Economics & Policy · May 2026
There is £111 billion a year flowing from the public purse to banks, overseas investors and the already-wealthy. That money was earned by ordinary people. It could be building something. Here is how.
I want to start with a number. £111 billion. That is what the British government paid in debt interest last year — more than the entire schools budget. Around £50 billion went to financial institutions. Another £37 billion left the country entirely. The wealthiest 10% of people pocketed roughly £48 billion from government bonds alone. The bottom 70% got almost nothing.
I’m an engineer. When something this large is going this wrong, my instinct is to ask what’s actually causing it — and whether it can be fixed. I think it can. What follows is my attempt to trace a complete programme of reform: not picking at symptoms, but going after the root causes in the right order, with honest assessments of where it’s hard and what the resistance will look like.
This is a long piece. The problem deserves the length.
The Root Cause Nobody Talks About
The story we are told about Britain’s finances is a simple one. The government borrowed too much. The markets are watching. Anyone who suggests spending money on public services is being irresponsible. We hear this so often that most people have started to accept it as a law of nature rather than a political choice.
But let me trace it more carefully. In my piece on Stockholm Syndrome I argued that people captured by a system often end up defending it — including people it’s actively harming. The story about government debt is, I think, a version of that. It takes a political arrangement that transfers enormous sums from the public to the already-wealthy and describes it as economic necessity.
£48,000,000,000
Paid annually to the wealthiest 10% through government bond interest alone
This is not an accident. The Bank of England pays interest on commercial bank reserves — reserves largely created by quantitative easing — at rates that Japan and the eurozone have long since reduced. The government borrows using short-term instruments that overseas speculators can use as leverage, rather than long-dated bonds that domestic pension funds would hold patiently. Every one of these is a choice. And choices can be changed.
The financial system’s power over those choices rests on one weapon: if a government steps out of line, bond yields rise, mortgage rates follow, and ordinary homeowners feel the pain before they feel any of the benefits. That transmission mechanism is the lock on the cage. The first task of any serious reform programme is to pick it.
The Programme — Six Policies That Build on Each Other
I want to be clear about why the sequencing matters as much as the policies themselves. A reform programme implemented in the wrong order gives opponents the opportunity to attack each piece before the defences for the next piece are in place. This one is designed so that each stage removes the financial system’s ability to punish the stage that follows.
1. Halve mortgage debt through shared equity
The government takes a shared equity stake in each mortgaged property, reducing what the homeowner owes to a bank by up to half. Monthly payments fall substantially. When the property is sold, the stake is repaid at the original value — any future gain stays with the owner.
This is not primarily a housing policy. It is a strategic defence. Once mortgage debt is halved, a 2% rise in interest rates is manageable rather than catastrophic. The financial system’s main weapon — push up gilt yields, push up mortgage rates, watch the government lose its nerve — largely stops working. Everything else on this list becomes possible once that weapon is neutralised.
2. Rent control and Land Value Tax
Rent increases capped at inflation, immediately. No-fault evictions abolished. A Land Value Tax phased in over several years, replacing Stamp Duty — taxing the value of the land beneath a property rather than the transaction itself, removing the incentive to sit on land and do nothing productive with it.
The standard economic objection to rent control is that it reduces supply over time as landlords exit. I think this is a real tension, though less decisive if you’re simultaneously building social housing at scale with redirected public money. It needs watching carefully and the social housing programme needs to be real, not rhetorical.
3. Renationalise critical infrastructure — and distribute the shares
Water, energy networks, and rail brought back into public ownership at regulated asset value. These are natural monopolies. The market argument for private water pipes has always been thin. What private equity actually did with them — extracting dividends while loading the companies with debt — removed any remaining doubt.
The shares in these national companies are then distributed directly to households, weighted toward those who experience the largest fall in property values as house prices moderate. This is the key move. It converts what people might experience as a loss into a different form of wealth — one that pays them a dividend income from the services they were already paying for. The household balance sheet does not collapse. It transforms.
