The First 100 days of the new UK labour government

Labour leader Sir Keir Starmer goes to Buckingham Palace to be appointed as the King’s Prime Minister. The 100 Days clock started ticking.

No business is conducted in the House ahead of the King’s Speech except to elect the Speaker of the Commons and for all sitting MPs and Lords to swear allegiance to the sovereign.

Meeting to be held in Washington. Likely the first major foreign policy test of the new Prime Minister and his Foreign Secretary, although both may be late arrivals given events in the House of Commons on 9 July (see above). Agenda items will include “NATO’s military presence in the east of the Alliance” which extends from the Baltic Sea in the North to the Black Sea in the South - the fault line defining the theatre of conflict around the invasion of Ukraine. The meeting will mark the 75th anniversary of the founding of NATO and will be the last for current Secretary General Stoltenberg before former Dutch PM Mark Rutte takes up the role from 1 October. The meeting is set against the background of conjecture as to the outcome of the US Presidential election in November 2024 and the rightward drift in the composition of the European Parliament. Both have possible implications for NATO strategy and funding.

The State Opening marks the formal start of the parliamentary year. The King's Speech sets out the government’s proposed policies and legislation for the coming session. It is followed typically by 2 or 3 days of debate in the House to approve the King's Speech. Although rare, the monarch’s speech can be defeated and – if it is – would normally be taken as a resignation matter for the government.

This will be the fourth meeting of the EPC, formed in response to Russia’s invasion of Ukraine. It is a supra-national body whose 50 or so members come from Europe - within and beyond the European Union.

Of significance to the extent of its convening powers – and potentially to the new Labour government - President Macron of France in an address to the European Parliament in 2022 described the EPC as a “new European organisation” that would allow “democratic European nations that subscribe to our shared core values [to] find a new space [for] political and security cooperation, cooperation in the energy sector, in transport, investments, infrastructures, the free movement of persons and in particular of our youth”

That latter element (freedom of movement for youth) may have been anathema for the UK’s previous administration but for the new Labour government it could allow the fulfilment of Labour’s ambitions for a closer working relationship with the EU without rejoining the Single Market or Customs Union.

Tax/Fiscal

The following measures have been extracted from the Labour manifesto and subsequent commentary. Whilst many of these items will be matters for a formal Budget (see later) followed by consultation on draft legislation that is to be enacted in a Finance Act that will mostly likely become law in Q1 2025, the expectation is that some of the detail that has to date been outstanding may emerge prior to the Budget:

• abolish non-dom status once and for all, replacing it with a modern scheme for people genuinely in the country for a short period, including closing the “loopholes” in the Conservative Spring Budget 2024 plans to remove non-dom status such as the treatment of offshore trusts for inheritance tax purposes
• close the “carried interest” loophole by taxing “carried interest” as income (this doesn’t necessarily specify how such a measure would operate, though it is forecast to raise £565m in 2028/29)
• close the loopholes in the windfall tax on oil and gas companies - Labour will extend the sunset clause in the Energy Profits Levy until the end of the next parliament and increase the rate of the levy by 3%, as well as removing the generous investment allowances
• end the VAT exemption and business rates relief for private schools
• increase the rate of the stamp duty surcharge paid by non-UK residents by 1%
• replace the business rates system, to raise the same revenue in a fairer way – this new system intends to level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship
• Labour has stated that it will not increase the basic, higher, or additional rates of Income Tax; nor increase National Insurance or the rate of VAT, although the position in relation to capital gains tax remains to be confirmed
• Labour supports implementation of the OECD global minimum rate of corporate taxation and backs international efforts to make sure multinational tech companies pay their fair share of tax
• Labour will undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets (it is not clear if this will involve consideration of the tax treatment of pensions and pension contributions, though it appears that Labour has dropped its plan to reintroduce the lifetime allowance)
• Labour plans to modernise HMRC and invest in efforts to tackle tax avoidance and tax evasion, with a view to further closing the tax gap
• Labour has committed to maintain a fiscal rule requiring the national debt-to-GDP ratio to be falling by the end of Year 5 of the parliament

