What will UK PM Starmer tell the Labour Party conference?

Seldom, if ever, can a British prime minister, barely a year into office and sitting on an enormous parliamentary majority, have gone to their annual party conference with so much riding on it.

Yet that is the weird situation Keir Starmer faces this week at the Labour conference in Liverpool. His party, which is largely to the left of him, craves ‘red meat’ such as scrapping the cap that restricts payment of child benefit to the first two children in a family and a more aggressive stance towards Israel over the conflict in Gaza.

Two rival parties — the Greens and Your Party, the new vehicle being launched by his hard-left predecessor, Jeremy Corbyn — threaten to tap into that vote.

At the same time, the polls are led by Nigel Farage’s populist Reform Party, whose combination of nationalism and — so far as the economy goes — aspirations for big government, is peeling away votes from both Labour and the center-right Conservatives alike.

Business, which Starmer wooed assiduously before the general election in July last year, is in a particularly mutinous mood. His Chancellor, Rachel Reeves, unexpectedly hit them with a £25 billion increase in payroll taxes in her first Autumn Budget and, as a result, unemployment is rising, job vacancies are falling and hiring intentions depressed.

Specific sectors have been particularly alienated. A clutch of pharmaceuticals companies, including Merck and AstraZeneca, have paused or scaled back investments in the U.K. amid unhappiness at the drug pricing regime. Oil and gas producers, meanwhile, are shedding jobs after Reeves increased the windfall levy imposed on the sector.

Other policies have also irritated the world of commerce. The ending of ‘non dom’ status left many thousands of wealthy business owners and investors potentially exposed to U.K. inheritance taxes and a lot of them have left — the consequences of which are already showing up in the public finances. Farmers also face higher estate taxes and small business owners face higher capital gains taxes.

The unhappiness set in even before the Budget. A so-called ‘business day’ at last year’s Labour conference drew criticism after corporate delegates were charged £3,000 to attend, only to be denied access to cabinet ministers.

So this year’s conference — and his speech today to the party faithful — is an opportunity for Starmer to turn the page.

Business will need to hear, categorically, that there will be no more surprise tax raids on it. The banking sector, in particular, needs reassurance that it will not face extra impositions either in the form of a windfall levy or a reduction in the interest rate it receives on its deposits at the Bank of England — which has been mooted by a number of key Labour figures, including Gordon Brown, a former prime minister.

Then there is the possibility of some positive surprises. The oil and gas sector has been encouraged by reports that Labour may dilute its current policy — a ban on new exploration licences in the North Sea — by allowing tiebacks, new wells drilled on current licence areas, which could have the effect of reviving activity.

The pensions and investment sector would like to see a promise that there will be no changes this parliament to the tax regime that encourages savers to put aside money for their old age and allows them to take a tax-free lump sum from their savings.

And, longer term, there is an appetite for tax reforms that would make the U.K. economy more competitive.

They were summed up in a thoughtful letter to the Financial Times on Monday from Rick Haythornthwaite, chair of NatWest Group, who wrote: “The dialogue must now turn to the simplifying levers that can be pulled to restore tax progression, support long-term net zero ambitions, make investment irresistible and work…