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/

The Tories actually increased and introduced quite a few taxes, but they generally weren't headline grabbing.

Such as tax on foreign owned properties held in limited companies (ATED).

Or broadening the scope of IR35 and Increasing taxes on dividends to counter the conversion of sole traders into limited companies (started by Brown).

You cant blame all of this on the Labour government. The military was starved of funds and reduced massively under the Tories. UC and PiP and tax thresholds were in place before the current government. We had years of chaos under May, Johnson, Truss. People seem to have short memories. Brexit is the single self inflicted cause of the economic decline.

I don’t understand why so many people who work have to top up with benefits
some companies need to pay more in wages,, the minimum hourly wage is the maximum for some employers , rents are a fortune . I feel sorry for working people

I have been thinking similar , at the weekend a single working mother was interviewed and said how welcome £600 a month extra for her 3rd and 4th child would be.
I'm not knocking benefits i am glad we live in a society that supports but i can see this backfiring somewhat in that we may get some who have more kids for this advantageous financial reason.
No shit £600 would be welcome i could do with that myself ,there will be a lot less incentive to get a job now knowing your benefit income is increasing ,in some cases i imagine to more than a working parent not on benefits.

https://siepr.stanford.edu/publications/working-paper/economic-impact-brexit

https://www.nber.org/papers/w34459

Feel free to Google it yourself

Don't take the Telegraph as your only source. It's heavily biased

Same with small businesses with the VAT registration threshold at just £90k of turnover (not profit!), meaning the average business has to increase turnover from £89999 to around £105k to get back to where they were, profit-wise and be out of pocket if they don't get turnover up to that. Most sole traders etc simply don't bother and do less work to keep their turnover under £90k. I've got shops who only open 3/4 days per week, a guest house that has closed down all rooms on it's top floor, etc., to avoid breaching the VAT threshold. It's utterly ridiculous that we have a stupid tax system that causes this kind of behaviour, akin to your example of people working fewer hours to stay under the £100k threshold.

It's not just the tax revenue either. When doctors and dentists work fewer hours to stay under £100k, less patients are seen, so it increases waiting times for medical treatments etc.

My MIL gets shedloads from the state, and has paid next to fuck all in tax as she stopped working at 20 when she had her first child and never worked again. She gets £238pw in pension credit, £125pw in housing benefit for her council house and 80% off her council tax.

My state pension is £244pw after 50+ years of work, and my (small) occupational pension mostly goes on my £167 a month council tax.

Yes to some extent, but the majority of UC claimants aren't in work at all, and many are only working part time. So higher wages isn't the full answer to the problem - we need more people working and part timers working more hours - that will increase their wages incomes and reduce their dependence on UC.

I never understand why people are allowed to send large sums of money abroad, as opposed to funnelling it back into the UK economy. I even saw one bloke saying his benefits weren’t enough as he has to send half back to his “second” family.

I agree that the triple lock is not sustainable - and indeed inflation- linked rises to benefits and public sector pensions should be regularly reviewed as opposed to automatic. If we get a period of high inflation then “workers” will be royally f*d.

These numbers don't seem right. The UK's income from tax and revenue is usually over 1 trillion. I'd expect tax to be the bulk of that.

But also working families with 3 children will see an increase in their money. 60% on income related benefits are in work. The largest portion of the remaining 40% are on incapacity benefits and have been certified permanently unable to work. It’s incredibly difficult to get that. The next largest are unpaid carers. Mostly women, they could be raising children because they can’t afford nursery fees, looking after elderly relatives because the care available from Local Authorities is shockingly poor, looking after disabled family members - particularly disabled children - because provision for them is also non existent.

They don’t get an extra £6,400 per year. It’s around half that. If you begrudge those people an extra £75 quid a week because of the tiny proportion of people are not working simply because they don’t want to, you need to have a word with yourself.

