The Alternative Budget: Breaking the Populist Paradox

Introduction

The cost-of-living crisis feeds populism. Populism rarely fixes the crisis. This the Populist Paradox.

The new Chancellor of the Exchequer, John Healey’s Budget on 28 October is the official answer.

I read widely on politics and economics specifically from all political viewpoints; from economist and former trader Gary Stevenson’s perspective on the increasing wealth gap and unbridled asset ownership on the left, to the more radical ideas put forward by right wing think tanks. I recently attended a local business round table organised by our local Conservative MP and listened to what around forty SME and MME businesses want from a budget. I have tried to balance reducing the obvious increasing wealth gap, with essential economic growth and fairness within a progressive tax system.

This is an alternative: a credible, costed, progressive plan on a ten-year timescale. Many criticise politicians for having no business experience, so my plan is built around the SMART objectives used by business consultants. The policies must be Specific, Measurable, Achievable, Realistic and set to a Time period. We all know what happened when the Liz Truss’ Conservative government went rogue on borrowing for tax breaks, then spooked the bond markets with disastrous consequences, so this budget makes costing an imperative.

The calculations and research

The incredible availability of AI means I can use prompts to research and analyse data super-efficiently and re-input ideas and rules I wanted to apply. This budget has been created from my own apolitical ideas and experience refined by Anthropic AI. In effect a personal resource of U.K. Treasury, OBR, Press and PR department at my fingertips.

My thoughts on the paradox

1. Inequality sits under the Cost Of Living squeeze. When incredible wealth pools at the top, everyone else pays more to get by, through housing shortages and market power over everyday essentials.
2. Anger finds a populist. Squeezed voters back leaders who promise to tear down the establishment.
3. The policy rarely matches the rhetoric. Thatcher, Trump and Farage-Tice-Lowe show the same pattern: anti-elite language, then tax cuts, deregulation and tariffs that land on the people who actually voted for relief.
4. The elite gets redefined. Billionaires, landlords and dominant firms drop out of the frame – in fact given immunity by describing them as vital to economic prosperity and jobs. As replacement bogeymen; Academics, broadcasters and career politicians are moved in.
5. The squeeze becomes the norm. Anger is useful politically, and fixing the cause is hard.
6. The answer needs a decade. Housing, energy, market power and the taxation of wealth cannot be fixed in one fiscal event. I’ve set this as a ten-year plan.

My objectives

1. Credible. Inside the fiscal rules, with OBR scoring on every measure. Relief follows receipts, never the other way round.
2. Costed. Every measure has a number and a named source of funding. Where estimates are contested, plan on the low end.
3. Progressive. A tax shift: lighter on jobs and investment, help for my business friends. Heavier on unearned wealth.
4. Pro-growth and pro-SME. Targeted relief for small employers, business rates reform and cheaper business energy. Specifically what I heard last week.
5. Ten years. Early base reform, then property and business rates, then Land Value Tax, energy and housebuilding.
6. Measurable. A public target for the wealth gap, reported every year.

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The Case

The squeeze

UK inflation rose to 3.5% in September. Private rents average £1,406 a month, up 3.8% on a year ago. Transport costs are up 6.6%, and the energy price cap rose again on 1 October. Since 1997, earnings have roughly doubled while house prices have more than quadrupled. The average English home costs 7.6 times the average full-time salary.

Wealth is just as lopsided. The richest 10% of households hold 43% of the country’s wealth. The bottom half hold 9%.

What happens when anger wins

Thatcher won in 1979 on anger over prices, strikes and a tired consensus. Between 1979 and 1984 unemployment rose from 5.3% to 12%. Over her time in office the top rate of income tax fell from 83% to 40%, and VAT rose to 15%. By 1990 the Gini measure of inequality had climbed from 0.25 to 0.34. After housing costs, the poorest tenth were 2.4% worse off while the richest tenth were 48% better off. She did cut inflation and jobs were created, but the voters who wanted relief from the squeeze did not get it.

The pattern repeats elsewhere. Donald Trump promised lower grocery prices from day one. His tariffs have since added an estimated $1,243 to the average US household’s annual costs, and they fall hardest on poorer families. Nigel Farage’s Reform UK promised £90bn of tax cuts, has now dropped the pledge, and offers ‘non-doms’ a £250,000 one-off fee for exemption from UK tax on overseas income. The rhetoric targets the establishment. The policy often favours the wealthy.

