483. The Future of British Politics, How The World Order Is Changing, and The Power of History

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1:27Welcome to The Rest is Politics on New Year's Eve with me, Alistair Campbell. And with me, Rory Stewart. New Year's Eve is where both of us are to be found in Scotland. Yep. Getting ready for New Year's Day. I think you're probably a little bit further north than me in Perthshire, is that right? A bit further northwest? No, way further north, up in Argyle, near Fort William. Lovely. Near Glencoe, Rory, scene of... Oh, don't, don't, please. We don't, we don't. I went to the Glasgow Art Gallery when we were doing our performance in Glasgow and sent you a very, very fine photograph of the massacre of Glencoe.

1:59Yeah. Everybody just generally looking as we all feel after the Campbells have been through. Have you ever been to the Glencoe Massacre Museum? There is a museum. Yeah. I mean, I wouldn't normally go there if I was called Alastair Campbell. I'm not sure that's there. But, you know, never been scared of controversy or pushback. Luckily for you, Rory, you're not called Alastair Campbell. You're called Rory Stewart. New Year's Eve is also the time when we pathetically sort of sit down and do a few New Year's resolutions. Let's not do them for ourselves. Let's do them for the political parties instead.

2:31Let's do that. Well, let me start you off then, Alistair. What do you think the New Year's resolution should be for your own dear party? What should Labour's New Year's resolution be? Well, I've actually gone down the three-word slogan route and I've got two. They're linked. Okay. Go for growth and get a grip. Growth was meant to be the number one mission of the Labour government. The recent budget that we talked a lot about was, as you kept pointing out, not really focused on growth. Growth is the key to all the things the government wants to achieve. So really, really focus on that and get a grip because too many of the wounds of the last 12 months, I would argue, have been self-inflicted.

3:09And that is because of this lack of coherent messaging, coherent narrative and a grip where everybody knows what everybody else is meant to be doing. So that is my New Year's resolution for Labour. Go for growth and get a grip. I was slightly sadly re-listening to this episode that we did 12 months ago. And what was interesting then is that we already could see that Starmer was no longer using the word growth. He'd started talking about rising living standards or faster GDP growth per head. I mean, the stuff which basically was much, much lower bar stuff that we've mostly seen since the Second World War.

3:45And last night, I was talking to my friend Felix, who's an economist, Felix Martin. And he was saying that the sort of things that Labour should be doing to get that growth are fourfold. Number one, much more imaginative about changing the way banking and finance works in Britain. One of the big changes that's allowed the US to grow very strongly over the last 10, 15 years is that the banking regulation they put in after 2008 was a better balance between managing risk and actually allowing people to invest and take risk. So we've got to sort that out. Secondly, something that will be music to, I think, the ears of many people in Labour, which is planning, where I think Labour has actually done quite a lot.

4:26There's been some very interesting recent announcements. Maybe we didn't give enough credit during the budget to Labour's announcement that in Marlowe, a big new film studio will be built, which I think would be a really good sign for the British economy. Third thing where I think we tend to agreeably disagree, which is energy prices, that Ed Miliband needs to really work out how we're going to get energy affordable for people and above all for businesses. And then I think the final thing is this whole question around deregulation and the endless creep of bureaucracy and rules into every bit of life, which most of us on the slightly more soft right side feel is choking business and entrepreneurship.

5:03Would you agree with those four as part of your growth recipe? I would. And also there are others that I would add. I would add Europe and post-Brexit fixing the mess, which Keir Starmer did signal in that speech he made after the budget. But it's interesting, given you've introduced these themes, one of the things we're going to be talking about later is politicians to watch out for in 2026. And one of them that I was going to mention, but I'll mention it now because it relates to what you've just said. And even though he's quite well known, I think he should be much better known. and that's Peter Kyle.

