Normally I would welcome a better government surplus in January, the one month each year when tax exceeds spending by the government. The Treasury is claiming credit and implying it is doing well on spending. If only. The figures show the surplus is all down to a massive tax hit on the UK economy. Total tax revenue this January was 13.8% higher than January last year, or 10.8% up in real terms after allowing for 3% inflation. VAT receipts were flat because people are so squeezed by the taxes they are not buying so many discretionary items that attract VAT.
The reason I think these numbers should ring alarm bells, not celebratory peals of joy, is they mean less growth, fewer jobs, and a smaller economy next year to try to pay for the ever expanding public sector. Tax on jobs was well up. The results are there to see in rising unemployment and mass unemployment for young people, priced out of the market by high National Insurance and Business rates. Tax on self assessment incomes is well up. Some of that is making more people pay not just last year’s tax but also 50% of their estimate of this year’s on top, so the figures contain a one off of more than one year of tax. Some of it is taxing hard work, extra jobs and savings incomes, which is driving more people to end their small businesses, to emigrate to lower tax countries, or to give up some of their activities. Capital Gains tax is well up. Some of that will be the stream of wealthier people rushing to the exit cashing in their expensive homes and selling stakes in their businesses, so they will be one off profits for the Treasury. Tax on incomes is well up as more and more people get dragged into higher tax bands and need to pay a much higher rate on their pay award.
There is no sign of spending slowing down. The government is rushing to give more away, as with the £35 bn over the longer term to Mauritius for Chagos, the £20 bn a year of unacceptable Bank of England losses on bad bond trading, the continuing surge in sicknotes for life adding greatly to the long term benefits bill, and the ballooning subsidies for renewable energy and the forced electric revolution.
The high tax strategy has delivered a rare good month for the public finances at the cost of more damage to the economy in the months ahead. Next comes more regular tax payments from small businesses, hitting their cashflow. With then higher business rates and lethal National Insurance it means there will be more small businesses closing down and fewer new jobs from this vital sector. The government is still creating and pushing its doomloop. It hates the private sector and thinks it can tax it and tax it again without people leaving and businesses closing. They need to listen to those of us who have seen this from previous Labour governments and do not want them to go the same road to misery and defeat.
73 Comments
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February 21, 2026
Indeed a vast transfer of money from the companies and individuals who in general use and invest it well to this government who spend billions doing net harm. Things like net zero, augmenting the feckless, killing private schools, doom loop economics, the wars on small businesses, landlords, the self employed and any growth, non doms, farmers, hard workers…
Unlikely to go well and they will get less going forwards as they strangle the golden geese and kill the tax base!
February 21, 2026
Agreed LL – spend, spend, spend. My first reaction to the figures was: Labour MPs will be immediately thinking how to “invest” (waste) the extra money. I guarantee by the end of this year the extra tax revenue will be spent not used to pay down debt.
February 21, 2026
More waste, waste, waste or often worse do harm, harm, harm!
February 21, 2026
Kind of O/T or is it related?
FY3025 debt increased by $2.2 trillion, stands at over $37.6 trillion, 123% of US GDP and all this despite DJT’s One Big Beautiful Budget Bill and all the tariffs it included.
February 21, 2026
So the deficit dramatically reduced by Trump.
Thanks for pointing that out.
February 21, 2026
I see you are a top economist.
Interestingly reports from other economists say that US citizens (ie, US importers) pay between 66 (Republican-linked economists) and 96 (Democrat-linked ones) percent of the increased prices due to the tariffs and that foreign exporter companies pay between 33 and 4 percent of them.
Well done Mr President.
Kielinstitut.de ‘America’s own goal: who pays the tariffs’, 01/2026, Kiel Policy Brief 201
cfr.org ‘Who pays Trump’s tariffs?’, 04/11/2025
itep.org ‘President Trump says his tariffs aren’t paid by Americans, Corporations are indicating the opposite’, 15/12/2025.
investopedia.com ‘New studies challenge who really pay for tariffs’, 12/02/2026.
February 22, 2026
hefner
Your post is just the short term effect of import tariffs.
You are assuming that no consumer will shortly change to alternative products faced with high priced imported products.
Home produced products made by USA companies will benefit.
PS
Are you a top economist hefner?
February 22, 2026
No, not at all. But I’m sorry to see you’re still suffering from HDS.