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The Alternative Budget

The constraints

The room is thin. Fiscal headroom was £23.6bn in March. Estimates now put it between £10bn and £15bn. The 30-year gilt yield briefly passed 6% on 1 October, the highest since 1998, and debt interest is forecast at £109bn this year. This proposal stays inside Healey’s own red lines: no higher main rates of income tax, employee National Insurance, corporation tax or VAT, and corporation tax at 25% at most. That leaves capital and property.

The principle: a tax shift

Lighter on jobs and investment. Heavier on unearned wealth. Every relief is funded, and every measure is phased.

The measures and the money

The figures are published estimates, not an OBR costing of this package.

Measure	Published estimate	Planning assumption
Capital gains tax base reform and exit tax	Between a £3.5bn loss and £19.7bn extra by 2030	Count on nothing until the OBR certifies it
High-value council tax surcharge (from 2028)	£605m before behaviour, £400m after, with £150m of valuation costs	£400m a year
Employer NICs on LLP partnership profits	About £2.1bn at the end of the forecast	£2.1bn
Rolling back unpaid small-business corporation tax	About £2bn from partial reversal	Count only if costed by the OBR
Targeted employer NICs relief for small firms	Full reversal of the 2024 rise would cost about £25bn a year	Set at no more than certified receipts
Business rates reform, Land Value Tax, cheaper energy	No reliable public costing	Revenue neutral by design, or phased

What it raises. Capital gains tax reform is the centrepiece. The IFS says to align rates with income tax and reform the base: end the tax-free uplift at death, and replace business asset disposal relief with deductions for investment costs. It raises about £15bn a year today, so a prudent plan treats any extra as a bonus, not a budget line. An exit tax would stop wealth leaving. The council tax surcharge is small but opens the door to a wider revaluation.

What it costs. A full reversal of the 2024 employer National Insurance rise is out of reach. A higher employment allowance or threshold costs a fraction, and the Treasury should publish the exact figure. Business electricity costs 45% more than the G7 median, and the Prime Minister wants energy costs level with Europe’s within ten years. Most of that saving goes to firms and households, but any subsidy or public investment falls on the Exchequer.

The ten-year timetable

Years 1 to 2

• Reform the capital gains tax base and add the exit tax.
• Raise the employment allowance for small employers, in step with certified receipts.
• Speed up planning and grid connections, which cost little.

Years 3 to 5

• Introduce the council tax surcharge in 2028 and revalue council tax bands.
• Reform business rates so they stop penalising investment. Move the burden, do not add to it.
• Keep the 19% small profits rate and marginal relief.

Years 5 to 10

• Phase in a Land Value Tax that replaces part of existing property taxes, rather than stacking on top.
• Bring business energy costs in line with European neighbours.
• Build homes at scale. Property and pensions make up over three-quarters of household wealth, so housing supply does more for the wealth gap than any single tax.

Keeping the bond market onside

1. Revenue first, relief second. Relief is released only when OBR-certified receipts arrive.
2. Fiscally neutral by design. Each relief is tied to a named source, such as the employment allowance funded by capital gains reform.
3. Swap, do not stack. Land Value Tax and business rates reform replace existing charges over time.
4. Do not bank growth. Any growth dividend counts as extra headroom, never as funding.
5. Independent scoring. The OBR costs each measure, and an annual report tracks the top 10% share of wealth against a public target.

On this footing, analysts say yields could have room to fall. A surprise would do the opposite.

The other side

Critics will say a tax on wealth drives mobile capital abroad, and that clumsy capital gains reform could harm entrepreneurs and growth. The IFS has warned that raising rates without reforming the base makes existing problems worse. Former Bank of England and IFS figures have said the revenue claims are uncertain. Small firms also need relief early, and a phased plan gives them less at the start. Supporters of Thatcher say her reforms broke 1970s inflation and widened home ownership. These are fair objections, which is why this plan is gradual, why the base is reformed before rates rise, and why relief follows the money.

The test

Anger wins elections.

Lower energy bills, affordable homes, fairer tax and profitable small firms win the argument.

A Budget that sets out a funded, phased ten-year path, and then sticks to it, would be the first real answer to the paradox.

*Sources of research, data and statistics available.