July 28, 2025

The UK Tax-and-Spend Fairy Tale Needs to End

You can’t fund a Scandinavian-style state with American-style taxes.

You don’t need to be a genius to know the UK’s in a mess. It’s obvious. Things feel worse, nothing works properly, and everyone’s quietly saying the same thing. We want change — not radical upheaval, but cautious, steady progress. We want things to get better, quickly.

What no one seems willing to say — at least not clearly — is just how deep the hole is. People don’t want to hear that. They want easy solutions, fast. And they’re not prepared to do what’s actually required: to face how much fixing things will cost. To ask who’s going to pay.

The short answer? We all will. Including the middle class.

And they need someone to convince them of that.

Let’s say we actually want to fix things. Not patch them up with duct tape, but really invest: in public services, housing, infrastructure, defence, energy, justice, councils, transport. It’s a long list.

So let’s put a price on it.

The £184 Billion Estimate — And It Still Might Not Be Enough

I’ve been banging on about this for over a decade. Frankly, I’m bored of it.

The UK currently taxes around 37% of GDP. But to fund the kind of public realm people say they want — services that work, safe streets, shorter NHS waits, functioning schools — we need to move closer to 45%. That’s standard across much of Europe. France, Germany, the Nordics — they all tax more.

That’s an extra £184 billion a year. Not once. Every year.

This isn’t a wishlist. It’s just catching up. Decades of underfunding, worn-out infrastructure, demographic pressures, global shocks — this is the bill. It’s not extreme. It’s what basic competence costs in 2025.

If We Raised Income Tax by 10p

Let’s take the best tool: income tax. A 10p rise in the basic rate could generate around £100 billion.

Huge. Politically explosive. But let’s say it happens. What does that actually buy?

First, £60 billion could be redirected from borrowing to real investment — because cheap debt is gone. That might just cover the maintenance backlog: crumbling schools, broken NHS estates, failing prisons and courts. No upgrades. No expansion. Just emergency repairs to keep things standing.

At best, maybe £40–£60 billion left, depending on priorities. Divide that across 44 departments, and it comes to around £900 million each. Peanuts — especially when departments like Justice, Transport, and the Home Office are still operating below 2010 levels.

And none of that touches fiscal resilience — the firepower needed for the next crisis. Pandemic. Financial crash. War. Energy shock. That £900 million? Gone in a blink.

Add to that:

Local government: still reeling from austerity, with councils flirting with bankruptcy. Billions needed just to restore core services.
Public sector pay: inflation and pay freezes have gutted real incomes. Nurses, teachers, civil servants — all due proper raises.
Net zero and climate adaptation: barely scratched. Flood defences, green energy, resilient infrastructure — the costs are vast.
Transport infrastructure: HS2 cuts, crumbling roads, rail upgrades stalled. Demand far outpaces funding.
Tech and productivity: the future depends on investment in R&D, digital systems, and AI. It’s not optional.

Labour’s current plan? £40 billion in new spending plus borrowing to invest. A start — but nowhere near the scale required.

And Just When You Think There’s Room to Manoeuvre, Reality Hits Harder

Defence: raising spending to 5% of GDP means a jump from £56.9 billion to £138 billion — an extra £80 billion gone.
Benefits and social support: a modest increase to Universal Credit, housing, care, and welfare could easily take another £20–30 billion, just to keep pace with need.

That £100 billion? Already gone — before anything transformative even begins.

Why Borrowing Isn’t the Answer Anymore

I hear it all the time: just borrow more. Except we can’t — not safely.

UK debt is now 95.6% of GDP — nearly wartime levels. But this isn’t the 1940s, and we’re not borrowing at 0.5% interest. It’s 4.5–5%+ now.

Gilt yields are high, and debt servicing already costs £111.6 billion a year — about 8.4% of the total budget.

To put that in perspective:

Health and social care: £188.5 billion (18.3%)
State pensions: 12.2%
Working-age benefits: 10.2%
Education: 9.1%
Defence: 4.8%
Interest on debt: 8.4%

Yes — we now spend more on debt interest than on all schools in England combined.

Truss and Kwarteng already proved that if you bluff markets with unfunded promises, the pound crashes, yields spike, and the country pays. We’re now paying a premium to borrow because investors don’t trust us.

Which is why some of the new tax revenue has to go toward stabilising debt — not because it’s fashionable, but because we need room to borrow again next time. Because there will be a next time.

A Tax Plan That Might Actually Work

Perhaps I should’ve studied economics — but really, I’m just a fed-up voter who wishes things were better. Sometimes you know you’ve landed on the right compromise when nobody’s happy with it.
Not going to lie: the numbers here are a thought experiment. They could be different. The point is to give you a rough idea of what I’d do — and the scale of change we’re talking about.

Raising £184 billion a year isn’t something you achieve by taxing billionaires alone. You wouldn’t even get halfway there. There simply aren’t enough of them — and middle-class wealth is already shielded through pensions, housing, and generous tax reliefs.

If we’re serious about rebuilding the public realm, we need a full overhaul of the tax code. That means:

Merging income tax with National Insurance
Flattening the worst marginal rate cliffs
Fixing the punitive 70–80% effective rate around £100k due to tapering allowances

One idea? A simple, graduated system with 5p increases per income bracket — up to around 65p for high earners. Under this, anyone earning under £15k would pay less than they do now, while higher earners would shoulder more in clear, structured steps.

