Has the UK Closed the Tax-and-Spend "Doom Loop"? What It Means for Everyday People

14th December 2025

In recent years, economists and commentators have used the phrase "doom loop" to describe a cycle in public finances where slow economic growth leads to higher taxes, which in turn dampens growth further, forcing the government to borrow more or cut spending, and the cycle repeats. In the UK, this term has been applied to debates around the autumn 2025 Budget, rising taxes, and ongoing government borrowing.

Some people may wonder if this cycle has now been broken. The short answer is no.

While the government has taken steps to manage public finances and adjust budgets, the structural pressures remain. Taxes remain relatively high, particularly because income tax thresholds have been frozen, meaning more people pay higher effective rates even if their earnings rise only modestly.

Public spending is also elevated compared with pre-pandemic levels, leaving less fiscal room to manoeuvre. At the same time, economic growth remains sluggish, making it harder to reduce debt naturally through expansion.

So what does this mean for everyday people? For most households, the effects are felt in a few ways. Higher taxes reduce disposable income, meaning families may feel the pinch when budgeting for everyday expenses. Slower growth can limit wage increases or job opportunities, particularly in sectors sensitive to economic performance. Public services may face pressure because the government must balance spending commitments with the need to control borrowing.

All these factors combined are what makes the “doom loop” a concern: it is not an abstract concept but something that can affect take-home pay, public services, and cost of living.

The government insists it is acting responsibly. Officials have highlighted plans to control borrowing, manage debt as a share of GDP, and make measured adjustments to spending and taxation. They aim to avoid sudden shocks to the economy while maintaining public services.

However, breaking the cycle entirely requires stronger economic growth, which is influenced by broader global factors, productivity improvements, and investment in industries that generate sustainable jobs.

For citizens, the takeaway is that while the doom loop has not been “closed,” the government is aware of the risks and is attempting to manage them. That means staying informed about how policy decisions — from taxes to public investment — affect personal finances and local communities. Understanding this cycle can also help households plan for changes in disposable income and public service availability.

In short, the tax-and-spend doom loop is still a reality in the UK economy, but it is a structural challenge rather than an immediate crisis. Its effects are most visible in take-home pay, job opportunities, and public services, and the government's ongoing measures are aimed at stabilising the cycle rather than suddenly breaking it.

For ordinary people, the lesson is that fiscal policy matters and staying informed is a practical way to prepare for how it may affect daily life.