Up next in 10
What's left of the Labour government is scrambling around for policy ideas as the UK economy faces a battering storm, while Labour leadership candidates Andy Burnham and Wes Streeting have fired the starting gun on a new debate about tax hikes, spending plans, Brexit and how to beat Nigel Farage. City AM Editor Christian May says businesses should buckle up for another crazy ride.
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0:00
Price controls, wealth taxes,
0:02
nationalization,
0:04
all the fun of the circus. It can only
0:06
be a Labour leadership election. Welcome
0:09
to the week in business with me,
0:10
Christian May.
0:15
Right, well, where to start? Um, first
0:18
of all, I feel like an apology is due. I
0:20
mean, this is beginning to feel like the
0:22
week in politics, but you have to bear
0:25
with me because really not since the
0:28
very height of Brexit sick chaos has
0:32
Westminster shenanigans affected the
0:34
business environment quite so much. And
0:36
forget about Liz Truss, because at least
0:37
that was over and done with relatively
0:39
quickly. Um, we're in a situation where
0:43
we have a government that is still
0:44
trying to pull certain levers to get
0:46
through a crisis that's only growing.
0:50
Um, and the music off is from its own
0:53
party are figures who would like to lead
0:56
it and shake up what passes for its
0:59
policy agenda. So,
1:00
let's try and unpack that a little bit.
1:02
We'll get back to the leadership
1:03
election, but consider what the
1:05
government has been doing just this
1:07
week. We had the most extraordinary
1:10
twist. Uh, after I wrote a column
1:14
in which I didn't hold back on the SNP's
1:17
plans in Scotland for a cap on the price
1:20
of certain foods. Uh, it never occurred
1:22
to me that my entire criticism of that
1:25
could just then be rewritten as a
1:26
critique of the Labour government in
1:28
Westminster because they began to flirt
1:30
with precisely the same extraordinary
1:32
idea
1:34
as the lunatics north of the border.
1:37
Rachel Reeves, Treasury officials
1:38
talking to supermarkets. What we
1:41
understand is that they were proposing
1:43
to pull back on some of the more onerous
1:46
regulations
1:47
and red tape that they've wrapped the
1:49
retail sector in in exchange for some
1:51
sort of publicly declared voluntary cap
1:54
on the price of bread and milk, etc.,
1:57
etc.
1:58
Now, obviously, all hell broke loose
2:00
when this story emerged and the retail
2:02
chiefs involved in those discussions
2:04
were not happy. And they were right to
2:06
be unhappy about this most economically
2:10
illiterate intervention from the
2:12
Chancellor
2:14
that I have ever heard of.
2:16
Nothing could could could could indicate
2:18
more the extent to which they've lost
2:20
grip of economic principles and lost
2:23
touch with reality than the notion that
2:25
they could somehow interfere or
2:28
intervene with pricing in what is the
2:31
most competitive and effective market in
2:34
the entire country. The British
2:36
supermarket and retail space is one of
2:38
the most extraordinary success stories,
2:40
incredibly competitive, very tight
2:43
margins, and as people from retail
2:45
bosses themselves to the top brass at
2:48
the Bank of England yesterday, when
2:50
asked about this ridiculous idea,
2:52
pointed out that if you look at the the
2:55
uh the price comparisons and the price
2:58
matching and the competition and the
2:59
discounting that goes on in that sector,
3:02
then it is much more effective as it
3:04
already is than anything the government
3:06
could do by wagging their finger or
3:07
trying to encourage some sort of price
3:10
cap. And by the way, we do have to take
3:12
a minute and consider that what this
3:14
Chancellor and this government have done
3:15
on business to the tunes of tens of
3:18
billions of pounds worth of tax
3:20
increases on national insurance, on
3:22
labor costs, the Employment Rights Act,
3:24
we see this week survey data pointing
3:26
out the extent to which employers
3:28
already bewildered by that and deterred
3:30
from hiring, to say nothing of the
3:32
energy costs, the business rate
3:34
increases, and and even taxes on plastic
3:37
and packaging. The government has
3:39
imposed an extraordinary amount of of
3:42
taxes and regulations on the retail
3:44
sector, and now has the gall to tell
3:46
them that they need to lower their
3:47
prices, when in fact they've they've
3:49
kept those prices unbelievably well
3:50
controlled in an environment in which
3:52
the government has just been throwing
3:54
bombs at them left, right, and center.
