AN EVER-smaller proportion of Britons work each year, productivity goes down and welfare claimants go up. These trends have been true for decades, even during economic growth – even between economic shocks such as the financial crisis of 2008 and the Government’s extreme lockdown response to Covid 19 – although these trends have accelerated since lockdown.
The costs of this imbalanced equation are unsustainable. Moreover its rewards are often undeserved and essentially discriminatory.
Yet no political administration has reversed the trend since the 1980s. George Osborne’s promise of austerity, policies that aimed to reduce the UK’s budget deficit through significant public spending cuts and tax increases, did not extend to welfare, pensions or healthcare. The current Labour government with its huge spending commitments elsewhere, finds itself forced to reduce welfare spending, but has come up against the brick wall of its backbenchers.
The post-Brexit ‘conservative’ administrations did not even try to commit to measures necessary to restore sustainability. Margaret Thatcher was the last Conservative with the motivation and skills to sell fiscal balance, personal responsibility and fairness. The party’s current leaders do not.
Last week, following Rachel’s tears, a golden opportunity was missed to leverage the bleedin’ obvious.
On Tuesday, the Office for Budgetary Responsibility (OBR) – once an opponent of Conservative austerity – warned of the unsustainability of Britain’s finances. The OBR warned specifically that welfare and benefits costs are out of control, and that these costs are the major contributors to public debt – warnings that are valid even if the economy and revenues were growing, which they are not, and are unlikely to for years.
Even assuming normal cycles of economic rebound, the OBR warns of bankruptcy within years to decades. Public debt is already worth 96 per cent of Britain’s economy (measured as GDP). That proportion is expected almost to triple within decades. The servicing of debt already costs twice as much as defence.
The OBR analyses many drivers to bankruptcy, such as Net Zero and state pensions, but let us focus on the drivers that the articulate classes least like to admit: welfare and benefits.
More than 52 per cent of British adults now rely on the state for their income in some form. A huge nine million of them are not in employment, education, or training. One million of them are NEETs (not in education or training aged 18 to 24 years): that’s one in seven of them. The next generation looks even less engaged: 1 in 4 secondary school students is ‘persistently absent’.
The welfare state was justified in the post war 1940s and 50s as temporary assistance into work and wellness; it was never intended to become a habit. But it has. Over the decades it has made Britons workshy. Staggeringly so over the past five years in which Britain has suffered an ‘almost unprecedented’ plunge in productivity. UK workers spend two days a week on average in the office. Only Filipinos are more reluctant (1.4 days). The unemployment rate rose to 4.5 per cent by March.
Britons can get paid a comfortable income by the state, and expenses besides, with little accountability. Analysis by the Centre for Social Justice (CSJ) suggests that an average welfare claimant will receive £2,500 to £5,000 above the official living wage in fiscal year 2026-2027. The National Living Wage is £22,500, after income tax and national insurance. An average claimant of Universal Credit (UC), housing benefit, and Personal Independence Payment (PIP) for ill-health will receive an income of around £25,000, rising to £27,500 for those awarded the highest rate of PIP. (New claimants would receive £22,550, under next fiscal year’s cut to UC Health.)
Let’s focus on payouts for ill-health, the fastest rising category. Around two in three claimants for Universal Credit Health receive PIP too (and housing support).
Of course, some claimants might need an above-average income to accommodate and treat their chronic incapacitation. But some are receiving more than the living wage for unfalsifiable or vague conditions that rarely prevent work. For instance, somebody who claims to be a single parent, with anxiety, and with a child suffering ADHD, will receive nearly £37,000 in the next fiscal year – £14,000 more than the living wage!
Let that sink in: An extra fourteen grand for being single and claiming unfalsifiable conditions that are not necessarily barriers to paid employment! Fourteen grand is a huge incentive – a perverse incentive. Almost all single parents are mothers. By offering 1.6 times the living wage, the state is incentivising mothers to leave the fathers of their children and to avoid work.
Don’t forget, since we’re on the subject of institutional sexism, the state is both incentivising women to be single parents and also disincentivising men from work, by involuntarily transferring a set proportion of a father’s income to her, even if she is worth more than him, remarries, or refuses him access to the children.
The state is biased towards immigrants too, an increasing liability. Welfare dependency is likelier for immigrants than multi-generational Britons (even though immigrants are overwhelmingly young and male). Idleness and crime runs high in some of the cultures over-represented in immigration. Every month, Britain is paying £1billion in welfare benefits to foreign migrants. This cost has more than doubled in three years. Even if immigrants work, they tend to be low-skilled and low-wage. Immigrants rarely return in revenues what they receive in welfare and benefits. (Net emigrants tend to be the highest earners and taxpayers.)
Disability claims are now the largest category of long-term claims for welfare and benefits. As of March 2025, the Department of Work and Pensions was agreeing six times as many claims to be unable to work as in 2010. One in four Britons claims disability. By 2025, 2.8million Britons were out of work claiming long-term disability and sickness. By 2030, we expect 2million extra claimants. Disability and sickness benefits already cost more than defence. By 2029, the annual cost will be £100billion. That’s equivalent to a quarter of the revenues the government receives from income tax!
Welfare benefits are many, and are easily bundled, including rent, food, taxi rides, and even private cars (under the Motability scheme). As Kemi Badenoch told the CSJ, ‘Food intolerances are a medical fact, but they’re not something we should be handing out new cars for.’ Obesity, ADHD and drug misuse are other justifications giving out free cars. Ninety per cent of these cars are not adapted for any physical disability.
The dominant claims for disability reduce to unfalsifiable free-floating pain, fatigue, or mental ill-health (largely self-diagnosed). Welfare payments for anxiety and depression tripled from 2020 to 2024. Two million more Britons who are not on disability benefit say they struggle with their mental health after covid than before.
This is not to deny that many Britons rightly rely on disability benefits after life-changing accidents or chronic medical conditions. But as Badenoch said, when one in four Britons is officially disabled, the category loses meaning, promotes scepticism, and robs resources from those who really need them.
‘We are becoming a welfare state with an economy attached,’ Badenoch said. ‘If we don’t solve this problem, our economy will collapse.’
As for solutions, Badenoch sounded Thatcherite: a return to the ‘Protestant work ethic’, to self-reliance, and to personal savings. But Britons are already relatively high personal savers, partly because they are sceptical of the state’s capacity to meet its obligations. Worse, Badenoch failed to specify any benefits to cut, apart from tightening the definitions of disability and severe mental ill-health. She also called for more retraining and physiotherapy.
Meanwhile, Reform UK plans to scrap the two-child benefit cap (enacted by Theresa May in 2017), in a bid to win voters in traditionally Labour constituencies (particularly immigrants with high birth rates). This is good politics, but bad economics. It would cost the state at least another £3billion per year.
With conservatives like these, I wouldn’t bank on Britain ever reversing its debt.
