Is bankruptcy inevitable now for the UK

[BringOnTheHandyMan]

In the most layman of terms the UK is actually broke.

Every month we cannot pay the interest on our outstanding debt and thus have to borrow more. (Note this is not repaying the capital, just the interest)

The rate we pay to borrow used to be quite low and that is not the case anymore.
The bond markets have lost faith in the UK and charge us a rate that reflects it.

We have systems we can no longer afford (welfare, NHS etc)
We have little to no growth
We have inflation issues (so printing money is out)
Raising or cutting interest rates is problematic due to having both growth and inflation issues together
Our politicians are scrapping like rats in a barrel and even prior to that they seem incapable of making hard decisions or even facing up to the mess we are in.

We do actually need a PM that stands up and says okay folks we are in deep shit. We are broke. Actually worse than that. In debt and unable to pay even the interest.
So any borrowing we do must be for investing/growing the economy only. All spare money must be used for paying down debt or investing/growing the economy. That means for the foreseeable future all state funding is scrapped. We would enter a period of being very much a 'poor country' and acting like it. If we worked really hard we might be able to turn it around but it would take years, hard decisions and many, many sacrifices.

Since I can't see any party being able to actually do that. Then I honestly don't see how we can go anywhere except an IMF bailout. Then they will play the tough guys and cut the lot anyway.

I try to plan for my retirement but honestly it's sort of impossible.

For those with public sector pensions I wouldn't be sure you will get it paid
For those with private defined contribution pensions, the stock market is vastly overpriced just now and your pension is likely to fall once the AI bubble bursts.
State pension - yip not convinced we'll be getting that
Costs to be budgeted for - healthcare but how much?
Downsize my house - perhaps but will house prices tumble making this impossible.

Does anyone think that any government (regardless of party) can fix the country. If not what happens. The UK used to have no NHS or welfare so do we just go back to that. How long will it be until the wheels come off?

Lots of threads about which benefits should be cut etc but nobody seems to be shouting that actually it ALL needs to be cut regardless of what hardship it causes.

Yes. Also I believe that lower earners pay tax on everything. So you do not have these allowances that we have in the U.K. The tax systems are progressive, in the proper sense of the word.

I don't remember making any of the arguments you're implying I've made, I've only stated that they pay higher taxes and get better public services (their welfare spend is also higher and they invest higher amounts in public infrastructure etc).

Despite all this though, labour force participation in the Scandinavian countries is only a few percentage points higher than our own. I very much doubt increasing our own workforce participation by a few points would make much of a difference.

Their average earnings are far higher though and the average person is far more productive. This is why they've been more successful. They've done this partly through allowing collective wage bargaining which has resulted in higher wages across the board and resulted in far less income inequality (also making work far more attractive for those at the bottom).

If you think the rules around disability benefits aren't tight here then it doesn't sound like you know the system from the inside. Our higher rates of disability have been caused by austerity and low investment in public health services for years on end.

It is much more complex than simply raising taxes and assuming it will just mean a few less holidays while everything else is fixed. The reality is that most ordinary and long-term taxpayers are already doing their bit. They are only one part of a healthy economy. You also need growth, productivity and as many people as possible contributing where they can.

It is a circle of trust, incentives and rewards. Remove any one of those and people adjust their behaviour accordingly.

As for workforce participation, “similar” does not mean "the same". We have higher levels of economic inactivity, lower productivity per worker and a whole host of other structural differences compared with many of the countries people like to reference.

And no, there is not meaningful rigour around large parts of our welfare system. Many Scandinavian systems tend to involve greater scrutiny, systems that actually share data and more explicit expectations around participation and contribution and, amazingly, those measures are not automatically treated as an attack on human rights. Fraud statistics alone do not really address wider questions around individual incentives, dependency and long-term economic inactivity. Equally, assumptions that everyone on benefits shares the same circumstances or barriers are obviously not true either.

