Trump, bizarrely, has offered Starmer a get out of jail free card

US President-Elect Donald Trump
US President-Elect Donald Trump

You can hear the wailing from the streets of North London. Tastefully appointed window shutters have been pulled closed. Holloways of Ludlow porch lights extinguished. Asked if she agreed with her earlier analysis that Donald Trump was “a racist sexual predator”, Emily Thornberry, Labour MP for Islington South and chairwoman of the Foreign Affairs Select Committee, replied simply: “Well, he is.”

Labour’s collective, comradely heads are in their hands as their nemesis romps to victory in America. One hundred of their members had flown over to support the much nicer Kamala Harris but had been unable to persuade conservative Latino working class voters of Dade County, Florida, that the former Californian Attorney General was the woman for them. Unfathomably.

What to do for the leader of the UK? Rahm Emanuel, Barack Obama’s former chief-of-staff, said “never allow a serious crisis go to waste”. Sir Keir Starmer should look him up. “It’s an opportunity to do the things you once thought were impossible.” It is.

Emanuel was speaking in the wake of the financial crisis. Donald Trump is Starmer’s political crisis, the victory of the 45th President – who will now become the 47th – of similar shock magnitude to the UK Government as the collapse of the banking system was to the global economy. Get the response wrong and Starmer will see his already precarious position with the public deteriorate further. Nigel Farage is ready and waiting to pick up the disaffected and the disillusioned.

The Prime Minister has not given himself the best chance of success – gaoling himself in tired, traditional Labour policies more akin to the 1970s than the 2020s. The first 120 days of his government have seen unnecessary rows over winter fuel payments and increased taxes on farmers that are leeching public support.

On the economy, the UK outlook is gloomy, with Rachel Reeves’s tax, borrow and spend Budget now looking more precarious than ever. The cost of servicing UK debt is rising as global markets judge that Trump’s tax cuts and deregulation instincts will spur higher inflation.

Central banks will respond with higher interest rates, which increases the price of global capital. In a worldwide battle for debt, the US is the 800lbs gorilla, hoovering up funds which want exposure to the faster growing and more dynamic American economy.

Then come tariffs, which Trump has pledged to apply to all imports to the US, the UK’s largest trading partner. The effects on the UK economy will be harsh. The National Institute for Economic and Social Research says that if the US President-Elect goes through with his plans, growth in the UK will shrink to an anaemic 0.4 per cent next year and then flatline. Inflation, interest rates and unemployment will rise.

“Trump’s proposed tariffs would be yet another shock to the economy,” said NIESR economist, Ahmet Kaya. “People in the UK would face higher prices for the products that they buy and would have less money to spend on other goods and services.”

The Government has briefed – implausibly – that it was well-prepared for a Trump victory, the Foreign Secretary claiming he could “feel it in his bones”. The economic truth of a Budget that was already inflationary before the events of November 5 suggests the opposite.

There is a route out of the malaise that Starmer has created for himself. And Trump is lighting the way.

First, Starmer will need to take the battle more clearly to his party and the unions that reform of the state and public services is non-negotiable. This Government must bring down its own costs and the costs of the public sector if it is to have any chance of reducing the inflationary spiral ahead.

Second, businesses will need to be more directly championed and supported. Chief executive after chief executive has complained that the tax rises on business the Government has already announced will only harm employment levels and increase costs to customers.

“If you get presented with a bill unexpectedly for around £100m that takes some digestion,” Lord Rose, the chairman of Asda, said last week. “You cannot rule out the fact there will be some inflation.” Starmer should make clear to his Cabinet that plans for new employment regulations – subject to two years of consultation – will be gradually unravelled, only keeping a few core elements for political cover.

On climate change, the PM should admit that it is time to dial down the language and the promises. Last week’s report by the government’s own National Energy System Operator gives cover, setting out the Herculean, and many would say ridiculous, targets that need to be met on building pylons across the country and wind farms in the sea. Ed Miliband may need to be jettisoned.

Starmer will also have to rein in his own Europhile instincts. Trump is likely to be more aggressive with the European Union on tariffs than he is with the UK. The Government should take advantage of the President-Elect’s own backing for Brexit, keeping clear of political, financial and regulatory EU entanglements. That could open up tariff-forgiveness for the UK, a country Trump instinctively likes.

The asks appear unachievable for a PM that lacks political guile. But the smarter strategists around Starmer insist there is hope. The Labour leader wears his political philosophy lightly, pivoting from a supporter of Jeremy Corbyn to a rather dull traditional Labour “tax and spend” politician in four short years. He needs to take a further, and quicker, journey, now to a more sensible and modern mix of pro-business reform, public service delivery and tighter public finances.

Last week Starmer announced the return of Jonathan Powell, Tony Blair’s former chief of staff, as the UK’s new National Security Advisor. Powell is a grown up among a sea of Cabinet individuals still struggling to make the transition from the warm baths of left-adjacent opposition to the steely needs of government and realpolitik. Powell was the man who famously said to Christopher Meyer, the UK’s ambassador to the US in the run up to the Iraq war, that his job was “to get up the arse of the White House and stay there”.

Liz Lloyd, Powell deputy during Blair’s administration, has also been brought back to Number 10 as director of policy delivery and innovation. For “innovation” read reform and a welcome hint of Blair 2.0.

Can Starmer achieve the change he needs to make a success of an administration which will operate in a Trump-led world? As he never tires of telling voters, politics is about choice. He will now need to be more free-market and less obsessed with the emotions of his own left wing, a group in danger of trapping the Labour leader in an undeliverable, state-obsessed cul-de-sac. Trump has offered Starmer a get out of jail card. He should use it.