The UK keeps calm and carries on toward French-style disaster

The United Kingdom is slowly sliding off a fiscal cliff edge. Absent major spending cuts, the U.K. will suffer a systemic crisis like that afflicting France. Beholden to socialism, the U.K.’s Labour government seems determined to bury its head in the sand.That’s the takeaway from Chancellor of the Exchequer John Healey’s budget, which was released on Wednesday.In the U.K. system, the chancellor has great power to shape economic policy, even against the wishes of a prime minister. More moderate than Prime Minister Andy Burnham, Healey’s appointment had suggested that the U.K. would quickly increase defense spending. After all, Healey had resigned as former Prime Minister Keir Starmer’s defense secretary in protest over low defense spending. But that was before he got a promotion. Healey now says that he’ll deliver defense spending details next fall. This will spark concern in Washington, where there is a bipartisan sense that sustaining the U.K.-U.S. “special relationship” requires London’s immediate pursuit of 3%-of-GDP defense spending.OBAMA IS WRONG THAT WAR HAS MADE IRAN STRONGER. HE’S RIGHT THAT IT’S MADE THE US WEAKERWhat Healey did tell us wasn’t inspiring. He referenced leveraging of infrastructure banks and dual-use systems to reach the 3% target. This suggests that the U.K. may employ creative accounting, as Italy and Spain have done, to get its defense budget up.But gimmicks won’t cut it. The British Army is the smallest it has been since the late 18th century, the U.K.’s air force lacks planes and pilots, and its depleted navy would struggle against just three capable Chinese warships.Unfortunately, Healey’s evasion on defense only represents his broader failure to meet the moment. Avoiding spending cuts and offering select, very limited tax breaks, Healey sought to chart a middle path between short-term bond market stability and avoiding the ire of his socialist colleagues. This avoidance of responsibility jeopardizes both the U.K.’s fiscal credibility, and its attractiveness to investors.The challenge is severe.U.K. taxes are exorbitant, standing at 38% of gross domestic product (including federal, state, and local taxes, it’s about 28% in the United States). The devil is in the details. And of note to those flirting with democratic socialism, the devil comes for all households here, not just the rich.Consider the U.K.’s sales tax rate. It stands at 20%. How about gas station sales? They are taxed even higher, at a rate three times greater than in the U.S. (it costs double to fill up your tank in the U.K. than it does in the U.S.)Protesters wave flags at the Winston Churchill statue during the Unite the Kingdom march in London, Saturday, May 16, 2026.(AP Photo/Kirsty Wigglesworth) That’s just the start. The U.K. share of global capital markets has significantly declined over the past 10 years, partly due to taxes that include surge charges on bank profits. These threaten the crown jewel of the U.K. economy, London’s financial center. JPMorgan CEO Jamie Dimon has threatened to cancel a major new office project in London if taxes were further increased. Healey seems unconcerned. On Wednesday, he boosted the surcharge tax by 3%.Next up, income taxes.Excluding the $16,000 individual personal allowance before taxes are levied (an allowance which is tapered then removed for those earning between $133,000-$167,000), taxpayers in England, Wales, and Northern Ireland (Scotland sets its own tax rates) pay 20% on earnings between $16,000 and $67,000, 40% on earnings between $67,000 and $133,000, and 45% on earnings over $167,000. An additional 8% tax for the U.K. equivalent to Social Security is due on earnings in the first bracket, falling to 2% for earnings over $67,000. A local “Council Tax” comes on top of this, averaging about $3,000 per year in London.Remember those statistics next time that Rep. Alexandria Ocasio-Cortez (D-NY) and co. promise that a welfare state utopia can be bought on the back of “the rich.” The math only works if everyone is considered rich. Also remember that economic growth rates in European welfare states have become lethargic compared to growth in the U.S.Taxes are only one element of the U.K.’s fiscal malady.The U.K. welfare budget is the big-ticket black hole for fiscal stability. That welfare state has long been defined by easy access to government handouts that are divorced from work-related requirements. Nor, in effective terms, does the U.K. cap access to unemployment benefits. Many Britons simply transition from the unemployment welfare program after its six-month expiration and into the overarching welfare system.This system is a public finances Charybdis.Disability and health-related claimants in the U.K. have doubled since COVID-19. Incredibly, 10%-11% of all working-aged residents now receive payouts (about three times the population percentage equivalent rate in the U.S.). There is a heavy representation here of those claiming for mental health conditions. Government subsidies for public housing or for payments toward privately rented accommodation are also extensive.This dynamic is made worse by regulations that have reduced housing construction and driven up renting costs. Housing benefits are also a source of public frustration amid recent immigrants and large families living at taxpayer expense while many others can’t even get on the property ladder.All of this speaks to the deeper truth about the U.K. welfare system. A truth which is not supposed to be spoken.Namely, that while immigration has put the welfare system under strain, many Britons game the system to bolster their private interests without bothering to find a job or otherwise cut their living expenses. Because there is an increasingly widespread sense that the system is being gamed, there is less social shame about getting in on the racket. This dynamic is particularly problematic with young people. Youth unemployment stands at approximately 9.5% in the U.S., versus 13% in the U.K., with many young Britons neither training nor looking for work.The fundamental problem is that the U.K. faces an ever-increasing outlay of welfare benefits amid a rapidly aging population the working-aged elements of which are already highly taxed. The U.K. has a problem even on healthcare. In return for heavily triaging access to adequate care, the U.K. has kept health expenditures (11% of GDP) closer to the Western average. While the U.S. spends exorbitantly (and unsustainably) on healthcare (17% of GDP), its general private model of delivery means that households and employers share costs. In contrast, absent adoption of an insurance/part-private delivery model, U.K. taxes will have to rise significantly to cope with healthcare costs born of an aging population.ELECTION OVER, ISRAEL-UK INTELLIGENCE COOPERATION WILL THRIVE AGAINIs the U.S. facing its own dire fiscal reckoning? Absolutely. Medicare and Social Security outlays are out of control and set to get far, far worse. Republicans lie to the public by pretending public finances can be fixed by cutting waste and also taxes. Democrats lie to the public by pretending that the rich can pay for everything.And we, the public, lie to ourselves and betray our children instead of facing hard facts.The difference between the U.S. and the U.K., however, is that America’s dynamic capitalist economy gives it more time to fix these problems. For the U.K., the fiscal grim reaper is gazing fondly over the English Channel.