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The latest post on Tim Watkins excellent  blog The Consciousness of Sheep is very relevant at the present time.

… hospitality sector trade bodies are calling for nothing short of root and branch reform of the taxes and costs levied on them.  In particular, the outdated business rates system – which taxes businesses on the basis of the estimated value of the buildings they trade from – from which pubs have been sheltered since the pandemic, could leave pubs facing a 400 percent increase from next year.  There are also calls to reduce both alcohol duty and the rate of VAT.  Other proposals from the sector though, would be counterproductive.  Holding down the minimum wage, for example, would mean younger people have even less discretionary income to spend on discretionary items… like a night down the pub with their mates.

For the moment, the hospitality sector is just one part of the discretionary economy – albeit a visible one – which is facing pressures of this kind:

• Rising input costs,
• Increased taxation, and
• Decreasing income (demand).

Government – which is increasingly drawn from an insulated professional-managerial class – on the other hand, continues to behave as if the whole of the UK, rather than just the City of London and a handful of top-tier university districts, is still prospering.  That being the case, the attempt to impose additional taxes on discretionary goods and services will result in the worst of all worlds – businesses will go bust, workers will be fired, tax income will fall, and government spending on health and welfare will be forced up…  but then, nobody within government – or, indeed, the opposition parties – is prepared to contemplate the alternative.

The decline of the discretionary economy in the UK will become unavoidable as we encounter a range of structural, environmental, and economic pressures that render it increasingly unsustainable. In a society where economic growth has long been prioritised, the discretionary economy—the sector comprising non-essential goods and services such as dining out, tourism, fashion, and luxury goods—has thrived on the back of expanding consumer spending. However, this model faces unprecedented challenges that will inevitably curb its scale and influence.

Shrinking Disposable Incomes

As the UK navigates an era marked by stagnant wage growth, rising inflation, and economic instability, fewer households can afford discretionary spending. Over the past decade, the gap between wages and the cost of living has widened, exacerbated by Brexit and global supply chain disruptions. The pandemic further strained personal finances, causing many to prioritise essentials over luxuries. As energy prices continue to rise, disposable incomes will likely shrink further, leading households to redirect spending from non-essential goods and services to core necessities.

Environmental Constraints and Changing Consumer Preferences

With growing awareness of climate change and environmental degradation, UK consumers increasingly seek products and services prioritising sustainability and low environmental impact. This shift is not only consumer-driven but also reinforced by government policies and incentives that aim to reduce waste, limit emissions, and promote renewable resources. The discretionary economy, often reliant on fast fashion, travel, and non-essential consumer goods, is at odds with these values. As the UK moves towards a low-carbon economy, discretionary sectors that cannot align with sustainability imperatives will likely experience contraction or forced transformation.

Shift to Local and Informal Economies

There is a growing movement towards localism and informal economies that prioritise resilience, local production, and mutual support over mass consumption. With its heavy dependence on mass retail, online shopping giants, and global tourism, the discretionary economy struggles to compete with the appeal of local goods and services that meet community needs directly.

In regions of the UK where the cost of living crisis has hit hardest, informal economies emerge as a practical solution, with communities sharing resources, skills, and services in ways that bypass traditional economic models. These local and informal systems will likely expand as trust in formal economic structures declines, especially among younger generations.

Economic Recession and Global Instabilities

Economic recessions, driven by domestic and global factors, have historically reduced discretionary spending. The UK’s ongoing economic vulnerability, exacerbated by recent geopolitical tensions, has left little room for expansive growth in discretionary sectors.

Dependence on international tourism, for instance, made the sector vulnerable to disruptions like the COVID-19 pandemic and, more recently, inflationary pressures worldwide. With the potential for sustained economic shrinkage, the UK’s discretionary economy faces fewer domestic consumers and an unpredictable international market.

The Rise of Social Value Over Economic Growth

The discretionary economy also faces a challenge from shifting societal values, particularly as social happiness increasingly gains importance over consumer-driven growth. Many in the UK, including policymakers, are re-evaluating the quality of life and community well-being as more meaningful goals than GDP growth or consumer spending. This shift could prompt policy changes that prioritise housing, healthcare, education, and renewable energy investments over tax cuts or subsidies for non-essential sectors.

The UK’s focus on social value, an aging population and rising demand for essential services could limit the scope for discretionary economic activity.

No More Discretionary Spending

The discretionary economy’s decline in the UK appears inevitable and logical within the context of evolving consumer priorities, environmental limits, and financial constraints.

As households prioritise necessities, communities lean into local and informal systems, and the government focuses on sustainable and equitable policies, the landscape of the UK economy will likely undergo a fundamental shift.

The question, therefore, is not whether the discretionary economy will contract but how society will adapt as it does, forging a path towards an economy that favours resilience, sustainability, and shared well-being over consumption.