Taxing billionaires isn’t going to fix Britain’s mounting fiscal shortfall.
U.K. government debt has steadily climbed since the turn of the century with net debt near 94% of GDP, a level not seen since the 1960s. At the same time, interest costs have risen, forcing the government to spend nearly £110 billion ($145.9 billion) this year alone just to keep current with its creditors. As interest expense surpasses spending on key sectors like defense, there’s little sign of improvement. Earlier this month, the U.K. paid its highest interest rate on long-dated bonds since at least 1998. The Bank of England has responded, overhauling its quantitative tightening regime to ease the pressure driving up borrowing costs. Still, borrowing continues to overshoot official forecasts with the U.K. taking on £18.3 billion ($24.3 billion) in new debt in August alone.
How Did We Get Here?
Governments need to pay for stuff. They get the money to do so by taxing citizens and corporations. They also can sell assets and charge tariffs, fees and fines. When that runs out, they can either (a) print more money or (b) issue debt. Since printing money devalues the currency in circulation, they lean on the debt markets by selling bonds to investors in exchange for regular interest payments.
Now this entire system works well enough when a government has money to pay the interest on said loans or bonds. However, when issues particular to the U.K., including sluggish GDP growth, a shrinking tax base and more pensioners, reduce their revenues, governments need to either cut spending or issue more debt to maintain the same outlays.
Since austerity measures are politically unpopular, politicians tend to choose the latter, and the cycle continues. The more debt increases look unsustainable, the higher the interest payments, so more debt is issued to cover the interest, and so on. Referred to as a “debt spiral” — it’s an uncomfortable trajectory that the U.K. now risks.
And it’s far from alone. Bond investors are getting impatient around the world with countries pushing the limits of fiscal responsibility. France, Japan and the U.S. are forking over record levels of interest to service their debts with little end in sight.
With a new prime minister — the seventh in just over a decade — and his finance minister slated to deliver their autumn budget in October, navigating this fiscal balancing act will remain front and center for Andy Burnham and his team.
In his first public address since taking office, Chancellor of the Exchequer John Healey tried to assuage bond investors by touting Britain’s growth potential and maintenance of a “buffer to protect against uncertainty.” Still, the chancellor stayed mum on the prospect of raising taxes, distancing himself from the previous administration’s promise of not boosting levies on working people. He recommitted to the fiscal rules and keeping that buffer at Monday’s Labour conference, even as rising borrowing costs have eaten into it.
While this buys Healey time to contemplate broader tax hikes for the autumn budget, he will do so at his own peril. Despite being a seemingly easier fix than reigniting GDP growth, the U.K. cannot tax its way out. Two problems stand in the way: a tax base dangerously reliant on a shrinking pool of top earners, and a relatively poor, overtaxed general populace that can’t make up the shortfall.
Britain’s income tax system is highly concentrated with the top 1% of payers on track to contribute 26.6% of all income tax collected during 2026 to 2027. Although this projection is trending lower than years past, a few high-paying departures can do significant damage to the country’s finances by relocating abroad.
And that’s exactly what’s at stake. After the Starmer administration axed the non-domiciled tax benefits – an effort to raise government revenues without hitting the working class – several wealthy individuals have fled the country, taking their businesses and, most importantly, their taxes with them.
The latest of the bunch is hedge fund founder Chris Rokos, who plans to switch his residency to Greece and open an office in Athens, according to reporting by Bloomberg. While it’s easy to dismiss Rokos as a disgruntled financier who doesn’t want to pay his fair share, he’s the country’s third-highest taxpayer and leaves a £330 million ($438 million) hole in public finances that can’t afford to be made any smaller.
So far, official figures tell a more muted story with the number of those claiming preferential tax treatment on overseas earnings falling just 0.5% in the tax year through April 2025, the last year before the regime ended. Still, without meaningful economic growth, taxes only go so far, and this small but highly influential population has a second effect: influencing big employers like JPMorgan and Citi to question their London presence.
Burnham has long been supportive of raising levies, favoring a shift in the tax burden from income to wealth and assets, a model popular among left-leaning Democrats in the U.S. But the comparison only goes so far. The U.K. doesn’t even come close to the wealth that has been amassed by America’s top billionaires — Elon Musk’s worth of $925 billion per Bloomberg exceeds double that of Britain’s top 20 billionaires combined. That leaves the U.K. with far less to work with. It already has fewer billionaires to start and taxing them further risks shrinking an already-highly mobile population who can move their entire tax base to the European Union rather than simply shifting, say, from California to Texas.
If the country wants to maintain its benefits, Britain’s and thus Burnham’s priority must be on growth. The country has struggled since exiting the European Union with countless prime ministers failing to deliver on promises to change that. Instead of trying to squeeze blood out of an already-drained stone, the United Kingdom needs deeper capital markets, lighter regulation, more housing and more immigration – the last of which means accepting a Britain that looks different from the one it’s been.
Growth doesn’t happen in a vacuum and Britain’s fiscal future depends on who it’s willing to do business with.
In an increasingly fragmented world where the U.S., Russia and China are competing or using military power to dominate strategic geographies, middle powers like the U.K. have to adapt to a changing world order. Britain can no longer rely on its special relationship with the U.S. and commonwealth countries to bolster its industries. Instead, Parliament may need to take Canada’s lead and lean back into its closest and most powerful trading partner: the European Union.
As we approach the October budget, Burnham inherits a country sick of political turnover, weighed down by borrowing costs and struggling to grow. One where its most vocal, well-heeled residents are already looking for reasons to leave the U.K. behind. He shouldn’t give them another.
