Britain’s tax burden is heading for its highest level since the early 1950s, yet a growing number of taxes are now raising less money, not more. The Laffer curve shows that beyond a certain point, raising a tax rate reduces revenue, as people cut back, buy from illicit sources or evade the tax altogether. Alcohol duty, tobacco duty and landfill tax all appear to have passed that point.
In each case, the Office for Budget Responsibility (OBR) expected higher rates to bring in more revenue. Instead, receipts from the three taxes fell by £3.2 billion between 2021/22 and 2024/25, leaving the public finances £5.2 billion worse off than forecast, while fuelling a booming black market in cigarettes and record levels of fly-tipping.
This new discussion paper, by Dr Christopher Snowdon, Head of Lifestyle Economics at the IEA, argues that several UK taxes have been pushed into the ‘prohibitive range’ of the Laffer curve, where further rises cost the Exchequer money, create huge opportunities for criminals and leave the public to pick up the bill.
Snowdon argues:
Following reforms in August 2023 that raised duty on spirits and many still wines, alcohol duty receipts fell from £13.2 billion in 2021/22 to £12.4 billion in 2025/26 despite high inflation, when the OBR had expected them to reach £14.2 billion by 2024/25.
Real-terms tobacco duty revenue fell by 40% between 2021 and 2025. A 20% fall in the number of adult smokers explains only part of this: the number of smokers buying on the black market doubled between 2023 and 2025, and almost a third of cigarettes consumed in Britain are now illicit.
Landfill tax has risen from £7 per tonne in 1996 to £126.15 in 2025, yet it now raises half as much in real terms as it did at its 2013 peak, while recorded fly-tipping incidents in England rose by 31% to an all-time high of 1.26 million in 2024/25.
The OBR’s repeated overestimates point to an over-reliance on static models and a failure to anticipate predictable behavioural responses to excessive taxation, such as smokers switching to illicit tobacco and firms turning to fly-tipping.
You’re spot on Christopher.
But the Laffer Curve is a symptom not a cause.
The decline in tax revenue is a direct result of insufficient SPENDING. It’s as a direct result of the switch to NOT SPENDING because they can’t spend any more than they do already! The SPENDERS reduce SPENDING due to higher taxes. Higher costs and inflationary pressures that make their ability to buy as much, to trigger taxes, less able!
I have written many times before. But it has not yet sunk in to those I write to.
All taxation yes, ALL TAXATION is a direct result of SPENDING. Even income taxes!
Yes even Income tax and Nic are both triggered by the SPENDING of employers on the wages of employees.
The same as Vat and Duty.
The big four taxes as well as all the smaller ones are TRIGGERED by SPENDING.
If SPENDING falls because of a lack of MONEY then a lower tax take is the result!!!!!
The more MONEY rotating and the more SPENDING of that MONEY then we get more TAX REVENUE!
That’s GROWTH for goodness sake.
Come on Chris. It’s not rocket science. The more money we rotate by the act of SPENDING it gives us tax revenue.
So it should follow if you increase the money supply and you increase SPENDING even by enforced SPENDING then, and only then, will you get the tax revenue to give surplus to our government.
Whether you like that idea or not it’s the only way you will ever get growth.
An engine runs in two ways. At an idle. Or under acceleration. We are at the idle!
To increase flow you have to hit the accelerator. There is no other way.
We’ve tried to give a carrot. To hope those holding money SPEND it. But it’s time to give them the stick.
To make SPENDING happen. We need those who hold too much of it to SPEND it. Not tax it once! Giving one amount.
No!
We need them to Spend it with us so we can rotate it all again and again and again giving hundreds more times than just that one tax amount!
From our raised production or reward from that tsunami of spending, so those tax levels required can finally be achieved.
Just like the Laffer curve for tax. There. Is the same curve for SPENDING. Let’s call it the EDMUNDS CURVE!
As spending increases tax take increases. Once spending falls tax take falls!
Surely that’s not that difficult to understand but Chris…… come on give me some credit!!!
You can’t keep ignoring my replies it’s start to make the IEA look silly.
Our whole economy rests and falls on having sufficient money in the first place based on population and need to reward being spent by those holding it all to pass on money to us all to spend and make the tax take increase to the required level for government to do its job. It’s that simple Chris.
MS=R
MONEY multiplied by SPENDING equals REVENUE.
The more money and the more spending gives us all the optimum revenue. From which tax revenue is triggered.
So to increase taxes you must increase money resupply and in a faster flow by spending and giving a time by which it all has to happen. Time!
It’s a four dimensional economy being led by two dimensional housekeeping economists and accountants led politicians.
We have 2D thinking when we need 4D answers.
Is that NOT clear enough for you all at the IEA?
And finally our economy is not based on tax payers and non taxpayer. No.
It is based on SPENDERS and NON SPENDERS.
Those who SPEND all their incomes like the disabled, pensioners the unemployed and yes, the unemployable SPEND all their incomes.
Contributing 100% to the passing on of money and triggers as much tax as they possibly can.
Whereas those lucky enough to NOT SPEND their part or full incomes pay less tax pro rata.
Those who spend nothing pass nothing on forward to others to rotate and crucially trigger no tax! None at all!
So it should be obvious, even you at the IEA that it’s the rich and wealthy who are preventing the required flow by not spending money but in so doing trigger no tax take at all! None.
We know this because we can qualify that statement.
We know SPENDING triggers tax because, NOT SPENDING MONEY TRIGGERS NO TAX.
So there you have it! The Edmunds Curve. And my doctrine for economics TED. (The Edmunds Doctrine).
We have vast sums of unspent, idle and unused money. In banks here and abroad or hidden from sight. It’s now crucial we start to control that money and keep it in house in the UK.
It’s our sovereign money. Yes it’s out there but if they won’t be asked to spend it then let’s tell them. Enforce spending by putting a spend by date on money.
It’s better for them to get equivalent in exchange. As with tax they just take it! Nothing in exchange.
Interesting to see that old piece of speculative economics used again. Unfortunately, applying this to Pigovian taxation (revenue is not the only objective but also improving public health by making harmful substances more expensive) is risky. What about other actual or intended tax changes ? Income? Land? Road? Would lower rates lead to higher revenue? Maybe with income, although the whole complex of taxes and subsidies should be taken into account. Lower land taxes would certainly not lead to more revenue (might boost more productive use but that depends more on tax structure than rates, imo) Road tax might lead to more congestion. I do not mention estate taxes of course...