What are the big issues facing the new PM as Starmer announces resignation?

Sir Keir Starmer has announced he will stand down as Prime Minister, and whoever replaces him will be faced with a complex series of policy choices.

Here is a summary of the main challenges facing the next Labour leader.

– Economy

Sir Keir took office pledging to prioritise economic growth with an ambition to establish the UK as the fastest-growing economy in the G7.

But growth has been largely underwhelming since Labour took office in 2024.

Gross domestic product increased by 1.4% across 2025, with a 0.6% expansion in the first three months of 2026.

The new Prime Minister will be determined to break the cycle of sluggish growth and low productivity, a challenge complicated by external factors such as the conflict in the Middle East.

While there has been some progress on the US and Iran agreeing a peace deal, the complexity of the issues involved and political volatility mean talks could break down or become protracted.

Instability in the event of a leadership contest could see borrowing costs rise further.

The yield on 30-year UK government bonds, also known as gilts, have recently hit historic highs, so efforts will be needed to reassure the markets.

– Welfare

Sir Keir’s failed bid to cut welfare spending last year by restricting eligibility for the personal independence payment (Pip) turned into a major crisis for the Government.

The next prime minister will be all too aware of the dangers of welfare reform, demonstrated by 100 MPs opposing personal independent payment (Pip) reforms.

Welfare minister Sir Stephen Timms was tasked with reviewing the Pip assessment process, but it feels unlikely a new prime minister will return to the specific issue and is likely to seek savings elsewhere.

– Foreign policy

Sir Keir has been praised for his performance on the international stage, which has seemingly provided respite from the challenges back home.

He has been a key player in the so-called “coalition of the willing” of largely Nato allies backing Ukraine in its war with Russia, including with funding for weapons.

Decisions will be needed on whether to continue Sir Keir’s aim of positioning the UK “at the heart of Europe”, and how to manage a relationship with US President Donald Trump.

– Education

Proposed reforms of special educational needs and disabilities (Send) education have proved controversial and could cause discord on the Labour backbenches.

The proposals could make it more difficult for children to get a care plan including legal entitlements.

The cost of providing them has risen for councils in recent years, with £14.8 billion projected to be spent in 2025-26.

The topic has been regularly raised by MPs since Labour came to power in July 2024, and there is a general consensus that reform is long overdue.

But there are concerns the Government’s reforms will leave some children without support.

– Immigration

Labour took power promising to stop small boat arrivals on the south-east coast of England by “smashing the gangs”.

Net migration has fallen significantly under Labour, with a drop of 171,000 people in 2025 – a 48% decrease on the previous year.

That is a positive narrative that a new prime minister could seek to amplify in response to an issue that polling suggests is a high priority for many voters.

Home secretaries Yvette Cooper and Shabana Mahmood have signed agreements with France aimed at deterring crossings and the Government has passed laws targeting criminal networks behind the boats.

But small boats have continued to arrive, with 2025 seeing the second-highest number of crossings since they began in 2018.

Efforts have begun to limit housing of asylum seekers and refugees in hotels, an approach which is likely to continue in light of high-profile protests.

– Defence

The Government remains under pressure to publish the long-delayed defence investment plan, an issue that has been a key element in the story of Sir Keir’s downfall.

The resignations of John Healey as defence secretary and Al Carns as armed forces minister, over what they deemed to be an inadequate funding settlement for the plan, contributed to a growing sense that Sir Keir was losing his grip on power.

The plan itself could be published soon, but the new prime minister will surely review the funding plans, particularly the criticised allocations in the initial years.

The Government has committed to spending 2.5% of GDP on defence by 2027, which will increase to 3% in the next parliament, and a Nato-agreed target of 3.5% by 2035.

A stand-off between the Treasury and Ministry of Defence is thought to lie behind the delay in publishing the plan.

The new leader would have an early opportunity to diverge from his predecessor on funding while maintaining the core principles of longer-term spending goals.

– Housing

Labour has pledged to deliver 1.5 million new homes in England over the course of this Parliament.

But figures suggest building will have to pick up pace to meet the target.

Reforms to planning and processes are under way, but a new prime minister is likely to want to give the issue greater impetus with evidence of progress.

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