Joe Hill(@jo3hill):Really enjoying this series of posts from Ben. We need much better solutions to the problem of extractive (non-financial) elite action. Often the legitimacy problem in point 2 bites hardest in the wider public finances, not the new revenue. When it comes to raising new revenue, we’d often be happy to pay more for eg good infra, more police. But the public have good reason to worry that a) it’ll be repurposed for bad ends or b) ‘isn’t that what I’m already paying record taxes for’. Hypothecation of funds is an important answer to this, as is a thoughtful curation of the institutions that get to raise taxes (local, regional, national), and moving to social insurance/contributory systems like Beveridge originally intended. It’s one area where I’ve really changed my mind since leaving HMT. The Treasury view of hypothecation is that it doesn’t allow sufficient flexibility to balance changing priorities, and may mean a more ‘inefficient’ tax take overall because we’re locked into hypothecated streams of revenue which we don’t need as much as other areas, where we then have to raise general taxation. But I wish more HMT officials would take an empirical approach, and realise that during the period they have defended almost all hypothecation attempts then overall spending/tax/borrowing l has soared without democratic legitimacy, and the flexibility it buys is mainly flex to spend in the least legitimate areas (welfare). A new elite consensus to govern with much greater respect for public legitimacy is long overdue.

2026.08.23 11:17

Really enjoying this series of posts from Ben. We need much better solutions to the problem of extractive (non-financial) elite action. Often the legitimacy problem in point 2 bites hardest in the wider public finances, not the new revenue. When it comes to raising new revenue, we’d often be happy to pay more for eg good infra, more police. But the public have good reason to worry that a) it’ll be repurposed for bad ends or b) ‘isn’t that what I’m already paying record taxes for’. Hypothecation of funds is an important answer to this, as is a thoughtful curation of the institutions that get to raise taxes (local, regional, national), and moving to social insurance/contributory systems like Beveridge originally intended. It’s one area where I’ve really changed my mind since leaving HMT. The Treasury view of hypothecation is that it doesn’t allow sufficient flexibility to balance changing priorities, and may mean a more ‘inefficient’ tax take overall because we’re locked into hypothecated streams of revenue which we don’t need as much as other areas, where we then have to raise general taxation. But I wish more HMT officials would take an empirical approach, and realise that during the period they have defended almost all hypothecation attempts then overall spending/tax/borrowing l has soared without democratic legitimacy, and the flexibility it buys is mainly flex to spend in the least legitimate areas (welfare). A new elite consensus to govern with much greater respect for public legitimacy is long overdue.

Ben Southwood@bswud

2026.08.23 08:03

A lot of UK government actions follow a similar script: 1) The government wants something nice and good, like new capital investment into hospitals. 2) It worries that it doesn’t have public consent for actually raising the money to pay for it through taxes. 3a) It comes up with a policy that the public doesn’t understand, which achieves the short-term policy goal without explicit public consent. 3b) Usually, this scheme costs the public more in total than direct taxation (which the govt thought it couldn’t convince the public to stump up), as with CfDs, PFI, narrow tax base funding, implicit MTRs, etc. 4) Knowledge producers come up with an explanation the public understand; they think it is outrageous. 5) There is a latent demand for further constraints on government freedom of action in the future. This is how we get declining state capacity. Short-term drawing on the social trust we depend on to let governments take complex and roundabout actions with discretion. We need norms against this like the norms against corruption we built at great cost over centuries.