That was actually the point I was making in my reply to you. It is not as simplistic as “raise taxes, reduce a few holidays and everything is fixed.” A healthy economy depends on productive growth, public trust, functioning incentives and a system people broadly feel is fair and reciprocal.

I think the country needs to pay more tax. But there is tax and there is tax.

People point out that taxation of wages will potentially decrease productivity and that is a fair point. Governments generally go for PAYE tax rises because they are easy to quantify and easy to get. But these unfortunately impact peoples willingness to work and tend to impact groups like young working families the most. It's no coincidence that middle class birth rate is dropping through the floor, as people find housing and bringing up children too expensive. We then enter a vicious cycle of less children to support a larger older cohort, with immigration and a lower standard of living for everyone the only solution.

There is a mammoth amount of wealth in the UK held in other areas. Particularly pensions and savings and other assets. The tax breaks on these and inheritance tax are far too generous and this wealth has generally been accrued by not taxing individuals highly enough in the past (hence national debt), so it seems equitable to me for them to be subject to a higher tax now.

The irony is that much of these pensions and savings hold large quantities of UK debt. So effectively we owe a significant fraction of the national debt to ourselves and it is only by the country as a whole paying out on this debt that it is serviced, effectively a wealth transfer from the young to the old. There is a more equitable balance point that exists currently between taxing the young and the old. I am not sure that the country can achieve this balance point due to the fact that the elderly are more numerous and more likely to vote.

People always say "you can't tax pensioners because some are poor". This is a fundamental misunderstanding of how our (usually) progressive taxation systems work. You can't tax poor pensioners anyway, as they have no money. It will be the rich cohort who should and will pay the extra tax, not the poor people if the taxes are designed properly.

The discussions re the Scandanavian tax model are really interesting and I think this model would be far better than what we have currently. I don't think it would be possible for us to change to this model though without ripping out the current system and rebuilding from the ground up, and politically this would be impossible IMO without the country entering a devastating economic crisis.

For the UK I don't see bankruptcy (or to put it more correctly a one off economic event that requires us to vastly change the system) in the future. What I see is a long slow decline as we lack the political ability to correct our imbalanced and failing systems. This will lead to polarisation of wealth (we are fast developing an underclass) and everyone generally getting poorer.

Dramatic change in our systems can ultimately only be forced through on the back of calamity. The fact that we have reached the limit of our debt expansion is at least forcing us to look some of these problems in the eye rather than just putting them off with an accounting trick. This is why this thread exists and why more people are beginning to ask hard questions that have no easy answers.

There is talk of putting up capital gains tax so you pay much more of the increase in value on your property to HMRC. Possibly on your own home - can’t help feeling there are loads of unintended consequences to this.

@Corianda

Every tax has unintended consequences:
Increase IHT and you impact companies being passed on and therefore reduce long term investment
tax or means test private pensions and you reduce the incentive to save for your own pension which reduces investment funds for the uk.

I agree. One of the very few things that Gordon Brown did was reduce the "starting" rate of income tax to just 10%. Unfortunately, the pillock then scrapped it a couple of years later. But the principle was sound - get EVERYONE paying tax, but start at a very low level.

I think the same could solve the IHT problems, i.e. have a much lower rate at lower levels of inheritance then increase the rate through bands according to estate size. The one and only rate of 40% just drives people to take expensive planning advice to avoid it completely, hence the Treasury get nothing from the majority of estates. If IHT started at say 10%, it wouldn't be worth the smaller estates paying for tax avoidance advice, so the Treasury would get more money and it wouldn't "hurt" the beneficiaries as much on smaller estates.

No reason at all why we can't have a "progressive" set of bands for taxes, i.e. start at 10% then 20, then 30, then 40, with nothing higher. When there's only a marginal difference of 10% from one band to another, there won't be the same "planning" done to avoid going into another band, like at £100k where there's a ridiculous 62% marginal rate even before loss of childcare!

