When examining the flow of wealth in the coming decades, privately wealthy individuals rest in a very healthy position. Their assets have increased in value, their portfolios have performed well, and many are looking to the generations above them for a significant windfall of cash set to come from inheritance.
Governments, with their eye-watering debt burdens and expensive borrowing costs, are eyeing that wealth—and they want in.
Policymakers have leveraged private wealth in the past to pay their way, UBS chief economist Paul Donovan recently told media at a roundtable discussing the economic outlook for 2026—but the question is whether they will use a carrot or a stick to drum up revenue from individuals.
As such, some may prove more popular than others. Donovan said last week: “Governments have long mobilized private wealth to support public finances. There are several approaches. One is to influence market behavior—encouraging individuals to buy government bonds through incentives like tax-free premium bonds, which channel savings directly into state financing. Prudential regulation can also steer pension funds toward domestic government debt, as seen in the UK after 1945, when a debt-to-GDP ratio of 240% was successfully reduced over decades.”
It is this debt-to-GDP ratio that has economists so concerned, rather than the volume of debt itself. After all, the ratio is a useful indicator of whether an economy is growing fast enough to generate the revenues necessary to repay its debts—or the interest payments on its debts—to lenders. If the customers buying a government’s debt feel the ratio is unbalanced, they may demand higher interest to offset the risk and so push the government’s budget even further.
To increase the supply of debt buyers—with individuals motivated by a tax-free incentive, for example—allows governments to borrow more without facing higher market interest.
However, there are other, less popular ways to raise revenue to pay off the debt. “More contentious options exist,” added Donovan, “Such as taxing wealth through capital gains or inheritance levies. In practice, the initial focus tends to be on financial repression—using tax incentives o
