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/

Back in 2020, many people, including me, predicted the economy would end up in shit. It was totally, 100% predictable. The response from many people was 'but we have to lock down, deaths in the streets blah blah blah.' Now the same people are complaining about the totally and utterly inevitable consequences of shooting the economy in the knees multiple times.

It makes me despair. The general population is so so so stupid.

Back in 2020, many people, including me, predicted the economy would end up in shit.

It was shit before lockdown though….

The general population is so so so stupid.

With very short memories as this thread proves!

That's because of low capital investment in the UK by companies in stuff like machinery (meanwhile UK companies did indeed invest heavily abroad). Low R&D in the UK due to lack of tax breaks compared to other countries. Skill shortages
creating low productivity companies.

Again it comes back to taxation.

It was shit before lockdown, yes. And then the general population demanded that a bat be taken to it to beat it to a total pulp. And now people are saying 'Oh my gosh it's so bad.'

I mean, does anyone understand cause and effect? It actually scares me how little people seem to be able to process simple logic.

The “tax the rich!” cry always ends up with taxing the schmucks in the middle.

The mansion tax… I’m betting that the definition of “mansion” inevitably becomes anything £500k+ . And the council tax re-banding will have Band H starting much lower.

All these punitive measures will lead to changing behaviours. Meddle with pensions and, guess what, people lose confidence and won’t save into them.

they simultaneously increased UC, so there are increases all around

@1dayatatime yes, but why didn’t the Tories encourage more investment & lower taxation?

36% of the UK population are in receipt of Government welfare payments (including state pensions). They will never vote for a political party that promises to cut welfare spending.

I can't remember where I read it but if you cut income taxes it can actually increase the amount of tax the treasury collects. The Rich don't move abroad and people are happy to work more hours as they see more pay.

Because there are no votes in it.

Plus the Government was focused on reducing Government spending to bring the deficit (tax in - spending out) under control.

The mansion tax… I’m betting that the definition of “mansion” inevitably becomes anything £500k+ . And the council tax re-banding will have Band H starting much lower

I do think the council tax bands are completely outdated. There will be plenty of people paying more CT than me for a much cheaper house because I’m in London.

Meddle with pensions and, guess what, people lose confidence and won’t save into them.

Means testing pensions won’t make me not save into a private pension. That would be stupid. I don’t not pay my mortgage because some people get council housing or housing benefit!

"yes, but why didn’t the Tories encourage more investment & lower taxation?"

Investment fell in the UK after the Brexit vote. We used to be the low regulation gateway to the European market. This stopped after he Brexit vote and investment switched to other EU countries.

Because there are no votes in it.

Which is the tricky bit

It was tried but it’s hard to sell in, plus as you say as state dependency goes up people tend to vote for more of it.

More older people means more voting in their interests.

To sustain the current and growing benefits bill, property wealth will have to be taxed really heavily - 90% inheritance tax and property taxes. Of course this is short-termism - it will be a one-generation money grab. And will obliterate the middle classes - which is the idea for some. We all end up with not a lot and reliant on the state.

This is the Laffer curve and we are already seeing it in action. It's what me and other posters have been talking about upthread. If you increase taxes too much it changes behaviour, so that the more you increase the tax rate, the less tax you bring in. This is where we are now with so many taxes and cliff edges resulting in businesses cutting staff, opening on fewer days, and individuals cutting back on their hours or going part time. All these things result in a much lower tax take. And when you are on the wrong side of that curve, as we already are, reducing the tax rate can indeed have the effect of increasing the the amount of tax money received, as fewer people seek to avoid it.

I do actually think that there might be a massive tax raid as the boomers die, to seize their accumulated assets via increased IHT.

No problem, I could have been clearer.

I do actually think that there might be a massive tax raid as the boomers die, to seize their accumulated assets via increased IHT

I think a lot will be swallowed up by health & social care costs. More will have to go private as waiting lists will grow & there will be a lack of carers in general so it will be pay private or do without.

Laffer curve.

Learned in first term of A-level Economics. Definitely repeated in Uni. Rachel must have missed both. Some other Labour didn't pass GCSEs so can be excused.

Yes, health and social care will eat a lot of inheritances @drippingsap. But Reeves move to include DC pension pots in estates for IHT rather trails the direction of travel.

It's already here. It's estimated £5.5 trillion wealth will be transferred from baby boomers to younger generations in UK in the next two decades. All of this, incl pensions now, is taxed at 40% about 500k. No other country, at least not in OECD, has anything remotely similar to our IHT.

The great wealth transfer: A financial shift | Brooks Macdonald

Labour are firmly after a huge slice of this. The party which will offer to get rid of IHT will have a good chance at least in SE.

No other country, at least not in OECD, has anything remotely similar to our IHT.

Do those countries have such a distorted housing market though? And so much wealth tied up in pensions & housing?

Labour are firmly after a huge slice of this

It realistically the only place to tap for tax left as @Papyrophile says.

The party which will offer to get rid of IHT will have a good chance at least in SE.

Has anyone proposed this?