There are few worse ways for a government to begin a new parliamentary term than losing a senior figure. Now, with the resignation of Deputy Prime Minister and Housing Secretary Angela Rayner, Keir Starmer’s premiership looks even more under threat. It opens him up to further attacks from opposition parties, but also from his own side, as the departure reshuffles the balance of power within the Labour Party.

Independent ethics advisor Sir Laurie Magnus’s letter to the PM today said that Rayner did not seek expert tax advice on the amount of tax that should have been paid on her properties and “cannot be considered to have met the highest possible standards of proper conduct”. Her punishment will likely include a fine, according to the BBC.

Rayner’s stamp duty mistake may have been a small one, but the headache it creates for the PM is huge. The role of deputy leader of the Labour Party is elected by the party members. Starmer can fill it temporarily, but either a new contest must be held eventually, or the rules must be changed. Neither will be welcome for the Labour leader.

A new contest for deputy leader will bring Labour infighting into the open. The Left — already disappointed with Starmer’s trajectory on economics, immigration and social issues — will be looking to install someone who can challenge the PM. The whole thing could become a proxy leadership challenge, and a chance for the Labour Left to reassert itself. Any attempt to stymie this from Starmer, like appointing an interim to give them the edge, could look like a stitch-up and provoke further anger and rebellion.

Rayner’s ministerial positions, of course, remain within the PM’s gift, but this hardly makes things any easier. Her role at Housing, Communities and Local Government was a crucial one for the success or failure of this government. Changes to planning rules are a key plank of the government’s growth agenda, while the parlous finances and functions of local government are crucial to delivering a state that looks like it is working once again. Starmer will have to find someone highly effective at driving these, without upsetting the political balance in his government.

There’s a chance this may necessitate a wider reshuffle. That is rarely a good thing. One of the things that dragged down the previous government was frequent ministerial changes. This denies ministers a chance to settle into their roles and really get policy moving, while also creating the usual bad blood around who gets moved up or down. A year into the job, Labour ministers should be getting the hang of their Whitehall briefs. Moving them around could further undermine the Prime Minister’s delivery agenda.

As for Rayner herself, a return to the backbenches could also see her become a focal point for opposition to the PM. Though damaged by this scandal, it is likely not career-ending. She remains popular with the party’s base and is no longer tied as closely to the government line. She could well become a nexus for criticism of Starmer’s direction on issues like benefit cuts and public spending. This would lay her foundations for a future leadership challenge, while bolstering the Left of the party.

For so long as Rayner was deputy, she played the role of a useful counterweight. For both the way the Labour constitution worked and the political balance, she could be to the Left of Starmer’s Right and both could co-exist. Now, that balance has to be reset. With the government’s popularity waning, and challengers in both the Greens and the Corbyn-Sultana outfit, the Labour Left will be looking to strike a blow against technocratic Starmer. This episode gives them the opportunity and marks a truly awful start to “Phase Two”.

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John Oxley is a corporate strategist and political commentator. His Substack is Joxley Writes.

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China is trying to catch up with America on artificial intelligence. The Wall Street Journal has reported that Zhipu AI — one of China’s six “AI tiger” LLMs — has released a new model that can rival leading US systems, including Anthropic’s Mythos, in cybersecurity tasks such as pinpointing security bugs. While this marks a milestone in China’s drive to catch up with Western AI capabilities, strong performance on a single benchmark does not mean it has taken the lead. Chinese models still lag behind their Western counterparts in broader capabilities, such as autonomous operation. Skepticism is therefore warranted before resorting to hysterical conclusions, but complacency about the geopolitical implications of China’s AI advances would be an even greater mistake.

On the infrastructure side, Chinese AI is still constrained by access to advanced chips, with American labs way ahead in computing capacity as well as investment. Analysis from earlier this year suggests that Chinese models are likely to be at least a few months behind those in the US. But they are still continuing to make progress, or that the geopolitical importance of AI will be decided only by whose LLM has ventured deeper into the technological frontier. The practical applications of AI, countries’ to capture foreign markets, and the application of AI into the real economy will matter just as much.

Here, China may hold an advantage. As with its dominance across many critical supply chains, Beijing may not need to produce the most advanced AI systems — only those that are affordable and widely deployable. In doing so, it could consolidate global influence by supplying functional, low-cost AI at scale.

Beijing seems to be pursuing exactly that path, developing an AI “open-source” strategy that offers affordable, widely available AI models for companies and individuals to use and modify as they wish. The production of the DeepSeek AI model, which matched the performance of Silicon Valley tools such as ChatGPT at a fraction of the cost for users, created goodwill among Chinese models with developers.

The four most popular models on OpenRouter, an AI hardware platform for developers, are now all Chinese. The goal for China is not only to win the frontier-model race, but to make its systems the default layer of AI adoption across industries and global markets. For most economies, the choice is increasingly between an affordable tool they can deploy now and a more robust one that may be out of reach.

And while the countries adopting Chinese models may be exposed to political pressure and cyber threats from Beijing, safer and more capable alternatives matter little if they are unaffordable. American AI companies are already under pressure to monetize products whose operating costs are rising. If Chinese open-source models become the cheap default for startups, universities, governments and businesses across the developing world, then America’s AI lead will be eroded from below.

Perhaps more concerning for America in the long run is how AI can give Chinese manufacturing even more strength, through the ongoing integration of AI as a general-purpose technology. China’s new Five-Year Plan mentioned AI more than 50 times and includes an “AI+” action plan aimed at spreading AI across the economy.

Beijing has been pioneering automation of its critical infrastructure for years, with promising recent results in increasing warplane production capacity. In that regard, China’s open-model strategy and manufacturing dominance will reinforce each other. Cheap, adaptable models accelerate deployment across the real economy while those deployments generate real-world data and use cases that can feed back into further model improvement.

The United States should not dismiss the importance of its lead in the AI race. That lead worries Beijing, not least because a more automated Chinese economy would also become more vulnerable to AI-generated cyber threats. But nor should Washington assume that China cannot catch up with American capabilities over time.

This AI competition represents part of a broader struggle over tech supply chains and geopolitical influence. Decisions over whether to adopt US or Chinese models could produce a more fragmented global reality, with different regions relying on different cloud providers, chips and security structures. The result will likely be a global economy which is divided into competing spheres, rather than one which produces a single winner.

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Miquel Vila is a political and geopolitical risk consultant focusing on industrial strategy, critical infrastructure and global supply chains.

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