These are not smart taxes in a service economy that desperately needs to increase productivity. We need a tax policy that encourages people to work longer hours, in the highest-paying, private sector jobs they can find. We need a tax policy that encourages money to move from unproductive assets to more productive investments, which hopefully make a profit and pay dividends. We need a tax policy that enables small and medium-sized businesses to continue to operate, employ people and pay taxes. We need a tax policy that encourages the global wealthy to live in the UK and spend their money here.
Worst still, besides risking the bulk of UK taxes by discouraging businesses and driving the rich out of the country, these tax increases still aren’t enough to pay for the Government’s additional spending. Which brings us back to the opening paragraph of this essay: A doom loop occurs when government policy reduces economic activity by over-taxing it, over-regulating it, or allowing unconnected third parties to stifle it with litigation. Lower economic activity lowers tax revenue, which in turn causes a debt spiral if the government can’t or won’t cut spending, which leads to increased debt and higher debt costs. In the 2024/25 financial year, the UK public sector net debt was £2.8 trillion, equivalent to 95.1% of GDP. Public sector net borrowing was £151.9 billion in 2024/25, £20.7 billion higher than the previous year and equal to 5.3% of GDP, up from 4.8% in the financial year 2023/24.
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