As for those with way more children, there is still an overall cap on benefits, regardless of the number of children you have. Not everyone on income related benefits qualifies for free school meals, housing support, free prescriptions etc. Not everyone on low income is in social housing and have the same repairs bills as you have.

You can be against welfare spending, but at least do it with all the information and not half assed lies spouted on social media.

I thought you were about to talk about wealthy tax dodgers with offshore accounts and villas in Dubai!

I don't think the problems will get solved until we are really deep in the shit and the IMF become involved as we'll end up asking for IMF bail-outs once we can't borrow any more at reasonable interest rates. Current interest rates on recent Govt borrowing is already more than under Liz Truss!

The IMF can impose spending cuts and/or tax rises as condition for giving us bail out loans. Granted, they can't tell the govt of the day to scrap the triple lock, but they can tell us to reduce public spending by, say, £100billion p.a. and then the govt have to make it happen one way or another. It'd be a good excuse to scrap the triple lock or reduce benefits etc as the govt could say "not us guv, it's the wicked IMF making us do it" to avoid becoming too unpopular and avoid back bench revolts.

The majority of UC claimants work.

And Reeves is just adding to it

Those links don't explain why the benefits bill has now overtaken income tax receipts.

I keep seeing this on MN - people highlight an economic issue.

Someone replies with "Brexit".

People then ask for evidence of what's that got to do with their point.

They're told: Google it yourself and don't believe the facts reported in the media they don't like.

It's a disingenuous way of arguing and just puts people like me off from listening to the left - something I was part of until not that long ago. And that's a shame, because I don't see the right as coming up with solutions (ie Farage seems weak on the economy and the Tories massively increased benefits so are hardly blameless) but they're at least the only side that seems to recognise the obvious: There's a massive problem with the benefits bill being higher than income tax receipts.

"37% of the people on Universal Credit were in employment in December 2024"

https://www.gov.uk/government/statistics/universal-credit-statistics-29-april-2013-to-9-january-2025/universal-credit-statistics-29-april-2013-to-9-january-2025

37% is not "the majority"

Thanks for this post.

It does make you think what’s the point of working all your life if someone else just gets benefits anyway when you retire .not everyone can afford a huge private pension

They explain how the macro economic climate has been negatively impacted by Brexit. This in turn affects tax income. It's all part of the big picture

I'm impressed how you read an 84 page document in such a short amount of time by the way

There was something similar on the news last night where a single mother had two older children who received child benefit and then went onto have 3 more she obviously couldn’t afford and was still a single mother. Obviously she was grateful for the extra support but there was no mention of the fathers who should be paying child support and not landing the cost of bringing up children on the taxpayer.

Not income from tax but receipts from income tax, which is by far the tax that brings in the most amount of revenue to the Treasury.

There are, of course, many other taxes.

Ah, so, not the disaster the Torygraph is making out. I'll get on with my day, so.

An awful lot of money goes on single parent households too. Child maintenance isn’t counted ( my friend gets more than £600 a month!) and while that’s not the norm and I know some absent parents don’t pay what they should, maybe that should be tackled instead of letting them just get away with it.
Housing is also a major cost.
How many mortgages are paid for from universal credit claimants as tenants? I don’t know how this could be fixed - I guess the only way would be to have much more social housing, but it really fucks me off that people are getting their mortgages covered by the tax payer on multiple properties.
(Yes, I know poor landlords have had changes inflicted on them lately that makes this a less attractive option.)
Ultimately, they shouldn’t have backed down on welfare reforms as it is what needs to happen.
Our system is unsustainable.
Perhaps the biggest problem is the shift in societal values that means people have this massive sense of entitlement so are fine with doing the minimum or even no work because other people will pay for you.

Tax revenue was stable between 2010 and 2019. NIC was lowered, personal allowances were adjusted from £9,590 in 2010 to £15,550 in 2020. The number of adults paying income tax dropped by 5%. This benefited wealthier people more because it also meant a drop in the number of people hitting the higher rate threshold. They did not start significantly raising taxes until 2021, by which time we were already screwed.