3:56
So, let's park that policy. I don't
3:57
think it will see the light of day
3:58
again. It's unbelievable situation.
4:01
The Chancellor now forced to consider
4:04
what other levers she could pull to help
4:05
Brits through the cost of living crisis
4:09
that is going to get worse over the
4:10
months ahead. And she's landed on free
4:13
bus travel for children in August,
4:17
which I think tells you the extent to
4:19
which they've got no room for maneuver.
4:21
But also in a sensible turn of events,
4:23
she's going to cut the tariffs on food.
4:26
Cut the import duties on things like
4:28
chocolate and and and nuts and things
4:30
that we import into this country. A
4:31
freedom by the way only made possible
4:34
because we're not in the customs union.
4:36
Now, let's move on to the Labour
4:38
leadership election and where that might
4:40
take us. There almost certainly will be
4:42
a change of Prime Minister over the
4:44
course of the summer. And what are we to
4:46
make of it? Where are they going to go?
4:48
Is anybody going to ride into the rescue
4:50
and and and and make some big
4:51
uncomfortable decisions and some big
4:53
important arguments about the size of
4:55
the welfare bill in this country or the
4:57
imposition of taxes on the productive
4:59
part of this economy or the employment
5:01
crisis and the youth unemployment
5:02
crisis? No, they're not. They're more
5:04
interested in total nonsense. Andy
5:07
Burnham has been
5:09
fluttering his eyelashes and talking
5:11
about Margaret Thatcher as the root of
5:13
all evils in this country, says that he
5:14
wants to undo the damage
5:16
that she inflicted all those many many
5:19
years ago now.
5:21
And he's said that we need to
5:22
nationalize
5:23
industry and energy and want to control
5:26
the cost of rent and all these kind of
5:27
crazy left-wing ideas. Wes Streeting for
5:30
his part, who probably won't be Prime
5:32
Minister
5:34
if Andy Burnham wins his by-election at
5:36
the very least,
5:37
has said today that he wants
5:39
a wealth tax.
5:41
But he says, and this is very important,
5:43
he wants it to be a wealth tax that
5:45
works as opposed to all the wealth taxes
5:47
that don't work.
5:48
Um and the idea that he's landed on is
5:51
to increase the rate of capital gains
5:54
tax to bring it into line with income
5:55
tax rates. Now, this is a little policy
5:58
that has been fetishized by um certain
6:01
parts of of uh the left-wing economic
6:04
debate, left-wing think tanks, Labour
6:06
MPs. Always gets them a little frisson
6:09
um of uh of excitement, little dopamine
6:12
hit uh because they think it's terribly
6:14
clever very elegant and it has all the
6:16
advantages of correcting an injustice
6:17
and without being a wealth tax and it
6:19
would raise loads of money. It's
6:20
complete and utter bollocks. The idea
6:23
that you can just simply whack up
6:25
capital gains tax rates in line with
6:27
very high income tax rates without any
6:30
of the distorting effects and
6:32
consequences that any other kind of
6:33
wealth tax would impose upon this
6:35
country and its competitiveness and its
6:37
attractiveness and its overall tax rate
6:39
is for the birds. But here we are. This
6:41
is where we're going. This is the kind
6:43
of crap that gets floated and thrown up
6:45
in the air during a Labour leadership
6:47
election where they've got all these
6:48
different factions to try and win over.
6:51
So whether you're going to end up with
6:52
Ed Miliband or Angela Rayner or Wes
6:55
Streeting or Andy Burnham, this is where
6:57
we're going. The government will move to
6:59
the left uh and given that they probably
7:02
won't be able to borrow any more and
7:04
smash through their own fiscal rules in
7:06
that regard, there will be tax increases
7:08
uh following uh a government of uh Keir
7:11
Starmer and Rachel Reeves that have
7:12
raised taxes by about 70 billion quid
7:14
with what to show for it, by the way. Uh
7:17
they're going to try and do this all
7:18
over again. So it is going to be a
7:21
circus um but I'm afraid it won't be
7:23
very entertaining. I'm afraid it's going
7:25
to be quite painful. Uh anyway, we'll
7:27
keep a close eye on it here. Uh so that
7:29
will be it from me this week. Do stay
7:32
up-to-date and in the know on the City
7:34
AM app and on cityam.com.
7:36
I'll see you next week. God knows where
7:38
we'll be by then.
7:47
>> Mhm.
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