The UK government is spending more than it earns, and now owes money on its debts that rises automatically with inflation.

Know this: the UK government paid £8.8bn just to service its debts in August alone, a record for any August since records began in 1997. Tax receipts rose. It did not matter. Central government spending overshot the OBR forecast by £2.3bn. Part of that bill is structural: the UK holds index-linked gilts, which are bonds where repayments rise automatically with RPI inflation. When inflation climbs, the debt bill climbs with it, regardless of what Healey does.

The total April-to-August deficit is £77.3bn, already £8.1bn above OBR forecasts. Analysts at Capital Economics estimate full-year borrowing will hit £125bn against an OBR projection of £115bn. That gap means Healey needs to raise between £9-14bn at the October 28 budget just to restore his existing headroom. Every pound spent on debt interest is a pound not spent on the NHS, schools, or wages.

Law of the Trap: once you are in, the exit costs more than the entry. People see a deficit number and assume it is a political choice. It is not entirely. Index-linked gilts mean every RPI rise automatically enlarges the bill. The trap is structural, not discretionary. The psychological move being made on you: frame debt as proof of government waste, so you accept cuts to services rather than questioning why the debt was structured this way in the first place.

Know this: Prime Minister Andy Burnham has ruled out raising income tax, VAT, corporation tax or National Insurance. Chancellor John Healey still needs to find £10bn for the October 28 budget. The mechanism being discussed: align capital gains tax with income tax rates, taking the top rate from 24% to 45%. Separately, the mansion tax threshold is under active Treasury discussion to drop from £2m to £1.5m, pulling an estimated 300,000 homes into scope.

CGT today sits at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Alignment with income tax would take higher-rate payers to 40% and additional-rate payers to 45%. An analysis by IG using HMRC methodology suggests raising CGT to 45% for additional-rate taxpayers results in £4.6bn in lost revenue annually because sellers simply stop selling. The mansion surcharge at £1.5m could raise £800m a year but the £2m version was only forecast to raise £400m.

Law of the Landlord: the asset holder extracts from those who cannot move. Now the government is the landlord, extracting from asset holders. The psychological pressure right now is urgency: sell before October 28 or pay the higher rate forever. That manufactured urgency is doing real work. People are making irreversible financial decisions based on speculation that has not yet been confirmed. Understand what is being done to your timing before you act on someone else's panic.

Know this: when Rachel Reeves raised CGT from 10% to 18% and 20% to 24%, HMRC data showed receipts fell 8%, or £1.3bn. The mechanism is straightforward: at higher rates, asset owners stop selling. They hold. They restructure. They emigrate. The Centre for Policy Studies estimates a 10-point rise in the higher CGT rate would cost £3.6bn in lost revenue by 2028/29. An analysis using HMRC methodology puts losses from a move to 45% at £4.6bn annually. Healey faces the same Laffer curve Reeves hit.

Know this: the CGT-free annual allowance has already been cut from £12,000 to £3,000, so there is almost no shelter left for ordinary investors. If CGT aligns with income tax at 40-45%, selling shares held in a general investment account outside an ISA becomes significantly more expensive. ISAs remain sheltered. Pension contributions remain sheltered. The people most exposed are small business owners, landlords with property gains, and investors outside ISA wrappers.

Law of Projection: the government projects the problem outward onto the wealthy asset class while the mechanism actually hits the moderately comfortable. The framing is fairness. The reality: the genuinely wealthy restructure around it. The upper-middle class with one rental property or a small business exit bears the cost. People feel the policy is aimed elsewhere and comply without recognising they are in scope. That gap between perception and target is the mechanism.