AIBU to very nervous about what Reeves is doing to the economy?

[ProudAmberTurtle]

The data for the last financial year is out and, for the first time in British history, the benefits bill (£333 billion) was higher than income tax receipts (£331 billion).

This didn't even happen during financial crises like when the banks were bailed out in 2008-09, or during Covid when the government paid private sector staff's wages.

What's worse is that the government did not predict this and the benefits bill is projected to rise significantly over the next three years to about £390 billion.

In fact, from what I can understand, income tax receipts have always been significantly higher than the benefits bill, and there's always been an understanding between the two main parties since the 1940s that that needs to be the case for an economy to function properly.

I've worked very hard for more than a quarter of a century and always plan for the future, ie paying the maximum in NI so that my partner and I will receive the full state pension. For the first time in my life, this year the amount I'm earning in savings is going up at below the rate of inflation, even though I've got the highest interest rate available, because I've hit an income tax threshold (£50k) which means 40% of everything I gain in interest goes to the Treasury. This means my savings are actually depreciating in value.

AIBU to think this is just the start? That it's inevitable that taxes will have to rise even further and the state pension will be cut?

www.telegraph.co.uk/news/2026/04/04/labour-welfare-bill-income-tax-revenue/

You're right, it is shit.
Why not put any salary over the high rate tax threshold on your pension? Either salary sacrifice, or in a Sipp? In a Sipp the gvt will give you your 40% tax back, or salary sacrifice you don't pay the tax on the first place.
It's a very efficient way to save

Taxes are already too high. There is too much money flowing out of this country to help others. This is why we have a black economy. The smarties are cutting their hours and making it up on cash in hand jobs.

You think it's smart to dodge tax? I dont.

I think if the tax dodgers paid their way, we as a country, would be better off.

and where and to whom exactly do you think the money "flowing out of this country" is going towards helping?

I agree.

Of course most of money spent helping others isn't flowing out of the country. The majority of it is spent on pensions and related benefits.

People are just cutting back on the amount they work as they approach tax thresholds. DH cut back to 4 days a week when he was going to go over the higher rate threshold last year. It's lovely that he now has a 3 day weekend, but he wouldn't have done it otherwise. I've seen or heard of so many people doing the same as they approach the additional rate threshold because the balance between effort and reward is no longer worth it. Therefore people are enjoying more free time and tax receipts plummet, as it's those on good salaries that are particularly affected. It's one of those easily foreseeable side effects of being on the wrong side of the Laffer curve.

Totally agree. Labour are not the party of the working class. They just want to spaff everything on welfare, to the point there is no money left for anything else.

Look at the pitiful state of our navy. At the time of the Falklands war, they were able to send a task force of 20 odd ships within 48 hours. Its just taken 2 weeks to get one measly ship to limp down to Cyprus. With the US withdrawing from NATO, this is a big problem.

See also housebuilding, infrastructure, NHS, etc etc.

A lot of us have been worried for some time. It’s same old Labour - tax and spend, enable unions until there’s nothing left

The economy is fucked cos of brexit. It's brexit. It's fucked the economy. Reeves can't fix that.

The tories have fucked the UK for generations.

Yanbu it’s concerning. Although not just Reeves but Starmer too.

This isn't really a Reeves or Labour or Tory issue.

We have a massively aged and aging population. Approximately 60% of that welfare bill goes towards pensioners, either as the state pension or other welfare. This is only going to get higher for a good while as more people age into retirement.

This has been a problem decades in the making - no single govt or chancellor is responsible, it's been a collective failure over many, many years.

I don't understand how they think people are going to get off benefits when there are no jobs. Most of the money goes to pensioners, perhaps they should start means testing them.

I think we'll see some big changes to PIP after the Timms review. I know it was knocked down by the backbenchers last year but something drastic needs to happen when so many people going onto PIP before turning state retirement age and then it just continuing usually until death. PIP can be almost double what people get on Attendance Allowance if they get both components and then that's before all the additional pension credit etc that they may be eligible for. Completely unsustainable at the current rate. I think we'll either see eligibility criteria tightened or PIP ending at state retirement age and people needing to switch to AA instead.

