Brett Dawson retweetledi
The Bank of England Read the Room. Reeves Didn't.
My piece entitled "Price Controls. 1970s Answers. A Government That Has Run Out of Road," argued that Rachel Reeves had reached for the wrong instrument at the wrong moment. Within hours, the Governor of the Bank of England, the chief executive of Marks and Spencer, the former boss of Asda, the Food and Drink Federation and Reeves's own Treasury minister confirmed every charge independently and simultaneously.
Andrew Bailey told the Treasury select committee that price caps on essential items were unsustainable and risked backfiring. A second Bank official warned the proposal risked creating a highly distorted economy. Stuart Machin of M&S called it completely preposterous. Lord Rose invoked Edward Heath and Harold Wilson. The Food and Drink Federation said Reeves was treating the symptom rather than the cause and demanded she address the root causes of food inflation instead. Every institution with direct knowledge of how food markets actually work reached the same conclusion within the same news cycle.
Then came the retreat. Lord Livermore, the financial secretary to the Treasury, told journalists the government would not tell supermarkets how to do their job and insisted this isn't about price caps, we would never advocate for that. The Chancellor proposed it on Tuesday. Her own Treasury minister disowned it by Wednesday. The proposal was never formally adopted, never formally withdrawn, and is now being described as something the government never really intended. That sequence describes a government that floated an idea, was told by every relevant authority that it was wrong, and is now pretending it never happened.
The isolation of Reeves at this moment is total. The Bank of England has called her proposal unsustainable. The retail sector has called it preposterous. The food industry has called it a distraction. And on the separate but connected question of Russian oil, General Lord Richard Dannatt, the former head of the Army, used the word shameful. Ben Wallace warned that any weakening of resolve only emboldens Putin. Emily Thornberry, Labour's own chair of the Foreign Affairs Committee, said Ukraine felt very let down. A Chancellor who has lost the confidence of the central bank, the retail sector, the food industry and the military establishment in a single day is not a Chancellor managing a crisis. She is a Chancellor the crisis has overtaken.
The underlying problem remains entirely unchanged. The costs driving food inflation are domestic and documented: National Insurance hikes, minimum wage increases, net zero packaging levies, business rates. The Food and Drink Federation named them. The retail sector named them. The M&S chief told the government directly to reduce tax and regulatory burdens and free us up. The answer to the food inflation crisis is to reverse the policy decisions that created it. That requires the Chancellor to admit that her October 2024 Budget made things worse. She will not do that. So the price signals will continue to be suppressed by other means, the distortions will accumulate, and the bill will eventually arrive in a form that no voluntary cap and no fuel duty freeze can address.
The Bank of England has warned inflation could reach 6 per cent. Gilt yields remain close to their highest level in 28 years. Morgan Stanley says the economy will flatline. The bond market has made its judgment. The retail sector has made its judgment. The central bank has made its judgment. Callaghan's ghost is not waiting. It is already in the room.
"Andrew Bailey told the Treasury select committee that price caps on essential items were unsustainable and risked backfiring."
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