February 22, 2026
That isn’t a sensible reply from you hefner.
I just see the weaknesses in your arguments which I feel are worth pointing out wighout descending to personal comments.
Dont be sorry.
February 22, 2026
Are the documents I originally put in reference ‘my weak arguments’? These documents produced by various institutions/think tanks are what some people (much better qualified than I am) say about the present situation. Are those people much worse than the column writers that, say, LL or others refer almost daily?
You don’t seem to comment on other contributors or on their sources? Why that?
February 23, 2026
As I said in my first response to you, your post on tariffs only show the initial effect, “the present situation” as you called it, not the longer term effects.
PS
I have already answered the question posed in your last sentence.
February 21, 2026
Charles Moore is surely wrong in today’s Telegraph :-
https://www.telegraph.co.uk/news/2026/02/20/west-make-russia-war-unwinnable-need-will-win/
Banging the drum for the corrupt Zelensky regime. We don’t want and cannot afford any more expensive and unnecessary wars.
‘Soft power’ conceit is now replaced by a desire to put a spanner in the works.
February 21, 2026
@Peter.+1. Another way to waste our tax money. £21.8 bn already to Ukraine and another £3bn pa “for as long as it takes”. No wonder super rich Ukranians are to be found flaunting their wealth in Monaco and elsewhere, and have no desire whatsoever for the war to end.
February 21, 2026
Starmer does not care any more now his time is up. Does as he pleases and keeps the weekends free.
Chagos reaction from Trump may be a reaction to denial of use of our airbases for Iran attack.
February 21, 2026
He’s got Greek bases now.
February 21, 2026
CGT is well up as people sell up due to the attacks on landlords or to leave the country. Stamp duty too no doubt but these are one off taxes they will not recur and will kill the tax base going forwards!
February 21, 2026
The very rich have just abandoned houses – a recent report about the Wentworth estate.
February 21, 2026
IHT income will rocket.
Legal or not, oldies will learn to quietly convert visible assets to hidden cash and valuables.
It may be more attractive than upping sticks and moving overseas.
February 21, 2026
This government’s wonderful offer to inward investors to the UK.
Come and invest in the UK with IHT 40%, income tax 45%, CGT up to 28%, insurance tax 12%, VAT 20%, NI x 2 total circa 25%, council tax, stamp duty up to 15%, vast reams of red tape, absurd employment laws and rip off net zero fuel costs we will take 90% of your investment off you in no time at all! Then we will waste nearly all of it doing other net harms!
February 21, 2026
In the Telegraph today:- Labour’s “hellbent” desire to hit net zero risks leaving Britain’s energy industry vulnerable to Russian attack, a former Nato chief has warned.
Gen Sir Richard Sherriff, Nato’s former deputy supreme allied commander Europe, said the clean power push by Ed Miliband, the Energy Secretary, risked crippling the UK.
He is surely correct and this on top of wrecking the economy & spending a fortune doing net harm anyway with the war on the gas of life.
February 21, 2026
A depressing but very useful summary of what is so wrong with the overtax and spend.
In my case, I’m delighted to start drawing the old age pension this year but horrified that it will burn up most of my income tax personal allowance. As a low-earning self employed person I was used to being taxed on about half my earnings. Now I’ll be taxed on the lot, so I won’t be taking on any extra work.
The left never learn. I suppose it is due to most MPs on the left never having had a proper private sector job, or close contacts with self employed people or small businesses.
I also think much of the damage is deliberate, as they have a fabian dislike of the wealth creating classes, from the humble tradesman to the tech billionaire. The “squeeze them” mentality.
Even at the lower end of the earnings scale, we’ve had enough.
February 21, 2026
Indeed. I suppose ex Prince Andrew will be getting his state pension now – starting on his birthday a couple of days back (the day of arrest). Perhaps the £230 PW (less tax) might cheer him up a bit!
February 21, 2026
I too draw my state pension and a modest private pension which is taxed. After my wife passed doing probate i was just under the tax threshold for IHT
Being over 80 that means when I pop my clogs a significant tax bill will be due. To mitigate this I’m buying a new car ( not an EV) and enjoying some good holidays with my friends . If I have to go into care the state will have to pick up the bill
After all it will be cheaper than funding a channel invader.
