Here’s how the chancellor can raise the billions needed to improve the quality of life of millions

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

Minister Andy Burnham faces a difficult task in changing the UK’s economic fortunes. The decline is due to the obsession with neoliberalism, which has failed to improve the quality of life for millions. Chancellor John Healey’s first budget offers a chance to improve the purchasing power of the bottom 50% of the population, which in turn will increase people’s disposable incomes, invigorate local economy and fuel economic growth.

Neoliberal Destruction

The evidence of neoliberal destruction is all around us. Workers’ share of gross value added has declined from 71.9% in 1975, to 59.7% in 2026. 1.23m workers are on zero-hour contracts. 4.4m jobs pay less than the real living wage. 6.3m workers are in insecure jobs with no guarantees of when they will work, how much they will earn, and whether they will have enough hours or even if they will have a job in future. The insecurity is compounded by a tax system in which the poorest 20% pay a higher proportion of their income in direct and indirect taxes than the richest 20%. 

Unsurprisingly, 25.3m people, including 14.9m working adults and 7.7m children, live below minimum income standards, and have little capacity to boost economic growth. At the same time, the richest 1% has more wealth than the bottom 70% of the population combined.  50 families hold more wealth than the poorest half of the population, comprising more than 34m people. Due to concentration of wealth in relatively fewer hands governments rely upon fewer people to stimulate the economy and are easily held to ransom.

Public infrastructure has been dismantled. 6.16m individuals await 7.28m hospital appointments. 1.3m households (about 4m people) are on a waiting list for a social home; but only 12,198 social homes a year are being built. Social care is in disarray. Universities are in financial crisis. Rivers are polluted with raw sewage. Roads are potholed. Half of England’s schools are unfit for use. The court system is creaking and prisons are overflowing. The economy is vulnerable as manufacturing has declined from 30.1% of economic output in 1970 to 8.5% by 2026.

Neoliberals have restructured the state. Instead of directly investing in infrastructure and new industries, it guarantees corporate profits through privatisations, outsourcing of public services, private finance initiative (PFI) and public private partnership (PPP). Profiteering by corporations has depleted the public purse, leaving less for frontline services. Neoliberals demand cuts in wages, benefits, state pension and public investment, but are silent on the social cost of corporate welfare and tax perks of the super-rich. 

Big banks have been bailed out and are now bankruptcy proof. The finance industry has turned town centres into economic deserts. Private equity has no long-term interest in the wellbeing of workers, customers and communities. It extracts cash through asset-stripping, cuts in wages and staffing, and tax abuses. It has devoured names such as Bernard Matthews, Body Shop, Byron Burger, Casual Dining, Cath Kidson, Claire’s, Comet, Debenhams, Flybe, Four Seasons Health Care, Homebase, HMV, Maplin, Monarch Airlines, The Original Factory Shop, Payless Shoes, Poundworld, Silentnight, Southern Cross, Thomas Cook, TM Lewin, Toys “R” Us and more. It owns supermarkets, hospitals, care homes, GP surgeries, water companies, vets and receives government contracts.

China invests over 41% of its GDP in productive assets, and India 34.3%. The UK spends around 17.9%, with about 50% provided by the private sector. Due to low investment state the UK has languished at or near the bottom of the G7 and OECD league of investment in productive assets for over thirty years, resulting in low productivity.

Reviving the UK

There is an urgent need to tackle social problems. What could the Chancellor do?

The government could embrace the Modern Monetary Theory (MMT) and create new money for economic revival, but MMT has no political traction.

It could increase tax rates but has pledged not to increase rates of national Insurance, income tax, VAT and corporation tax.

The post-war prosperity we had was built on government debt of 270% of GDP. The public debt is currently around 95% of GDP and the government can borrow more for social investment, but it fears big corporations and the City of London who demand more privatisations.

Despite the self-imposed constraints, the government can access billions for tackling poverty and social investment by eliminating tax, legal and fiscal anomalies .Here are some examples.

Wages are taxed at marginal rates of 20%-45%. Earners also pay national insurance. Capital gains above £3,000 are taxed at marginal rates of 18% to 24%. By taxing capital gains at the same rates as wages, around £12bn to £14bn could be raised. More, if national insurance is levied.