It’s not perfect. But it raises meaningful revenue and flattens some of the worst distortions — especially for those caught in the £100k trap.

Would it be popular? Not remotely. But it spreads the load. It avoids the fantasy of clobbering a tiny elite and pretending that alone will fix everything.

I’m no tax expert — but the point here is simple: wide-based increases are unavoidable.

Other measures would need to accompany this:

Unfreeze fuel duty
Revalue council tax bands to reflect actual property values
Tax capital gains like income
Add CGT to property (with sensible tapering)
Tweak pension tax reliefs
Review every exemption and tax break

Will some of this dent investment? Yes. But pretending there’s a cost-free way forward is the real lie. The system is riddled with carve-outs, reliefs, and exceptions that quietly drain billions from the public purse. We need a full review.

Given the UK’s chronic productivity problem — largely driven by decades of underinvestment — we need to get capital flowing again. This isn’t just about raising revenue. It’s about changing behaviour.

If spare cash or assets aren’t sitting idle, they’re being used, invested, or channelled into pension pots that fund long-term growth. That’s the kind of shift we need.

And maybe it’s time to rethink how we treat unproductive assets. Homes rented out at high margins could be converted into housing bonds — financial instruments that help fund someone else’s next home. Social housing bonds could be issued to local firms in need of capital, creating a virtuous cycle of investment and infrastructure. Mortgages could be structured to generate local investment, with bonds held by councils or banks as assets against future borrowing — all funding housebuilding.

Radical? Absolutely. Risky? Certainly — especially given UK housing assets have risen by 75.7% over the past decade, and we’re short by 6.5 million homes compared to European averages. But freeing up capital and making it useful again is the kind of ambition we need.

Higher inflation from higher spending?

Some folks worry that pumping more public spending into the economy will just push inflation higher. But you can’t improve public services without more money — both to handle rising demand and to invest in making those jobs more productive. Think better IT systems in hospitals.
No surprise, then, that this government’s clung to tight fiscal control.
And yeah, inflation can happen if you just throw money at demand without fixing the supply side. But certain public sector roles need a pay rise — or we’ll lose the people the country depends on.
If you pair spending with proper supply-side reforms — things like planning reform or cutting NHS waiting lists — the inflation risk isn’t as bad as people fear. Shorter waiting lists even free up the labour market.
I get that you also need a higher minimum wage and better benefits — not just for fairness, but to raise the price of labour and force firms to invest or let zombie companies die.
What matters is that spending is smart, targeted at boosting productivity, and backed by labour market reforms — like trimming low-productivity jobs. Workers should be more productive and better paid. That’s how you keep inflation in check, alongside the tax rises I’ve already laid out.
We have to fix NHS pay and conditions — especially for doctors and nurses. They need big increases to stay in the UK, plus lower fees so they don’t train here and then leave.
Bottom line: this is about honest trade-offs and strategic choices — not wishful thinking.

We Need to Be Honest With the Middle Class

This is the part nobody wants to say: the middle class will have to pay more.

Not because it’s politically fun — but because it’s mathematically unavoidable. We can’t fund a civilised country purely on the backs of billionaires, bankers, and landlords. Everyone will need to contribute more — proportionally, progressively, but meaningfully.

There’s no such thing as a social contract where only the rich pay. Especially not in a country with an ageing population, high dependency ratios, and huge wealth tied up in property. Makes zero sense to pass on property wealth to people aged 50+.

This Isn’t Ideology. It’s Arithmetic.

My politics? Radical. Progressive. Rooted in reality. But also honest.

And the strange thing is — what I’m proposing isn’t even that radical. It’s pretty tame. I’ve never been one for ideological purity. This isn’t about dogma. It’s about numbers. It’s about arithmetic.

We can’t borrow endlessly.
We can’t rely on growth fairy tales.
We can’t assume forecasts will magically fix it.
If we keep doing the same thing, we keep getting the same results.

I think Starmer’s being too cautious. I get it — telling voters the truth is electoral suicide. The hope is that tight fiscal control plus targeted investment will yield results. But if expectations rise and delivery doesn’t, disillusionment will explode. And the backlash could bring something far worse.

The number one reason voters backed Labour? Public services. After COVID, people expected government to step up. But now it can’t — because of COVID. Combine that with stagnation since 2008, and you’ve got a toxic mix. The lack of investment since the 1970s means the rot goes deep.

So Someone Has to Say It

Raise taxes. Across the board.
Reform them.
Invest.
Grow productivity.
Free up capital.
Accept hard choices.
Get serious about reducing debt.

That’s the only route out.

Perphaps I should have studied economics but im fed up voter who wishes things was better. Sometimes you know you reached the right compromise when nobody is happy with it.

Final Thought

We either choose a bigger state, funded properly — or we accept a smaller state with visibly worse outcomes.

That’s the real trade-off. There is no other path.

And I’m not deflecting — I’ve laid out a plan. So if you think I’m wrong:

What’s yours?

The UK Tax-and-Spend Fairy Tale Needs to End