February 21, 2026
Indeed think of it as 40% of you holidays or cruises . Gift out of excess income still possible effective directly and trading companies farm land if you livr 2 years i think.
February 21, 2026
That’s the way to do it.
February 21, 2026
And a massive struggle to even get quotes for work now. Trades people now charging to come to quote, even then if I get one I’m delighted – had to explain this new reality to the Insurance Company.
February 21, 2026
Incidentally, I always pay same day so that I have a chance of the trades coming again when I need them.
February 21, 2026
@Lynn Atkinson. Good for you.
February 21, 2026
Offer to pay cash in hand – that normally interests trades. It is like the massive increase in tobacco duty, this has resulted in me being able, should I so wish, to buy a pack of Manchester brand cigarettes for £6 in a local shop. One consequence of high taxes is that evasion becomes widespread.
Reply This site does not support tax evasion. I campaign for lower and fewer taxes but accept we all have to pay the taxes that government imposes.
February 21, 2026
We have a God given right to avoid taxes, particularly when we see them wasted especially funding the channel invasion. It’s ironic the effort 2TK us putting into evicting 4 Chagosians 5 thousand miles away but can’t control our borders.
I’m having a new kitchen and see no justification for the government wanting £3,500 in vat from me so cash it is.
Reply Avoiding tax is fine. I avoid tobacco tax by not smoking. Evading taxes is a crime which you commit if you buy smuggled cigarettes without paying duty.
February 21, 2026
The site does not support it, but plenty of smokers do. I don’t smoke but I know folk who have supplied cheap tobacco for decades.
February 21, 2026
Indeed a real shortage and an even worse shortage of honest and competent ones!
February 21, 2026
I was in your position last year, except I had “a little job” which I quite enjoyed but didn’t pay much. I gave the job up and decided to spend my time doing whatever I wanted to do, whenever I wanted to do it. The (small, private company) boss decided not to replace me and now uses existing staff to cover the role I used to perform.
February 21, 2026
Your pension is income, it is not a benefit and please don’t ask for it to be treated as such or you will give credence for the call to abolish it.
February 21, 2026
That single January figure 13% increase in tax, and the Chancellor’s happy smile as she rushes off to spend spend spend tells anyone everything they need to know about this government.
February 21, 2026
Socialism produces the usual result yet again. Given socialism’s unbroken record of misery and tyranny that it has produced everywhere it has been tried It is hard to understand why socialists still believe it will work next time. No, it won’t. It never has. It never will. They will not listen. The fault always lies in the resistance of the ignorant and in the interference of traitors to the faith. By the ignorant, socialists mean those who have a different philosophy and were thus failed by the state’s education programme. By traitor, socialists mean those who didn’t merely fail to get with the faith, but who actively resist and advocate alternatives. Clearly the citizens of Britain need to be put through a mass re-education programme. Perhaps Starmer has been asking President Xi for advice on how this should be done. Although Starmer released thousands of violent criminals from prison in order to make space for Britain’s first gulag, his programme seems to have stalled. Standby for Chinese Re-Education Academies to be set up in Britain, or mass enrolment in Chinese communist training camps, a spicily eastern and adventurous alternative to the EU’s youth mobility scheme.
February 21, 2026
This is what was voted for. Massive problem as recipients outweigh contributors and more vote themselves more benefits rises. Eventually the system turns in on itself. Probably worth analysing the voting numbers and how close we are to this.
February 21, 2026
All the time labour were out of office they were planning their policies for when they gained power again – trouble is that these policies:
– were all ideological;
– unfair – targeting distinct groups;
– rewarded those on benefits or those working in the state sector;
– punished the private sector;
– increased spending for no return.
They clearly gave little thought to those things that would grow the economy, instead concentrating on destructive doctrines like net-0.
If only they had been able to learn from history, but no, they were intent on turning Britain ever more socialist, implementing the failed policies of Blair, while their devastating handling of the economy has brought nothing but misery.
February 21, 2026
I paid my Income Tax in January, based on the income I received during the previous tax year (2024-2025). I also paid an advance on my anticipated income during the current financial year (2026-2027). Next January, I will be paying less because:
1. I’ve already paid half of it.
2. I gave up my “little job” last May since it was no longer worth doing it post-state retirement age and paying tax on what was little more than the minimum wage (I have other sources of income)
Next January’s tax receipts will be far lower because many people will have made their own decision based on their individual circumstances which will reduce their tax liability. And that will include the great many wealthy/high earning people who have decided to leave the UK rather than pay Labour’s extortionate taxes.