5:33I think what's really interesting, the reason why I would say he's worth watching, because in that Keir Starmer speech, where he talked about asking him to take on the findings of the Fingleton Review on nuclear power and address them across the economy. And I thought one of the things that happened late in 2025 that didn't get nearly as much attention as I thought it would, was this compromise that Peter Kyle had brokered between the unions and business on the implementation of the Employment Rights Bill. And I thought that was a really interesting sign because what he did essentially was to get unions and business in together and say, okay, Angela Rayner brought forward this bill.

6:11Business hates it because it's basically saying you will get employment rights from day one, including unfair dismissal, et cetera, et cetera, et cetera. And he seems to have managed to bridge that divide in a way that didn't create mayhem when he announced it. He had a few MPs shouting at him. And then the next thing I think was interesting. I just wonder whether what Keir Starmer was signalling in relation to him specifically saying, I've asked Peter Kyle to take this across industrial strategy, is actually whether he's signalling that Peter Kyle's job, in a way, is going to be to focus on growth.

6:46And I think Peter Kyle could be great at this. And a couple of things. I mean, one, it'd be great to see him sitting down with people like my friend Felix to try to work out how you do this. But the second thing, which I think is exciting in terms of politics, is that many of these things are, in technical jargon, supply-side reforms. In other words, they're not necessarily things where Labour needs to have a huge fight with its backbenchers about tax. These are Peter Kyle issues, many of them, not Rachel Reeves' issues. They're things that the government could change without getting into brutal conflicts with pensioners, welfare.

7:22What they take is some courage. I mean, obviously, there will be pushback. There'll be pushback from people who don't want housing built. There might be pushback from some bits of the environmental movement if you started taking some of the radical steps to drop energy prices. There might be some pushback from people worried about risk and banking. But I think that's probably an area where Peter Carr really could do stuff. He's got opportunities there in the whole regulation. I believe the Financial Conduct Authority, for example, has gone from a few hundred people when it was set up to nearly 3 ,000 now, which is a really sort of interesting bit of data.

7:57That's the Tories' fault. I mean, they allow this huge ballooning bureaucracy to emerge. And of course, the reason why it happened is we were all very frightened about the financial crisis. But what we mustn't do is get into this very simplistic black and white. Either you have a financial crisis or you need total choking over-regulation and no risk at all. Peter Kyle's opportunity is to say that's a ridiculous choice. If we're thoughtful and sensible about this and look at what people like the US have done, actually, maybe we could get capital markets going. And just to sort of end that story, part of the story about this famous thing, which is that we create these amazing companies in Britain and we have great ideas in Britain and Demis Hussabes creates the AI revolution in Britain, and then it all moves to the US, is that we just don't have flexible enough credit markets to provide the money for these businesses to get them going in Britain and indeed actually across Europe.

8:49That's the kind of big picture international side of things. I also think we haven't focused sufficiently on regional development and the role of the regions. So I hope there's a kind of devolution agenda attached to this as well. And your point on energy. So for example, one of the kind of debates has been going on. We talk a lot about, you know, AI and these massive data centers and Peter Carl's very much been pushing on those. And we know that they're going to require an awful lot of electricity. So they've got to be sort of linked into the green agenda debate as opposed to being seen as in conflict.

9:21Anyway, I think we're on the same page on this. I think that the growth was one of, the promise of growth was one of the reasons why business did get behind the Labour Party and opposition and then the government. And the lack of focus on it is one of the reasons why they've got a little bit pissed off. So I think that we're singing from the same hymn sheet for Labour. What about your old party, the Tories? If you're sitting down writing their New Year resolution, what should it be? One of the questions here is about people showing grip. I like your grip, or another word would be agency. Oh, no, no, no.

