Taxation, Public Spending, and a Free Economy

Version 5 Working Draft

Version note

This document forms part of the Restoring Constitutional Programme - Version 5.

1. Purpose

This paper believes that economic policy must serve a free, responsible, and widely prosperous society.

The purpose of taxation is to fund necessary public goods, not to feed an endlessly expanding state. The purpose of the market is to allow people to work, trade, own, build, save, invest, employ, and provide goods and services to one another. The purpose of government is to maintain fair conditions for that activity, not to create monopolies, protect favoured corporations, or turn citizens into dependants.

This paper’s economic approach is therefore:

pro-market, pro-enterprise, pro-ownership, anti-rentier, anti-monopoly, and anti-corporatist.

The goal is a country in which ordinary people can acquire capital, build businesses, own homes, trade freely, and become economically active citizens.

2. Financial Stewardship and Constitutional Control of Public Money

This paper does not yet fix a mechanical constitutional ceiling for taxation, public spending, borrowing, or debt. That question is parked for further development. The immediate constitutional requirement is more fundamental: public money must be authorised honestly, accounted for properly, and made visible to Parliament and to the people.

Public money is held on trust for the people. No Minister, department, public body, or authority should make promises of public money, incur public liabilities, seek supply, or present expenditure to Parliament without lawful authority, honest disclosure of material cost and risk, and proper account to Parliament and to the public.

This reflects Article 2 of the Common Law Constitution. The principle is not that every fiscal question must be settled by a formula. The principle is that no government should be able to hide the true cost of its promises, shift liabilities out of sight, or obtain supply from Parliament on incomplete or misleading information.

No promise without cost. No commitment without disclosure. No expenditure without authority. No public money without stewardship.

Parliament chooses priorities; the people control the purse.

3. Democratic Choice Over Spending Priorities

This paper’s purpose is not merely to restrain public spending. It is to restore democratic choice over how public money is used.

If taxation, spending, borrowing and public liabilities are constitutionally disciplined and honestly disclosed, political parties can no longer win votes by making unlimited spending promises while leaving the cost obscure. Instead, they must publish clear plans showing how they would allocate public funds and account for their choices.

At the ballot box, voters would then have a real choice between competing public priorities.

One party might choose to spend more on defence, another on health, another on tax relief, another on debt reduction, another on local government, infrastructure, policing, education, or support for families. But each would have to show what it would reduce, postpone, reform, or abandon in order to fund those choices.

This would make elections more honest. It would also make governments easier to hold to account. Voters could compare published spending plans with actual spending decisions and judge whether politicians had honoured their mandate.

Democratic government should mean choosing priorities within known limits, not handing politicians a blank cheque.

4. Tax Simplicity and Public Sector Efficiency

Modern taxation is deliberately spread across income, consumption, employment, savings, property, business, fuel, insurance, duties, levies, fees, and hidden compliance costs. The effect is to extract the maximum amount of money from the public with the minimum amount of visible resistance.

This is costly, inefficient, and bad for democratic accountability.

A constitutional duty of financial stewardship would create a powerful incentive for government to simplify the tax system. At present, the cost of tax complexity is widely dispersed. It is borne by taxpayers, businesses, accountants, lawyers, HMRC, the courts, and the wider economy.

Under these proposals, the cost of collecting tax and administering public finance should become visible as part of the public account. A complex tax system would no longer be a hidden burden. It would become a visible failure of public administration.

Government would therefore have a strong incentive to reduce the number of taxes, simplify tax rules, lower compliance costs, reduce avoidance opportunities, and make collection as cheap and automatic as possible.

The same principle should apply across the public sector. Public money is not an unlimited resource. Every pound wasted on bureaucracy, duplication, poor procurement, administrative complexity, or failed schemes is a pound taken away from services the public actually value.

This paper believes the public sector must pursue efficiency with the same seriousness normally required of the private sector.

The purpose of taxation is to fund public goods, not to feed administrative complexity.

5. Fair and Progressive Taxation

This paper believes taxation should be fair, progressive, simple, and economically sensible.