Monetary Policy

• Reverse recent changes to downgrade climate change emphasis in the Bank of England's remit
• Potentially change the Bank of England's mandate to include a focus on productivity growth

Financial Services

• champion UK FS sector as “one of Britain’s success stories”
• deliver “inclusive growth” with regional financial centres and “unlocking the full potential” of the mutuals sector
• enhance international competitiveness of the UK FS sector including through “innovation-centred” regulation/ supervision and streamlined regulatory rulebook in line with Consumer Duty
• reinforce consumer protection and financial inclusion including with longer-term fixed rate mortgages, a national financial inclusion strategy and regulating the Buy Now Pay later sector
• lead the world in sustainable finance
• become global standard-setter for the use of AI on FS, deliver next phase of Open Banking and “embrace” securities tokenisation and a central bank digital currency
• British Business Bank: Empowering the bank to invest more in growth capital for businesses.
• British 'Tibi' Scheme: Establishing a program to increase institutional investment in venture capital and small cap growth equity.
• Solvency UK Reforms: Aiming to increase investment in infrastructure and green industries through regulatory reforms
• reform (“unlock”) workplace pension schemes to increase investment in UK markets including to invest in long-term infrastructure projects; will require care in relation to retail exposure to illiquid assets
• Edinburgh Reforms: Labour has expressed intentions to accelerate reforms proposed under the Edinburgh reform package, which aims to enhance the competitiveness of the UK financial services sector. These reforms were previously criticized for slow progress, and Labour plans to expedite their implementation to better align with EU standards and practices. In general Labour wants to work towards "compatible regulatory approaches" where regulations deliver similar outcomes See also under UK-EU relations (below)

UK-EU Relations

The Labour manifesto has only a few references to Europe (14 mentions, mostly regarding Ukraine/NATO), but including its ambition to improve trade relations and to champion UK financial services.

Substantial changes are likely deferred until the scheduled 2026 review of the Trade and Cooperation Agreement. Labour appears to plan for incremental moves initially, potentially becoming bolder if re-elected in 2028/29, envisioning a 10-year investment plan over two terms.

All of which said regarding incrementalism, the areas where a Labour government might “ditch the fixation with divergence” (a quote from Rachel Reeves) and seek earlier, closer working with the EU include:

UK-EU: Financial services

• Aligning the UK's carbon pricing regime (emissions trading scheme and carbon border adjustment mechanism) more closely with the EU's. Labour is exploring how to realign the UK's carbon market and border tax for imports with the EU's system to prevent UK industries from being undercut.
• Pursuing mutual recognition of professional qualifications for the financial services sector; seeks further mutual recognition agreements beyond the current one with Switzerland
• Exploring a "sustainable solution for cross-border clearing" to maintain access for UK clearing houses to EU markets.

UK-EU : Ireland/Northern Ireland: Windsor Agreement

• Although no specific measures have been cited by Labour, the relationship between Ireland and Northern Ireland remains a touchstone for UK-EU relations and the incoming Labour administration will have to deal with issues arising from, in particular, Article 18 which provides for a mechanism of “democratic consent” through periodic votes by members of the Northern Ireland Assembly. Article 18 relates to customs and the movement of goods, VAT and excise.
• The first vote under the protocol is scheduled to take place before the end of 2024 came into force. An important test for the incoming Labour administration
• Beyond the Windsor Agreement and Article 18, Labour has committed to negotiating a "veterinary agreement" to prevent unnecessary border checks and help tackle food costs. This could also help smooth trade between Britain and Northern Ireland across the Irish Sea border.

