{"id":87782,"date":"2025-11-25T07:03:42","date_gmt":"2025-11-25T07:03:42","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=87782"},"modified":"2025-11-25T07:04:19","modified_gmt":"2025-11-25T07:04:19","slug":"is-britain-at-the-peak-of-a-great-financial-wave","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/11\/25\/is-britain-at-the-peak-of-a-great-financial-wave\/","title":{"rendered":"Is Britain at the peak of a great financial wave?"},"content":{"rendered":"<p class=\"p1\">In this podcast, I talk with John Christensen, co-founder of the Tax Justice Network, about whether Britain can escape the final stage of a decades-long inflationary cycle without social and political rupture.<\/p>\n<p class=\"p1\">We explore Jersey as an early warning of the \u201cfinance curse,\u201d the extraordinary scale of the housing shock, the generational wealth divide engineered by decades of rising house prices, and why younger people are locked out of economic security.<\/p>\n<p class=\"p1\">We discuss how government policy helped create the crisis, why zombie banks are now vulnerable to falling asset prices, and what the end of a long inflationary wave has meant throughout history.<\/p>\n<p class=\"p1\">We end with the reforms that could save Britain: mass social housebuilding, capital controls, redirected savings, and democratic control of credit creation.<\/p>\n<p class=\"p1\">The choice now is stark: reform or rupture.<\/p>\n<p><iframe loading=\"lazy\" title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/5-DutvOB3QU?si=GLwp0DUPqQCjXmhL\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>This is the audio version:<\/p>\n<p><iframe loading=\"lazy\" style=\"border: none; min-width: min(100%, 430px); height: 150px;\" title=\"The Finance Curse: Housing, Banks and Crisis.\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=27s4s-19d04b2-pb&amp;from=pb6admin&amp;share=1&amp;download=1&amp;rtl=0&amp;fonts=Arial&amp;skin=f6f6f6&amp;font-color=auto&amp;logo_link=episode_page&amp;btn-skin=c73a3a\" width=\"100%\" height=\"150\" scrolling=\"no\" data-name=\"pb-iframe-player\"><\/iframe><\/p>\n<hr \/>\n<p class=\"p3\"><em><span style=\"color: #000000;\">In this podcast, I talked with John Christensen, with whom I co-founded the Tax Justice Network nearly a quarter of a century ago. What follows is a summary of that conversation: not a transcript, but a reflection on the themes we explored. <\/span><\/em><\/p>\n<hr \/>\n<p class=\"p3\"><span style=\"color: #000000;\">At heart, our discussion addressed a straightforward question: <span class=\"s2\">can Britain navigate the end of a decades-long inflationary wave without suffering the social, financial and political crises that history tells us often accompany such turning points?<b><\/b><\/span><\/span><\/p>\n<p><span style=\"color: #000000;\"><b>Jersey as a microcosm<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">John began by going back to the late 1980s and early 1990s when he was Director of Jersey\u2019s retail and house price indices. Jersey, he argued, was a miniature model of what happens when a financial sector becomes overwhelmingly dominant. As the island\u2019s finance industry boomed, prices rose sharply: retail prices ran at twice the rate of the UK, and house prices soared far beyond anything sustainable. That inflation, he said, was not a short-term fluctuation but a long-term wave that warped the structure of the island\u2019s economy.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">Tourism, agriculture and manufacturing were gradually crushed under the weight of a rising cost base. Finance crowded out everything else. For John, those years were the origin of the \u201cfinance curse\u201d: the moment when an economy becomes so dependent on financial services that it undermines every other sector, corrodes social relationships and destroys resilience.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>The scale of the housing shock<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">We then turned to the core of the problem: housing. Using long-term Nationwide data, John noted that the average UK house in 1956 \u2014 the year of his birth \u2014 cost \u00a31,884. By 2025, that figure was \u00a3271,000. That is a 144-fold rise in nominal terms. Even allowing for inflation and rising wages, nothing in the productive capacity of the country justifies such a change.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">More importantly, the structure of mortgage lending has shifted. In the 1950s, a typical mortgage was three times a single householder\u2019s income. Now the average is 6.6 times combined household earnings, and in London it exceeds 11. This is only possible because banks have radically expanded credit creation for property. Two incomes are now required to service debts that once required one. Families have lost freedom and security as a result.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">This tightening grip \u2014 the <i>mort-gage<\/i>, the \u201cdeath pledge\u201d, as its etymology reminds us \u2014 now stretches not only across working lives but well into people\u2019s seventies in some cases. The mortgage that once ended in late middle age has become a lifelong constraint.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>The inequality engineered by housing inflation<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">Housing inflation has not only made home ownership inaccessible to young people; it has reshaped the distribution of wealth and income across society.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">Those who bought early \u2014 my own generation included \u2014 have seen their homes inflate in value far beyond anything they ever paid. That unearned gain has come from somewhere: it has come from the wages that were not paid, from the rents that younger households now hand over each month, and from the public subsidies that flow through housing benefit into landlords\u2019 pockets. Britain has created, John argued, a vast system of rent extraction, and it functions only through ever-rising debt.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">A growing share of pensioners now also rent privately for life. The benefit system effectively subsidises landlord income. <\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">Meanwhile, the productive economy is starved of investment because building houses generates more predictable returns for banks and investors than making anything.