Is Britain going bust?
Britain’s economy is in the world’s largest top ten. Its GDP is about £3,22tn, amounting to about £48,000 per capita. There are estimated to be 31.5 million households in the UK, meaning that GDP per household would amount to some £122,000. Average income per household is in the region of £40,000. It sounds very comfortable, but of course the reality is very different.
Inequality of distribution
The inequality inherent in the way Britain’s national income is distributed, as evidenced by Britain’s gini coefficient standing (officially) at 0.36, is startling. If wealth distribution were perfectly equal the gini coefficient would be 0, and if all the country’s wealth belonged to a single person it would be 1. The top 20% of income recipients average £60,000 a year, compared to the bottom 20% who average £14,000. The top 0.1% average £700,000-£1,000,000 a year; the top 1% average £250,000-£300,000 a year; and the top 10% average £70,000-£80,000 a year.
On the other hand, the combined wealth of UK billionaires (some 55 individuals) increased by £35 million per day in 2024 (over £600,000 a day EACH). In spite of these tasty pickings, 12 billionaires are said to have relocated out of the UK in the last year, fleeing for fear of having to pay a bit more tax.
At the same time, the lowest 10% of the British population average £12,500 a year, while the lowest 1% get £7,000-£8,000 a year. An adult person receiving below £11,000 a year is considered to be living in absolute poverty; an adult person receiving above £11,000 but below £15,000 a year is considered to be living in relative poverty. Approximately 18% of the population live in relative poverty and a further 8% in absolute poverty. 27% of children are living in relative poverty. Yet the government is in trouble with its finances and can only see one way out of trouble, i.e., to squeeze more out of the pockets of those who are already poor or those who are modestly comfortable.
Already “The chancellor announced in her budget in October that national insurance contributions for employers would rise by 1.2 percentage points to 15 per cent from April 6.
“The change…, is expected to raise between £23.8 billion and £25.7 billion for the exchequer, which Reeves argued was vital to fill a ‘black hole’ in the public finances.
“… It estimated that working families would be £3,536 worse off over the course of this parliament because of the increased cost on businesses” (because, inevitably, businesses would pass on most of their extra production costs to consumers) (see Aubrey Allegretti, ‘Working families “to lose £3,500 as firms pass on tax increase”’, The Times, 1 April 2025). At the same time, welfare benefits are being cut by £5bn, obviously to the detriment overwhelmingly of the very poor.
Four million of the relatively poor will be hit by ‘fiscal drag’, i.e., by the chancellor’s decision not to increase in line with inflation the limits below which income tax is not payable. Therefore many people whose low wages have risen in line with inflation, without gaining any increase in purchasing power, will now find themselves liable to pay income tax. A further 4 million people enjoying a modest but liveable income that has risen in line with inflation, but again without increasing their purchasing power, will find themselves paying 40% tax on some of their income rather than the 25% paid previously.
So, is Britain really in such dire straits that it is necessary to pick the pockets of the working masses, especially the poor?
Indebtedness
To start with, Britain’s public debt is over £3tn. – more or less 100% of GDP. giving rise to an obligation to pay interest. The interest that has to be paid for the foreseeable future is well over £100bn. a year! And all that time, the government will be borrowing more and more in order to cover its expenses, as a result of which the interest payable will be continuously rising. As Britain’s economic strength wanes, sooner or later it will find itself paying higher rates of interest as lending to it will become more risky. Obviously it would be a good idea to reduce the debt as much as possible, but where will the money come from to pay down the debt? So far this year Reeves has had not only to borrow, but to borrow much more than was expected:
“The government borrowed £14.6 billion more than official forecasters expected last year, suggesting further tax rises or spending cuts from Rachel Reeves may be necessary to strengthen the public finances.
“In the financial year to March, the government borrowed £151.9 billion, according to the Office for National Statistics (ONS), up by £20.7 billion across the same 12-month period a year earlier.
“This was the third-highest borrowing in any financial year since records began in 1947, behind the pandemic in the year to 2021 and the global financial downturn in 2010. The estimate has not been adjusted for inflation” (Jack Barnett, ‘UK borrowing was £14.6bn more than expected in year to March’, The Times, 23 April 2025).
As Chancellor of the Exchequer, Rachel Reeves, is being blamed for having fiscal policies that will supposedly make matters worse. The wealthy are accusing her of damaging the British economy by raising taxes, and the rest of the population are criticising her for raising taxes (through increased employer National Insurance and the freezing of income thresholds at which tax or a higher rate of tax become payable) when her Party on the campaign trail had promised it would not be raising taxes at all. However, it needs to be realised that neither Reeves nor the Labour Party, nor any other individual or party, is responsible for the fact that the bourgeoisie is keeping its government short of money essentially by tax evasion. Were they to increase taxation on the multinationals, they would not be able to prevent the multinationals from moving their business elsewhere, to the detriment of the availability of employment as well as their tax income. The government is not really, therefore, responsible for the sheer capitalist greed that is condemning the working and middle classes to a declining standard of living in the midst of plenty. Sure, its members are well rewarded for their diligent service to capitalist interests, which leads to them getting the blame for what their masters get up to, but they themselves are in no position to do anything about it. It is only proletarian revolution that can get rid of the billionaire parasitic excrescence, not this or that bourgeois government. Ever-escalating capitalist greed, in turn, is driven by the crisis of overproduction that drives the least productive out of business; to survive it is necessary to accumulate greater and greater stocks of capital to maintain an acceptable level of profit. Capitalism is like a cancer that keeps growing and growing at the expense of the body it lives off.
