And why ousting him is so difficult
Sometimes the UK seems like the epitome of political uncertainty. Not least in the last few weeks, as Labour’s disastrous local election results have raised very real questions about Prime Minister Sir Keir Starmer’s future. To give UK readers a crumb of comfort, it is worth remembering that, since the Second World War, the UK has had only 17 prime ministers. This is relatively low compared to Italy, which has had around 30 over the same period, and France and Japan, which have had 35.Scant consolation perhaps, as Starmer labours on amid a wave of resignations from MPs and pressure mounting on all sides. However, when Labour leaders have foundered, history tells us that it has proven difficult to remove them from the party’s top job. And so it is proving again.
This has not prevented its MPs from trying, mind you. The first Labour prime minister, Ramsay MacDonald, led the party from 1922 to 1931. He struggled to cope with the Great Depression and was expelled from the Labour Party in 1931 after forming a National Government with the Liberals and Conservatives. Despite being expelled, MacDonald remained prime minister until 1935, when he resigned due to ill health.
There was a plot in 1947 to remove Labour Prime Minister Clement Attlee and replace him with Ernest Bevin, who was considered by some to be better equipped to deal with the post-war economic crisis. One of the plotters was George Brown, who later lost to Harold Wilson in the Labour Party leadership contest in 1963. Brown was a serial plotter and attempted to oust Wilson in 1968, when Wilson was grappling with sterling devaluation and widespread protests against the Vietnam War. Wilson responded with a speech declaring, “I know what is going on, and I am going on.” He remained party leader until 1975, when he unexpectedly resigned due to ill health. If history is any guide, perhaps a bout of consumption is more likely to bring down Starmer than either Andy Burnham or Wes Streeting.
Perhaps the biggest plot in the Labour Party came with the breakaway of the “Gang of Four” MPs: Roy Jenkins (often described as the best prime minister the UK never had), Shirley Williams, David Owen and Bill Rodgers, who formed the Social Democratic Party. There were further attempts to depose Labour leaders in 1988 (to force out Neil Kinnock), 2006 (Blair), 2009 (Brown) and again in 2016 following the Brexit referendum. That year, Jeremy Corbyn faced the resignation of 21 members of his shadow cabinet and around 60 shadow junior ministers, yet still refused to resign. He then lost a vote of no confidence among Labour MPs by 172 votes to 40, but survived a subsequent leadership challenge, winning comfortably thanks to strong support from grassroots members. One minister who resigned at the time was, ironically, Sir Keir Starmer.
The only successful removals of sitting Labour leaders have been indirect. Tony Blair resigned in 2007 under sustained pressure from Gordon Brown and his staffers. Brown himself, after losing his majority in the 2010 general election, initially sought to continue in office leading a minority government, but soon stepped down following pressure from within the party.
The difficulty of removing a Labour leader explains the pressure being placed on Starmer to step down himself. To oust a party leader, the challenger must secure the support of 20% of sitting MPs (81 at present), as well as the backing of 5% of constituency Labour parties and at least two trade unions. This is difficult to orchestrate, as Wes Streeting is discovering, and more difficult still for Andy Burnham, who would first need to secure a route back to Westminster via a by-election before mounting his challenge. The Conservative Party is structured differently, and there is far more scope to oust an unpopular leader. There, a leadership challenge requires the support of just 15% of sitting MPs. The last Conservative government alone had five different prime ministers, four of which resigned in the knowledge that collapsing party support would eventually see them ousted one way or another.
Another obstacle for any potential Labour plotter is the lack of a clear, unifying alternative to Starmer who could both unite the party and improve its electoral prospects. None of the mooted candidates to replace Starmer appears to offer convincing solutions to the current challenges, including high welfare spending, immigration pressures, growing demands on the NHS, rising debt costs, the pension triple lock and the need for increased defence spending (ironically, the only part of government whose vehicle fleet does not need to worry about the poor state of the UK’s roads).
Andy Burnham has emerged as a central figure, though he is likely to veer to the left on economic policy. Labour MP Paula Barker demonstrated a troubling lack of understanding when she claimed that the markets would need to ‘fall in line’ under a Burnham premiership. Markets are not a single entity that can be controlled, but rather a reflection of the decision-making of individuals and independent institutions. Bond markets in the UK, especially at the long end of the yield curve, are showing that individuals are not brimming with confidence. At the time of writing, yields on the 10-year gilt exceeded the levels that brought Liz Truss’s short premiership to an end, as investors wince at the uncertainty ahead. At Callanish we moved away from longer-dated UK government bonds in client portfolios because of concerns about fiscal stability in the UK, shifting to a more global view in recent months.
It is not only the Labour Party that appears short of answers, but centrist parties more broadly. Faced with pressure from both left and right, they often feel compelled to respond to every economic setback, leading to step changes in the UK’s national debt and the associated servicing costs, to the point where the debt risks becoming unsustainable. In response, some commentators are now calling for “heterodox economic measures”, such as price controls, nationalisation of key industries, financial repression (keeping interest rates below inflation) and closer coordination of fiscal and monetary policy; a euphemism for renewed economic interventionism.
However, we have been here before, in the 1960s and 1970s. Such measures, particularly during periods of rising prices, have historically proved ineffective and have often led to even higher inflation. In the UK, inflation peaked at 24% in 1975 thanks to weak government and heterodox economic policies. High inflation makes it difficult for businesses to plan, tends to increase unemployment and erodes the savings of those who invest in supposedly “safe” assets such as government bonds. In addition, a large chunk of UK government debt is inflation-linked, meaning that soaring inflation would have a particularly detrimental impact on the government’s debt servicing costs.
The truth is that heterodox economic policies tend to deliver disappointing results. Recent experiences in Zimbabwe and Turkey reinforce this pattern, and there is little to suggest such approaches would fare any better in the UK today than they did 50 years ago. For gilt investors, this is the key concern as they look beyond Starmer to any potential successor. Markets will tolerate difficult choices, but not the denial of economic constraints. Without a credible plan to reconcile competing demands on spending, taxation, and growth, the UK risks drifting towards policies that test that tolerance. The sticking point will not be survival in Westminster, rather the far less forgiving judgement of the bond market.
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