London Daily

Focus on the big picture.
Monday, Sep 08, 2025

The UK's six big money problems

The UK's six big money problems

Brexit dominates the headlines - but the UK economy faces many other important challenges.

Brexit continues to dominate the headlines - but the UK economy faces many other important challenges.

Inequality in the housing market, poverty among working people and reducing greenhouse gas emissions are among them.

For any party hoping to win power on 12 December, these are serious issues.


Fewer young people own homes

Only 36% of those born in the late 1980s have become homeowners by the age of 30, compared with 55% or more of those born between the 1940s and the 1970s.

Younger generations have seen the price of homes rise far more quickly than their salaries - the main reason for this change. This is particularly true in southern England.

Many more people in their 20s and 30s are now renting privately. Their average housing costs are about 20% higher than 20 years ago.

Meanwhile, low interest rates mean most owner-occupiers - many of them older people - enjoy lower housing costs than in the past.


Wages are £5,000 less than they might have been

Growth in productivity - the amount the UK's workers produce per hour worked - has been unprecedentedly poor since the 2008 financial crisis.

In the past 11 years, the amount workers produce every hour has grown by just 2.9%. That's about as much as it grew on average every 15 months in the preceding 40 years.

As a result, productivity in the UK is now 19% lower than it would have been had the trend seen before 2008 continued.

This really matters.

In the long-run, average living standards grow in line with growth in productivity.

Average hourly wages are roughly at the same level now as they were in 2008. Given they usually rise every year, this means they are also 19% below where they would have been had long-term trends continued.

A full-time worker on average hourly wages now earns £5,000 a year less than they would have done had the pre-2008 trend continued.


Poverty among people who are working

Low wages have had another knock-on effect - most people living in poverty in the UK are actually in working households.

In 2017-18, 58% of all those below the poverty line (less than £248 a week income for a couple with no children) were either in paid work or living in a household with someone who worked. This figure compares with 41% two decades ago.

In part, this reflects positive trends. There are fewer households where nobody works, and pensioner incomes have increased.

But it also reflects the fact for low-income workers, wages are not growing as fast as housing costs.


An ageing population

As the UK's ageing population grows, so does the amount of money the UK spends on pensions and healthcare.

In the past 30 years, spending on these areas has increased from 8.5% of national income to 13.1% - in other words, a rise of £100bn.

It's estimated this figure will have to increase by 1.7% of national income (£37bn in today's terms) over the next 10 years. This is just to keep pace with changes in the population and other cost pressures.

That will mean big tax rises, or spending cuts, just to keep things broadly as they are.


Problems with tax

The UK government currently takes nearly 35p in tax from every £1 earned - the highest share it's taken since the 1940s.

Given the ageing population, and the various spending promises being made by the main parties, this is unlikely to go down any time soon.

Having said that, many European countries raise more in taxes. But they tend to raise more from people on average incomes.

The UK, on the other hand, tends to rely on a small number of high earners for a lot of the tax it raises. The highest-income 1% of adults pay more than a third of all income tax.

The problem with this is that public finances are more vulnerable to changes in the income or behaviour of high earners. If a relatively small number leave the UK, this can have a outsized effect on taxes.

The amount of money raised is also under threat because tax levels on petrol and diesel have not been maintained. And it can be difficult to raise tax from multinational companies.


Going for zero

The main parties all say they want to reduce the UK's greenhouse gas emissions to net zero by 2050 at the latest.

While progress has been good so far (the UK's domestic emissions are 44% down on their 1990 level), the UK is still nowhere near meeting the target.

According to the Committee on Climate Change, radical changes are needed in the next few years. By 2025, it says, the UK should have a plan to completely replace gas as a source of domestic heating. By the early 2030s, all new cars and vans sold should be electric.

One of the economic challenges here is the less well-off spend more of their income on heating and transport costs. Any taxes targeting the carbon people produce need careful consideration to avoid making some worse off.

Newsletter

Related Articles

0:00
0:00
Close
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
US Justice Department Launches Criminal Mortgage-Fraud Probe into Federal Reserve Governor Lisa Cook
Escalating Drug Trafficking and Violence in Latin America: A Growing Crisis
US and Taiwanese Defence Officials Held Secret Talks in Alaska
Report: Secret SEAL Team 6 Mission in North Korea Ordered by Trump in 2019 Ended in Failure
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Florida Murder Case: The Adelson Family, the Killing of Dan Markel, and the Trial of Donna Adelson
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
Big Tech Executives Laud Trump at White House Dinner, Unveil Massive U.S. Investments
Tether Expands into Gold Sector with Profit-Driven Diversification
‘Looks Like a Wig’: Online Users Express Concern Over Kate Middleton
Brand-New $1 Million Yacht Sinks Just Fifteen Minutes After Maiden Launch in Turkey
Here’s What the FBI Seized in John Bolton Raid — and the Legal Risks He Faces
Florida’s Vaccine Revolution: DeSantis Declares War on Mandates
Trump’s New War – and the ‘Drug Tyrant’ Fearing Invasion: ‘1,200 Missiles Aimed at Us’
"The Situation Has Never Been This Bad": The Fall of PepsiCo
At the Parade in China: Laser Weapons, 'Eagle Strike,' and a Missile Capable of 'Striking Anywhere in the World'
The Fashion Designer Who Became an Italian Symbol: Giorgio Armani Has Died at 91
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Queen Camilla’s Teenage Courage: Fended Off Attempted Assault on London Train, New Biography Reveals
Scottish Brothers Set Record in Historic Pacific Row
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Court of Appeal Allows Asylum Seekers to Remain at Essex Hotel Amid Local Tax Boycott Threats
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
Nvidia Reveals: Two Mystery Customers Account for About 40% of Revenue
Woody Allen: "I Would Be Happy to Direct Trump Again in a Film"
×