Those with greater economic capacity should make a greater contribution to the common good. But the present tax system places too much burden on earned income, employment, enterprise, production, and ordinary household spending.

A country should not discourage people from earning, building, trading, saving, employing, or producing useful goods and services.

This paper therefore supports a gradual shift in taxation away from work, employment, enterprise, production, and everyday spending, and towards unearned gains and economic advantages that arise from scarcity, monopoly, planning decisions, land value, speculation, inherited privilege, regulatory protection, or public investment.

Where private wealth is created by public action or community growth, it is reasonable that part of that gain should return to the public. Roads, schools, transport links, planning permissions, public services, and local economic activity can all increase private land and asset values.

Taxation should recognise the distinction between value created by personal effort and value created by society as a whole.

The direction of travel is to tax what is taken from the common stock rather than what is created by individual effort.

The public principle is:

6. Public Office and Private Enrichment

This paper believes that public office must not become a route to private enrichment.

There has always been an element of patronage, self-interest, and personal advantage in politics. Historically, however, national politics was often dominated by those who were already privately wealthy. That system had many faults, but political office was not usually presented as an ordinary career ladder by which a person could begin with little private wealth and emerge as a multimillionaire.

Modern politics has changed. Increasingly, individuals study politics, enter party machines, become advisers, MPs, ministers, regulators, or public officials, and then acquire substantial wealth through influence, access, consultancy, lobbying, speaking fees, book deals, directorships, foundations, contracts, or insider knowledge.

This damages public trust. It creates the appearance, and sometimes the reality, that public office is being used as a route to private gain.

This paper believes that politics must be restored as public service. Those who hold public power should be able to live decently, receive proper salaries, and build ordinary savings. But they should not be able to use public office as a means of unexplained enrichment.

The precise mechanism requires further development, but the principle is clear:

No one should become mysteriously rich from public office.

Office-holders should be subject to strong transparency rules, asset declarations, conflict-of-interest controls, restrictions on lobbying and post-office enrichment, and effective sanctions for concealed gains arising from public power.

7. Broad Capital Ownership

This paper has a free market capitalist principal.

Private property, enterprise, trade, profit, saving, investment, and competition are essential to prosperity and freedom. A healthy economy is not built by the state directing every activity, but by millions of individuals, families, firms, farms, trades, and associations making their own decisions, taking risks, serving customers, and building wealth.

However, capitalism must not become a closed game in which only those who already possess capital can meaningfully participate.

The purpose of a free market should be to allow ordinary people to acquire, build, and use capital so that they can become economically active citizens. Capital should not be confined to large corporations, inherited wealth, banks, asset managers, monopolies, or politically connected interests.

This paper therefore supports an economy in which people can start businesses, own homes, buy land, save, invest, acquire tools, build productive assets, employ others, and pass something on to the next generation.

The aim is not state socialism, and it is not crony capitalism. It is a property-owning, enterprise-owning, capital-owning democracy.

Economic freedom means more than the right to work for wages. It means the realistic opportunity to acquire capital and take part in the economic game as an owner, builder, producer, and investor.

Capitalism should not mean rule by existing capital. It should mean broad access to capital.

8. A Nation of Shopkeepers

Napoleon is said to have described Britain disparagingly as a “nation of shopkeepers.” This paper accepts the phrase, but rejects the insult.

A nation of shopkeepers is a nation of people who make their living by providing goods and services to one another. It is a nation of enterprise, trade, thrift, independence, usefulness, and mutual obligation.

This is the moral heart of a free economy. Prosperity is not created primarily by government direction, corporate monopoly, financial engineering, or bureaucratic schemes. It is created by people finding needs and meeting them; by farmers, builders, shopkeepers, manufacturers, hauliers, engineers, professionals, tradesmen, inventors, landlords, tenants, customers, savers, and investors making voluntary exchanges.

This paper believes Britain should recover this spirit.

The economy should not be arranged around passive dependence on the state, nor around dominance by global corporations. It should be arranged so that ordinary people can earn, trade, own, save, invest, build, employ, and pass something on.

