Britain’s welfare crisis is the symptom of a sickness going to the heart of our national economic model.
We’re using benefits to sustain people in a state of despair rather than rooting out the problem.
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Welfare has become an economic opiate. Britain spends almost £140 billion a year on working-age benefits, up £50 billion since 2019 in today’s money, an increase worth around £1,200 per taxpayer. But the greater cost is measured in lost human potential.
The scale of worklessness in Britain is far greater than conventional unemployment statistics make out. Britain’s ostensibly low rate of unemployment obscures the rise of medicalised worklessness – what we call hidden unemployment – as people have moved from conditional support to more generous benefits, which carry few or no expectations of future work. The number of working-age claimants with no work requirements has increased by almost 1.7 million since 2019.
Today, Britain faces a new benefit trap, where taking on full-time work can still bring too little reward compared to the security, cash and ease of combined benefit packages. A single economically inactive claimant receiving Universal Credit health and housing support alongside PIP can receive around £27,400 a year, tax free. A worker on the National Living Wage would need to earn more than £33,000 to take home the same amount; that is, more than 50 hours, or six days of work, per week.
The crisis has its roots in a generational shift away from investment – both public and private – in the foundations of prosperity, towards ever larger fiscal transfers to the ‘left behind’ parts of the country. The last two decades saw the state spend £1.6 trillion on working-age benefits – over £1.1 trillion more than its capital investment on transport, science and technology, and housing combined.
At the same time, employers have gained unprecedented access to overseas labour while taxpayers have absorbed the growing cost of domestic worklessness. British nationals accounted for just one in five of the 3.7 million additional payroll employments created since 2014. Migration, welfare and taxation emerge as interconnected parts of the same broken economic model.
The British state has become highly effective at financing worklessness but remarkably ineffective at reversing it. Artificial Intelligence could make these weaknesses far more consequential.
Britain needs a new welfare settlement that protects those who cannot work while relentlessly supporting those who can towards recovery, employment and independence. Welfare reform cannot achieve that alone. It must form part of a broader economic strategy to raise productivity, restore contribution and fairness, rebuild local economies and make work pay.
For many years, Britain has used welfare to anaesthetise the symptoms of economic failure. The task for the coming decade is to treat the sickness itself.