UK-EU: Other/security/longer-term

• Increasing foreign policy and security cooperation with the EU, potentially through a new UK-EU security pact
• Scheduled review of the UK-EU Trade and Cooperation Agreement (TCA) in 2026. Seen as an opportunity for Labour to make more substantive changes. In part driven by acknowledgment that Brexit has negatively impacted UK productivity
• Increase productivity to counter Brexit-related losses Rachel Reeves has acknowledged the OBR estimate of a 4% reduction in productivity potential due to Brexit)
• May attempt to influence EU policy through supranational forums eg the European Political Community (see above)
• Could use the TCA or Financial Services MOU as channels for cooperation

Employment

Labour's employment and labour market plans focus on improving workers' rights, boosting employment, and enhancing skills and training. The party aims to create what they call a "decade of national renewal" with several key initiatives. Note again the reference to a 10-year plan reinforcing the idea that their strategy is predicated on winning the next election in 2028 or 2029 also.

New Deal for Working People

• Possible Employment Rights Bill could be introduced in the first 100 days
• ban exploitative zero hours contracts (with some exceptions)
• End fire and rehire practices (with some exceptions)
• introduce basic rights from day one to parental leave, sick pay, and protection from unfair dismissal.
• strengthen the collective voice of workers, including through their trade unions
• create a Single Enforcement Body to ensure employment rights are upheld
• make sure the minimum wage is a genuine living wage
• strengthen the right to flexible working
• enhance rights for workers in the gig economy

Commitments to D&I including

• Enact the socio-economic duty in the Equality Act 2010
• Reduce gender pay gap
• Introduce landmark Race Equality Act to extend the right to equal pay from sex to race and disability
• Reverse the decision to downgrade the monitoring of antisemitic and Islamophobic hate

Skills and Training

• Labour plans to reform the skills system to better meet the needs of workers and businesses:
• Introduce a new 'Skills England' body to coordinate skills policy
• Reform the Apprenticeship Levy into a 'Growth and Skills Levy'
• Ensure everyone can access training throughout their working lives
• Introduce a 'Young Persons Guarantee' of education, training, or employment opportunities

ESG and sustainable finance

Arguably the single biggest programme within the Labour manifesto including its ambition to achieve net zero in electricity generation by 2030 – the only programme with explicit commitment to increase borrowing as part of the funding proposal. The proposals cut across all sectors of the UK economy and include all three pillars of the ESG agenda.

Labour's Environmental and Social Commitments

• Ambitious goal of achieving zero carbon electricity by 2030
• Plans to introduce a new Race Equality Act to address racial inequalities and mandate disability and ethnicity pay reporting
• Commitment to make the minimum wage a genuine living wage, removing age-based discrimination

Green Prosperity Plan and Energy Policies/ Infrastructure

• Proposal to establish a National Wealth Fund to attract private investment
• Aim to crowd in £3 of private sector investment for each pound of public money spent
• Great British Energy: A new publicly-owned clean energy company to invest in renewable energy projects.
• Warm Homes Plan: A £6.6 billion investment over the next parliament to insulate 19 million homes, reducing energy bills and emissions.
• Plans to offer clean energy developers a "British jobs bonus" of up to £500 million per year from 2026
• Overhaul the Contracts for Difference system for clean energy investments
• Interest in harnessing untapped potential of tidal and wave technology
• Funded partly by a windfall tax on oil and gas companies (£1.2 billion annually) and partly through borrowing (£3.5 billion annually).

Regulatory Approach:

• Intention to make climate change a policy priority for the Bank of England
• Plans to update the Bank of England's collateral framework and supervisory measures with climate change in mind
• Commitment to advancing plans for a UK green taxonomy
• Pledge to make the UK the "green finance capital of the world"
• Require financial institutions and FTSE 100 companies to publish carbon footprints and adopt credible net-zero plans

Investment Focus:

• National Wealth Fund to target sectors such as ports, gigafactories, clean steel, carbon capture, and green hydrogen
• Recognition of UK's competitive edge in producing technologies needed for net-zero transition (e.g., electric trains, heat pumps, turbines)