4. Reform government debt — cut what we pay the banks
Cut the rate paid on bank reserves. Shift gilt issuance toward long-dated bonds sold primarily to domestic pension funds, reducing the leverage of overseas speculative buyers. Legislate a new Bank of England mandate that balances debt costs against social outcomes, not just inflation. Require any policy retreat made in response to bond market movements to be publicly justified in Parliament — making the political choice explicit rather than hiding it.
This is the step that directly attacks the £111 billion problem. It comes third rather than first because by now the mortgage restructuring is in place, the national companies exist, the households have their shares. The financial system can still make noise. It can no longer make it hurt.
5. End casino capitalism — and redirect the talent
A Financial Transaction Tax of 0.1% on every share, bond and derivative trade. France, Italy and Sweden all have this. We had our own version for decades. At modern trading volumes even a small rate raises £20-30 billion annually while sharply reducing high-frequency speculation, which contributes nothing to productive capital allocation and a great deal to systemic fragility.
Retail and investment banking separated. Carried interest — the mechanism by which private equity managers pay capital gains rates on what is functionally income — abolished. Complex derivatives subject to strict position limits.
And a National Investment Bank, publicly owned, allocating capital to green transition, housing, industrial development, and regional regeneration. Staffed substantially by people whose skills — quantitative analysis, risk modelling, structured finance — were previously deployed at the speculative end of the City. The maths is the same. The purpose is different. That is not a small difference.
6. Literally recycle the skyscrapers
As the speculative financial sector contracts, City tower space becomes vacant. The temptation is to find new uses for the buildings. My suggestion is more fundamental: take them apart carefully and put the materials back to work.
Traditional demolition: fast, mechanised, sends the majority of materials to landfill or low-grade use. A single large City tower generates around 50,000 tonnes of concrete. Most of it is wasted. The embodied energy — the enormous resources that went into making those materials — disappears.
Strategic deconstruction recovers up to 90% of embedded materials. Structural steel is already being reused at scale — 30 Duke Street in the City proved this, with the cost premium over new steel described as negligible. Concrete becomes certified aggregate for foundations and road bases. New carbonation technology turns it into a carbon sink. Curtain-wall glass anchors a domestic recycling industry Britain currently lacks.
Deconstruction costs 17-25% more than demolition. That premium is largely a wage bill — it employs more people, in more skilled roles, for longer. The techniques proven in the City then become the model for the 30 million buildings across Britain that need retrofitting or carefully taking apart over the coming decades. The City is not just a source of materials. It is the training ground for a national circular economy workforce.
The steel in those towers took enormous energy to make. The glass took skill to form. The concrete took labour to pour. None of it should go to landfill. We are not demolishing the old economy. We are recycling it — every beam, every pane, every tonne — into something that belongs to everyone.
The Order Everything Needs to Happen In
Announce everything on day one. The entire programme, with a clear timeline. This matters more than it might seem. Markets can only attack policies piecemeal if they are announced piecemeal. A comprehensive announcement forces them to price the whole package simultaneously, and it establishes a democratic mandate that makes reversal politically costly. The Truss mini-budget was a disaster partly because it was announced without context, in 48 hours, with no institutional preparation. The opposite approach — total transparency, multi-year timeline, full OBR engagement — is also the strongest defence.
| Phase | Timing | Key actions | Strategic purpose |
|---|---|---|---|
| Announce | Day one | Full programme published with timeline | Forces simultaneous pricing. Establishes mandate. |
| One | Months 1–18 | Rent control. No-fault eviction ban. Mortgage restructuring. Renationalisation. Shares issued to households. | Protects people from retaliation before it happens. Breaks the mortgage rate transmission weapon. |
| Two | Months 18–36 | Reserve rate cut. Gilt restructuring. Bank of England mandate reform. Financial Transaction Tax. Banking separation. National Investment Bank established. | Households are now protected. Financial system’s leverage is sharply reduced. Reforms that directly cut financial sector revenues can now be implemented safely. |
| Three | Month 36+ | £50bn redirected to public investment. Dividend payments begin. City deconstruction programme starts. | Benefits become visible. Political coalition solidifies. The programme becomes self-reinforcing. |
The Financial System Will Fight Back — Here Is What That Looks Like
The response would be fast, loud, and coordinated. Gilt sell-off driving up yields. Sterling under pressure as overseas investors convert back to their own currencies. Credit rating agencies placing the UK on negative watch. IMF warnings about fiscal credibility. Diplomatic pressure from the US Treasury and European institutions. All of it presented as a neutral market verdict rather than what it actually is: the defence of a £48 billion annual income stream.
