How Labour Chaos Could Sink the UK Economy

Added: 2026-05-21

[00:00:00]Price controls, wealth taxes, nationalization, all the fun of the circus. It can only be a Labour leadership election. Welcome to the week in business with me, Christian May.

[00:00:15]Right, well, where to start? Um, first of all, I feel like an apology is due. I mean, this is beginning to feel like the week in politics, but you have to bear with me because really not since the very height of Brexit sick chaos has Westminster shenanigans affected the business environment quite so much. And forget about Liz Truss, because at least that was over and done with relatively quickly. Um, we're in a situation where we have a government that is still trying to pull certain levers to get through a crisis that's only growing.

[00:00:50]Um, and the music off is from its own party are figures who would like to lead it and shake up what passes for its policy agenda. So, let's try and unpack that a little bit.

[00:01:02]We'll get back to the leadership election, but consider what the government has been doing just this week. We had the most extraordinary twist. Uh, after I wrote a column in which I didn't hold back on the SNP's plans in Scotland for a cap on the price of certain foods. Uh, it never occurred to me that my entire criticism of that could just then be rewritten as a critique of the Labour government in Westminster because they began to flirt with precisely the same extraordinary idea as the lunatics north of the border.

[00:01:37]Rachel Reeves, Treasury officials talking to supermarkets. What we understand is that they were proposing to pull back on some of the more onerous regulations and red tape that they've wrapped the retail sector in in exchange for some sort of publicly declared voluntary cap on the price of bread and milk, etc., etc. Now, obviously, all hell broke loose when this story emerged and the retail chiefs involved in those discussions were not happy. And they were right to be unhappy about this most economically illiterate intervention from the Chancellor that I have ever heard of.

[00:02:16]Nothing could could could could indicate more the extent to which they've lost grip of economic principles and lost touch with reality than the notion that they could somehow interfere or intervene with pricing in what is the most competitive and effective market in the entire country. The British supermarket and retail space is one of the most extraordinary success stories, incredibly competitive, very tight margins, and as people from retail bosses themselves to the top brass at the Bank of England yesterday, when asked about this ridiculous idea, pointed out that if you look at the the uh the price comparisons and the price matching and the competition and the discounting that goes on in that sector, then it is much more effective as it already is than anything the government could do by wagging their finger or trying to encourage some sort of price cap. And by the way, we do have to take a minute and consider that what this Chancellor and this government have done on business to the tunes of tens of billions of pounds worth of tax increases on national insurance, on labor costs, the Employment Rights Act, we see this week survey data pointing out the extent to which employers already bewildered by that and deterred from hiring, to say nothing of the energy costs, the business rate increases, and and even taxes on plastic and packaging. The government has imposed an extraordinary amount of of taxes and regulations on the retail sector, and now has the gall to tell them that they need to lower their prices, when in fact they've they've kept those prices unbelievably well controlled in an environment in which the government has just been throwing bombs at them left, right, and center.

[00:03:56]So, let's park that policy. I don't think it will see the light of day again. It's unbelievable situation.

[00:04:01]The Chancellor now forced to consider what other levers she could pull to help Brits through the cost of living crisis that is going to get worse over the months ahead. And she's landed on free bus travel for children in August, which I think tells you the extent to which they've got no room for maneuver.

[00:04:21]But also in a sensible turn of events, she's going to cut the tariffs on food.

[00:04:26]Cut the import duties on things like chocolate and and and nuts and things that we import into this country. A freedom by the way only made possible because we're not in the customs union.

[00:04:36]Now, let's move on to the Labour leadership election and where that might take us. There almost certainly will be a change of Prime Minister over the course of the summer. And what are we to make of it? Where are they going to go?

[00:04:48]Is anybody going to ride into the rescue and and and and make some big uncomfortable decisions and some big important arguments about the size of the welfare bill in this country or the imposition of taxes on the productive part of this economy or the employment crisis and the youth unemployment crisis? No, they're not. They're more interested in total nonsense. Andy Burnham has been fluttering his eyelashes and talking about Margaret Thatcher as the root of all evils in this country, says that he wants to undo the damage that she inflicted all those many many years ago now.

[00:05:21]And he's said that we need to nationalize industry and energy and want to control the cost of rent and all these kind of crazy left-wing ideas. Wes Streeting for his part, who probably won't be Prime Minister if Andy Burnham wins his by-election at the very least, has said today that he wants a wealth tax.

[00:05:41]But he says, and this is very important, he wants it to be a wealth tax that works as opposed to all the wealth taxes that don't work.

[00:05:48]Um and the idea that he's landed on is to increase the rate of capital gains tax to bring it into line with income tax rates. Now, this is a little policy that has been fetishized by um certain parts of of uh the left-wing economic debate, left-wing think tanks, Labour MPs. Always gets them a little frisson um of uh of excitement, little dopamine hit uh because they think it's terribly clever very elegant and it has all the advantages of correcting an injustice and without being a wealth tax and it would raise loads of money. It's complete and utter bollocks. The idea that you can just simply whack up capital gains tax rates in line with very high income tax rates without any of the distorting effects and consequences that any other kind of wealth tax would impose upon this country and its competitiveness and its attractiveness and its overall tax rate is for the birds. But here we are. This is where we're going. This is the kind of crap that gets floated and thrown up in the air during a Labour leadership election where they've got all these different factions to try and win over.

[00:06:51]So whether you're going to end up with Ed Miliband or Angela Rayner or Wes Streeting or Andy Burnham, this is where we're going. The government will move to the left uh and given that they probably won't be able to borrow any more and smash through their own fiscal rules in that regard, there will be tax increases uh following uh a government of uh Keir Starmer and Rachel Reeves that have raised taxes by about 70 billion quid with what to show for it, by the way. Uh they're going to try and do this all over again. So it is going to be a circus um but I'm afraid it won't be very entertaining. I'm afraid it's going to be quite painful. Uh anyway, we'll keep a close eye on it here. Uh so that will be it from me this week. Do stay up-to-date and in the know on the City AM app and on cityam.com.

[00:07:36]I'll see you next week. God knows where we'll be by then.

[00:07:47]>> Mhm.