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.
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
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
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
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
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
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.