Dividends above £500 are taxed at marginal rates of 8.75%, 33.75%, and 39.35%. Bringing dividend taxes in line with income tax rates could raise £6 billion a year. Higher if national insurance is also charged.

Gross tax relief on pension contributions to employers and employees in 2024- 2025 was £83.9bn. 14% of the tax relief benefited 1.1m additional rate (45%) taxpayers, 57% benefited 6.6m higher rate (40%) taxpayers and 29% went to 30.4m basic rate (20%) tax payers. By restricting tax relief at the rate 20% to all, the government could have £14.5bn spare.

A 2% tax on wealth above £10m could raise £24bn a year.

A modest Financial Transactions Tax (FTT) on the purchase and sale of financial instruments like shares, bonds, and derivatives could raise £5bn a year.

VAT at the standard rate on private healthcare insurance premiums could raise around £2bn a year.

A home worth £320,000 falls into the same council tax band as a property worth £32m. Additional council tax bands can raise revenues.

The rules for curbing tax avoidance don’t apply to business rate avoidance. Promoters of one scheme boasted that they have deprived local councils of £500m of revenue. Millions can be raised by ending abusive schemes.

In 2024-25, HMRC failed to collect taxes of £59.2bn; totalling nearly £500bn since 2010. Another £12.8bn is lost through profit shifting by multinationals. Billions can be raised by tackling tax abuse and its enablers.

Lawyers, accountants, dentists, surveyors and architects trade through limited liability partnership (LLP) structure. As partners, they receive share of profit instead of wages. Their self-employed status means that the LLP does not pay employer national insurance on the profit shared by partners, saving the firms £150,000 for every £1m of profit shared. Big four law firms alone reportedly avoided paying £4bn of employer national insurance. Billions can be collected by ending the employer national insurance dodge.

Dividends to foreign investors are paid without deducting tax at source. Countries such as the USA, Australia, Canada, France, Germany, Italy and Sweden have a dividend withholding tax for foreign investors. The UK should follow suit. Each £100bn dividend paid to foreign investors could yield £20bn or more in tax revenues.

Research shows that since the pandemic corporations have increased their profit margins by an average of 30%. Electricity and Gas supply companies increased their profit margins by 363%, often without additional investment or risks. Governments can raise large amounts through windfall taxes. For example, a windfall tax on the UK’s four biggest banks could raise £19bn. A small windfall tax is already levied on energy companies and there is scope for much higher rates. Their 2025 profit of £23.1bn is further boosted by the Iran war. 

HMRC is an unsecured creditor for taxes specifically relating to a business (such as corporation tax and capital gains tax). It recovers little from bankrupt businesses. Phoenixing also robs the public purse. HMRC wrote-off £5.6bn in 2023-24, £7.2bn in 2024-25 and £12.8bn in 2025-26. Restoration of the preferential creditor status for HMRC can raise billions.

Since 2006, the Bank of England has paid interest on central bank reserve deposits to commercial banks. Central bank reserves are deposits held by commercial banks at the Bank of England (BoE) and are used to settle payments between banks. They are also used by the BoE to manage interest rates through tools such as quantitative easing. The interest payments accelerated in 2009 as quantitative easing took hold. As interest rates rose, payments to commercial banks increased. The EU had similar arrangements but in 2023 virtually eliminated the practice. The Swiss central bank also stopped paying interest on central bank reserves. The UK continues to pay massive amounts; £38.23bn in 2023, £36.33in 2024 and £25.9bn in 2025. Billions can be freed by ending hidden subsidies to banks.

The above is a small sample of the anomalies that need to be addressed to boost the public purse. The tax base needs to be broadened.  Billions can be raised without increasing the basic rates of national Insurance, VAT, income and corporation tax. It won’t immediately dismantle neoliberalism but a start can be made by reducing inequalities, alleviating poverty, raising personal allowance and removing millions for paying income tax, bringing essential services into public ownership and by making much needed social investment. Does the government have the political will to act?