9:53Agency is not the same as grip. No, no, no, no. Grip is different. Grip is different. The basic idea is that you can make a difference. The world doesn't have to be, you know, 2026 doesn't have to be a sort of gentle, pessimistic drift of continuations of 2025. If it were, you know, you could tell a story where the Tories just continue to be pretty ineffectual, factional, unable to resolve whether they're going to go to the right or the left and really unable to get support behind them in the polls. You can tell the same story, I think, for most of these parties, that 2026 is just a sort of slightly disappointing version of what they did in 2025, which is where leadership comes in, or maybe your grip point.

10:28My hope for the Conservatives is that they seize this message around growth and that they really compete with Labour. Let's say this is where Peter Kyle's going. Let's see the Conservatives lay out a platform on this and really explain what they would do. So, for example, the Conservatives could pursue a more radical energy policy. It could be very controversial. They're already beginning to, you can see this, Claire Cattino, the shadow energy secretary, talking about dropping net zero. And she says, coming up with a different vision of how you can reduce Britain's carbon consumption and footprint without tying itself into these very strange subsidy financial knots.

11:10Second thing I think they could be doing is really thinking about this question of how we ended up with a million extra people out of the workforce. And that's not about aging. We often say that our choices are constrained because we're getting older and older. But there's a million extra working age people who've remained outside the workforce, many of them on different forms of welfare and disability payments, many of them with mental health challenges. a conservative message that really talked about how you get the incentives right there to get people back into work i think would be a smart thing so that's my conservative one let me come to you on what the new year's resolution might be for the party that you're sometimes sympathetic to the green party excuse me am i am i allowed to comment on your party yeah go on you gave a full spiel about the late party i i was sticking with a three-word slogan for the tories that is own your past.

12:01And what I mean by that, I think all the things you're saying are perfectly sensible thoughts for them. But I don't think they're going to get a proper public hearing until they are honest about the extent to which the problems that the current government are dealing with are the consequences of choices that the Tories made. And I think until they do that, the things that you've just said there, which they could present in a very sensible way, I think will be seen entirely in the context of them trying to take on reform. Presumably, there are two things they could do there. One of them is to say, we screwed up, did a lot of things wrong.

12:33They may not want to go quite as far as what you just said, which is all the problems that the current government is dealing with were caused by us. No, I'm not saying that. I'm not saying that. What I mean by own your past is have a proper analysis as to why you lost the general election so badly and admit within that some of the decisions that you made are part of the problem that the country faces right now. And you see, the fact that they have got a new leader, even though she was part of that cabinet, it does give them agency, to use your word, to try to shape a new agenda. I don't think if they do come along with a new agenda, I think at the moment it will not be listened to properly, out with the context of they're worried about reform.

13:14That's what people will think if they hear what you just said on energy. And then the other thing I think when we talk about get a grip, I think that Kemi Badenok, and I think she's in a stronger position than she was, I think she needs to get a grip of Robert Jenrick because you have a sense of two strategies playing out at the same time. So I think the thing that unites both of them is them just being more honest with the public. So every time that Labour says something at the moment, the Tories come out and say, well, what are you talking about? You've had 15 months, you've had 18 months, whatever it might be.

13:45But I think there has to be some humility and some honesty. Otherwise, they wouldn't have got smashed in the way that they did. Yeah. And maybe you identify people who are responsible. You define this is what Boris did wrong. These are the two big policies he mucked up. He mishandled immigration. He mishandled COVID. He mishandled Brexit. And this is what we've learned from it. This is what Liz Truss did wrong. And then maybe you don't lean very hard into Rishi Sunak and Jeremy Hunt. You might explain them as being products of the kind of Boris Truss catastrophe. But above all, I think you need an analysis of where our economic policy went wrong since 2019.

14:23So from the point that Boris took over, because I know I'm often accused of being myopically, madly anti-Boris. But if you look at the data, the real problem with our productivity, GDP per capita compared to other countries, particularly compared to the US, starts in 2019. That actually the story 2010 to 2019 was disappointing. But in relative terms, the real catastrophe goes wrong in the Boris era. Okay, Rory, what about the Lib Dems? They don't get, you know, they've got more MPs than the Reform Party and Greens put together by some considerable margin. But my thought for them is that they need, and they're kind of getting to this, I think, they need a big national message that doesn't contradict with their traditional, very effective local campaigning.