I have a degree in economics thank you and understand perfectly well that "It is much more complex than simply raising taxes and assuming it will just mean a few less holidays while everything else is fixed." In fact you keep telling me I'm making points I'm not making, that I've said things I haven't said at all and that I don't understand things I understand perfectly well.

The point I am making is that we won't fix the economy by making further cuts to disability benefits or tightening criteria yet again. There have been round after round of cuts and criteria tightening already - some official, some unofficial and they haven't done anything other than disable people further, both physically and mentally (adding to the already huge strain on our NHS), while simultaneously causing destitution and a great many preventable deaths. The UN has already made a statement about widespread UK violations of the rights of disabled people - if you think our system is easy and lenient you have absolutely no idea of the realities people forced to claim disability benefits in the UK are facing. I don't see why the next round of cuts or criteria tightening would be any different.

And furthermore there is no need to do something so recklessly dangerous when the relatively small amounts that could be raised could easily be found with tax increases on the large section of society that can afford to go on multiple holidays a year - we all used to get by just fine with fewer holidays believe it or not, so I think we would cope. At the very least this would allow us to avoid more benefits deaths - by some estimates there have already been hundreds of thousands caused by austerity alone and they continue to be reported in the disability press even if the mainstream press rarely reports these tragedies (I presume they don't fit in with their scrounger narrative). And much like people going on 4 holidays a year on an average income, disabled people dying due to benefits cuts also didn't use to happen.

Neither of these options on its own will be enough to fix the economy but increasing taxing on those who can afford so many holidays will certainly do a lot less harm while paying for some of the things we desperately need. The Scandinavians have higher taxes without it disincentivizing work - as you've pointed out they have a higher work force participation rate than we do even if it's only by a few percentage points.

And finally, yes, I also understand that "similar" does not mean the same - I don't think anyone struggles with that one. I haven't said otherwise anywhere so I've no idea why I'm being lectured on that point. The fact remains however, that despite their supposedly tougher system, their work force participation rate is only a few percentage points higher than our own. The fact that those few percentage points would seem to be largely explained by more women working suggests that it's not a tougher disability benefits system that's incentivising work - it's better working conditions for parents and better provision of child care (if the reason was disability benefits related you wouldn't expect the gender difference).

Economics and accounting together would probably be a healthier mix. Theory + Reality leads to sustainability. Whether the numbers actually stack up is actually quite important.

My degree included a year of finance and accounting. I can't see there is any way of getting anything to add up merely by reducing benefits unless you went for pensions but that would be even less popular. I do struggle to believe that the super rich can't be compelled to contribute more. They will be still be super rich even after a substantial contribution.

A suggestion I don’t remember seeing - charge 50% tax on any money being sent from the U.K. to a country where we give foreign aid (remittances). I’d do this immediately. Now the gov may choose to donate a percent of that money eventually but not now. If people are flying to their country of origin (on the 50% list) and are caught taking it out of the country in cash it’s 100% tax.

I would tax remittances at 100% if a country refuses to take back people we want to deport.

No benefits to anyone from abroad who has not paid into our system for 15 years. (Similar to how a state pension is accrued). We can’t afford such a luxury anymore. We are clearly too poor. That includes no council houses, no benefits, no pensions, no universal credit, child benefit, DLA, no housing benefit, pip or pension credit etc.

I would not dream of moving abroad unless I could support myself and if I lost my job I’d return to the U.K.

Deport all foreign criminals to free up prison space and reduce crime in the community. Deport all foreign tax evaders/money launders/those working in the hidden economy. (I’d deport criminal citizens too but we don’t have that luxury). Long sentences for violent offenders as there will be more prison space. This makes the law abiding women and girls and boys and men safer. If that makes me a meany and takes away my ‘progressive’ badge then who cares!

An honest conversation with the public. Cut the size of the state. The aim being to increase trust and participation and safety.

