In the summer of 1992 John Major was riding high. Selling himself as the everyman leader voters could relate to, Margaret Thatcher’s successor as prime minister had just won an election against the odds and had a few months when all seemed well.
Then Black Wednesday happened, the 1992 sterling crisis, and after George Soros and his fellow speculators ousted Britain from the European exchange rate mechanism it was never the same again. Major became the man with the reverse Midas touch. He could do nothing right. He became a figure of fun. The press was merciless.
Keir Starmer is the new John Major. True, there has been nothing as totemic as Black Wednesday in the past 18 months, merely a drip feed of bad news.
Voters who expected Starmer to be a fresh start after 14 years of Conservative incompetence and sleaze have suffered from a bad dose of buyer’s remorse, with the Green party and Reform UK the beneficiaries of rapid public disillusionment.
Once a prime minister has a reputation for being hapless, the impression is hard to shift. Major lost the 1997 election by a landslide even though the economy had performed strongly in the five years after Black Wednesday. Starmer doesn’t even have that going for him. Growth is weak and this week there was news that unemployment has risen to its highest in almost five years.
The fragmented state of British politics means it is still just about conceivable that Labour will win the next election. For that, though, four things need to happen. First, Starmer has to go. Voters feel he is not up to the job of being prime minister and he will remain in office only until the Labour party agrees on who should succeed him. Then the axe will fall.
Second, the government needs to stop shooting itself in the foot. Labour was guilty of unforced errors when it came to power and has performed U-turn after U-turn. The uncertainty created by the 2024 and 2025 budgets has meant businesses have been hesitant about investing. The increase in employers’ national insurance contributions was what it says in the economics textbooks – a tax on jobs. Life is particularly tough for young people looking for work.
Third, a successor to Starmer needs to show he or she has a coherent strategy. Here, if you look hard enough, there is material with which to work because – contrary to the current conventional wisdom – Labour was broadly in tune with the public mood at the 2024 election. It knew voters wanted extra investment in the NHS, more money spent on Britain’s clapped-out infrastructure, a shift in the workplace balance of power in favour of employees, a boost to manufacturing, higher taxes on the rich and an improvement in living standards.
Labour has delivered on most of these things. Rachel Reeves’s first budget provided extra cash for the NHS and changed accounting rules so that the government could increase public investment. There is an industrial strategy focusing on eight specific potential growth sectors, and a bill to provide workers with fresh rights.
Now, it could be argued that this has not gone far enough and that focus has been lost due to the constant screw-ups. That’s true, but even so, higher public spending paid for by a mixture of borrowing and taxes, a plan to boost manufacturing output and an attempt to end the worst excesses of the labour market could form the kernel of a centre-left programme.
Where Labour has failed to deliver is on growth, and in particular on growth in living standards, which fell in the second half of 2025. After more than a decade and a half in which incomes per head rose only marginally and the state of the public realm deteriorated, Labour has so far offered more of the same. Patients are still waiting for treatment on trolleys in hospital corridors. The roads are still full of potholes. Starmer says that change will take time, but there is no point in saying the public needs to be patient. The public has had it with being patient.
So the final condition for a Labour recovery is that the economy starts to motor. There is no real prospect of a return to the rapid growth of the mid-1990s, but things should get better from here. If nothing else, the sluggishness of the economy will force the Bank of England to cut interest rates.
Internationally, things should also be calmer than they were during the first year of Donald Trump’s second term. Despite the dire predictions, tariffs have not proved to be a wrecking ball for the global economy.
The conditions are ripe for business investment to pick up. Inflation will soon be back to its 2% target and interest rates are coming down. The impacts of past shocks that helped delay capital spending – Brexit, the pandemic, the war in Ukraine – have faded. Tax breaks for investment announced by the Conservatives combined with the measures Labour has introduced – higher employer NICs and above-inflation increases in the minimum wage – have made capital spending relatively less expensive and hiring labour relatively more expensive.
After years in which it has repeatedly done worse than forecast, the economy is now poised for a period of higher investment, higher productivity and higher living standards. The pick-up won’t be spectacular and it will be too late for Starmer. But perhaps not for his successor.
