After 14 Years, What Would a U.K. Labour Government Look Like?

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The United Kingdom's Parliament building in London.

In the United Kingdom, a Labour government would increase the state's presence in the economy, spend more on social policies and public services, and embrace a more ambitious energy transition agenda than its Conservative predecessor while trying to maintain fiscal discipline. However, foreign policy would not change significantly, and while Labour would seek closer relations and regulatory alignment with the European Union, major revamps to post-Brexit arrangements would be unlikely. The United Kingdom will hold a general election on July 4, which opinion polls predict the opposition Labour Party will win comfortably, ending 14 consecutive years of Conservative rule. If the polls are correct, Labour will control a solid majority in Parliament, appoint Keir Starmer as prime minister and implement its policy agenda with minimal opposition. A large majority would enable a new Labour government to overcome potential internal dissent and pass legislation despite sporadic intra-party rebellions. By contrast, a narrower majority would make the government more susceptible to potential defections, increasing the influence of the party's left wing and unions on policy. In the unlikely scenario in which Labour fails to secure the 326 seats necessary for an outright majority, the party would be forced to negotiate a coalition agreement with smaller parties or attempt to form a minority government in a confidence-and-supply agreement with one or more other parties. Potential coalition partners for Labour include the centrist Liberal Democrats, the center-left Scottish National Party and the Greens, each of which would demand policy concessions in exchange for their support.

A seat projection by The Economist in collaboration with research firm WeThink published on June 26 indicates Labour is on track to win 465 seats in the 650-seat House of Commons against the incumbent Conservative Party's record-low 76 seats.
This projection comes despite Prime Minister Rishi Sunak's efforts to win back support from dissatisfied conservative-leaning voters through policy moves such as stricter migration policies, watered-down environmental pledges and tax cuts. In fact, Labour has maintained a consistent double-digit lead over the Conservatives since the ousting of former Prime Minister Boris Johnson in July 2022, after which the ruling party's approval ratings plummeted amid political turmoil and a series of successive scandals and resignations.
Local elections in England and Wales on May 2 confirmed the Conservative Party's poor electoral prospects for the general election, with the party suffering heavy defeats at the hand of Labour across the country, including in contested constituencies widely seen as key electoral battlegrounds.

A Labour government would increase economic regulations and state spending, although fiscal constraints could require tax hikes, especially if economic growth struggles to pick up the pace. In the coming years, a combination of slow economic growth, deteriorating public finances and little room to adjust economic policy amid record-high taxation, struggling public services and high borrowing costs will constrain the next government's fiscal room, regardless of which party wins the election. This means that eventual spending increases under a Labour government would be limited or largely offset by tax hikes. Until growth accelerates and borrowing costs decrease, a Labour government would likely focus on implementing high-impact, lower-cost policies such as bolstering workers' rights, cutting red tape, fighting tax evasion, and reforming the planning system for the construction of new housing projects and public-funded infrastructure. If and when the economic environment improves, Labour would grow increasingly keen to deliver on promised spending increases in public services such as healthcare, education and affordable housing. Should growth continue to stagnate, the government may have to implement measures such as an increase in income taxes, corporate tax rates and taxes on financial transactions, as well as possibly introduce a wealth tax or increase the inheritance tax. Meanwhile, the government would seek to spur growth and productivity through more state-driven, interventionist supply-side policies, such as increasing public investment in digital infrastructure, education and vocational training, as well as reforms to reduce red tape, simplify planning processes, and streamline applications for high-value projects (such as for high- and green-tech manufacturing) to favor business expansion and innovation.

Like the Conservatives, Labour has committed to lowering public debt as a share of GDP (which is estimated at about 98% of GDP as of mid-2024) over the next five years. However, the United Kingdom's government deficit has been rising over the past few years, from 2.7% of GDP in 2019-20 to a projected 3.1% of GDP in 2024-25 (rising dramatically in between to address the economic impacts of the COVID-19 pandemic). Meanwhile, the United Kingdom has had one of the slowest post-pandemic economic recoveries among major advanced economies, struggling with low productivity and private investment levels, as well as with a shrinking workforce due to a growing number of working-age people claiming long-term sickness.
Labour's government plan includes pledges to expand the country's power grid, build 1.5 million new homes and hire more teachers, doctors and police officers. Labour has also promised to fight tax evasion, end tax credits for private schools, extend a windfall tax on energy companies and complete the government's plans to phase out the so-called non-dom tax regime. Starmer's manifesto stresses that growth — not increased taxes — will provide the additional revenues needed to finance these measures. Labour's commitment to reducing public debt as a share of GDP within five years, coupled with an initial reluctance to raise taxes significantly, will thus reduce the new government's ability to increase public spending considerably in the short-to-medium term.
In an attempt to spur investment without mobilizing large public funds, Labour will seek to implement several measures, including simplifying the planning system for the construction of new housing projects and public-funded infrastructure such as railways and energy infrastructure. The party will also seek to fast-track regulatory permits, environmental assessments, compensations for local communities and eventual litigations, as well as grant local authorities greater oversight powers to accelerate projects' completion.
Labour will implement new protections for workers and other labor reforms to increase job security and wages, including reducing so-called zero-hours contracts, strengthening workers' protections against dismissal, increasing sick pay, repelling laws restricting trade union activities and promoting flexible working arrangements. All of these protections would somewhat increase operational costs for businesses.

