Chris Mason: Starmer and Reeves navigate tricky economic backdrop

Weak economic growth, soaring government borrowing costs, and a sharp drop in approval ratings are understandably causing senior ministers, especially the Chancellor of the Exchequer, considerable anxiety. The current dire economic situation is placing immense pressure on government officials.

It's important to note that Keir Starmer and Rachel Reeves represent the resurgence and return of the Labour Party in the 2020s, and they are committed to earning trust on economic matters. However, the markets have not positively received Starmer and Reeves' economic plans, and market volatility could trigger political instability. While these issues should not be overstated, they also cannot be ignored.

We are witnessing a difficult period of governance, with a stagnant economy that critics argue is exacerbated by government policies. Some Labour MPs are concerned about the challenges of governing, worrying about the complaints they are receiving and whether the government will have sufficient funds to support their priorities. In this context, it's not surprising that journalists are questioning the Prime Minister's confidence in the Chancellor. While the Prime Minister has expressed confidence, he has not explicitly committed to keeping Reeves in her role until the next general election.

Subsequently, some excited headlines appeared in the media, but Downing Street has stated that it does intend for Reeves to remain as Chancellor for the remainder of this parliament. Downing Street considers these discussions absurd, given that Starmer and Reeves have had a close relationship for years, and their political fates are intertwined. They both want the markets to stabilize and government borrowing costs to decrease, thus reducing the likelihood of having to make difficult decisions.

The Prime Minister has reiterated that the government's so-called fiscal rules, borrowing parameters set to demonstrate credibility, are non-negotiable. Combined with previous promises not to raise taxes, this strongly suggests that if government spending on servicing borrowing costs continues to exceed expectations, then spending in other areas will have to be reduced. Furthermore, the emergence of artificial intelligence signifies an industrial revolution unfolding on countless hard drives and computer chips.

The Prime Minister is keen to capitalize on the opportunities presented by artificial intelligence. One might argue that perhaps he can achieve better public services at a lower cost through smarter computers, or that, theoretically, computers can do things better and faster than humans. Many also anticipate that artificial intelligence will fundamentally transform the economy, boost productivity, and promote economic growth. Keir Starmer has adopted a positive and optimistic stance on artificial intelligence, emphasizing the opportunities rather than the risks and threats.

In recent months, the Prime Minister has been criticized for talking down the British economy, while his rhetoric on artificial intelligence seems quite optimistic, attempting to play the role of a Prime Minister guiding the nation's attitude on the matter. But history tells us that industrial and other revolutions disrupt the status quo, which means there will also be losers. How to address this challenge, both for society and the government, will be a problem for the future. For now, addressing the volatile markets and the stagnant economy is the immediate priority.