If they deported foreign criminals and made the streets safer. Stopped benefits for foreign arrivals. Locked up rapists and violent thugs.
If I trusted they were genuinely acting in the interest of the public and I felt safe I would happily donate 4 hours of time a week to improving our country. Litter picking. Painting fences. Cleaning signs. Clearing a canal. Or using professional skills if that is preferable. Whatever they need. I would happily volunteer to improve the country. I doubt I am the only one. The benefit to me is a nicer community, Good for mental health, get to know likeminded people.

I won’t be doing it for this wasteful government - they are clearly set to ruin small businesses (for their corporate friends?), bankrupt farmers (our food security is vital), and bankrupt the nation. Let off criminals. All while tax evading and getting convicted of crimes abroad and every other bloody scandal.

I want an honest government that reduces their costs quickly and makes us safer. Someone above said High Trust, High Participation. Great slogan!

I’m a floating voter and being tough on crime is my main issue and reducing gov spending is number 2.

I’ve pondered this further - tax all remittances for non UK passport holders too. If money is sent abroad it can’t be spent in our economy. So tax at 40%.

The WSJ has published an editorial on this week's immigration figures and their implications for Britain's tax receipts.

Britain Versus the Laffer Curve - High tax rates push more Britons overseas—and revenue down.

The Laffer Curve comes for us all in the end, and man is it attacking the United Kingdom with a vengeance now. The latest immigration data suggest Britons are voting with their feet against rising taxes.

Migration figures for 2025, released Thursday by the Office for National Statistics, showed the lowest net immigration since Covid, at 171,000. Prime Minister Keir Starmer’s Labour Party is eager to trumpet a rapid decline in new arrivals, given how contentious immigration policy has become.

But an equally important part of the story is increasing net emigration by Britons. While the number of people leaving has held steady at some 250,000 annually in recent years, the number of people who repatriate each year is declining noticeably. This is down to 110,000 in the most recent year, from as much as 170,000 annually in the wake of the pandemic.

The stereotypical British émigré used to be the retiree packing up for sunnier climes in Spain or France. These days it’s the younger worker who moves to Dubai for lower taxes and then delays returning to Britain. These are some of Britain’s most entrepreneurial people, and they’re spending their prime tax-paying years out of the country.

They’re in good company. The annual “rich list” of Britain’s wealthiest, published last week by the Sunday Times of London (owned by the same company as the Journal), found a race for the exits. One-sixth of the people on the list two years ago have dropped off, and 111 of the British citizens on the 350-name list live offshore.

Only one foreign billionaire moved to Britain: Warren Stephens, the U.S. ambassador. As a diplomat, he’s exempt from British taxation.

Undeterred, Labour Party politicians keep promising to tax the rich more. The latest is Wes Streeting, former health secretary vying to replace Mr. Starmer as party leader and Prime Minister. Mr. Streeting this week proposed a new “wealth tax” in the form of a higher tax rate on capital gains to match the rate on personal income. That’s as high as 45% for anyone earning over £125,140. He seems to think this would be a revenue raiser.

The migration data show it isn’t. Don’t compare today’s tax revenue to some fanciful future when entrepreneurial young Britons and the wealthy take higher rates on the chin. Instead, compare today’s revenue to what the treasury will take in from people who leave: zero. Arthur Laffer tried to warn them.

Drop in the ocean though. There are too few "super rich" to make a difference. If you taxed the top 1,000 "super rich" an extra million pounds per year that's only an extra billion in tax revenue. When the country is 3 TRILLION in debt and paying 100 BILLION per year in interest alone, you see it's trivial and would almost certainly do more harm than good.

Joseph Stiglitz, world renowned economist, has spoken in favour of a tax on billionaires to address the increasing wealth inequalities we're seeying. I think he was talking at an EU tax forum. I think Denmark is currently considering a tax of 0.5% on the super rich. Stiglitz is arguing that the super rich won't miss 0.5% of their wealth.