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>The social consequences<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">We are now at the point where, apparently, in 42 out of 47 UK cities, a person on average earnings cannot buy an average home. <\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">In London, Oxford<span style=\"box-sizing: border-box; margin: 0px; padding: 0px;\">, and Cambridge, people earning\u00a0above-average<\/span>\u00a0incomes cannot buy one either. <\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">Half the income of many private renters goes straight to their landlord.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">This is not a marginal inconvenience. It is a central cause of low productivity, low growth and collapsing wellbeing. <\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">When households spend half their income on rent, they cannot spend on anything else: leisure, education, social life, or family formation. A society that cannot afford children is not a society with a future.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>How governments helped create the problem<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">John reminded me that for decades after the Second World War, credit controls limited banks\u2019 ability to pump credit into property. Council housing provided a non-speculative alternative. Both these stabilising elements were dismantled in the 1980s and 1990s. Policy then encouraged the \u201cwealth effect\u201d: rising house prices were seen as a substitute for rising wages.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">That devil\u2019s bargain suited governments because it kept voters quiet. It suited banks because their balance sheets depended on ever-rising property values. But it has left younger generations locked out of wealth entirely, and it has left banks dangerously exposed. These are the \u201czombie banks\u201d of our time: institutions propped up by government guarantees, unable to withstand a fall in asset prices.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>A financial system waiting to break<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">We went on to discuss the likelihood of a correction. Share prices are already falling. Crypto markets are collapsing. Property is likely to follow. John noted that in previous great inflationary waves \u2014 four have occurred since the thirteenth century \u2014 the final stage brings falling asset prices, falling rents and falling interest rates, followed by long periods of stagnation or deflation. This, he suggested, might be where we are now.\u00a0<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">These end-phase collapses have historically coincided with political turmoil: the French Revolution, Napoleonic dictatorship, and decades of conflict across continents. We did not predict that history would necessarily repeat itself, but we agreed that risks on this scale demand immediate political attention, and we are seeing none.<\/span><\/p>\n<p><span style=\"color: #000000;\"><b>What would reform look like?<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">Across the conversation, we sketched the outlines of a different approach:<\/span><\/p>\n<ul>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Massive expansion of council-led housebuilding, delivered through revived direct labour organisations.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Capital controls to limit speculative financial inflows and outflows<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">A national mortgage institution offering long-term fixed-rate mortgages that break the link between bank profits and house price inflation.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Redirecting tax-relieved savings \u2014 pensions and ISAs \u2014 into productive social investment, and most especially social housing.<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">A national payments platform so that no bank failure can again hold the economy hostage<\/span><\/p>\n<\/li>\n<li>\n<p class=\"p1\"><span style=\"color: #000000;\">Dismantling the privileged role of private banks in money creation, and putting credit creation under democratic control<\/span><\/p>\n<\/li>\n<\/ul>\n<p class=\"p4\"><span style=\"color: #000000;\"><span class=\"s3\">In short, <\/span>rebuilding a functional housing system requires the rebuilding of the financial system that sits behind it.<b><\/b><\/span><\/p>\n<p><span style=\"color: #000000;\"><b>The political danger<\/b><\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">We ended by noting that current political parties show little interest in confronting these structural failures. Young people are right to feel abandoned. Without a willingness to act, Britain faces the end of a long inflationary wave without any of the buffers needed to manage its collapse. If we do nothing, the consequences will be catastrophic.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">John\u2019s final point was stark: we are at the peak of the great wave. The next move is either reform or rupture.<\/span><\/p>\n<p class=\"p3\"><span style=\"color: #000000;\">On the eve of Rachel Reeves\u2019 2025 Budget, neither of us was confident that the political imagination needed would be found there. But without it, the future will be far harder than it needs to be.<\/span><\/p>\n<hr \/>\n<p><b>Comments\u00a0<\/b><\/p>\n<p>When commenting, please take note of this blog\u2019s comment policy,\u00a0<a href=\"https:\/\/www.taxresearch.org.uk\/Blog\/about\/comments\/\">which is available here<\/a>. Contravening this policy will result in comments being deleted before or after initial publication at the editor\u2019s sole discretion and without explanation being required or offered.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this podcast, I talk with John Christensen, co-founder of the Tax Justice Network, about whether Britain can escape the final stage of a decades-long<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/11\/25\/is-britain-at-the-peak-of-a-great-financial-wave\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14,204,35,224,106,80,32,97],"tags":[],"class_list":["post-87782","post","type-post","status-publish","format-standard","hentry","category-corruption","category-economic-justice","category-economics","category-neoliberalism","category-politics","category-secrecy-jurisdictions","category-tax-havens","category-tax-justice"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/87782","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=87782"}],"version-history":[{"count":4,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/87782\/revisions"}],"predecessor-version":[{"id":87899,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/87782\/revisions\/87899"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=87782"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=87782"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=87782"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}