That would make existing valid code an error anywhere a label has the same spelling as any identifier in scope at that point in the code by putting them in the same namespace. You could try to limit the error to only contexts inside an if/switch/do expression, but then the diagnostic would have the same action-at-a-distance problems. And regardless, a reader would not actually be able to know what sort of control flow statement break foo is without context.
This is basically like wondering whether we could “solve” a design where if, guard, switch, and do are all spelled if—not sure why this is being entertained 450 replies into a thread about making the language more joyful to write.