Two-Tier, Theeves and the Treasury Goons seem to be determined to bankrupt the country.
February 21, 2026
And above all Mad Miliband with his rip off unreliable energy.
February 21, 2026
2Tier will be disappointed next year when my self assessment is paid. My private pension was eaten by taxes and churning and is only £980 pa, so I invested in 2 slum 3/4 bedroom house at 45k each and used my own labour to renovate them. 30 years ago they returned 12% but with regulation and 10x house inflation is now down to 2%. Improvements to insulation for epc C cost 3k, licensing on a £450 pcm rent was £800 and rent on the £1000 pcm house stopped when the Renter’s Revenge Act came in. It’s now too risky to let. The income will be way down. But the brilliant idea from HMRC to make us spend most of our spare time submitting digital tax 5 times pa has also made me decide to live off savings for my remaining years. And I won’t be selling to the favoured corporations and paying 250k CGT. I am lending the empty house to a company that lets shirt term to tenants that take care of the building for cheap rents. Other small businesses are also saying “Why bother”.
Whoever takes over from our troubled PM will find the tax grab has run out of steam.
February 21, 2026
Yes, in many ways Fools Gold.
As for “Misety and Defeat” – if I remember correctly it is Labour that gets defeated but us who are miserable… 🙁
February 21, 2026
Governments are at best necessary parasites. More often they’re just parasites. Celebrating more tax is like being told by the doctor, “Good news! Your cancer’s ten per cent bigger. Well done you!”
February 21, 2026
Here’s a (cynical) theory. With this news of government surplus, just ahead of the local elections. Which are predicted to see Labour annihilated.
Reeves and Starmer (sounds like a double act, Morecombe and Wise, Cannon and Ball etc,) will announce some minor easing of taxes on the lower earners. In the hope that we all then forget the disasters they’ve inflicted on us in just under two years.
February 21, 2026
More like Dumb and Dumber…
February 21, 2026
Laurel and Hardy.
February 21, 2026
exactly… ‘another fine mess you got me into’.
February 21, 2026
Plainly, OA, you are not wise enough to be familiar with towns in Lancashire or perhaps it was different in your day.
February 21, 2026
It’s a one off massive tax take. People/ compnies will have altered their behaviour, as we hear in apocryphal stories. People cutting hours, companies not hiring, people moving.
Enjoy the moment Rachel, the arrow has already been launched that will hit you in the eye, and you and TTK launched it yourselves.
February 21, 2026
What we need now is the same surplus every month and in 8 years the national debt will have been paid off.
Don’t worry, it will get easier as interest payments decrease.
February 21, 2026
It is a pretty dismal picture, made worse by Jenrick’s speech that made it clear that not even Reform is serious about facing up to unpleasant truths, like the essential need to abolish the triple lock, abandon the pledge not raise income tax, VAT or NHI, or give the whole tax system the radical reform it so desperately needs.
February 21, 2026
Well they want to get elected!
February 21, 2026
Looking just like the Conservatives is no the way that Reform will get elected!
February 21, 2026
Why when uk pensions are amongst the lowest in Europe do we need to get rid of the triple lock. Civil Serpents pensions are the ones that should be targeted.
February 21, 2026
+10
February 21, 2026
Well who is going to pay back the debt the governments the pensioners voted for have racked up? Why should the next generation pay for the excesses of this one?
Reply The big debts increased by covid policy were strongly supported by all age groups and mainly was money given to people of working age. Very few of us opposed the expensive and long lock downs.
February 22, 2026
Reply to reply: the lockdown protest march I attended in central London in May 2020 had hundreds of thousands of people (possibly a million) attending, from all over the country.
The MSM ignored it and subsequent ones – following instructions from the Tyrants who removed our civil rights and ruined the economy over a virus they knew back in early March 2020 was not very dangerous for 99% of the population.
I think there was far more opposition to the tyranny than is admitted by the Establishment – despite the attempts to silence all those who objected.
February 22, 2026
and to oppose and protest almost certainly risked police intervention.
February 21, 2026
Taxshould not be increased. Spending should be reduced.
February 21, 2026
The Spectator reports that in spring 2022, David Lammy, now a Cabinet Minister in the U.K., was announced as the director of another country’s (Guyana) sovereign wealth fund.
