[Interview] "New UK Government Faces Serious Challenges... Difficult to Change EU Relations"

"The new government will face serious challenges."

Jonathan Portes, Professor of Political Economy at King's College London, stated in a written interview with Asia Economy Daily shortly after the UK's July 4 early general election, which marked a change of government after 14 years, "The Labour Party has made it clear that promoting growth is a priority, but this is very difficult, time-consuming, and inevitably subject to broad global repercussions beyond the UK's control."

Professor Portes, a macroeconomics and policy expert with a background in bureaucracy, first defined the election result, which ended in a landslide victory for Labour, as a "comprehensive rejection" of the Conservative Party. He pointed out, "Under 14 years of Conservative rule, the performance of the UK economy was extremely poor," adding, "The productivity growth rate was also very low, so the standard of living itself hardly improved."

According to Professor Portes, this was triggered not only by global trends but also by policy mistakes of the ruling party such as austerity measures in the early 2010s and Brexit (the UK's withdrawal from the European Union). He said, "Austerity policies caused the gradual deterioration of key public services, a situation that has become more evident in recent years," and criticized, "The Conservatives' poor economic management worsened due to chronic corruption combined with chaos and incompetence." In other words, he analyzed that public dissatisfaction with 14 years of Conservative rule, marked by fiscal austerity, Brexit divisions, and various scandals, surged among UK voters, ultimately leading to a change of government.

In this context, Professor Portes expressed concern that the new Labour government’s first steps would not be easy. He said, "The Labour Party led by Keir Starmer showed a remarkable turnaround by securing a majority compared to the devastating defeat in the 2019 general election," but predicted, "They will face serious challenges."

The newly elected Labour Party had already prioritized "economic growth" before the election. They also clearly stated their policy not to increase the tax burden on individual workers, including income tax, value-added tax, and national insurance rates. Regarding this, Professor Portes expressed concern, saying, "Public expectations for improvements in public services will be very difficult to meet without tax increases or expanded fiscal spending," and "The growth that Labour has clearly prioritized is also very difficult."

Ultimately, it is expected that economic issues will hamper the new government and Prime Minister Keir Starmer due to limited fiscal capacity. Local analyses suggest that as below-trend economic growth continues and unemployment rises, the so-called "Misery Index"?the sum of unemployment and inflation rates?will increase until the end of 2025.

At the same time, Professor Portes sees little likelihood that the new government will renegotiate Brexit. He said, "The new government will want to improve political and economic relations with the EU," but noted, "Labour has already clearly ruled out rejoining the single market or customs union." He added, "Because of Labour's stance, significant changes to the UK-EU trade agreement are unlikely," and "Only relatively minor changes or adjustments can be expected." Professor Portes, who is active at the think tank 'Britain in Changing Europe,' has previously warned multiple times that Brexit would have adverse effects on the UK economy.

The recent wave of far-right populism across Europe is also considered a major variable in the new government's policy management. Professor Portes pointed out that a significant portion of Conservative votes in this election shifted to the far-right Reform UK party led by Nigel Farage, known as "Britain's Trump." The Reform UK party, which has advocated Brexit and anti-immigration policies, secured seats for the first time in history in this election, successfully becoming a parliamentary party.

Professor Portes said, "The core challenge for the new government is 'immigration,'" adding, "Like other parts of Europe, far-right forces will continue to push for more restrictive policies. However, if the government succumbs to this pressure, it will be even more difficult to realize the growth and public service improvements promised by Labour." The far-right forces mentioned by Professor Portes include not only the far-right Reform UK party but also far-right factions within the Conservative Party.

◇ About Jonathan Portes

- Born April 1966

- Bachelor of Mathematics from the University of Oxford, Master’s in Public Sector (Economics and Public Policy) from Princeton University, USA

- Current Professor of Political Economy at King's College London

- Member of the Royal Economic Society (RES), Senior Researcher at the think tank 'Britain in Changing Europe'

- Formerly with the UK Treasury, International Monetary Fund (IMF), UK Cabinet Office, and National Institute of Economic and Social Research (NIESR)

This content was produced with the assistance of AI translation services.