What can be done to save our economy as Britain is on the verge of catastrophe?

According to James Mackreides, there are easy solutions to Britain's problems, but nobody is paying attention

There are both positive and negative news regarding the future of the British economy. The good news first. The UK's issues are comparatively simple to resolve. The government is wasting a lot of money on asylum hotels, paying Mauritius to remove the Chagos Islands, and re-entering the Erasmus program in order to gain favor with the EU and the pro-EU lobby in the UK. Certain taxes, like the taxes on oil and gas production in the North Sea, the reintroduction of non-domicile status, and the return of VAT rebates for tourists, could be reduced in order to increase revenue and promote growth. Numerous recent tax increases, including those on inheritance, capital gains, and private education, will hurt growth while producing little to no revenue. They could be quickly undone.

Restricting immigration to individuals with taxable employment and limiting welfare benefits and public administration would both reduce costs and boost incentives to work. If productivity increases, there is no need to reduce public services like health, education, and law and order. With a 2.5 percent increase in 2024 - 2025, the NHS has started off well and is well-supported by data and anecdotal evidence. There is a lot more to aim for, which lessens the need for additional funding to enhance services. Deregulation would result in savings for the public and private sectors.

The ensuing increase in growth would further reduce the budget deficit and lower gilt yields, which would lower the cost of financing the UK's debts. As Sweden has seen in recent decades, this would allow for tax cuts and establish a positive feedback loop of economic expansion that would improve public finances and prosperity.

What the United States can teach Britain.

Despite the possibly premature tax cuts of 2025, the US is beginning to see the effects of such a course of action. Growth, which is predicted to have been 2 percent in 2025 and to accelerate in 2026 due to productivity growth of 3.5 percent, has not been negatively impacted by harsh immigration restrictions and import tariffs, as many had predicted. The rate of unemployment is rising, but in contrast to the UK, the private sector is hiring more workers while the government is laying them off.

Inflation and bond yields are lower in the US than in the UK, despite stronger growth. The budget deficit decreased from 6.3 percent to 5.9 percent in relation to GDP, but it only decreased by 2 percent in the year ending in September 2025. Since then, the deficit has decreased by 27% annually; therefore, in 2025 - 2026, it is likely to drop to 4% of GDP. In 2026, the debt-to-GDP ratio would continue to increase before declining.

Since 2008, the UK has seen clear structural improvements. Prior to that, the expansion of credit in the private sector was the primary driver of growth. This resulted in unsustainable practices such as excessive mortgage debt, low savings, debt-financed consumer spending, unstable banks, overindebted businesses, and property speculation. Since then, the percentage of households with mortgages has decreased by half (and 80% of those with mortgages are now on fixed rates), the savings rate has doubled, and private-sector finances have significantly improved. The UK's future growth is probably going to be far more balanced than it was in the past.

Don't anticipate a shift in direction under Labour.

The bad news is that while the current government is in power, the economy is unlikely to improve. In fact, things are likely to get worse, with a stagnating economy, a persistently high budget deficit, stubborn inflation, and rising unemployment. It is highly unlikely that an early election will take place; governments that are certain to lose, like those in 1997, 2010, and 2024, wait until the very last minute, which means mid-2029. By altering the legislation governing the dissolution of Parliament, the government might even be able to postpone the election for longer than five years.

Although the 1976 precedent is not encouraging, some may hope that a funding crisis in the gilts market will compel the government to make a dramatic U-turn in economic policy. After that, there was only an L-turn, and then three years of unstable stabilization with a few minor advancements. Damascene will not be converted. It is equally likely that the government will use the next three years to make life as difficult as possible for its successor by enforcing regulations, enacting laws that obstruct progress, and tightening its control over the public sector and civil service in general. The next administration might have to use a chainsaw instead of taking a more progressive course.

Soon, Britain will require its own chainsaw.

In Argentina, Javier Milei has demonstrated that no nation is in such dire economic circumstances that it cannot be turned around quickly and relatively painlessly with the correct policies put in place as soon as possible. Furthermore, this may be a surefire way to win elections. People, though not necessarily investors, will have to wait as the UK has not yet reached the point of no return, as Argentina appeared to have done long ago.

The price of Argentina's five percent 2038 bond has tripled since Mileis was elected in October 2023. Although UK bond investors may be disillusioned with the current administration, they do not want to be left behind when things change. This makes the case against a funding crisis because too many investors would view it as a chance to make purchases. In a similar vein, people who are holding off on purchasing UK stocks during a crisis like this are probably going to be let down.