2025: A make-or-break year for the Labour government

Much has changed in UK government since the Institute’s last annual conference. Many of the key protagonists have stepped onto or left the main stage – we have the first Labour government in 14 years, a new leader of the opposition, a House of Commons in which over half of MPs are new, the Liberal Democrats are resurgent and a plurality of minor parties have greater voice, a new cabinet secretary, a new EU Commission and a new, albeit familiar, US president.  

Political narratives have also changed dramatically. This time in 2024, both the Labour and Conservative parties were assuring voters that they could fix the problems facing the UK – including low growth, long-term underinvestment in public services and significant public debt – without reducing the scope of the state or increasing taxes. Now Labour misses no opportunity to emphasise its negative fiscal inheritance and the resultant need for tax rises, while Kemi Badenoch has arrived with a blank policy slate and apologies for the mistakes of previous Conservative administrations.

New year, new government

Six months in and there is much to welcome from the new Labour administration. Most fundamentally, we have seen a step change away from the political instability which has dogged UK government over the last five years. This is easy to take for granted, but not having to engage in constant firefighting, field constant media questions about how long the prime minister is going to last, or shape repeated reshuffles leaves more space for a government to focus on governing well. And it is clear that Labour is interested in the question of how to govern well, putting a welcome focus on rewiring the state and on stability of policy and personnel. 

This should mean the new government increases its chances of realising its clear long-term ambitions (in the form of missions) which have now been underpinned by more concrete medium-term milestones. These should give focus to the efforts of the public sector and are commitments against which ministers can be held to account. In some areas – notably the net zero mission and on English devolution – concrete policy proposals have emerged. An initial reset with the civil service set a more positive tone about how ministers wanted to work with officials.

The public is nervous

But new polling we have undertaken with Deltapoll ahead of our annual conference shows that only just over a fifth of people think that this government is being effective at improving their lives (22%) compared to 28% who now think the last Conservative government, which voters have just ejected, was effective. And, despite Labour’s efforts to highlight the long-term nature of their aspirations – the need for a decade of renewal – the public is only slightly more optimistic about the government being effective at improving their lives after four years (28%), while less than a quarter (23%) believe the size of economy will grow before the next election. Labour may have overperformed in landing its narrative about its difficult fiscal inheritance – and alongside anaemic growth figures and sticky inflation, the government seems to have convinced key economic actors that the outlook as well as the inheritance is poor.

We are still in the early days of Keir Starmer’s premiership, and the next general election could still be more than four years away. But while that gives the government time to change public opinion, Starmer and his ministers are entering a make-or-break 12 months to demonstrate that theirs is a government that can deliver. With public expectations so low, ministers have a real political incentive to bank a poll boost by governing effectively and out-performing expectations.

By this time in 12 months, Labour will effectively be half-way through its usable term of office, before campaigning for the next general election begins to absorb all its political bandwidth. That means this is the year in which it needs to make real progress in three key areas:

Embedding strategic capacity for the long term 

After a swift reset in No.10, with the removal of Sue Gray and her replacement with the trio of Morgan McSweeney and his two deputies, the government has made more progress with key appointments – including Chris Wormald as cabinet secretary, Jonathan Powell as national security adviser, Nin Pandit as principal private secretary and Olaf Henricson-Bell as civil service head of the policy unit. 

Having key personnel in place is essential but only the first step towards enabling the government to achieve its objectives.
The economic headwinds and Twitter/X storms that blew in the new year have illustrated once again just how difficult it can be for governments to stick to their course when external events, and individuals, intervene. And the return of Donald Trump to the White House makes both ever more likely. Starmer and Reeves have both asserted their determination not to be knocked off course, but our Centre Commission, which reported early last year, found that without significant reforms to No.10, the Cabinet Office and the Treasury, no prime minister will have the support they need to operate strategically.  

