Labour will be thinking global, but their fortunes depend on the local
Labour strategists will be focused on what Trump’s victory means for Britain and the world, but the government will soon face big challenges at the local level, says James Nation
Following on from the US election result, takes abound on what Trump 2.0 means for the world and for the UK.
On the economy, there will be active discussions between the Chancellor and her advisers on the implications of a new OBR forecast in the Spring. Another forecast this financial year is unavoidable, in line with the OBR’s legal mandate. If the OBR finds that the threat of tariffs on the UK and the global economy forces them to revise down their growth forecast, then this will cause a big headache. Before the US election, gilt yield movements were enough to wipe out the Chancellor’s headroom. But if the OBR forecast worsens then, while desperate to call it by another name, she will have to do a full fiscal event.
On defence, the Prime Minister is keen to show leadership. He will want to project strength to Washington, perhaps by spearheading efforts for Europe to collectively commit to more spending on Ukraine. But Brussels will say that’s a bit rich, when the government’ still doesn’t have a timeline to get to spending 2.5 per cent of GDP on defence.
Given the big geopolitical changes, it’s all too easy to get sucked into a focus on the global (guilty as charged with the start of this piece). However, there are more immediate tests at the local level for the UK government.
In the May 2025 local elections, Labour will face an odd dynamic for a governing party. They will contest elections for the 21 county councils in England and ten unitary authorities in England, with the control of most of these areas held by the Conservatives. Given the extent of the defeat in July, should Kemi Badenoch’s Conservatives hold on in many of these places, then that will be a notable dent in Labour’s momentum so early on in the Parliament. Senedd elections in Wales in 2026 will be a concern for both main parties, with Reform likely to do all they can to exploit proportional representation for a strong foothold.
We can also see a complex dynamic emerging between Number 10 and Labour leaders across the country, whether local Mayors in England or Anas Sarwar in Scotland. Mayors will expect swift progress on devolution and join other Council leaders in demanding more resources for local government. Watch in December whether the government is prepared to allow for hefty increases in Council Tax as a result.
Mayor nightmares
Likewise, decisions in Whitehall are already creating awkward moments within the Labour coalition. Mayors – either by design or necessity – see the need to differentiate themselves from Westminster. Witness both Steve Rotherham in Merseyside and Andy Burnham in Manchester preserving the £2 bus fare cap while the Chancellor elects to lift it elsewhere in England. Or the difficulties posed for Sarwar in opposition in Scotland. Consider the irony of Holyrood receiving more money as a result of the additional spending at the Budget, only for the SNP to then make a point of using that funding to protect pensioners losing out on the Winter Fuel Payment, in direct contrast to the Chancellor’s decision. In general, welfare spending has the potential to become a big dividing line within Labour, as the Treasury looks for further savings that Burnham and others are likely to vocally oppose.
All of this suggests that whether Labour’s prospects improve over the next period could depend on their political dexterity at local level, as much as prioritising effective statecraft with the second Trump White House.
James Nation is the former deputy director of the Prime Minister’s Policy Unit and ex-special adviser to the Chancellor