The budget
About 89% of the government’s income comes from taxes. The largest tax revenues are income tax and National Insurance contributions combined, which are expected to raise around £480 billion this year. Value Added Tax (VAT) is the next largest source, expected to bring in approximately £171.3 billion. Other significant taxes include corporation tax, council tax, business rates, and fuel duty, with none of these individually exceeding £20 billion in revenue for the year.
The government may have some income from interest on assets such as foreign exchange reserves and student loans, as well as income generated by public corporations, though these are obviously much less than they might have been before the family silver was largely sold off into private hands in the spree of privatisations that brought in short-term bonanzas, long ago all spent.
The following table shows the proportion of total taxes attributable to each of the taxes we pay:
Receipts (£bn)
Share of total government receipts
Income tax (gross of tax credits)
268.0 (25.6%)
National Insurance contributions (NICs)
172.3. (16.4%)
Value added tax (VAT)
162.2 (15.5%)
Other indirect taxes
93.4. (8.8%)
Company taxes
101.0. (9.5%)
Straight away we can see that “Companies”, which include the vastly profitable multinational corporations who take the lion’s share of the productive output of the working class, contribute only a measly proportion of the government’s income. Of course, they pay a lower rate of tax than individuals do but that alone could hardly explain why they fund the government at such a low rate.
Are they not making much in the way of profit in Britain?
Official figures do make the case for the fragility of British capitalism, starting with a longstanding massive trade deficit. Since the turn of the century the average trade deficit on current account has been £5.56bn per annum. Britain imports a whole lot more than it exports in the way of goods. In 2024 it imported some £60bn more than it exported. Some of this deficit was made up by the trade in services which produced a surplus of some £20bn. In addition, Britain benefits from returns on its Foreign Direct Investment – although it also has to pay returns to Foreign Direct Investment in the UK from overseas entities. In 2024 this showed a net surplus of £30bn, meaning an overall loss of £10bn in Britain’s dealings with other countries.
Nevertheless, none of this affects British internal trade, which represents the bulk of Britain’s economic activity. Therefore apparent fragility of international dealings is misleading as regards the British economy as a whole. Even theoretically, corporate profits amount to between £500bn and £600bn a year. Corporation tax paid in the UK last year was £85.2bn which is 15% of corporate profits. The official rate of corporation tax is 25% for larger earners and 19% for smaller ones (profits under £250,000). So, how do they get away with paying only 15%?
Tax havens
Nevertheless, this open tax dodging is as nothing compared to the serious exercise undertaken by the multinationals which is to channel the overwhelming part of their profits through tax havens and other countries with low rates of taxation. Even profits generated in the UK ‘disappear’ when the company that made them receives an invoice from its parent company in the Cayman Islands demanding payment for ‘management services’ that consume most of the profit made. It ceases to be profit in the hands of the British subsidiary; it becomes profit in the hands of the overseas parent company, but only pays the rate that the country in question charges, often nothing at all. That is how to get rich!
Therefore, if the British government is so strapped for cash that it has to borrow massive sums in order to pay its way, the real reason is that it is being starved of funds by its capitalist masters who could well afford to pay more but would never consider doing so! Instead it has to go cap in hand to one of its masters’ banks, and ask to borrow the money it needs, which it can always do in the expectation that the interest will be paid by the working masses through the many taxes they are forced to pay.
Government spending in the interests of the bourgeoisie
Even though the government is kept short of the cash it needs to maintain the necessary public services, it is constantly being required to devote more and more of its cash to the support of imperialist causes in which the working masses have no interest. Chief among these demands are those for military expenditure. The Afghan war, for instance, cost an estimated extra cost around £22.9 billion in cash terms, or £32.8 billion in 2024/25 prices, all paid for from the public purse. Funding for the Ukraine war has been £15 billion to date (not all of which has yet been spent). When one takes into account the massively increased energy bills that British households are paying as a result of this war, the cost borne by the public is more over £100bn. And now prime minister Starmer is being urged by his masters to continue this war that has already been lost, no doubt in the hope that this might open up the possibility of more corporate looting. Although the chances of any success are obviously low, why should the bourgeoisie worry about that when it is the working masses whom they expect to foot the bill?
The working class, however, does need to worry. The crisis of overproduction is making the bourgeois billionaires desperate to eradicate the competition they face from China in the world markets and to extend their domination of the world to the entire territory of the Russian Federation. In the same way that the First World War came about because the British and French bourgeoisie were desperate to eliminate German competition in world markets and to annexe former Turkish colonies in the Middle East before Germany became too militarily strong for it to be defeated, today the Anglo-American bourgeoisie and the EU bourgeoisie are preparing for war to put down China and Russia. Hence the desire of Prime Minister Keir Starmer to increase defence spending to 3% of GDP before the end of the current parliament. Needless to say, war against Russia and China would be infinitely more expensive than the war against Afghanistan. More than that, Russia and China are, unlike Afghanistan, Iraq or Libya, well capable of retaliation with bombing the countries of their aggressors, just as Germany was able to fight back against France and Britain – causing massive death and destruction even if it did not win in the end. In the short term, the extra ‘defence’ expenditure required by the government can only come out of its already overstretched budget – and it will inevitably be the working class who will be paying the extortionate price in terms of higher taxes and the further slashing of the funding of public services and squeezing of welfare. It is high time to fight back.
Conclusion
It should be clear from the above that no responsible person can allow the bourgeoisie to continue on its rampage of profiteering. Capitalism has fulfilled its historic mission of exponentially improving the means of production to enable the needs of humanity to be met with relatively little labour, but it is now nothing but a threat to the whole future of humanity, in particular with its lust for war. Never has it been so obvious that only proletarian revolution and the establishment of a socialist planned economy can save us.