Climate and the energy transition would take center stage on a Labour government's policy agenda, which would include more ambitious state-driven targets than its predecessor. A Labour government would pursue more ambitious decarbonization and renewable energy targets than the current Conservative government. Specifically, Labour would seek to decarbonize its power sector by 2030, as opposed to the current 2035 target, and to increase onshore wind capacity from 15 gigawatts to 35 GW, offshore wind capacity from 14 GW to 55 GW (fast-tracking at least 5 GW of floating offshore wind capacity), solar power capacity from 16 GW to 50 GW, and green hydrogen production capacity from nearly zero GW to 10 GW over the same period. To achieve this, a Labour government would pursue measures inspired by the U.S. Inflation Reduction Act, with increased public spending on new green energy infrastructure and industrial subsidies for the production of green technologies. Labour also pledged to establish a publicly owned company (Great British Energy) to drive investment in clean energy projects; create a national wealth fund to invest in industrial projects, infrastructure and the decarbonization of the steel industry; upgrade and extend the country's power grid to support the increased generation and use of renewable energy; and upgrade homes' insulation to improve energy efficiency. A Labour government would also likely ban new oil and gas licenses for the North Sea, leading to a slow and steady decline in domestic hydrocarbon production in the country. However, there would also be elements of continuity between the current government's energy policy and that of a potential Labour administration, including support to the nuclear power sector (by promoting new projects, extending existing plants' lifetimes and investing in new nuclear technologies such as small modular reactors), as well as a windfall tax on the excess profits of oil and gas companies.

A ban on new oil and gas licenses for the North Sea would not affect existing projects or projects already under development, with the likely exception of the large-scale Rosebank and Cambo oil fields. As a result, the United Kingdom would continue to produce oil and gas domestically through at least the late 2040s (though at ever-declining rates).

Labour would seek closer relations and regulatory alignment with the European Union, particularly in areas such as defense, trade oversight, energy and the regulation of new technologies, though a reversal of Brexit would not be on the agenda. A Labour government would seek greater regulatory alignment and deeper cooperation with the European Union in specific sectors, such as food standards, veterinary regulations, data protection, critical raw materials, energy, emissions trading, environmental standards, pharmaceutical supply chains and financial services. These moves would reduce trade barriers and facilitate closer economic ties with the bloc while showcasing to the British public that the government has maintained sovereignty. Incremental advances could also include mutual recognition of professional qualifications, easier youth mobility and potentially rejoining the Erasmus student exchange scheme. On defense, a Labour government would work with the European Commission toward establishing a more formalized U.K.-EU framework for cooperation with regular defense and security meetings, potentially negotiating access to EU forums like the Foreign Affairs Council to enhance diplomatic and policy coordination. Over time, deeper bilateral cooperation is possible, particularly if British public opinion shifts in favor of closer alignment with the European Union and if Labour looks set to secure a second term in power. A second Trump administration in the United States could also spur closer U.K.-EU alignment, prompting both sides to view greater trade and defense European integration as a necessary response to an increasingly isolationist United States. However, a Labour government would likely not seek to revamp major elements of post-Brexit agreements or rejoin the bloc's single market or customs union amid political and structural constraints.

Labour pledged not to rejoin the EU single market or customs union or seek to bring back the free movement of labor within the bloc. On the other hand, there will likely be little appetite from the European Commission to renegotiate major elements of the post-Brexit Trade and Cooperation Agreement when it comes up for review in 2026.
For the United Kingdom, reentering the European Union's customs union would mean walking back on the country's few trade policy victories since Brexit, including repealing trade agreements signed with Australia and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Moreover, the United Kingdom would again bind itself to the European Court of Justice, which many in the United Kingdom would criticize as surrendering national sovereignty.

A Labour government would maintain a high degree of continuity in foreign policy by supporting Ukraine, seeking to preserve cooperation with the United States, gradually de-risking from China and cautiously approaching the Israel-Hamas war in Gaza. Under Starmer's leadership, Labour has pivoted away from the unpopular foreign policy agenda of former party leader Jeremy Corbyn, a long-time critic of NATO, nuclear weapons and Israel. Starmer would keep strong support for Ukraine and alignment with NATO and seek to maintain strong cooperation with the United States, even though relations with Washington could become more tense in case of a second Trump presidency. A Labour government would also maintain a policy of de-risking from China, seeking to increase scrutiny of trade and investment flows for critical technologies without severing economic and trade relations with Beijing. De-risking would likely involve targeted export and outbound investment restrictions vis-a-vis China for sensitive technologies such as artificial intelligence, facial recognition and advanced semiconductors. These measures could also include increased tariffs against growing influxes of cheap Chinese solar panels, electronic vehicles and other green tech products into the United Kingdom amid rising trade barriers in the United States and the European Union. The most complex foreign policy issue for Starmer would be the Israel-Hamas war, a particularly divisive issue for Labour. While a Labour government would support the idea of a potential formal recognition of Palestine as part of an eventual peace process with Israel, London would maintain a cautious approach and a large degree of coordination with Washington on the conflict in Gaza. This issue would be even more complicated if Labour wins only a narrow majority in the House of Commons, as the government would be under pressure from its left flank to take a tougher line on Israel.

There is nearly no distinction between the Conservatives' and Labour's stance on support for Ukraine in its war against Russia, and both parties have committed to raising military spending to 2.5% of GDP, with the former pledging to do so by 2030 and the latter by "as soon as economic conditions allow."
Starmer, in contrast to his predecessor Corby, also committed to maintaining the United Kingdom's nuclear deterrent, the submarine-based Trident missile system, despite the high associated costs. Maintaining the system costs about 3 billion pounds ($3.80 billion) per year, and a new submarine fleet is estimated to add another 30 billion pounds.
Under a second Trump presidency, transatlantic trade tensions would likely reignite over potential U.S. tariffs on aluminum, steel, vehicles and various industrial goods. Though to a lesser extent than the European Union, the United Kingdom would also be exposed to the impact of such tariffs.