I should probably start this by saying it must be a horrible feeling. Having been in opposition for fourteen years, to finally win victory with a crushing majority, only to find that the country has been left in an appalling state. From the state of the public finances, to the NHS, to energy, to immigration to defence; so much of what constitutes a stable government is found wanting.
You have to make tough decisions to fix things, so people are going to hate you for it. It’s a no win scenario where the most likely outcome is not, as some were predicting before the election, a Labour government for at least the next decade, but that you are cast out by the electorate at the next available opportunity, to wander in the political wilderness for another fourteen years.
As I say, it’s easy to feel sympathy in these circumstances.
But to then take office and institute a raft of policies guaranteed to simply make the situation worse; there’s no excuse for that, and what little sympathy I and many other people had, has rapidly evaporated.
Which brings me to the title of this piece; why 2025 is going to be an awful year for Labour.
Finance
Much has been written about the Chancellor, and the decisions she has made since taking office. We’ve been told that the budget was a one off, a necessity to ‘fix the public finances’, and having done it, would eliminate the requirement to return at a later date to take more from us in tax. Let’s see shall we?
Despite annoying pensioners, farmers, ‘hard working people’, homeowners, landlords, retailers, hospitality, small business owners; in fact most of the population, with her extremely unpopular tax rises, the chancellor is still adamant that she’s done nothing wrong and has taken all the right decisions to fix the public finances.
Except she hasn’t. She’s simply poured fuel on the fire.
The oft repeated “£22 billion black hole” was, we discover from various sources, largely created by the immediate granting of high wage rises to public sector workers within days of taking office. What’s worse is that these rises were unconditional. No requirement to improve productivity, no requirement to increase output or hit targets and nothing to stop them returning to the table and asking for more in the immediate future.
Having signalled that the public purse is open, the first problem Labour will have to deal with is that 2025 will see a rise in union demands for more and bigger pay rises for their members.
Meanwhile, the government is now spending more on national debt interest than the entire defence budget, have enormous liabilities in their public sector pension funds, which are getting worse by the day, and with their National Insurance rises, public sector pay awards and an increase in minimum wage, have triggered an inevitable rise in inflation (more of that in a bit).
Just this week, the Prime Minister has issued an edict to several Quangos insisting that they prioritise growth. And if you ever needed a clear signal that the government are hopelessly out of their depth, it’s in this one act. Insisting that public service regulators prioritise growth is nothing short of madness.
Despite history teaching us that command and control economies always fail, we seem to be heading towards ‘5 year tractor production plan’ territory. With six measurable milestones, five missions, three foundations and two plans for change, we have descended into a buzzword bingo card, where everything is measured in soundbites and management speak, with nothing actually being done to fix the original problem.
Not a soul on the high street could tell you what any of these missions or milestones are and no one really cares. They simply won’t work. Centrally dictating how the economy grows is as likely to work as King Cnut was at stopping the tide.
The only way to get out of this mire is to let the private sector flourish, reduce the size of the public sector and create an environment that will encourage both inward and foreign investment in U.K. PLC. Then, allowing more people to retain more of their money will allow them to make market based decisions on how to spend it, driving consumer confidence and growth.
It’s not rocket science, but it’s the opposite of the path Labour have chosen, so expect 2025 to be a rocky road for finance, and expect the chancellor to find more ways to take more tax from each and every one of us.
Inflation
If there’s one certainty for 2025, it’s that inflation will rise; it’s inevitable. From the moment Labour entered power they immediately sparked a wave of inflation by granting pay awards to junior doctors and train drivers. On its own it wasn’t enough to drive inflation up significantly, but increasing the minimum wage and increases to employers’ National Insurance have all but guaranteed it will rise.
Wage inflation is one thing, but what it typically triggers is price inflation as well. Businesses exist only through making a profit, and to do that they need to sell their products and services for more than it costs them to make or supply them. Increasing the cost of labour shrinks the profit margins, so this can only be redressed by increasing prices.
Some might argue that there is another way, that they could make greater efficiencies to retain more profit. It sounds great on paper, but try doing it in practice. Most healthy businesses are pretty lean as it stands; there’s very little to cut or improve to help with profit margins. Certainly nothing to get back the NI hike.