15:09And I think that relates to Europe and Brexit. Take Brexit where they are pretty outspoken, but they're getting competition from the Greens on that now, but they then need to localize it. So they have to sort of have a big national message that allows them to campaign locally. And that for me is Europe. So I would say focus even more than they do now on Europe. And is the risk that they feel, if you're a local candidate, that almost any national message is going to alienate some of your voters? And Lib Dem local MPs hate having to defend a national platform. It's much more comfortable for them in the short term to just be campaigning about local issues.

15:48And almost whatever the National Party says, they then think, oh, God, on the doorstep, I've got to defend what they said on tuition fees or what they said about Brexit or what they said, whatever. Well, look, the downside for the Lib Dems is that they don't get as much coverage nationally as they'd like to. The upside from that is that they can actually do both. They can pursue a national message. And of course, the thing about Brexit, it takes you to the economy, it takes you to foreign policy, it takes you into all the areas that you want the leaders to be talking about. So I don't think they're necessarily inconsistent.

16:18I just think that would be my plan for them. I would say like, you've already started on this journey, really own it and really go for that as your big thing. In the most ambitious world for the Lib Dems, what would it take for them to break through and become the second largest party in parliament over the next three years? What would they have to do to do that? Well, they'd have to see the others collapse. And of course, at the moment, you know, the focus we'll talk about reform in a minute. The focus on reform has been part of this debate about, are we seeing the end of the sort of traditional two-party dominance?

16:49And it used to be the Lib Dems that featured in that. And in many ways, they should still be featuring that. But I don't think that's where they want to be. I think they want to be building on the success they had at the last election electorally. And I just think that their problem is always people don't quite know what the Lib Dems stand for. And I think this would give them a big way. You're saying their aim at the next election should be to get, let's say, another 10 or 20 seats and that it's the election after where they want to be the first or second largest party in parliament. Well, no, listen, I mean, look, things are so volatile.

17:19We've said many times on the podcast over the year, we've now got a kind of five, six party politics in a two party system. The Lib Dems are very much in the mix of that, of the churn that could come in that. So if I were them, I'd aim very, very high. But all I'm trying to say is I think they need a national message that knits with their very, very effective local campaign. What about reform? We mentioned reform now. What about reform? What should they be doing? Well, reform, you know, if they have their dream, they replace the Conservative Party as the default party of the right. And they capitalise on all those problems you pointed out, which is the Tory party basically lost the one thing that mattered to them.

17:56And we kept saying this during the Liz Truss period, that the one card that the Tories had to play is they were considered to be a little bit more cautious and sensible with your money. The story that Tories always sold was, we may be the nasty party and Labour may be nice and more compassionate people, but in the end, we're cautious and careful about spending and taxing. And Liz Truss blew that by scaring the markets and feeling irresponsible. sport. So what reform has to do is to present to all those natural conservative voters. And in many ways, Britain is a much more small seat conservative country than people quite understand.

18:33Compared actually to many European countries on lots of different issues and opinion polls, you'll find the British are more in favor of pro-business, pro-market, small government policies, and a bit suspicious of the left. You know, it's not very difficult to say to the public at the moment. Listen, what really is the... I had this talking to a Greek person recently who said, what's happened to Britain? It's completely mad. She's a Greek doctor thinking of leaving Britain. And she said, I don't understand what's happening. I don't understand what the government's doing. All our wealthy friends are looking at leaving Britain.

19:04And I said, it's pretty straightforward. We've elected a left-wing government and their instincts are obviously going to be a bit left-wing and you should be familiar with this from Greece, right? When you get a left-wing government in, they're less pro-rich people. They're more pro-equality. They're going to put your taxes up. they're going to spend more, they're going to be in favour of big government. It's not very surprising, right? But that instinct, that sense is what reform needs to use. They basically need to say, listen, all you need to know about Labour is that they're more left-wing than you think, and all you need to know about the Conservatives is that they're hopeless and they're finished.