The government’s defences are real. The Bank of England can cap gilt yields through asset purchases — it did exactly this in 2022 when pension funds were destabilised. Japan has maintained yield curve control for years. Minimum holding requirements for pension funds and insurers create a captive domestic buyer base that does not panic-sell. And naming publicly the specific institutions selling gilts and the specific financial interests being defended changes the political calculus considerably for organisations with retail customers and reputations to protect.
The one area I would not minimise is foreign currency obligations. The Bank of England can create sterling. It cannot create dollars. If large UK banks have borrowed heavily in foreign currencies — as they do — a confidence crisis could create foreign currency liquidity problems that are genuinely harder to manage. This is solvable but needs detailed technical preparation before any of this is announced. It is not an argument against the programme. It is an argument for doing the groundwork properly first.
Britain after 1945 used financial repression — keeping real returns on government bonds slightly negative, slowly, without fanfare — to eliminate war debt over 35 years. It worked. Iceland defied orthodox advice after its banking collapse and recovered faster than Ireland, which took the austerity route. The financial system’s attack is real. It is not invincible. And a government that can explain clearly who is attacking it and why tends to come out of that fight with more public support than it went in with.
What to Say to Each Group — Honestly
Reform programmes often fail not because the policies are wrong but because the communication is either dishonest or undifferentiated. Different groups have different stakes in the current system and different fears about change. What follows is my attempt at straight communication for each group — not spin, but the closest I can get to the truth as I see it.
Renters
Landlords
Mortgage holders
Mortgage-free homeowners
Financial institutions
City workers
Why This Holds Together as a Whole
When I look at the full programme, what I see is an attempt to address five connected root causes rather than pick at individual symptoms. As an engineer, that feels right. Solving a problem partially often just moves it somewhere else.
The root causes are: government debt interest that redistributes income upward on a massive scale; housing treated as an investment vehicle rather than a basic service; a financial sector that has grown large enough to capture political decision-making; talent misallocated from productive to extractive activity; and physical resources wasted through demolition rather than recovered through careful deconstruction.
The programme addresses all five. The debt reforms free up £50 billion a year. The housing reforms convert illiquid property wealth into distributable shares in productive national assets. The financial sector reforms redirect talent from extraction to production. The deconstruction programme recovers materials and builds a circular economy workforce that Britain badly needs. Each element reinforces the others.
The political vulnerability is not in the economics. The economics are coherent, mutually reinforcing, and historically precedented at every step. The vulnerability is whether any political formation currently exists with the majority, the nerve, and the communication discipline to announce all of it at once and hold the line through twelve months of sustained assault from every institution whose income depends on things staying exactly as they are.
That is always a question about public understanding more than political will. People who understand clearly what is being defended against them, and what is being offered instead, are considerably harder to frighten than people who only hear that the markets are unhappy.
That is what this piece is trying to do. Make it clear enough that the fear stops working.
This programme builds on the analysis of Richard Murphy — Tax Research UK and The Politics of Care. Further reading: Bank of England Quarterly Bulletin 2014 (“Money creation in the modern economy”); GPE / Mace, 30 Duke Street reclaimed steel project (Building Design, October 2025); Neustark, One Undershaft circular economy case study (2025); Kate Raworth, Doughnut Economics; Chris Smaje, A Small Farm Future. On financial repression: Carmen Reinhart and M. Belen Sbrancia, “The Liquidation of Government Debt” (2011). On Iceland’s recovery: IMF Working Paper, “Iceland’s Unorthodox Policies Suggest Alternative Way Out of Crisis” (2011).
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