We are pleased that Starmer has adopted some of our recommendations, strengthening Pat McFadden’s role as chancellor of the Duchy of Lancaster to focus on delivering the government’s priorities, making use of a smaller subcommittee of cabinet to make more focused decisions, and producing a set of priorities early in his term to focus the government’s activities – in the form of the Plan for Change. It seems that our key principle that government should “only do at the centre what can only be done at the centre” has gained traction, with some functions being moved out of the bloated Cabinet Office.

But there is much more to do. The Centre Commission argued that the prime minister should ensure his priorities were fully reflected in a new strategy, budget and performance process owned collectively at the centre of government, not dominated by the Treasury via bilateral negotiations with each department. I look forward to hearing what the chief secretary to the Treasury, Darren Jones, has to say about how the government is running the spending review process, now underway in Whitehall and due to report in June. Aligning the spending review process with the missions and milestones is essential if the prime minister wants to ensure that his government maintains focus on the key priorities he wants to deliver against in this parliament.

Making tough choices

In good news for the Institute for Government, our polling suggests that the public has no longer had enough of experts. A net 33% think that the government should listen more to tech experts, 32% to academics and 31% to public sector workers. In terms of demographic characteristics nearly half (I wonder which half?) think women should be listened to more by government, and the same for older people (both 48%), while 39% think younger people should have more of a voice. In fact, the only people the public think ministers should listen to less are journalists (-40%).

And apparently the government is listening – launching 17 policy reviews since July last year. But   leadership is also about knowing when to stop listening and being able to take the tough decisions that will please some and disappoint others. 2025 will be the year in which ministers must make those difficult choices – on where to site new towns, whether and when to increase defence spending, how to redraw sentencing guidelines, deal with criminal courts and reshape the curriculum in schools. Achieving this will be less about listening to others, and more about involving them in delivering change. From school readiness to delivering net zero, partnership with industry and civil society will need to be a crucial part of the mix.  

Many of the most significant choices this year will be made in the spending review. Whatever the forecast delivered by the OBR on 26 March, the decisions are going to be impossibly hard. Asked in our polling to choose, the public are equally divided on whether the government should cut spending or raise taxes (both 34%) while just 17% think cutting taxes remains a viable option. 
If the government had more money to spend the public is agreed about where the government’s spending priorities should lie – at 70% the proportion who selected the NHS as one of the top three areas where more money should be spent is more than double the 32% who selected social care – which came in second place. But the luxury of spending increases seems an unlikely prospect.

With their poll numbers already low, ministers will need to have the courage of their convictions to choose policies they believe will deliver in the long term even if they may be unpopular in the short term. To stick – for example – to the focus on prevention that Labour emphasised in opposition but which will inevitably conflict with more immediate priorities. And to tackle the thorny problem of social care, which none of their predecessors have had the courage to grasp.

Rewiring the state

The prime minister has made clear he believes that a fundamental rewiring of the state will be required for his government to achieve its aims. We agree and our Whitehall Monitor, published last week, shows just how much there is to do in the civil service. 

Keir Starmer’s remark about civil servants being ‘comfortable in the tepid bath of decline’ was widely interpreted as an attack on the civil service, rather than – as might have been intended – as a reflection on a collective failure by public servants under ineffective leadership to raise their sights and ambition. This is the challenge that the new cabinet secretary will need to meet. 

Progress on civil service reform has been limited in recent years and accountability remains weak. When we publish our next Whitehall Monitor, a year from now, it is reasonable to expect to see: an improvement in the morale of civil servants; a series of strong appointments to senior roles; and clear accountability structures, that align with the government’s missions, in place across government departments. If ministers are frustrated by slow progress, they should adopt the Centre Commission’s recommendation of putting the civil service and an empowered civil service board on a statutory footing to hold its leadership accountable for delivering against their reform priorities. 

A week may be a long time in politics, but a year at this point in the parliamentary cycle will pass in a flash. And yet 2025 is the year that will make-or-break the new government’s chances of delivering its promises ahead of the next election. A year is enough time for the government to embed the changes needed to focus on its priorities, make a series of tough policy choices and make serious progress towards rewiring the state. These are changes long argued for by the IfG, that would make a real difference to what government can achieve.