A healthy economy is one in which millions of people are economically active, not merely as consumers or employees, but as owners, producers, traders, and citizens.

This paper takes “a nation of shopkeepers” as a compliment: a nation of practical people making money honestly by serving one another.

A nation of shopkeepers — not a nation of dependants or monopolies.

9. Against New Mercantilism

This paper supports free market capitalism, but rejects the new mercantilism.

A free market is not the same thing as a market dominated by a small number of corporations, banks, funds, regulators, and politically connected interests. When government policy, regulation, planning rules, procurement systems, banking rules, and compliance costs favour large organisations over ordinary citizens and smaller businesses, the result is not capitalism. It is state-assisted monopoly.

This paper opposes this new mercantilism.

In a healthy economy, people should be able to acquire capital, buy homes, start businesses, rent property, employ others, and build independent livelihoods. Government should not create systems in which only large corporations and global financial institutions can afford to comply, borrow, build, buy, or operate.

The housing market is a clear example of this danger. Banking regulation can make it harder for first-time buyers to obtain mortgages, while large institutional investors can access capital more easily. Over-regulation of private landlords can drive smaller property owners out of the rental market, reducing personal ownership and leaving more space for large corporate landlords and investment funds.

The result is a distorted market in which ordinary families, small landlords, local builders, and first-time buyers are squeezed, while large financial institutions are well placed to acquire assets at scale.

This paper believes policy should be judged by a simple test:

Does it widen ownership and opportunity, or does it concentrate ownership and power?

State-assisted monopoly is not free enterprise.

10. Transitional De-Concentration of Captured Markets

This paper believes that free markets require open entry, real competition, and dispersed economic power.

Where markets have become dominated by a small number of mega-firms, market forces alone may no longer be sufficient to restore competition. In such cases, simply removing regulation and waiting may only strengthen the incumbents who already control the field.

This problem is not limited to supermarkets. Similar concentration can be seen in accountancy, law, consultancy, banking, technology, procurement, audit, logistics, finance, insurance, housebuilding, and other sectors where scale, regulation, professional rules, government contracts, and compliance costs have entrenched large incumbents.

In such markets, the largest firms often benefit from a corporatist or neo-mercantilist structure. Regulation intended to protect the public can become a barrier to entry. Government procurement can favour only firms large enough to satisfy complex bidding requirements. Professional rules can entrench existing players. Compliance costs can be absorbed by global firms but crush smaller competitors.

This paper therefore supports transitional de-concentration measures in sectors where excessive concentration has damaged competition, public accountability, local enterprise, or national resilience.

These measures should not be designed to punish success or impose permanent state control. They should be designed to reduce the harm caused by corporatism and monopoly until genuine market forces can operate again.

Possible measures may include:

These anti-monopoly proposals are not attacks on property. They are proportionate regulations of market power designed to preserve free competition, local enterprise, consumer choice, and economic independence. The right to hold and enjoy property does not include a right to use accumulated market power to prevent others from entering, trading or competing.

The right to property is not the right to monopoly power.

11. Grocery Retail and Supermarket Concentration

The grocery sector illustrates the problem of excessive concentration.

The major supermarket groups have developed into a complex monopoly supported by planning policy, regulatory structure, buying power, national logistics, land control, and government-created barriers to entry.

This paper does not oppose large supermarkets as such. Large stores can serve a useful purpose. They allow families to make substantial savings on a weekly or monthly “big shop”, offer wide choice, and preserve some of the economies of scale that make food cheaper.

The problem is not the existence of large stores. The problem is excessive concentration of ownership and market power.

This paper suggests a cap on supermarket groups, such as limiting a group to around 500 stores. This would preserve the benefit of the big-shop model while preventing any one company from dominating the national grocery market.

Alongside this, smaller and regional chains should be able to operate networks of local shops. A chain of 500 corner shops is very different from a chain of 500 megastores. It supports local access, local employment, walkable communities, and more varied retail ownership, while still giving the operator enough buying power to offer attractive prices.

Some upper limit on total retail floor area may also be needed to prevent technical compliance with a store-number cap while still accumulating excessive market power.