And of course if you’re going to argue for greater efficiencies in the private sector, you can equally make the case that the public sector should be doing this. But no, we’re now at the point where there are more public sector workers than at any point in history, and that number seems unlikely to shrink anytime soon. Apparently, public sector efficiencies are not sufficiently important to become a mission, milestone or target.
Also fuelling inflation is the cost of energy, which is eye wateringly high in the U.K. We have the highest electricity prices in the world currently and they will also rise again in the future. There’s no way that our bills will be £300 lower as promised in the Labour manifesto. A simple look at the cost of the feed in tariffs and contracts for difference in the renewables market, which is currently being turbocharged by Ed Miliband, and you will see that we are locking in inevitable price rises.
An increase in energy prices will drive an increase in raw material costs, whilst tax rises and a general disincentive for the private sector to grow for fear of getting taxed means that inflation will be nowhere near the 2% Bank of England target for most of 2025. Which means interest rates will remain high and government receipts will be lower than expected. There will be little or no fiscal headroom due to the policies they are currently enacting.
No matter how much the Prime Minister commands it, this problem simply isn’t going away.
Energy
One of the policies guaranteed to upset most people, most of the time, is the current obsession with Net Zero.
Quite apart from the fact that most people in the street can’t tell you what it is, or how you measure it, when you examine what is being proposed for our country in the name of Net Zero it becomes apparent that we are simply careering towards disaster.
Far from freeing us from international gas markets, a claim reliably repeated by Ed Miliband whenever anyone questions his mission, it will ensure we are enslaved to it. Shutting off our own production of oil and gas from the North Sea, slowly closing our nuclear reactors and not replacing them, and covering the countryside with miles of solar panels and windmills will guarantee we have an unreliable and expensive energy supply.
Forget for a moment that we will need to build ‘spinning reserve’ for all the panels and windmills; quite simply gas turbines ready to jump into action when our renewables can’t produce enough energy. The fact that we already know we cannot produce enough energy means, if we’re not producing gas ourselves from the North Sea, we will be importing it to keep the lights on. Which means we will be paying whatever prices are dictated on the international markets. Far from freeing us from their variability, we are wedding ourselves to it.
Meanwhile, in the name of driving ‘clean, green energy’ Ed and the rest of the crew are busy forcing planning decisions through to carpet agricultural land with solar panels and erect a forest of pylons across the country, particularly down the eastern part of Britain which is about to be blighted by these eyesores.
Whilst renewables do have a part to play in supplying our energy needs, they are simply not reliable enough to form the backbone of Britain’s energy strategy. With no viable way of storing it (batteries can’t store more than a few hours of the country’s needs) we are at the whim of the elements.
The battles that have already begun will become more obvious and mainstream in 2025 and there will be an almighty clash between the government and the people over this. As more people wake up to the fact that what is being proposed is simply not feasible, no amount of reassurances and soundbites will convince them to destroy their local communities in the name of progress.
Foreign Policy
The world is a tricky place to navigate these days. What passed for foreign policy in the 1950’s simply won’t work today. With an ever connected world, news from across the globe can be in our hands within seconds. Events far from Britain end up causing enormous issues domestically.
From the Black Lives Matter protests during lockdown, to the more recent troubles in Gaza, these events far from our shores lead directly to issues at home.
The Labour government haven’t had a terribly good start in this area either, despite the Prime Minster globe trotting in the first six months, they have made errors which will cost us dear in 2025.
From being particularly rude to a man who will shortly be the 47th President of the United States of America, to trying to give away the Chagos Islands without a thought for the people who should rightfully live there, the Chagossians, our foreign policy looks amateur.
Insisting that we should put “climate and nature at the heart of our foreign policy” displays a deep naivety and a lack of understanding of what is required in the real world. Climate and nature mean nothing to the Ukrainians defending their borders, nor to the Indians driving their economy forward, nor the Chinese, for whom coal fired power stations are a necessity.
With European growth stagnating, and Labour insisting we should build a closer ‘special’ relationship with the EU, our eye is firmly off the ball at the moment and I expect events overseas in 2025 will prove the mettle of the current government one way or the other.
