In this Institute of Economic Affairs podcast, Communications Director Callum is joined by Executive Director Tom Clougherty and Editorial Director Kristian Niemietz to examine the OBR's damning 2025 fiscal sustainability report. The conversation covers Britain's vulnerable public finances, with the UK posting a 5.7% deficit - four percentage points above the advanced economy average and the third highest among European nations. They discuss how despite 14 years of Conservative-led government and supposed austerity measures, the country failed to eliminate deficits or meaningfully reduce debt as a percentage of GDP.
The discussion exposes the political fantasies on both left and right that prevent serious fiscal reform. On the left, there's magical thinking about painless tax solutions targeting only the wealthy, while the right clings to unrealistic beliefs about efficiency savings and deregulation automatically solving fiscal problems. Tom and Kristian highlight how demographic change will worsen the situation dramatically, with an ageing population set to push the deficit from 5% to 20% of GDP over the next 50 years, largely driven by pension costs and the politically toxic triple lock policy.
The podcast concludes with an examination of wealth tax proposals, particularly Gary Stevenson's theories about wealth inequality driving economic stagnation. Kristian critiques Stevenson's thesis, pointing out that wealth inequality hasn't actually increased as claimed and that countries with higher inequality like the US have performed better economically. They argue that housing policy, not wealth concentration, is the real driver of apparent wealth inequality, and advocate for planning liberalisation rather than punitive taxation as the solution to Britain's economic challenges.
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