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/

When spent on goods, mostly imported from China, it IS disappearing offshore!

When spent in the black economy, the tax due is evading due to tax fraud, VAT fraud, benefit fraud, illegal working, illegal duty free booze and fags, etc.

IF it was spent on goods made in the UK, on services provided by legitimate service providers, all paying their correct taxes, then, yes, fair enough, it is being spent and contributed to the UK economy, but often that's not the case.

The black economy costs the country tens of billions per year in lost tax revenue and benefit fraud.

It is unsustainable if you think welfare spending is too high. 60% of welfare spending is on pensions.

The effect of the 2 child cap hasn't been seen yet. Surely you'd rather remove state pension from millionaires/billionaires, than payments targeted at disadvantaged children?

Yep.

Last time I checked, there's no insurance for having a disabled child.

It’s money lost to the state though. That money could be spent on buying MRI machines to improve hospital services, or getting rid of some of the tax band cliff edges etc etc. all a more efficient use of the state’s resources than welfare handouts.

The way some people talk it’s a wonder the government doesn’t just hand out the whole budget in welfare payments because it’s so ‘good for the economy’.

Are you kidding me?! There are hundreds of firms dealing with sending money abroad. Just watch the cricket on tv and you will see multiple ads. Visit a street in certain places - many outlets to send money abroad.

In Minnesota this very fact has come to light: billions of tax dollars paid in benefits being sent straight out of the country.

But this post is specifically talking about benefit spending vs income tax in the last financial year. Interest rates and borrowing costs are a separate issue - they don’t change those figures.

The NI increase and the rate at which point it kicks in hit businesses and slowed growth and in some cases caused companies to make people redundant. Then the NMW increase has hit businesses again slowed growth further and means that the jobs market has shrunk resulting in more people applying for jobs that are available. This all means that people who are out of work are taking longer to find work which means they’re on benefits for longer.
The vat on school fees meant people removed their children from private schools and impacted the uptake of places, this meant school closed or that previously available bursary’s were removed.
You then have business rates increasing, tax rises alcohol, tax rises on fuel incoming and lots of other small tweaks that mean the money in your pocket won’t go as far and that’s the same for everyone. Hospitality as an example has been hit very hard by the increases.

I don’t deny that brexit had an impact but if you hit businesses hard when the economy isn’t booming then jobs dry up, companies don’t invest and growth doesn’t happen. Less jobs = more benefits being paid out.

You directly asked how Brexit has affected the economy and that’s the question I responded to. You accuse others of being biased but I think you have your own set of prejudices too.

It's in today's Times. I will try to link, but it normally remains firmly behind the paywall even with a share token.

https://www.thetimes.com/business/companies-markets/article/leon-tax-government-restaurant-6pcdnb2jf

You said it was rare for people's circumstances to change unexpectedly. Clearly it isn't.

they are closely related though.

Are we allowed to discuss it?

Of course it's true that some individuals send part of their income abroad but that’s a small fraction of total benefit spending. Most of the money is going to be spent domestically. Pointing to money transfer firms or adverts doesn’t show that welfare spending is 'lost' from the economy.

Of course you're allowed to discuss it. But not as proof that the OP is correct.

I think there are some fair points in what you’re saying, especially around businesses facing higher costs and that feeding into hiring and investment decisions. It’s reasonable that things like employer NI, wage increases and wider cost pressures can make some firms more cautious.

That said I’m not sure the link of higher costs = fewer jobs = more people on benefits, is quite as direct as it’s being presented. Businesses will respond in different ways. Some may slow down hiring but others will adjust through prices, productivity, margins, or restructuring rather than redundancies. And hiring tends to depend heavily on overall demand in the economy as well as costs.

If wages don’t keep up with the cost of living, more people end up needing top ups through in work benefits. So while higher wages can increase costs for employers, lower wages can also increase reliance on the welfare system. So as I said before, it's impossible to make a decision which makes everyone happy.

I'm not convinced that rejoining the EU would be clever, but a free trade area -- absolutely. Much like the Common Market we originally joined and that I voted to stick with in 1975. A large part of the population was not sold on the EU, or on the post-2000 expansion programme. Blair's failure to limit freedom of movement is the mainspring behind Brexit.

France and Germany are not enjoying much economic success right now though, leaving Spain and Poland as the top performers, but from much lower starting points.

Someone upthread mentioned the reward vs cost gap of higher earners doing more hours. It's the same for universal credit. The taper rate is so harsh that people can be left worse off by doing extra hours after travel, childcare etc are factored in. And being worse off at UC income level is far worse than being worse off at £100k. Even if you are "better off" it's by a tenner or something ridiculously low and not worth the stress and effort, especially for people in precarious situations with very young children or relatives needing support. Those sneering and preaching about tax payers money wouldn't even set their alarm clock to be paid £10 let alone do a shift at work. The system is designed to keep people poor and dependant. The old system was far better for working people and should never have been merged with unemployment benefits as the two groups have very distinct support needs. Carers similarly have their own needs which are often not met.

The benefit system is not something of which I have any personal experience or knowledge, which makes me very fortunate, but your description of the taper rates being too fierce at both ends of the scale explains much. Likewise, that suffering at UC level is worse than the pain of being worse off on £100k.

@Papyrophile ayree

I don't blame single parents tbf. Things happens and it's not their fault. But I think a healthy person, with no dependents or no health issues can easily earn enough to cover their expenses.

Most uni grads once they get their grad job makes things work in their house share.

Yes, uni grads living in house shares probably can manage fine. But they're not likely to be claiming UC top ups if they have graduate jobs as they wouldn't qualify for anything.

The 'drain' on welfare is people like me - working full time with 3 children at home, but can't earn enough to sustain ourselves as the cost of housing is so high. If I could access social housing, I could pay my own way without needing assistance, as it is my entire UC award is spent on housing - despite only half of it being allocated for housing, as my rent is so high and there are no alternatives here!

Labour and the Greens will be out-benefitting each other in the run-up to the next election. By heaping benefits on some it may serve to stop them voting Reform, and there will be pledges in order to lure Muslim blocks.

Of course, now actual taxpayers are in a minority there is little hope of any fiscal responsibility. It will just be a constant mining of their assets to keep stoking the benefits fire.

I think that’s the way it will go. If voters are outnumbered in this way it’ll just keep the cycle going.

Being on benefits and being a tax payer aren't mutually exclusive. Nor are taxpayers in the minority. Stats have tax paying adults at around 65% (this obviously includes people of pension age, many of whom won't pay tax if they are only receiving a state pension).

Seriously? The idea that everyone has extra funds to pay into savings and insurance for a rainy day is beyond naive; same for the assumption that people have solvent, reliable parents to move back home to. These are privileges that many cannot access through absolutely no fault of their own. Lucky you to have no concept or understanding of this.

Just paperwork...I have some friends in a band who run their own record label. Most of their audience is in Europe, Germany, Holland, Belgium. Brexit has destroyed their mail order operation because people won't pay the import fees, which didn't exist before.
Then there are the carnets, making touring ridiculously more onerous than it was before.