Cut taxes? No, reform them instead

The way the state raises money is far too complicated, says Merryn Somerset Webb. Time for a radical revamp.

HM Revenue & Customs
(Image credit: © Getty Images)

The UK is in a little financial trouble. Public-sector spending has already reached £1.2trn, or 48% of GDP. That’s another peacetime record. Total government debt is now more than 100% of GDP (up from below 30% before the global financial crisis). That wasn’t a particularly big deal last year. Low rates meant that interest payments were exceptionally low in 2022. Unfortunately that is about “to change dramatically”, says MacroStrategy’s James Ferguson. Firstly, because 28% of our outstanding debt is index-linked. That will raise interest rates by at least 2.5% of GDP this year.

At the same time, it seems clear that the UK is heading for at least a slowdown (judging by the way our money supply is shrinking) and possibly a recession. That has historically added roughly 2%-2.5% of GDP to welfare costs. Not long now and government spending will make up a larger percentage of GDP than the private sector does.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.