Unions’ populist fix is fiscal folly
Britain’s trade unions have a simple story to tell: the rich can pay, and the rest of us will prosper.
It’s a seductive line. Tax banks, tax wealth, tax “unearned” assets – and suddenly the government will have billions to spend on schools, hospitals and housing. But this is political theatre, not serious economics.
The doom loop explained
Let’s be blunt. The UK is already locked into a fiscal vice. Borrowing costs are at their highest in decades, growth is anaemic, and public services are straining under the weight of expectation.
Every extra pound of borrowing now costs more in interest. Every tax rise that dents growth makes it harder still to balance the books. That’s the doom loop: slower growth equals higher borrowing, which demands deeper cuts, which in turn damages services.
Wealth taxes, as demanded by the TUC, would pour petrol on this fire. Tax capital gains, hammer banks, slap levies on fortunes over £10m – it may raise a few headlines, but it will sap investment, accelerate capital flight, and depress economic activity. In short, less growth, less revenue, more pain.
Chasing quick fixes
The unions insist that a 2% tax on large fortunes could bring in £24bn a year. Maybe on paper. But in practice, these revenues are volatile and temporary. The wealthy have accountants, lawyers, mobility.
Raise the drawbridge too high and the money moves – to Dublin, to Geneva, to New York. When the capital base shrinks, so does the tax take. The shortfall falls not on billionaires but on ordinary taxpayers through stealth rises or service cuts.
Banks too are an easy target. Yes, they have profited from higher interest rates. But piling on new surcharges only makes them less competitive, less willing to lend, and more likely to pass costs to customers.
That means fewer mortgages, tighter credit, and a drag on growth.
Populism vs prosperity
This is where the unions’ rhetoric collapses. They argue wealth taxes will protect working people. The reality is that without growth, working people suffer most – through lost jobs, squeezed wages, and crumbling services.
There is no shortcut. You cannot redistribute what you fail to create.
Rachel Reeves knows this. The chancellor faces a near impossible balancing act: calm jittery markets, hold borrowing down, and avoid alienating Labour’s base.
A populist dash for wealth taxes would do the opposite – spooking investors, throttling growth and worsening the very pressures on public services she is desperate to ease.
The hard truth
Britain doesn’t need another redistributive crusade; it needs a growth agenda.
That means reforming planning, unblocking infrastructure, incentivising investment, and fixing productivity. It means making Britain a place where capital wants to come, not flee.
Only then will the Treasury have the revenues to sustain public services in the long term.
The unions are right about one thing: voters are restless. But fuelling resentment of wealth is not leadership. It is a dangerous distraction.
If Labour succumbs to this siren call, Britain risks sliding further into the fiscal death spiral – a country taxing more, growing less, and cutting deeper.
Wealth taxes may be good politics for a TUC rally. They are terrible economics for a fragile nation.
