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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
For those seeking the true character of Britain’s new Labour government, the sudden run of pay deals offered topublic sector unionswere a worrying portent. The attack lines duly followed: Keir caves to his union paymasters.
In fact, the defining moments of the Starmer government will not be the strike settlements but the first Budget and spending review delivered by Rachel Reeves, the chancellor, in the autumn. These will offer the clearest sense of the extent of Labour’s radicalism and determination.
But until then, the narrative of Labour doing favours for its union pals is an easy one for opponents to grasp. Even as ministers talk up their “disastrous” economic inheritance and cut pensioner benefits, they have found billions to pay off the public services unions. The latest deal saw a settlement with the train drivers only for the Aslef union to immediately announce separate new strikes over conditions on the east coast LNER service.
There are clear grounds for criticism. The deals encourage other unions. Already new disputes are threatened by GPs and border force officials. More troubling is that these settlements came without any productivity gains. In the words of one Tory commentator, it was quid without quo. Critics add that one of the government’s first priorities is an employment rights package that meets a number of union demands and abolishes recent anti-union legislation.
Yet before we succumb to the usual clichés (beer and sandwiches, union “barons”), there are good reasons to think this summer of love will not last.
First, it is standard practice for new governments to settle their predecessors’ disputes. Even Margaret Thatcher delivered major pay deals to public servants at the start of her rule. It is a mistake to read too much into Labour’s actions beyond a desire to clear the decks of problems that can be attributed to the Tories.
A more nuanced reading is that both sides had a shared interest in settling disputes that have hobbled the NHS and led to rail strikes, projecting an image of the UK as a country where nothing works. Furthermore, there was a strong case for the pay rises. Teachers’ and nurses’ pay has fallen behind inflation and there is a recruitment and retention crisis in both sectors.
Even so, any unions foolish enough to assume a tame administration may soon be disobliged. Aslef’s two-fingers to the government may turn out to be a serious mistake. It embarrassed Starmer and undermined transport secretary Louise Haigh, who is more of a union ally than some in cabinet. It also rammed home a message that the unions offer no goodwill.
This matters because public service reform is at the heart of Starmer’s mission. It may have seemed more important this time to settle existing disputes but the imposition of conditions will soon follow. One close ally explains: “Our long-term changes are heavily about reform. Productivity deals are coming. This is something Keir really believes in.”
The first plans are likely before the end of the year, and will demand changes to working patterns in both the NHS and the railways. Wes Streeting, the health secretary, has already talked about paying for extra weekend shifts.
This is all far easier to say than to do. The creation of the NHS relied in the end on Nye Bevan, then health secretary, having to buy off GPs by, in his words, “stuffing their mouths with gold”. This time any gold will come with heavy conditions.
The notion of Labour in the pocket of the unions is antiquated. There is little readback to the 1970s, when Downing Street seemed a branch office of the major unions and strikes crippled the government. For all their shared history, the party no longer depends primarily on union donations — they contributed just £6mn of the £21.5mn raised in 2023 — or on the massed ranks of an industrial workforce.
But they do retain shared instincts. Many ministers, including Angela Rayner, the deputy prime minister, instinctively buy into the producer interests of public sector unions (which account for 60 per cent of the UK’s 6.4mn trade union members). Even so, since Tony Blair accepted most of the Thatcher union legislation, Labour’s relationship with its union founders has been far more transactional.
There are already signs of some readiness to temper union demands. Proposals to give employees a right to ignore after-hours calls and emails are being watered down and the Treasury is alive to the risk that excessive employment regulations pose to UK competitiveness.
On public services, Starmer sees a distinction between delivering for workers and delivering for unions — if they want amity with this more sympathetic regime, they will need to be seen as allies not obstacles to reform. Ministers hope that unions will see an alignment of interests in improving public services. One notes: “We are used to this. Like a family relationship, we have our most robust and frank exchanges with unions.”
Yet Aslef’s stance is a salutary warning that Starmer should expect few favours and that he will have to square up to the unions sooner rather than later. He has no choice. Failure to secure public service reform at a reasonable price will doom his government.
After the spoonfuls of sugar the sharper medicine is coming. Both sides should enjoy these moments of harmony. The golden era of shared interests may already be a thing of the past.