Financial Sector Reforms:

• Plans to mandate UK regulated financial institutions to develop credible transition plans aligned with the 1.5°C Paris Agreement target
• Support for diversity and inclusion guidance for financial services led by the FCA and PRA

Just Transition and Job Creation:

• Emphasis on ensuring a just transition that doesn't leave anyone behind
• Proposal to establish Great British Energy, a publicly owned clean energy company, headquartered in Scotland
• Acknowledgment of potential job losses in the North Sea oil and gas industry and the need to address this challenge

Challenges and Constraints:

• Limited budget for implementing ambitious plans
• Need to "outsmart rather than outspend" to remain competitive
• Requirement to catalyse private finance and reduce bureaucracy

Comparison with International Efforts:

• Recognition that the proposed National Wealth Fund (£7.3 billion) is significantly smaller than the US Inflation Reduction Act ($350 billion)
• Need for the UK to offer a unique proposition to attract foreign investors

Potential Challenges:

• Balancing regulatory ambition with potential legal challenges, as seen with the SEC's climate disclosure rules in the US
• Addressing concerns from trade unions and regional parties (e.g., SNP) about job losses in traditional energy sectors

  Non-Financial Levers:

• Focus on improving planning processes and grid connections for renewable energy projects
• Emphasis on reducing bureaucracy to facilitate green initiatives

Artificial Intelligence

The approach of the Labour government may not differ significantly from the current government's direction of travel. The post-Brexit focus on investment and innovation likely to continue and the current government had already hinted at binding regulation for the most capable AI models.

AI Sector Plan

• Developing a strategy to support the AI industry, though specific funding details are not provided.
• National Data Library: Creating a national resource to support cutting-edge research and data-driven public services.
• Regulatory Innovation Office: Establishing a new office to update regulation and speed up approval timelines for innovative products and services.

AI Regulation

• Commitment to introduce binding regulation on AI developers, replacing the current voluntary regime
• Focus on regulating "highly capable AI models"
• Potential establishment of a Regulatory Innovation Office

Key Considerations for AI Regulation:

• The specifics of regulation will be crucial (who is regulated, nature of regulation)
• Potential for more detailed regulation due to backbencher pressure
• Regulation may target both developers and users of AI models
• Enforcement will be a critical factor in the effectiveness of regulations

Challenges in AI Regulation:

• Rapidly evolving landscape makes it difficult to define "high impact" models
• Priorities may shift (e.g., from deepfakes to chemical weapons and cyberterrorism)
• Enforcement strength will determine the regulation's effectiveness
• UK's approach to AI regulation needs to consider its global context

Relationship with EU AI Act:

• UK unlikely to adopt the EU AI Act wholesale
• Potential for borrowing concepts, such as regulating general purpose AI models
• Recognition of merits in both EU and UK approaches to AI regulation 

Healthcare and Life Sciences

• NHS Investment: Pledging to cut waiting lists and improve NHS performance, though specific funding details are not provided.
• Mental Health: Recruiting 8,500 new mental health staff at a cost of £410 million annually by 2028-29.
• Diagnostic Services: Doubling the number of NHS CT and MRI scanners, with an annual investment of £250 million by 2028-29.
• Dental Care: £125 million annually by 2028-29 for a dentistry package including 700,000 urgent appointments every year
• Aims to create 100,000 jobs by 2030
• Increase R&D in pharma by £10bn a year
• Planning reforms to increase laboratory space
• Establish Regulatory Innovation Office to hold regulators to account for delays in innovation
• Require UK Research and Innovation organisation to set 10-year budgets to provide greater certainty for longer-term investment

Infrastructure

The incoming Labour government has ambitious plans to revitalise the economy including through fostering significant improvements to productivity. The infrastructure sector will play a critical role in achieving those aims. The following is our summary of the key policy initiatives already announced in its manifesto or otherwise signalled by the Labour Party.