Yes the job market is dire. I am hearing from people left right and centre who are losing their jobs. I heard from one friend how half her team of twelve are being made redundant and barely any available jobs in the sector. My fixed term contract ( charity sector) is ending soon and whilst I've been able to secure a part time job it is half of the salary I have been on. Fortunately as dh has a reasonable salary and kids left home we will be ok but if you have a young family it's a scary situation to be in.

Will look into this, thanks.

My issue is more general about the economy, where it is now and where it's heading, but good idea re salary sacrifice. I am saving up as I want to move to a better home, but at the moment, saving just isn't cost effective

First time in your life? I’m 52 and this has definitely happened before.

Reeves might not be doing everything right, but she cannot be held responsible for what Trump has done and continues to do with the World economy. Our economy after a decade of turmoil, some self inflicted, some not (Brexit/Covid/Ukraine/Truss) was in a very poor position to be able to deal with Tariffs and Iran. If anyone has any bright ideas how to fix it, I’d love to know what they are. Reeves has been hampered at every step of the way, forced to climb down on things like cuts to welfare spending. No matter what she chooses next, some group will make a noise about it and the tabloids will go after her and Starmer.

I am also in a higher tax bracket. The difference is, I’m on board if taxing me more helps get us out of a hole. Take it off me and not those who need PIP. I wish more people had this view, particularly those who have way more money than I do. A lot of our problems could be solved that way. Instead we just hear “I work hard for my money”. As if those on income support benefits don’t work hard at all.

Playing politics with the economy is what leads to people like Trump and Farage getting away with spinning bullshit about immigrants and scroungers being the cause of people having enough money. As Trump has proven, when he got in to power he had absolutely no intention of improving the economy. Instead he is just a useful idiot for Stephen Miller’s right-wing, white nationalist agenda. There is no reason to believe Farage will be any different.

As opposed to Conservatives just spending without raising additional revenue?

Workless families with three children to get an extra £6,400 a year. Heaven knows what six children gets you! And of course the fsm, free school trips, free prescriptions…And of course housing benefit etc. And no upkeep on a property eg the boiler breaking down, rotting window replacement and so on.

My sympathy for “poverty” is now at zero.

Businesses have directly warned against Labour’s policies due to the impact on jobs. It doesn’t get heard though.

You think all those things are in bad shape because of less than 2 years of a Labour government?

Further to my earlier post, here is a month old Daily Telegraph article. It's not like I have sympathy for very high earners (I'm a non earning carer), but they pay such a massive proportion of income tax. And when that tax system encourages them to cut back their work and therefore pay less tax, we have major problems. One of the examples it gives is someone with 2 children in childcare in London. If they breach £100k salary, they will actually be worse off until that salary hits £149k. So cutting back hours/going part time makes far more sense. Actively encouraging your top paying tax payers to cut back and pay less tax makes no sense whatsoever.

https://archive.ph/KIxgn

What specifically about Brexit has made the economy so much worse, in particular resulting in a much higher benefits bill?

The company I work for (mainly tech finance, employs over 1,000 people) has analysed the role of Brexit and concluded it has had no significant impact on the business, and Covid had a much bigger role.

If it is Brexit, how come that for most of post 2016, and post 2020 when we actually left the EU, the UK economy was still either outperforming or growing at roughly the same rate as our main European competitors like France, Germany, Spain and Italy, who are all in the EU?

We need to get bank into the EU pronto. I feel that without that they're on;y rearranging the deck chairs on Titanic. Brexit has caused so much damage.
And then there's the disaster unfolding in the Middle East...totally out of our control.

Almost half the benefits bill is for the state pension and other pensioner benefits. We have an ageing population.

Successive governments have prioritised rises in indirect taxes rather than income tax (VAT, Insurance Premium Tax etc).

Income tax receipts shrink as a % of income; benefits increase as a % of expenditure as the population ages. Hardly rocket science.

You want your state pension penny, and your low tax bun.

This is very true.

I do think one thing that's a bit different though, especially since Covid, is that benefits in addition to pensions, have ballooned, making what was already an inevitable disaster likely to happen much more quickly.

The benefits bill being higher than income tax receipts in the last financial year has nothing to do with the Iran War