Immigration
This is the simmering problem that vexes more Britons than just about anything else. The visible part is characterised by waves of small boats illegally crossing the channel, only to be picked up by our lifeboats and navy, ferried to Britain, where they are housed at taxpayer expense for as long as it takes to process their applications for asylum.
Never mind that we have a system already that requires people to go though the proper channels. Never mind that it is illegal to simply cross in a small boat and simply expect to walk onshore. And let’s not forget that Labour promised to ‘smash the gangs’. What we have seen so far is the removal of any deterrent to people trying to cross illegally and an increase in the number of boats and people crossing. So much for smashing this vile trade.
What people miss, however, is the invisible immigration; the hundreds of thousands of people who arrive legally every year and are simply waved through to become part of our country. Figures are released, then quietly revised after the event showing that just short of a million people a year are arriving on our shores, with just 4% of that figure being in small boats.
It is true that Labour have continued the conservative policies that restricted legal migration, so we can expect the figures to come down a bit next year, plus they have also managed to send some refused asylum seekers home. But with so many arriving from areas considered unsafe to return them to such as Iran, Afghanistan and Syria, the problem isn’t going away.
The reality is that immigration is an issue. It’s an issue of resources, cost and integration. 2025 will probably see a slight drop in numbers, but Labour’s problems may well come from the ongoing cost to the taxpayer from their inability to stem the tide of humanity washing onto our shores.
Housebuilding
One of the great pledges of the Labour 2024 manifesto was that they would “…deliver the biggest increase in social and affordable housebuilding in a generation”. To this end they have announced that they will be delivering 1,500,000 new homes during the life of this parliament, which equates to 25,000 homes every month, or over 800 a day.
How many of these will be ‘affordable’ and how many social housing is still unspecified, but we’ve been told that they will definitely deliver these homes. Which is where the problems will start in 2025.
If you speak to anyone in the housebuilding sector, they will tell you quite simply that this number is totally unachievable.
Not only are we having problems getting the raw materials needed to build a house, there simply aren’t enough skilled tradespeople to build them. It does’t matter how ambitious you are, nor how big your wild pronouncements are, without the resources and infrastructure, the entire project is dead in the water.
And even if they did, by some miracle, achieve this number, as Trevor Philips pointed out to Angela Rayner in a recent interview, most of them will be filled with the migrants that arrive during the time they take to build them.
If these new homes are not social housing but instead for the public to purchase, how are they going to ensure they are affordable? Most young people can’t afford to buy these days, particularly in London and the South East, and affordability has gone from four times annual earnings in 2000 to almost nine times annual earnings in 2024.
We all understand the problems with underperformance in the housebuilding sector, but Labour’s plans simply won’t work. By the time 2025 draws to a close and the numbers delivered are shown to be so far behind as to be unachievable within the life of this parliament, expect a downward revision of this figure and a finger pointing blame game to ensue.
Conclusion
There’s so much more that I could write highlighting the areas in which Labour will come unstuck in 2025. I’ve not even touched on the NHS which is beyond reforming, nor on the cost of debt on the international markets. I’ve completely missed education and free speech, the introduction of a new regulator in football (which will end disastrously), the quangos Labour have created since coming to office, nor the sheer number of people employed in the public sector.
I’ve also dodged past the fact that judges now appear to make law in this country, not parliament, and the inevitable protests from Farmers which will lead to food shortages on shelves.
There’s also the small matter of the upcoming local elections in 2025 where they will be trounced by opposition parties like Reform, and the inevitable by-election that will happen next year where they will lose their majority and lead people to question everything they are doing.
2025 will lay bare the structural failures of the British Government, from national debt to unaffordable public sector pay schemes, along with the smaller things that are simply ridiculous like trying to mandate which cars people can buy and which boilers people can have.
And if all of this was simply the result of the dreadful mistakes made by the conservatives whilst in office, as I said as the start, there might be an element of forgiveness from the public and a willingness to give them time to sort out the mess. But entering office and immediately making things worse means that 2025 will, without doubt, be an ‘annus horribilis’ for the Labour government.