The aim is a mixed grocery market: large stores for bulk value, smaller stores for convenience and localism, regional chains for competition, and independent retailers for diversity and resilience.

The goal is not smallness for its own sake. The goal is scale without monopoly, competition without domination, and consumer savings without corporate capture of the food system.

Economies of scale, but on a broader ownership base.

12. Platform Monopolies and Digital Marketplaces

The problem of monopoly is no longer confined to physical shops, banks, utilities, or supermarkets. Some of the most powerful monopolies now exist as digital platforms.

Amazon is the clearest example. It is not merely a retailer. It is also a marketplace, logistics network, advertising platform, data system, cloud infrastructure provider, payment intermediary, search engine, and gatekeeper between producers and consumers.

This creates a structural problem. A business selling through Amazon may also be competing against Amazon. A producer may depend on Amazon’s marketplace, storage, delivery, rankings, reviews, advertising, and payment systems, while Amazon controls the rules of access.

In a healthy free market, Amazon should have major competitors. The question this paper asks is why there is no serious British equivalent: no Nile, no Thames, no national or regional marketplace with comparable reach.

The answer is not simply that Amazon is efficient. It is that scale, data, logistics, capital, regulation, consumer habit, and network effects create barriers so large that normal market entry becomes extremely difficult.

This paper does not believe that successful companies should be punished merely for being successful. A company such as Amazon has succeeded because it offers convenience, scale, logistics, choice, and customer service that many consumers value.

The proper role of government is not to penalise success, but to ensure that markets remain open to fair competition.

Where large foreign platform companies benefit from structural advantages created by their home environment, government should examine whether British firms are competing on a level playing field. These advantages may include access to deeper capital markets, larger domestic scale, favourable tax structures, data advantages, logistics networks, cloud infrastructure, procurement relationships, regulatory asymmetry, or network effects established before competitors can respond.

A British competitor should not be expected to defeat a global platform giant while also carrying higher compliance costs, weaker capital access, fragmented infrastructure, and no national strategy for digital market entry.

This paper therefore supports a pro-competition role for government: identifying structural barriers, reducing unnecessary regulatory burdens on domestic entrants, supporting shared infrastructure where appropriate, ensuring fair platform rules, improving access to growth capital, and preventing dominant platforms from using their control of marketplaces to suppress future competitors.

Government should not choose permanent winners. But it should ensure that British enterprise is not forced to compete on a tilted field created by foreign scale, regulatory imbalance, and monopoly infrastructure.

Government should not pick winners, but it should stop incumbents owning the racetrack.

13. Summary of the Proposal

This paper proposes:

1. constitutional financial stewardship over taxation, spending, borrowing, liabilities and public accounts;

2. public spending plans published with honest disclosure of costs, risks, trade-offs and liabilities;

genuine voter choice over spending priorities;

simpler taxation and lower collection costs;

a progressive tax system that burdens work less and unearned privilege more;

stronger safeguards against private enrichment from public office;

broad access to capital and ownership;

a property-owning, enterprise-owning, capital-owning democracy;

opposition to state-assisted monopoly and new mercantilism;

transitional de-concentration in captured sectors;

a mixed grocery market with scale but without monopoly;

fair competition against global platform giants;

a pro-market state that restores competition rather than replacing it.

14. Core Principle

This paper believes in free market capitalism, but not corporatism.

The market should be open to ordinary people, small firms, families, farms, trades, professions, local businesses, regional companies, and national enterprises. It should not be captured by a narrow alliance of government, regulators, global corporations, banks, asset managers, and professional monopolies.

Taxation should be honest, limited, progressive, and simple. Public spending should be constitutionally controlled. Borrowing should not hide the cost of government. Work and enterprise should be rewarded. Unearned privilege should make a fair contribution. Ownership should be widened. Monopoly should be restrained. Government should restore the market, not replace it.

The aim is a nation of citizens with capital, enterprise, responsibility, and independence.

A nation of shopkeepers — not a nation of dependants or monopolies.

Back to top