Fix our tax system to fix our public services

The UK tax system is poorly designed, but a new CenTax paper authored by a range of economists (including me) sets outs how to make it more efficient and improve economic growth. And that this could be done with an extremely broad ideological consensus.

The Government must highlight that taxation is what pays for our vital services: education, the NHS, fire service, local government, transport, our social security system, business support. Rather than just ‘filling a fiscal black hole’ which sounds like being poured down the drain, taxation can, and does, benefit all of us daily.

Effects of poorly designed taxation

There are many ways in which our taxation system actually has negative effects, if we look at Stamp Duty as an example, it prevents people downsizing or moving area for a new job. A more efficiently designed property tax could avoid this.

Applying different tax rates on income from different sources is also unfair and misses out on potential government revenue. It incentivises activities with lower tax rates, such as investing in rental property rather than starting a business — redesigning this area of tax could increase efficiency and grow the economy.

Taxation funds our vital services

A well-designed tax system can efficiently raise the revenue required to fund an effective public service and social security system, the benefits of which would permeate all aspects of our lives. The problem the Government faces is that even in this ideal public service system it is far easier to count the amount of tax paid than to count the benefit of the roads you drive on, the NHS appointment you needed, or education you received.

It is even harder to count the value of knowing the support system is there when you need it. Of knowing that if you fall ill your NHS treatment will be free, if your company goes under and you lose your job the social security system will provide income support. Of knowing if an accident or illness results in a disability, there will be support to help cover additional costs, and if you need social care later in life, it will be provided.

It can be harder still to highlight the wider value of providing these benefits to everyone in society, not just us as individuals and the people we intrinsically care about — our friends, family and neighbours. For example, the education system provides skilled workers to employ and work with, and the security provided by income support enables an entrepreneur to take a risk and start the company that provides you with a job or a service.

Our public service system is not working

People cannot count the benefits of an effective public service system because the one we have is not working.

Our social security system does not cover the cost of essential goods. In the first half of 2025, over 5 million low-income families were cutting back or skipping meals. For renters in the poorest fifth of households around half of their income disappears in housing costs. Energy bills remain over 50% higher than in 2019 and nearly 1 in 5 households cannot afford to keep their homes warm. There are nearly 3 million more people waiting for NHS treatment than in 2019 and 1 in 7 people will face care costs in excess of £100,000.

The result is people facing unnecessary hardship, unsure if the safety net will be there to help them if something goes wrong. Employees turning up to work hungry cannot possibly be at their most productive, and people are less likely to take the risk of a new job or starting a new business without confidence they will be supported if it does not work out.

Taxation can, and should, benefit us all

Fixing these problems is a necessity and requires upfront investment. Advanced economies around the world have begun to increase tax revenues to tackle costs faced by an aging population.¹ If the UK also wants these economic and social advantages, it will need to do the same.

But it is essential that taxes are raised in a way that is efficient, fair and progressive. CenTax reminds us this could be done, and there’s potentially an extremely broad ideological consensus out there on how to make a start.

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