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Acceptance, is the first stage of grief and then ideally followed by a grown up debate of what actions are needed to put the UK on the right course.
Then Action, lots of it!
Solving the financial problems will in itself generate GROWTH, which is the Holly Grail of what all political parties desire as their preferred solution, so they don't have to increase taxes or reduce spending. This will be created as confidence in the Future turns positive.
When the current unsustainable National Debt level is fixed, the UK Tax burden target should be 28% or less. The last time this was seen was in the 1990's. The current forecast of UK Tax burden for 2027/28 is 37.7%.
The Income Tax personal allowance should be increased to £18,000 or greater, so taking more people out of paying income tax and reducing effective Tax rate for all.
| Rank | Tax Type | Rate | Amount (£ Billions) | % of Total Tax |
|---|---|---|---|---|
| 1 | Income Tax | 30% with no National Insurance cost | £303.0 | 36.1% |
| 2 | Value Added Tax (VAT) | 20% no big ticket rate, Travel at 10%, Food at 5% | £203.0 | 24.2% |
| 3 | National Insurance Contributions | 5% Employers only | £177.7 | 21.1% |
| 4 | Corporation Tax | 25% and remove Bank levy | £93.3 | 11.1% |
| 5 | Fuel Duty | 60p per litre | £24.8 | 3.0% |
| 6 | Council Tax | Varies by band | £18.5 | 2.2% |
| 7 | Business Rates | 49.9p/£ rateable value | £15.2 | 1.8% |
| 8 | Stamp Duty Land Tax | 5% (property value) | £12.8 | 1.5% |
| 9 | Insurance Premium Tax | 12%/20% | £8.2 | 1.0% |
| 10 | Capital Gains Tax | 20% with Principal property at 10% | £7.8 | 0.9% |
| 11 | Inheritance Tax | 15% with 100 day taper relief | £2.2 | 0.3% |
| 12 | EV Levy | 30p per Kilowatt Hour | £2.0 | 0.3% |
| Approximate Total Tax Receipts | £1,000.0 | 100% |
Annual government expenditure, including capital spending—which should ideally constitute 20% of the total budget—must be aligned with independently forecasted revenue. Additionally, a minimum of £50 billion should be allocated annually toward reducing the national debt.
To prevent a recurrence of the debt spiral, it is essential to maintain spending within the limits of annual revenue. Any receipt of capital funds should be prioritized for debt repayment rather than new spending initiatives.
Taxes are typically expressed as a percentage of income or economic activity. When the economy performs well, tax revenues naturally increase, providing more funds for public services. However, continuously raising taxes to support increased spending can lead to unintended consequences, such as reduced economic activity, which may ultimately decrease total tax receipts.
Therefore, it is crucial to strike a balance between taxation and spending to ensure sustainable economic growth and fiscal responsibility.
The challenge of setting priorities and making difficult decisions will persist, as the government must determine how best to allocate a finite budget.
Growth is the holy grail, as if high it can help solve or at least soften the fiscal environment in which to be constrained by.
