Britain’s weak growth and widening social divides are feeding political instability, according to former Institute for Fiscal Studies director Paul Johnson. He argues that years of underinvestment, planning restrictions, and uneven wealth gains have left the country struggling to improve living standards.
The UK’s economic model is facing mounting pressure as public spending rises, growth slows, and younger generations fall behind their parents financially. According to Johnson, the country risks entering a cycle in which stagnation and political disillusion reinforce one another.
The warning comes from Johnson’s latest book, Challenging Inequalities: How We Got Stuck and Where We Go Next, produced as part of a long-running Institute for Fiscal Studies project examining inequality in Britain. Speaking to MoneyWeek, Johnson said the research drew on more than 100 papers overseen by a committee chaired by Nobel Prize-winning economist Angus Deaton.
While some traditional measures suggest inequality has remained relatively stable since the 1990s, Johnson said the picture changes when focusing on top earners and wealth concentration. The richest 1% continued to pull away from the rest of the population until around the 2008 financial crisis, even as broader income inequality plateaued.
Growth Slowdown and Rising Inequality Reshaped Public Frustration
According to Johnson, the main driver behind Britain’s political discontent is not inequality alone but the prolonged absence of economic growth. He told MoneyWeek that living standards have failed to improve for many households over the past two decades, while wealthier groups continued accumulating income and assets at a faster pace.
Johnson noted that younger generations are increasingly affected because earnings growth has not kept pace with rising housing costs. He said concerns about inequality become sharper when people feel they are no longer advancing economically.
The book argues against relying solely on tax redistribution to reduce inequality. Instead, Johnson advocates what he describes as “pre-distribution,” focused on improving the structure of the economy before inequalities emerge. According to the interview, the proposals include strengthening early-years education, improving family support, expanding housebuilding, and addressing regulation affecting major companies.
Johnson also discussed immigration and globalization, describing them as forces that can support growth while also contributing to inequality if poorly managed. He said recent immigration policy has been inconsistent, pointing to the expansion of care-worker visas and continued family migration.
Artificial intelligence could deepen these divisions, Johnson warned. According to MoneyWeek, he said the United States already shows signs that technological change can create highly concentrated gains benefiting a small group of companies and individuals through salaries, stock options, and economic rents.
Public Debt and Spending Pressures Narrow the Government’s Options
Johnson identified several long-term reasons behind Britain’s weaker economic performance compared with other advanced economies. He cited heavy reliance on financial services before the 2008 crash, low public and private investment, restrictive planning rules, and the economic impact of Brexit.
Political instability has also contributed to uncertainty, he said, referencing repeated changes in government leadership and policy direction over recent years. Johnson told MoneyWeek that stagnation itself can fuel further instability, creating what he described as a “vicious cycle.”
The interview also addressed criticism of the Office for Budget Responsibility after Reform UK leader Nigel Farage suggested scrapping the institution. Johnson defended the OBR, saying its creation removed fiscal forecasting from direct political control. According to Johnson, the organization’s projections have generally been slightly optimistic over the past 15 years rather than excessively pessimistic.
Looking ahead, Johnson said Britain’s fiscal outlook is becoming increasingly difficult. Taxation as a share of national income has risen by roughly 5% to 6% over the past decade, while spending pressures continue to increase.
He pointed to higher defense commitments, rising healthcare costs linked to an aging population, and pension spending driven by the triple lock policy. At the same time, Britain faces growing debt-interest payments, which Johnson said are limiting the government’s ability to finance new commitments through borrowing alone.
