Now is the time for Starmer to say no to the unions

The Labour Party won’t like it, but the voters will reward fiscal prudence

Labour members feel a strong pull towards promising the earth (PA Wire)

Keir Starmer should say that if he were prime minister now, he would not offer public sector workers more than Rishi Sunak is offering. There are three advantages to doing this.

One is that it is true. Starmer and Rachel Reeves, the shadow chancellor, can take no risks with the public finances. They hope that inflation will have eased and that interest rates will have started to come down by the time they hope to be in government towards the end of next year, but if they were in charge now Reeves has already said that she would not increase borrowing for fear of stoking inflation and interest rates.

The second is that it will lower expectations of what Labour can achieve if it wins the election. Starmer and Reeves appear to be genuinely alarmed, as they should be, by how bad their economic inheritance will be. The one thing they want to avoid is a Labour government that becomes unpopular straight away because voters expected things to get better immediately.

The third advantage is that being a responsible government-in-waiting will help to maximise the Labour vote at the election. This is the part that will be most vehemently contested at the National Policy Forum in Nottingham next weekend, and at its annual conference in Liverpool in October.

Labour members feel a strong pull towards promising the earth. Union leaders will line up to demand more money. That is, I suppose, what party members and union leaders are for. But the voters recognise that what a prime minister is for is saying “No”.

Of course, parts of the wider electorate are not above being tempted by shiny, unfunded offers, but the dominant mood among voters at elections is that of suspicion of promises that appear not to add up.

We have just had a demonstration of what happens when politicians try to defy the laws of economics, by borrowing to cut taxes. Starmer and Reeves have set their faces against Trussonomics of the left – of borrowing to pay public-sector workers more – and the voters will reward them for doing so.

Starmer is ignoring the predictable voices urging him to be “bolder” (Sharon Graham, general secretary of Unite) or complaining that there is no difference between Sunak and the “Red Tory” Labour leadership (most of Labour Twitter).

Even so, the Labour leader seems to be taking the path of least resistance in the party’s internal debates, by resisting the unions’ demands without being explicit about rejecting them. As my colleague Andrew Grice reports, Unite wants Labour to promise to “restore public sector pay levels that have been eroded by 13 years of cuts and freezes”. It also wants Labour to abolish the independent pay review bodies, which would take the country back to the days of annual negotiations between ministers and union leaders.

Starmer’s proposed wording is to promise to “improve public service workers’ living standards throughout the parliament”. That is a minimal commitment over a five-year period, but it should be backed up by a firm “No” to any further demands. The voters need to hear clearly and unequivocally that a Labour government will take difficult decisions to protect the public finances.

Although “just say no” sounds like a simple message, it is far from it in practice. The honest way of selling it would be to say that the government’s plans for spending and taxes are already hopelessly unrealistic, and so either spending will have to be cut or taxes increased, or both. As Paul Johnson of the impartial Institute for Fiscal Studies put it yesterday: “The only way the government’s current plans add up is because they have pencilled in impossibly tight spending targets after the next election.”

Starmer’s message to his party and the unions in Nottingham and Liverpool really ought to be: “No, public sector workers cannot have a pay rise; they should brace themselves for tax rises instead.”

But that is more truth than the electoral market will bear. As long as Starmer and Reeves stick to Conservative spending plans, they are safe. The Tories cannot attack Labour for sticking to their own unrealistic plans. The IFS can continue to point out that both emperors are equally naked, but the electoral playing field will be level.

Even if Starmer loses the votes in the party on pay policy, he has to say “No”. He cannot allow any divergence from the government on the public finances, because he cannot take any risks with public opinion.