The four Ps Labour needs to get right to stay in power

Good morning. A few weeks ago during our first set of reader Q&As, I set out what I thought were the key metrics that will decide whether Labour is re-elected.

Cue the “four Ps”: patients (how many people are waiting for some form of NHS procedure), policing (has the effectiveness and speed of it improved), potholes (visible signs of public disorder, wear and tear and a state that can’t do the basics) and, in something of a reach to maintain the “P” conceit, purse.

As one, many of you rose up to say “Stephen, the word ‘prosperity’ is right there!” — thanks to Ben, Claire, Marcus, Tom and Peter for that suggestion. Among other things, “prosperity” is an altogether prettier word than purse so I hereby declare that the fourth P. However, equally importantly, were the number of interesting additional Ps, some of which I wanted to talk about in today’s newsletter.

How do you like them acronyms?

Rob, Ian, Dean, Patrick and Anna all suggested some variation on “purchasing power” or “personal finances” in lieu of “prosperity”. I received a very strong and firm bit of lobbying from an ex-Conservative MP about why I should pick “personal finances”.

They argued, I think perfectly rightly, that one problem with the election campaign was that Rishi Sunak was determined to tell a general story about the economy as a whole, but one that was so divorced from people’s personal finances that, if anything, it further aggravated people.

On that theme, I really enjoyed this, from Charles:

In terms of the fourth P, might it be its own treble P — Personal Purchasing Power? I don’t know whether it’s cynical to think that in representing half of what is then six Ps, it better depicts the actual proportional importance people place on the different elements.

I’m torn here between how much I like saying the word “prosperity” and how much I enjoyed this message, which I also think is exactly right. You can get away with an awful lot going wrong elsewhere if you are delivering the goods when it comes to people’s own incomes and sense of prosperity. (Not least because the more prosperous people are, the more they themselves can opt out of poor public services.)

This is one big reason why I think Labour’s self-denying ordinance to not raise income tax and national insurance are huge risks for the party and indeed for the UK. The tax rises under consideration instead of these revenue raisers are mostly taxes that come with big risks attached as far as our overall economic health and people’s individual prosperity are concerned. Yes, I know that changes to carried interest and capital gains tax poll better in the abstract but these tax rises pose economic risks in a way that, say, simply undoing Jeremy Hunt’s two cuts to the rate of national insurance do not.

However, I am shallow, so I am going for the prettier option of “prosperity”, even though “Personal Purchasing Power” I think exactly captures the relative weight of the two. Some of you suggested some additional Ps that were worth thinking about:

How about the fourth P being poverty. Can we be selfless enough to agree that the living conditions of the poorest — say — 10 per cent of us is unacceptable in a wealthy country? Alun

I think anger at the condition of the country’s poorest is a big part of why the Conservatives did so badly at the last election, particularly in the seats they lost to the Liberal Democrats — seats in which they will need some form of revival if they are going to form a majority government. Several Lib Dem MPs, new and old, have described their key voters as some variation on “fiscally conservative and socially concerned”.

But tackling poverty is so important to the Labour party that it is, I think, unlikely to be a feature of the next election. If Labour has not started to make progress on this and can’t point to things it is doing, we are not in “the Labour party is not re-elected” territory, we are in “the Labour party goes down to a worse defeat than the one the Conservatives experienced in 2024” territory.

Now I want to move on to another excellent “P” that I think is better seen as “threats” rather than the key performance indicators to how the next election will turn out:

“Public finances, which are going to give the others a mighty squeeze.” David

As I’ve said before and doubtless will again, Labour’s inheritance is really bad. In 2010, the Conservatives inherited public finances that had been ruined by the financial crisis but the country’s public services were in a good state. In 1997, Labour enjoyed the best economic inheritance a British government has ever had, and Ken Clarke didn’t even use his final budget for giveaways. Public services were in a bad state but they had been handed all the economic firepower they needed to turn them around.

In 2024, Labour inherits bad public finances and bad public services. The economy is growing but as Louis Ashworth puts it, it is not growing in a way that is particularly helpful to the public finances. Couple that with Labour’s own pledges not to touch the main revenue raisers and you have all the conditions for a one-term government.

But one really important difference between Labour’s inheritance in 2024 and 1997 is that when the Conservatives left office in 2024, they had increased NHS funding as a percentage of gross domestic product.

This wasn’t the case in 1997, when Frank Dobson, Tony Blair’s first health secretary, warned Blair in a memo that “if you want a first-class service, you have to pay a first-class fare — and we’re not doing it”. Blair went on to pledge that the UK would reach the EU average and thanks to that money and a lot of public service reform, the condition of the NHS significantly improved.

The British government is paying an above-average OECD fare but not getting an above-average set of outcomes. It may be that a government that is really focused on reforming how the NHS operates can get better outcomes without much additional money — and part of how Labour does it will be decided by its ability to change how public services operate, given the state of the public finances and the promises it has made.

On Monday, I’ll have some more thoughts on another suggested “P”, and one that is particularly relevant to what is shaping up to be the government’s most difficult moment of its young life: pensioners!

Now try this

I’m at the FTWeekend Festival tomorrow and hopefully I’ll see some of you there. Register to join in-person or online here (newsletter subscribers get £24 off). However you spend it, have a wonderful weekend!

Top stories today

• Keep your cool | Keir Starmer is facing mounting criticism from Labour MPs and party grandees over his plans to scrap £1.5bn in winter fuel payments for pensioners, ahead of a Commons vote on the issue next Tuesday.

• Peers a thought | The hereditary peer Tom Strathclyde has warned that he and other aristocratic parliamentarians are gearing up to battle the government over its plan to axe them from the House of Lords.

• Record low | UK pension schemes have among the lowest proportion of funds held in domestic stocks and private assets of any significant global pension market, according to a new report, adding pressure on the government to revive investment in British industry.

• No quick fix | The main lobby group for UK universities has called on the government to find more cash for higher education after education secretary Bridget Phillipson warned that there were no quick fixes to the sector’s looming financial crisis.

• Pay and play | All but three members of the new cabinet have accepted gifts and hospitality worth a total of more than £170,000 since the start of 2023, according to the register of members’ financial interests. The latest instalment of the Dark Arts Substack does some interesting digging into the motivations behind these arrangements. Separately the Guardian’s Rowena Mason finds Tory leadership hopeful Robert Jenrick raised £250,000 in donations by the end of last month, while some other candidates are still short of the fundraising target required to stay in the race.