This 45% on earnings over £125,140 - is this just earnings in the form of capital gains? Seems reasonable and even if we lose some wealthy people, if there are more who stay it could indeed be a winner. I think there was a survey recently where most millionaires said they'd be happy to pay more.

I think there was a survey recently where most millionaires said they'd be happy to pay more.

People tend to tell survey and poll takers the answer they think is most socially acceptable. That's why controversial politicians typically poll lower in surveys than they do in the privacy of the voting booth. The immigration figures cited above show that they're leaving rather than staying and paying.

I would not speak honestly to anyone with a clipboard. Fingers crossed, I hope we are in a reasonable situation for two 70 year olds who have worked, earned and paid their taxes for 50 years. And who have been net contributors for most of those years. DH is now a bit of an expense for the NHS, but continues paying both corporation tax and income tax.

Yes it is harmonizing Capital Gains rates with income tax. Was streeting was interviewed on a BBC podcast about it and gave the example of a working woman in Lancashire paying a higher rate if tax on her income than her Landlord paid for the growing value of the house she rented off him.
I have Danish family and it is not a surprise to me that Denmark are thinking of this. Ideologically, there is a feeling of social security for all, an equitable society, with reasonable living standards for all - literally the opposite of the American Dream and there is an uncomfortable feeling of going in that direction.

Sorry 😐, Wes not "was"

You have also missed out some details with your comparisons, namely that earnings are slightly higher, the cost of living is lower for someone living in Denmark for example compared to the UK. The big difference arises from the cost of housing. Mega landlords in this country have a huge impact on that affordability.

Interesting that these so rich pensioners disadvantaging young people are the ones taking fewest holidays while the young people are taking the most. Also that while the higher costs of being disabled recognised the higher costs of old age (which often involves low level disability) are not.

We need a better health service. The reason some people are out of work is ill health. In some cases these are problems that can be fixed - we need to get that done and get them back to work.

Young people's mental health is bad partly because of social media - lets ban it for children. It also doesnt help if you see no prospect of ever getting work, so we need programmes that give them work experience. We need a lot of houses built so train a load to do that sort of work.

We need to build homes - not large firms making money, homes for social rent. We cant afford all of these to be houses, it will have to be flats.

We can fund this from an increase in taxation. We HAD the increase in taxation but it hasnt gone on that, it's gone on expanding benefits. So lets have more increases but very clearly tied into building homes for social rent. Lets put up taxes on foreign travel and make levies on tourist accommodation compulsory. and fees for foreign visitors to museums please. If we need to put a penny on tax lets do that.

Inheritance tax limits for lifetime giving are silly. Lets encourage people to pass money on while alive, although this may just go on more foreign holidays for the young.

If you want elderly people to move out of large houses they need places to move TO, suitable ones are hard to find. Incentivise it by abolishing or reducing stamp duty for downsizers.

What this misses is that it is young people that are most likely to leave in search of new opportunities.

Older cohorts generally won't.

So generally if you are going to tax harder it is best to skew that towards older age groups if you are concerned about economic migration as a result of tax.

Tax is also best levied on things that are relatively difficult to move/are locked in.

It's hard to practice tax avoidance with land and pensions.

This also co-incidentally automatically pushes tax towards the most wealthy.

There is net emigration of British citizens, with more leaving than returning. In the year ending June 2025, this was estimated at 109,000, although the figures are highly uncertain. It is also unclear whether this figure is high or low by historical standards, because it is not comparable with pre-pandemic estimates of British net migration.

At the moment young people are more likely to leave as they look for work. Provide them with work and hey are less likely to leave. If you are elderly it can be more difficult to move abroad but more countries are now waking up to the fact that older people spend their money where they live and as they increasingly become unable to do things for themselves provide jobs for the young. If I was single I might go for this https://lanop.co.uk/greece-7-percent-tax-regime-uk-retirees/

What's the old age social care like in Greece ?

Cheaper than in the uk.