Is this legal JR?
Reply I think Lammy declined it, contrary to the announcement. Had he joined and if he was paid he would have had to declare it. He would obviously had to resign the day he became a UK Minister. Shadow Ministers can hold other posts outside Parliament as long as they declare them and avoid conflicts of interest.
February 21, 2026
This surplus is fool’s gold. It is an unreapeatable one off that shows how stupid the Labour Government is. Too much tax at too high levels is like a person with breathing problems. As the lungs clog up the ability to breathe gets worse and worse. The person can still function, but life gets more difficult and less enjoyable.
This Labour Government is damaging ther lungs of the UK economy, and as a result it slows down, produces less and less, and life gets more difficult for everybody. When a person’s lungs stop working properly, they are put on oxygen, and when that no longer helps, they die. The UK economy has been on a debt binge for 25 years, and the day will come when we run out of credit and no one will lend to us. What fools we have had in government for those last 25 years. Now, at a time when we needed giants in government, we get pygmies!
February 21, 2026
Is there a link where these figures are easily laid out (rather than the usual longwibded report where obfuscation and hiding in plain sight is prevalent)?
A simple table of categorised spending in the month v last year and categorised income in the month that can be shared on social media would be very useful. Especially when Labour’s back benchers, Reform and the Greens start calling for greater expenditure on the poor and disadvantaged.
Reply Yes see monthly ONS Report on government revenue and borrowing.
February 21, 2026
Well at least they have kept the department as HMRC rather than UKRC as with the now UK government. Not so much boiling frogs but boiling rosbifs.
February 21, 2026
Meanwhile, the millions of immigrants here and claiming welfare (boosted by 4 million more, in just the last 4 years) are sending £billions out of the country in the form of remittances to their families “back home.”
We’re being milked dry.
https://www.conservativewoman.co.uk/bye-bye-billions-uk-haemorrhages-more-wealth-than-ever-to-migrant-countries-of-origin/
February 21, 2026
What’s wrong with that if they obey the rules and the country is daft enough to act in that way? During the early Thatcher years they made a programme about such practices called Auf Wiedersehen, Pet and I knew somebody from the north east who went to work in Bahrain for a couple of years or more to provide for his family.
February 21, 2026
£15 billion benefits to illegal immigrants in the last 18 months.
The Boris wave gets to become ‘citizens’ v shortly – unimaginable costs..
Auf wiedersehen Pet was all about WORKING ABROAD AND LEAVING THE FAMILY AT HOME,
February 21, 2026
To quote Donna – remittances to their families “back home.”
February 22, 2026
It was about putting some ‘working class funny odd characters’ together from different social circumstances to create brilliant situation comedy, not about sending money ‘home’.
February 22, 2026
What’s wrong with it?
1. “You can have mass immigration or you can have a welfare state. You can’t have both.” Why? Because mass immigration drives wages down; the cost of living (housing etc) higher and it makes life unaffordable for those who have fewer life chances to start with
2. Much of these immigrants’ income is welfare. We are becoming the Welfare State for the 3rd World; we’re borrowing money to pay for it and it’s going to bankrupt us.
February 21, 2026
Its got to the point now that if this government stood up and admitted it was lying about something, i wouldn’t believe them
February 21, 2026
This is a Dear John comment.
Great Britain is going down the tubes at a rapid rate of knots.Whenever you are on “Farage” though it is seldom he presides you have been quite and quietly polite -whenever you can get a word in.This may well suit the
decorum of the Upper Chamber to which you have gravitated.For my part I simply wish you had brought
out your armour sword and shield and crusaded for a re-born England(plus hangers-on).Very
best wishes for your future debates.
February 21, 2026
+10
February 21, 2026
Isn’t high taxation to defund the wealthy and redistribute the proceeds to the poor (including all over the world), a key, if not the only, policy of the socialist governments we have elected for the last 30 years? As Lord Gus O’Donnell who, when Cabinet Secretary, said in 2011: “When I was at the Treasury I argued for the most open door possible to immigration … I think it’s my job to maximise global welfare not national. With the wealthy consequently leaving the UK, the 2021 Net Zero Strategy has been introduced to defund the next group, those that are “just about managing”. Plus of course mass immigration, another policy designed to impoverish.