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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Governments are like plays: if the third act is unsatisfactory, the problem can usually be traced back to the first. Britain’s new(ish) Labour government is a case in point.

Labour’s first act problem lies in the decision the party leadership made in opposition to rule out any increase in income tax, national insurance or value added tax. Everything it has done in the four months since entering office, and everything it does for the next five years, will in one way or another be distorted by those pledges.

While the party’s focus groups consistently find that the condition of the UK’s public services in general and the NHS in particular matter more to their re-election hopes than anything else, its tax pledges place hard limits on how much can be spent on those services.

As a consequence, and in order to fulfil Labour’s ambitions, businesses have to take a greater share of the strain, with all the negative implications that has for the UK’s already sluggish economic growth. Some of the policies involved are particularly ill-timed. For instance, Britain has made its rules on non-domiciled high earners from overseas less attractive at precisely the point at which the country faces a generational opportunity to attract talent looking for somewhere else to go following the election of Donald Trump in the US.

In some ways, it’s not a good idea to over-intellectualise about why Labour are raising taxes in this way. The shared lie in British politics for the best part of a decade now has been that you can have excellent public services for the many funded by taxes on the few. Mitt Romney was unable to convince a much more naturally pro-business electorate that corporations are in fact people, and while that argument is no less correct in the UK, it has even less hope of landing any time soon.  

But two measures are worth thinking about in light of another promise made by both Labour and the Conservative opposition: to reduce the UK’s net immigration statistics. These are the souped-up national minimum wage and the rise in employers’ national insurance contributions. Taken together, they represent significant new costs on hiring people — other than in the public sector, which will be exempt from the increase in NICs.

Increasing the cost of employment is generally a bad move with plenty of negative externalities — unless, that is, you think that the British public won’t bear greater levels of immigration or that we actually need to see net decreases. The former is the dominant position in the Labour party. The latter is the official position of the Reform party and becoming more widely held among Conservatives.

If you believe that, then you are no longer in the business of working out how best to attract talent. Rather, you are in the business of working out how to deploy your current labour force differently.

You absolutely do want to disincentivise hiring someone to work in an Amazon warehouse or at a supermarket checkout so that you can fill vacancies in the social care sector or the NHS without recourse to further immigration. You do want the restaurant and hospitality sector to struggle and to shrink in order to free up additional labour market capacity for the state. You want fewer people in the private sector in general in order to be able to get by with a falling number of working age people and the current level of state provision — even more so if you want to maintain or increase the current level of financial support for the retired. This, again, is the position of both the Labour government and the Conservative opposition, which opposed even the relatively trivial measure to means test the winter fuel allowance (a Tory policy as recently as 2017).

Now, it’s true to say that there are some positive externalities here: a supermarket that invests in a self-service checkout with a skilled tradesperson to repair it is a good proposition. And the irony is that all of these measures have been what Conservative backbenchers have long claimed to want, only to discover that when they are implemented by Labour ministers they became repugnant.

There’s a lesson here for both the government and the opposition. If the prospect of squeezing out private sector jobs in order to keep the standard of public service provision up and the number of immigrants down is so unpleasant, then something needs to change. One or both of those impossible promises is going to have to be traded away, openly and explicitly. Failing that, both sides need to relax, stop worrying and learn to love Rachel Reeves’ Budget.

stephen.bush@ft.com

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The US Department of Justice is seeking to drop two federal criminal cases against Donald Trump, abandoning its historic attempts to prosecute the former president after voters sent him back to the White House for another term.

Special counsel Jack Smith, who was appointed to oversee DoJ investigations involving the former president, said in a court filing in Washington on Monday that a case accusing Trump of interfering with the 2020 election must be dismissed before his inauguration in January. He cited a long-standing DoJ policy against indicting and prosecuting a sitting president.

“That prohibition is categorical and does not turn on the gravity of the crimes charged, the strength of the government’s proof, or the merits of the prosecution, which the government stands fully behind,” Smith wrote.

Smith’s office cited the same policy in a filing with a US appellate court seeking to end proceedings against Trump in a separate case over the retention of classified documents. That case had already been dismissed by a federal judge, and Smith had appealed against the dismissal.

Trump wrote on X: “These cases, like all of the other cases I have been forced to go through, are empty and lawless, and should never have been brought.”

He added: “It was a political hijacking, and a low point in the History of our Country that such a thing could have happened, and yet, I persevered, against all odds, and WON.”

The filing in the election interference case seeks dismissal “without prejudice”, meaning the case may be refiled at a later stage. 

For now, the requests will sound the death knell for what has been an unprecedented effort to prosecute an ex-president, in two separate cases, for alleged crimes at the core of America’s democratic system of government.

The DoJ indictment that last year accused Trump of mishandling classified documents made him the first former US president to face federal criminal charges. It was quickly followed by the election interference case, which focused on the events between the 2020 election and January 6 2021, when a mob of Trump supporters stormed the Capitol.

Some Democrats had hoped the legal challenges — which also included two separate criminal cases in state courts — would dent Trump’s popularity leading up to the 2024 polls, but in the end they only galvanised his base.

Trump has pledged to seek retribution from individuals he believes have been wronged, and has called for the prosecution of his political opponents, including current vice-president Kamala Harris.

Since his appointment as special counsel in November 2022, Smith faced a tight timeline to obtain indictments against Trump ahead of the 2024 election. He also became a target of fierce attacks by Trump’s allies, who have accused the DoJ of unleashing a political witch hunt against the former president — claims strenuously denied by the justice department.

Only one of Trump’s criminal cases ultimately made it to trial: a New York state court proceeding over alleged “hush money” payments to a porn actor, in which he was convicted on all 34 counts. Trump’s sentencing was postponed repeatedly, however, and last week a court said the delay would be extended indefinitely as Trump returns to the White House.

Smith was one of several special counsels appointed by US attorney-general Merrick Garland to oversee politically sensitive investigations. One was named to examine President Joe Biden’s handling of classified documents, while another was tasked with overseeing cases against Biden’s son Hunter. Joe Biden was never prosecuted and Hunter was charged in two cases.

Smith, a career prosecutor whose past jobs have included working at a special court at The Hague hearing Kosovo war crimes cases, acknowledged the unprecedented nature of his work in the filings on Monday.

“The government’s position on the merits of the defendant’s prosecution has not changed. But the circumstances have,” he added, citing Trump’s win in the presidential election.

Smith’s requests cite two DoJ opinions issued in 1973 and 2000, which held that prosecuting a sitting president would “unduly interfere” with the presidency.

While the classified documents appeal would be dropped against Trump, Smith noted that it would continue against two co-defendants, Trump aide Walt Nauta and a property manager at Trump’s Mar-a-Lago estate. Both have pleaded not guilty.