Why the reshuffle alone won’t change the government’s fortunes

“For better electoral fortunes, the government needs to junk neoliberal policies, never-ending austerity; directly invest in infrastructure and redistribute income and wealth.”

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

After 14 months in office, Sir Keir Starmer, the UK Prime Minister has completed his cabinet reshuffle. In this political merry-go-round familiar faces have been shunted around from one government office to another. The Labour government is riding low in the opinion polls and has suffered heavy blows in the May 2025 by-elections and local council elections. The reshuffle alone won’t change the government’s fortunes.

For better electoral fortunes, the government needs to junk neoliberal policies, never-ending austerity; directly invest in infrastructure and redistribute income and wealth. The economy continues to flatline and a large part of the population is barely surviving. Median wage of £30.432 (£25,431 net) means that nearly half of the population lacks purchasing power to buy goods and services whilst some bosses collect up to 1,112 times the average worker pay. Millions of Britons don’t have the financial resilience. 37% of universal credit claimants are in work. The UK has some of the least generous welfare across the OECD

Wealth is concentrated in fewer hands. The richest 1% of Britons holds more wealth than 70% of the population combined. Just 50 richest families hold more wealth than 50% of population combined. The bottom 50% of the population has 5% of wealth, and the bottom fifth has only 0.5% of wealth. The poorest households in Slovenia and Malta are better off than the poorest in the UK. After Tory years of austerity people don’t feel any better off and the government has shown little inclination to change course.

Despite a 174 majority in the House of Commons it got off to a bad start.by deliberately attacking the old, poor, sick and disabled. It continued with the Conservative Party’s two-child benefit cap, first imposed in 2017, and deepened child poverty. It abolished the Winter Fuel Payment for retirees and then backtracked after losses in the May 2025 election. It cut disability benefits and then partly backtracked after a bank-bench rebellion. Following the Tory lead, it is going ahead with the Public Authorities (Fraud, Error and Recovery) Bill, which will give the government powers to snoop on the bank accounts of anyone claiming universal credit; employment and support allowance, and state pension credit. Such policies do not have broad support amongst the electorate.

Taxation policies should be used to redistribute, but that is not the case. The poorest 20% of population pay a higher proportion of their income in taxes than the richest 20%. The government is continuing with the last Tory government’s freeze on income tax thresholds, forcing low/middle income earners to pay a higher proportion of income in taxes for crumbling services. At the same time the government has granted tax concessions to the super-rich. Before the general election, Labour promised to close the carried interest tax loophole, which taxes performance-related profit of private equity asset managers as capital gains rather than income. Income can be taxed at marginal rates of up to 45%. After opposition from the finance industry, the government has capitulated and the tax rate for carried interest will not exceed 34.075%, a largesse worth £2.5bn to private equity managers.

Wealth continues to be transferred from the poor to the rich. Vast amounts of subsidies to auto, steel, oil, gas, coal, biomass, internet, shipping and other companies continue. The government doesn’t take equity stake in return. Rather than protecting people regulators have become guarantors of corporate profits. Ofwat guarantees profits for water companies regardless of performance. The same applies to Ofgem which enables energy companies to make massive profits. Ofcom enables internet companies to increase annual bills by inflation plus 3.9%. For every £1 of investment in public assets, the private sector received £6 from public purse over a 25 year period. Instead of ending profiteering, Labour has revived the private finance initiative even though it is cheaper for government to borrow and build public assets. There is no structure that guarantees inflation-busting wage rises to workers.

Whilst the government appeases corporations and the super-rich, people navigate crumbling social infrastructure. It is hard to access family doctors or dentists. There is shortage of affordable and social housing. Tenants in England are spending 36% of income on rent. Roads are full of potholes and rail fares are prohibitively high. Water companies dump sewage in rivers. Social care is fraying. 6.25m individual patients in England await 7.4m hospital appointments. The government response is even more privatisation and guaranteed corporate profits.

Racism has become a feature of political discourse. Right wing parties, such as Reform, blame the UK’s economic problems on minorities, especially immigrants from Asia and Africa. No immigrant has ever caused hikes on the price of energy, water, food, banking, insurance, internet or other essentials. None are responsible for decline of manufacturing, lack of social housing, potholed roads, climate change, and lack of skilled labour or anything else. The rise in what some call illegal immigrants arriving in small boats is connected with Brexit, climate change,  wars, colonial legacies, economic oppression, poor border controls, people smuggling and more. Instead of developing narratives to challenge Reform, Labour has been pulled along by Reform’s narratives. Sir Keir added fuel to fire with his “island of strangers” speech. Following Reform’s promise to withdraw from the European Convention on Human Rights (ECHR) and the European Court of Human Rights (ECHR), Labour is now keen to reform ECHR and some Labour grandees want to ditch the ECHR altogether. Labour has failed to develop an effective counter narrative.

To appease corporations and the super-rich, the government promised not to increase rates of income tax, corporation tax, capital gains tax and employee national insurance. In November 2024, the Chancellor further boxed-in the government by saying that she is “not coming back with more borrowing or more taxes“. Such foolish promises are developed in an echo-chamber populated by a select few and do not easily withstand scrutiny.

Labour needs to be pluralistic but the leadership isn’t. It dislikes discussion and has pursued divisive policies. Trade unions and left-leaning civil society organisations have been alienated, and links with the working class have been weakened. Party conferences are stage-managed and local branches are emasculated. Policy development groups are anonymous, submission to committees disappear into a black hole and 30-second questions at Parliamentary Labour Party (PLP) meetings result in soundbites rather than any meaningful dialogue.

The leadership is intolerant of dissent. The party whip was withdrawn from seven Members of Parliament (MPs) for opposing continuation of the two-child benefit cap. Four further MPs had their whip withdrawn for opposing disability benefit cuts. The cabinet is full of right-wing MPs which inevitably narrows policy choices. The left has been generally purged from Select Committees and party senior positions. This purge began before the general election, with the expulsion of former Labour leader Jeremy Corbyn. Before becoming leader of the party, Sir Keir made 10 pledges and has reneged on almost all of them. Disillusioned members have left in droves. Local party branches are weak and motions at the annual conference have little influence.

The emphasis must immediately shift to improving the life of the bottom 50% of the population. At the very least, the chancellor must abolish VAT on domestic fuel, cut the standard rate of VAT and increase income tax personal allowance by at least £1,000. It is easily achievable by ending tax perks of the rich. For example, capital gains and dividends must be taxed at the same rates as wages.

Essential industries such as water and energy need to be brought into public ownership to end profiteering. It also gives the government additional levers to manage inflation and the economy. It must democratise large corporations by following the European practice of appointing worker-elected directors to company boards. Therefore, workers with long-term interest in the future of companies will have a say to counter the short-term interests of shareholders.

The government must invest directly into infrastructure and new industries. This also fuels growth of the private sector. The post-war economic boom was facilitated by government debt of 270% of GDP. The subsequent prosperity reduced it to 49% in 1976, and 22% of GDP in 1990. We need an entrepreneurial state, not the one that now guarantees corporate profits.

Much needs to be done and Labour must change course or risk being a one-term government. It must improve the purchasing power of the bottom 50% of the population. The old two-party system is fraying. At the next election, the centrist and left vote will be split between labour, liberal democrats, greens and your party, to create an opening for a possible right-wing government. Labour needs to return to its roots and be an inclusive party. The alternative is electoral oblivion.