The Tax Death Spiral: How Britain's Government Destroyed Jobs While Promising Growth

Rachel Reeves promised economic growth. Instead, UK businesses are now cutting jobs at the fastest pace since the pandemic recovery period of 2021. The Bank of England’s latest survey reveals an annual employment reduction rate of 0.5% over the summer months—a direct consequence of the Chancellor’s £25bn employer National Insurance raid that she claimed would “fix” Britain’s finances.

This is the reality of modern British economic management: governments that systematically destroy the productive capacity they claim to champion while extracting ever more from a shrinking base.

Key Facts

The numbers tell the story Labour doesn’t want discussed:

• Employment falling at 0.5% annually - the steepest decline in four years
• Half of all businesses surveyed are actively cutting jobs due to NICs increases
• 66% of firms have reduced profit margins to absorb the tax hit
• 34% raised prices - directly feeding inflation
• 20% cut wages - reducing living standards for those still employed
• Employment growth expectations collapsed from 0.5% to just 0.2% for the year ahead

The Bank of England’s Decision Maker Panel survey covered 2,130 companies of all sizes. This isn’t anecdotal evidence or selective sampling—it’s a comprehensive snapshot of British business responding to government policy by doing exactly what any rational observer would predict: cutting costs, reducing investment, and shrinking operations.

Critical Analysis

The Predictable Destruction Cycle

What we’re witnessing is the classic British policy doom loop: government needs revenue, government taxes employers, employers cut jobs, tax base shrinks, government needs more revenue. Repeat until economic collapse.

The particular perversity here is that Reeves implemented these NICs increases while simultaneously claiming to be the champion of “working people.” Yet the survey data reveals the obvious truth: you cannot tax employers without those costs being passed directly to workers through job losses, wage suppression, and price increases.

Consider the cascading failure this represents:

• Businesses cutting jobs reduces consumer spending
• Lower profit margins destroy investment capacity
• Price increases erode real wages
• Wage suppression compounds the cost-of-living crisis

Each response makes the underlying economic situation worse, requiring more government intervention, which requires more taxation, which accelerates the decline.

The Competence Deficit

The Bank of England admits that “fewer firms were reporting price increases, lower employment or lower wages in response to the employer NICs changes than it had expected.” Translation: even the Bank underestimated how badly businesses would react. This is our central banking institution essentially confessing it doesn’t understand basic economic cause and effect.

Meanwhile, Reeves is already preparing another budget for November 26—later than usual to allow “weeks of speculation” about additional revenue raising. The Treasury is actively planning how to extract more from an economy it’s already strangling.

Pattern Recognition

This isn’t Labour-specific incompetence—it’s systemic British governance failure. The pattern repeats regardless of party:

1. Promise growth through “investment” (spending)
2. Discover massive budget shortfalls (always unexpectedly)
3. Raise taxes on the productive economy
4. Express surprise when productivity collapses
5. Blame external factors or predecessors
6. Propose more of the same as the solution

The Conservatives did this with corporation tax rises. Labour is doing it with NICs. Neither party can conceive of an alternative because the British state has become structurally dependent on ever-increasing extraction from an ever-shrinking productive base.

The Hidden Admission

Buried in the article is Reeves’ remarkable confession that the UK economy is “not working well enough for working people.” This comes eight months into Labour’s governance and directly after implementing policies that the data proves are making things worse for working people. She’s describing the consequences of her own decisions as if they’re mysterious external phenomena.

Reality Check

Here’s what this actually means for British citizens:

If you have a job: Your employer is now 34% likely to raise prices (reducing your real income), 20% likely to suppress your wages, and actively looking to reduce headcount. Your job security has measurably decreased.

If you’re seeking work: Half of all businesses are cutting positions. The jobs that remain offer suppressed wages. Your prospects have demonstrably worsened.

If you run a business: Two-thirds of your peers are accepting reduced profitability rather than growth. Your tax burden has increased while your pricing power has diminished. The government that claims to support enterprise is systematically destroying it.

If you’re retired or on fixed income: A third of businesses are raising prices directly due to government policy, eroding your purchasing power while the government claims to be fighting inflation.

The Bigger Picture

This isn’t a policy mistake—it’s the logical endpoint of a governing philosophy that sees the private sector as something to be harvested rather than cultivated. The UK has created a governance structure that can only function through perpetual extraction, staffed by people who genuinely don’t understand why businesses might respond to increased costs by cutting operations.

The tragedy is that everyone except the political class can see where this leads. Businesses will continue cutting. The tax base will continue shrinking. The government will continue demanding more from less. The Bank of England will continue being “surprised” by predictable outcomes.

Britain isn’t experiencing a temporary economic downturn that better policies might reverse. It’s locked in a structural decline where each intervention makes the next crisis inevitable. The jobs data isn’t just bad news—it’s documentary evidence of a nation consuming its own productive capacity while its leaders plan the next raid on what remains.

The November budget Reeves is preparing won’t solve this. It will accelerate it. Because that’s what British economic governance has become: a machine for destroying the prosperity it claims to create, run by people who can’t understand why the machine keeps producing the opposite of what they promise.

The data doesn’t lie. The decline continues. And somewhere in Whitehall, they’re planning how to make it worse.