The working population is being squeezed dry to pay for Rachel Reeves’s benefits state

Chancellor’s latest tax raid is another burden on fraction of population which is economically productive

Daily Telegraph 

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Britain’s last half-decade is a tale of two countries. For the new leisure class, relieved from the burden of economic production, this is a golden era. Pensions are swelling, the public sector pays more for ever less work, and the benefits bill continues to soar as people realise just how profitable it can be to sit on the couch claiming Personal Independence Payment (Pip) for your mental health and Universal Credit for your lack of work. For the fraction of the population paying for their lifestyles, it’s a catastrophe.

To mildly paraphrase Vladimir Lenin, the central issue of the modern British state is who shall pay for whom. Those who manage to get out of bed and go to work despite a state determined to reward grift and punish graft find themselves confronted with: migrants in taxpayer-funded hotels with private healthcare laid on; a rigged housing market that drags home ownership out of reach, while rents soar; and a welfare system that can lead to socially housed families in London being better off living on benefits than on a £70,000 salary.

Rachel Reeves’s latest tax raid is simply another burden piled onto the productive fraction of the population. The top 1pc of earners already pay 29pc of all income tax, and the top 10pc fully 60pc of the take.

The last time the Office for National Statistics totted up the numbers, the median household in Britain was a net recipient of state funds. Even those who nominally cross the cost-benefit threshold might still do so at the taxpayer’s expense, with public sector workers shielded from the National Insurance raid and handed pay rises even as productivity levels have dropped below their pre-millennium baseline.

If it feels like you’re forking out ever more in taxes for the same or less in public services, it’s probably because you are.

The tax burden is at its highest level in 70 years, and taxes on earnings in particular are higher as a share of GDP than at any point since 1990. This influx of funds hasn’t resulted in a crackdown on shoplifting, A&E waiting times or hospital waiting lists getting back down to pre-pandemic levels, or pristine roads and punctual trains. Instead, your money has been spent on a series of transfers.

Adjusted for inflation, the Government spent £160bn more in 2023-24 than in 2019-20. Around £56bn of this total was interest on the national debt; payments to creditors for money already spent rather than investment in current services. Another £34bn went on what we can loosely call welfare – £17bn on Universal Credit and associated benefits, £7bn on pensions, £5bn on disability benefits, and £4bn on personal social services. And finally, of course, there’s the healthcare money pit, which swallowed an additional £25bn (roughly £15bn of which went to higher NHS wage bills) only to treat fewer patients.

For young graduates who consume relatively few government services, the deal has never looked worse. Wherever they look, the state, in its infinite generosity, is handing their money out to a cause deemed deserving in what is rapidly approaching a form of punitive redistribution.

And with the tax and benefit system practically set up to reward grift and punish graft, people seem to be responding to the incentives they’re given by maximising their take-home from the state.

Some 3m people are claiming Universal Credit with no work requirements whatsoever, and 1.6m more people are claiming the Personal Independence Payment (Pip) than were in January 2019. Around 324,000 people were transferred from the old Disability Living Allowance over this period, leaving a substantial net rise in the total number receiving the benefit, with the vast bulk – almost 1.3m – under state pension age. The old bad back is making a return – with 87,000 more claims than in 2019 – but the real action is in mental health.

Almost 1.4m of current Pip claims — and 37pc of new claims — are for “psychiatric disorders”, with huge numbers identifying as anxious, depressed, autistic or otherwise mentally unwell. Claims for autistic spectrum disorders now account for over a quarter of all Pip claims from the under 30s.

If you pay people to be disabled, you’ll find you have a lot more disabled people. This is particularly true when you’re squeezing every other benefit, and you can claim it while working.

When Pip was introduced, it was supposed to cut spending by 20pc relative to its predecessor. Instead, more generous awards and higher claims have contributed to the disability benefits bill blowing out to £39bn a year, with another 49pc rise predicted by 2028.

The UK’s age dependency ratio – those too young to work, or old enough to retire against the working age population – is hovering around 58pc. But this massively undersells the burden on the working population.

In addition to those under 16 or over 65, the 27m people employed in the private sector are tasked with supporting 9m working-age people who are economically inactive, and the 6m employed in the public sector. If you tot that up, you find that rather less than half the population is providing the basis for the lifestyles of everyone else.

To make matters worse, we’re busy importing new sources of fiscal strain. The Office for Budget Responsibility has highlighted the sheer madness of our current immigration routes for low-wage labour, noting that each individual will cost the taxpayer £465,000 by the age of 81.

This is not a sustainable state of affairs; the UK is already on a fiscally perilous path even without further punishing people for working in order to reward those who don’t.

The social contract isn’t so much fraying at the edges as torn down the middle. The legitimacy of the welfare state is based on the buy-in of the population, who reasonably expect that their earnings will be appropriated only when necessary, to pay for those who are deserving.

When people suspect instead that their money is being frittered away through intentional misuse of the system, or splashed around by politicians buying votes, this rapidly breaks down.