Alex Brummer: The UK must break the tax‑spend‑borrow cycle before the October Budget

# What this column says

Alex Brummer warns that Britain faces a reinforcing tax‑spend‑borrow cycle ahead of Chancellor John Healey's first Budget on October 28. He says recent tax increases and frozen thresholds risk squeezing enterprise and shrinking the tax base, while spending — especially welfare and public sector pay — is rising faster than receipts. Interest payments on a large national debt are already significant and will grow unless spending is cut or debt reduced.

# The fiscal picture in plain terms

Tax receipts have risen modestly so far this year (3.8 percent) while public spending is rising faster (4.9 percent). Government borrowing therefore remains under pressure. Earlier policy decisions — notably the predecessor Chancellor's £75 billion of tax increases and frozen tax‑free thresholds scheduled to raise another £25 billion over three years — are central to the squeeze on households and businesses.

# Main drivers of the mismatch

• Welfare and social spending: inflation‑linked pay deals in the public sector (teachers and others) and expanded benefits are large upward pressures on spending.
• Interest on public debt: with a national debt of about £2.99 trillion, the interest bill is already large — flagged at £8.8 billion in August — and will grow unless borrowing is reduced.
• State interventions: costs associated with taking parts of industry into public ownership add to fiscal strain.

# Practical options Brummer says Healey should consider

• End or reform the pensions triple lock. Removing or altering it would slow the growth of pension spending and signal fiscal restraint to markets.

• Use taxpayer cash strategically to lower the effective cost of borrowing by reducing debt where feasible, rather than allowing large interest flows to go to external holders such as hedge funds.

Brummer also invokes the Treasury experience of Gordon Brown and Ed Balls, arguing they recognised that servicing borrowing is a waste of taxpayers' money when it merely pays down interest to outside investors.

# A sector doing well: legal services

Brummer highlights legal services as a post‑Brexit success story. Exports in the sector rose roughly 60 percent over five years to nearly £11 billion. English commercial law continues to command global influence: London courts outperformed New York commercial courts in verdict volume, English law governs a vast volume of derivatives contracts, and Europe and the US account for the majority of legal exports.

# Bottom line

The column urges Healey to pair revenue measures with concrete, targeted spending reforms to avoid a self‑reinforcing cycle of higher taxes and lower growth. Brummer presents specific, actionable changes on pensions, benefit indexing and disability eligibility as practical ways to reduce medium‑term spending pressures while preserving the City's economic strengths.