Privately wealthy households are heading into the next few decades from a position of strength. Their assets have ballooned in value, investment portfolios have generally done well, and many are poised to receive sizable inheritances from older generations.
Governments, meanwhile, are wrestling with towering debt loads and higher borrowing costs—and they’re looking at that private wealth with growing interest.
Speaking at a roundtable on the 2026 economic outlook, UBS chief economist Paul Donovan noted that policymakers have a long history of leaning on private balance sheets to shore up public finances. The real question, he suggested, is whether they’ll rely more on “carrots” like tax breaks or on “sticks” like new levies to unlock that money.
Donovan explained that one route is to nudge market behavior rather than confront it directly. For example, governments can encourage households to buy public debt by offering tax-advantaged savings products, such as premium bonds, that funnel private savings straight into state borrowing. He also pointed to “prudential regulation”—rules that quietly guide pension funds and other institutional investors toward holding more domestic government bonds. After World War II, the U.K. used a similar playbook to help bring down a debt-to-GDP ratio of around 240% over several decades.
It’s that debt-to-GDP ratio, rather than the sheer size of the debt, that worries economists. The ratio acts as a rough gauge of whether an economy can grow fast enough to support its obligations, including interest costs. If investors decide a country’s debts are too large relative to its output, they may demand higher yields as compensation for the perceived risk—making the government’s financing challenge even harder.
By expanding the pool of willing buyers—say, by enticing individuals with tax-free incentives—governments can, in theory, sell more debt without having to pay sharply higher interest rates.
But there are blunter tools available, too. Donovan warned that “more contentious” strategies involve direct wealth taxes, such as higher capital gains taxes or stiffer inheritance levies. Historically, he said, policymakers tend to start with softer methods—what economists sometimes call “financial repression,” using regulations and tax perks to steer money toward government bonds—before turning to outright wealth taxation.
The Great Wealth Transfer in the Crosshairs
Inheritance taxes are likely to attract intense attention in the era of the so-called Great Wealth Transfer. UBS estimates roughly $80 trillion will change hands over the next 20 years, while some analyses suggest the total may climb as high as $124 trillion as older generations pass wealth to their heirs.
Donovan has previously argued that politicians are unlikely to ignore such a vast pool of capital in motion. In a recent video, he said it is unrealistic to think governments will “sit idly by” as this money is redistributed within the private sector. Instead, he expects them to look for ways to capture a portion of it to help refinance public debt—though doing so could reduce the funds available for private investment.
With global public debt now exceeding $100 trillion, anxiety is rising among both policymakers and voters. Some governments are already experimenting with unconventional revenue sources. Economists have described President Trump’s tactics as unorthodox, but his tariff policies have undeniably generated billions in additional income for the federal government.
The White House has also floated ideas like selling special “gold cards” to affluent would-be immigrants, with Trump suggesting the proceeds could help shave down the national debt. The proposal was put forward in February with the promise of more details within weeks, though no concrete follow-up has yet materialized.
Across the Atlantic, U.K. Chancellor Rachel Reeves has signaled a different path—one that aligns more closely with the strategies Donovan outlined. In a recent pre-budget address, Reeves made it clear that individuals will be asked to shoulder part of the burden of restoring fiscal health.
“If we are to build the future of Britain together, we will all have to contribute to that effort,” she said, stressing that “each of us must do our bit for the security of our country and the brightness of its future.” In her view, the reward for making those tough choices now is a more resilient public balance sheet—one that has enough “headroom” to absorb future global shocks without lurching from crisis to crisis.
