Keir Starmer is fighting for his political life. The bond markets are watching — and they have a long memory.

Kallum Pickering, chief economist at Peel Hunt and columnist for The Telegraph, joins CapX editor Marc Sidwell for a lucid diagnosis of what is really going wrong with the British economy, why the markets are spooked, and what a change of Labour leadership could mean for the country's already precarious fiscal position.

Pickering's central argument: Britain's borrowing costs are the highest in the G7 not because of its deficit or its debt, but because of its inflation record. And that inflation, he contends, is not bad luck — it is the predictable consequence of two decades of policy choices that have systematically rationed Britain's own factors of production. 

Land, labour, energy, commodities: each has been constrained in turn, shrinking the economic pie even as demand has grown. The result is an economy that borrows to fund current consumption while steadily eroding the private sector's productive potential.

Even as the predictable leadership tension rolls on, the underlying problem, Pickering argues, will not change with the occupant of Number Ten. His prescription is neither complicated nor politically fashionable: deregulate land, labour and planning; cut government spending by three to five percentage points of GDP; let taxes follow. But above all, fix energy. Britain has 25 per cent less electricity available to it than in 2005. Until that changes, every other reform is working against the tide.

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