19:34Well, that is kind of what they say. But I think if I were reform, I think that they've got, I think this could be, and I hope it will be, a much more challenging year for reform. I still think the Russia influence story has not been remotely fully told, and that needs to be told. I also think that they had considerable success in the local elections. That means they now have quite a lot of power in local government. Virtually everything you hear about them in local government is bad for reform. So Nigel Farage loves being the sort of big guy, and he gets loads of media, and what have you, and he likes the big moments.

20:07If I were them, my new resolution would be actually to focus on their performance in local government and get a grip of it. Because I think that that will become a theme as we go over the year. And the other thing I'd say is I think they've got to be very, very wary. If it is true, and it may not be true, but if it is true, as Nigel Farage says, that there is no way he's ever going to deal with the Tories, I think they've got to be really wary of all these Tory retreads that keep coming their way. I mean, when they were trying to celebrate the arrival of Jonathan Gullis, a man who said, you know, over my dead body, would I ever join reform?

20:41And now he's there. I mean, Danny Kruger's got a bit of a kind of, you know, Etonian intellectual feel to him. You can sort of say, yeah, well, OK, I can see that one. But, you know, Nadine Dorries, Maria Caulfield, Gullis, Anne-Marie Morris, Anne Whitticum, it's looking very much like the Tory party that the country really couldn't stand any longer. So I'd be wary of that. I get why they like getting the sort of publicity hit every now and again. And then so I think that's a couple of things. I really hope this will be the year that reform come under proper scrutiny because we haven't had that yet.

21:17We're going through these New Year's resolutions in a lot of detail. So I'm going to give you three. Greens, Plaid and SNP. What do you think their New Year's resolutions should be? Okay, well, Greens, not least because of the extraordinary sort of, I mean, I don't know if you saw, Rory, just how much analysis there was on the left, and particularly by Green Party supporters of our interview with Zapolansky. But my advice to him would be to get an economic voice, possibly one of the people he mentioned, like Richard Medway or Grace Blakely and the other people he mentioned, and actually get them to become your economic spokesperson.

21:52A bit like, you know, Zia Yusuf has been dragged in by Farage to sort of project a sense of, you know, business voice and what have you. So I would do that for the Greens. If I was the SNP, this relates a little bit to the Tories. I think own a bit more of the critique. Stop being more defensive and saying that everything you've ever done is great. Own a little bit more of the critique as a way of saying, and this is how we're going to do the next steps. Plied, I've got a very interesting and unusual suggestion here. Yeah. So Fiona and I have been watching this TV series called The Beast in Me.

22:23I don't need to go into the story. It's a pretty dark kind of American drama. But anyway, the actor, the main star, is this guy called Matthew Rhys, R-H-Y-S. And I thought, that sounds really Welsh, because he's playing an American guy. So I looked him up, and he is Welsh. And not only is he Welsh, he's a supporter of Plaid. His first language is Welsh. It's probably why he's so good at it. Honestly, you wouldn't know he was not British when you were watching him play this thing. So if I was plied, I'd phone up Matthew Rhys and I'd say, come on, come and get involved in this campaign. We need a bit of showbiz and a bit of life.

22:58And of course, the reason why it matters a lot, the performance of the so-called smaller parties, is because one of the big events in 2026 is going to be the local elections alongside the Welsh and Scottish elections. And I think there's a feeling abroad that if they are very, very, very bad for Labour, then we're going to revisit the whole thing about, you know, Keir Starmer, Rachel Reeves and all that. So this is going to matter. A while back, I think Anasawa, who you and I both like a lot, I think he was looking, you know, not nailed on, but he was looking very, very strong in the upcoming Scottish elections.