
Capital investment is expected to go into improving schools and hospitals to repair crumbling buildings, as well as on rail and roads, and renewable energy projects.
Reeves is also expected to use the budget and spending review to announce a major cash boost to fund a new generation of social housing council houses.
It comes amid concern about a significant dip in affordable and social homes being built by housing associations, which are increasingly cash-strapped due to dwindling sales and having to fund cladding remediation post-Grenfell.
The housing sector is now awash with rumours that Reeves will announce a significant increase in the affordable homes grant, which distributes cash to local authorities and housing associations, as well as a potential 10-year guarantee allowing associations to raise rents in line with inflation. Coupled with guarantees that they won’t be forced to sell stock under right to buy, this would give them a much more reliable income stream to expand the number of homes being built.
However, there are suggestions the chancellor could go further and shift investment in housing off the books for day-to-day spending and into capital spending. This would see housing treated in the same way as other critical infrastructure, potentially allowing Reeves to borrow billions of pounds to fund investment in homes without it counting against her fiscal rule to balance the books on day-to-day spending.
In an interview with The Guardian on Saturday, Starmer said: “It’s common sense to invest and build. If working people can’t afford a decent home, they can’t build good lives and careers.
“When people can’t get to work because public transport is poor, productivity suffers. If schools are crumbling over our children’s heads, how can we expect them to learn the skills that they need?”
This autumn the government will be seeking to make progress on its five missions of boosting economic growth; making Britain a green energy superpower; cutting crime; fixing the NHS; and spreading opportunity.
Announcements are expected on improving the availability of nursery school places, with more money made available to transform surplus classroom space in primary schools.
There will also be a greater focus on curbing illegal migration. The UK is seeking to create new “support deals” with a number of countries to accelerate the return of migrants to their country of origin as part of plans to remove 14,000 migrants by the end of the year.
After 100 days of setbacks, mishaps and controversy, the budget is a gamble that neither Starmer nor Reeves can afford to lose.