Great British Energy (GBE)

• New publicly owned clean energy company central to Labour's net zero plans
• To be established through a Great British Energy Bill
• Capitalized with £8.3 billion
• Three initial priorities:
  • Co-investing in new technologies
  • Scaling up and accelerating mature technologies
  • Scaling up municipal and community energy
• Similarities with proposed National Wealth Fund (NWF) and existing UK Infrastructure Bank (UKIB)

National Wealth Fund (NWF)

• Proposed £7.3 billion fund
• Focus on ports, gigafactories, steel industry, carbon capture, and hydrogen
• Aims to help deliver £50-60 billion annual investment for UK's net zero requirements

UK Infrastructure Bank (UKIB)

• Already invests in economic infrastructure, networks, and technology to tackle climate change

Labour's Defence Policy

• Commitment to spending 2.5% of GDP on defence "as soon as possible"
• Emphasis on using defence industry to help drive economic growth
• Focus on European alliances and maintaining the nuclear deterrent
• Pledges to improve service accommodation
• Plans to establish a Military Strategic HQ in the first week of government
• Strategic Defence Review planned for the first year to assess armed forces' state and future needs of the military

Railway Reforms

• Taking the railway system into full nationalisation
  • Bringing all train operating companies into state control
  • Network Rail to be disbanded in due course
  • No proposed changes to rolling stock ownership (remains with private leasing companies)
• Focus on whole industry decision-making to reduce fragmentation
  • Aim to generate savings of up to £2.2 billion per year

Key Considerations and Potential Challenges

• Overlap between GBE, NWF, and UKIB needs to be addressed
• Clarity required on GBE's role in "public ownership of energy"
• Success of GBE dependent on strategic clarity and coordination
• Defence spending increase subject to economic conditions
• Details of railway reforms yet to be fully outlined

Real Estate

• Planning Reform: Streamlining planning processes to accelerate infrastructure projects and housing development.
• Housing Target: Aim to build 1.5 million homes over the next parliament.
• Data Centres: Removing planning barriers for new data centres to support AI and tech industry growth.
• Infrastructure Strategy: Developing a new 10-year infrastructure strategy ie extend time horizons to provide greater stability for long-term investment
• Devolution: Shifting power away from Westminster to support regional growth, including new powers for mayors over transport, skills, housing, planning, and employment support.
• Town Growth Plans: Developing new plans for towns across the country, though specific funding is not outlined
• Seek to introduce a ban on Section 21 ‘no fault’ evictions in the first 100 days; proposal aligns with several amendments tabled by Labour while in Opposition to the Renters (Reform) Bill (RRB) to strengthen tenants’ rights. The original RRB was lost after the election was called
• Leasehold Reform: the Leasehold and Freehold Reform Act 2024 received Royal Assent during the ‘wash-up’ period of the last parliament. It will be up to the Labour Party to bring its provisions into force. However, those did not include proposals for commonhold to be the default tenure. It remains to be seen if Labour in government will introduce or otherwise tackle that provision.
• Build 1.5 million new homes
• Introduce a permanent mortgage guarantee scheme for first-time buyers

If the first 100 Days’ clock started ticking on 5 July and included weekends and bank holidays it would reach 100 on 13 October – a Sunday! Counting weekdays only it would continue to run until 22 November. Somewhere within that window is likely to be a full Departmental Spending Review and full Budget with OBR analysis, followed by Budget Resolutions and draft legislation likely to be enacted (post-consultation) in a Finance Act in Q1 2025. Those will set the fiscal framework for the whole of the Parliament. Given the ambition of Labour’s programme including relatively short timescales (eg net zero electricity by 2030) it is likely they will want the Budget around the early part of that window. We may also see the business tax roadmap promised in the first six months of the new Parliament, intended to provide businesses with greater certainty on fiscal measures over the life of the new Parliament.

See the earlier section on Tax/fiscal and Monetary Policy.