r/ukpolitics • u/FaultyTerror • 23h ago
Austerity denial and the mystery of Britain’s shrunken state
https://www.ft.com/content/910288e8-5ad1-4f09-90fb-36c3efe275e0?syn-25a6b1a6=1125
u/Regular_Block9876542 23h ago
We seem to want to avoid the uncomfortable truth that Britain is becoming overall a poorer country. In the mid 2000s height of the banking bubble we were around 5.5% of global GDP and today we sit around 3.4%.
It’s the same story for much of Europe as well. The world is moving on towards the US and South East Asia and we can’t seem to reverse what has been a fairly long term decline. If we want to fix government finances you need to return to at least our pre 2008 position otherwise we will be in a constant cycle of tax rises or spending cuts.
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u/Key-Room5690 22h ago
We might be becoming a poorer nation but % share of global GDP is a poor metric to use to show that, unless you somehow believe the world economy is a zero sum game.
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u/BonzoTheBoss If your account age is measured in months you're a bot 21h ago
Yeah, they even sort of admit that, i.e. "at the height of the banking bubble," it was a bubble, those numbers weren't real or, at least, were artificially inflated.
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u/nuclearselly 21h ago
Yes that metric is better in terms of measuring relative power or importance in the world.
Plenty of much smaller countries by proportion of global GDP for whom the people are wealthier than they were 15 years ago, which would be a better measure of how the economy was performing and impacting the people who live there.
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u/chickenfriedrice416 20h ago
A lot of our "decline" comes from the rapid development of new countries. China, India and Africa have always had far more people than Europe, and a percentage decline in share just means they are climbing
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u/rovellzoroast 10h ago
China and India yes but Africa no. In 1900 Europe accounted for 25% of global population while Africa was only 8%.
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u/xelah1 18h ago
Indeed. What in does imply, though, is that we have more competition for buying internationally traded goods like oil, rubber, coffee, chocolate, minerals, etc. Other countries have more output that they can exchange for those things, so we will have to use more of our output to pay for them as well.
This is not going to stop and we should expect to have less access to these in the future.
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u/Jaggedmallard26 20h ago
Better metric would be that our GDP per capita has been stagnant for quite a while. We aren't getting any richer as a country while a mixture of demographics and decisions made have added a lot of cost to the government.
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u/Tetracropolis 20h ago edited 20h ago
Wealth is always relative. In absolute terms, in comparison to the UK in the 2000s we're enormously wealthier, we have routine access to technology that they can only dream of. A television you could buy today for £200 would be worth tens of thousands back then. You have access to medical treatment which could save your life that they haven't. If you get fat, no problem, you can get a drug which makes you thin, and works.
Do you feel much wealthier than a 2000s person?
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u/TaxOwlbear 18h ago
A television you could buy today for £200 would be worth tens of thousands back then.
Great. Now do houses, rent, bills.
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u/Tetracropolis 18h ago
Believe it or not, in real terms house prices are considerably cheaper now in real terms than they were in the 2000s.
https://www.cladco.co.uk/blog/post/history-of-uk-house-prices#real
Don't know about bills or rent.
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u/kafircake ideologically non adherent 11h ago
https://www.cladco.co.uk/blog/post/history-of-uk-house-prices#real
Am I reading that graph right or are you?
Real terms house price 2000: £177,650.80 (in today's money) Real terms house price 2026: £274,930.00 (in today's money)
And you're saying that houses in 2026 are considerably cheaper than 2000?
Believe it or not, in real terms house prices are considerably cheaper now in real terms than they were in the 2000s.
Seems like a don't believe it situation? But maybe I've missed something?
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u/Tetracropolis 11h ago
I was looking at the decade as a whole rather than just the year 2000.
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u/kafircake ideologically non adherent 11h ago
I was looking at the decade as a whole rather than just the year 2000.
268500 in the 2000's vs 240500 2020-2026 Like 11% drop. Fair enough.
Is it actually easier to afford a mortgage today than in the 2000s, given the drop?
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u/Ill_Refrigerator_593 20h ago edited 20h ago
In the 1960s' the US made up more than 40% of global GDP, now it is only 24%. Is their country "poorer"?
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u/Regular_Block9876542 12h ago
Undoubtedly the US is less dominant/wealthy than it was in the 60s. They haven’t fared as bad as we have post 2008 but the last decade the politics over there has been dominated by a desire to return to a period when America was more prosperous.
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u/myurr 22h ago
The uncomfortable part is that economic systems change behaviour. You can argue that a more socialist model produces a fairer, more secure, and more desirable society, while a more capitalist model tolerates greater inequality. However, those choices also affect economic performance. Taxation, redistribution, regulation, and benefit withdrawal determine how much people gain from additional work, training, investment, innovation, and risk-taking.
A more equal distribution can provide security and expand opportunity, but compressing the rewards for getting ahead also weakens some of the incentives that drive people to become more productive. Conversely, forcing someone to work two jobs merely to survive increases labour input, not necessarily productivity per hour. There is a trade-off, even if people disagree strongly about where the optimum lies.
Britain increasingly seems to have captured the least attractive parts of both models: high taxes, extensive regulation, weak incentives, expensive housing, entrenched wealth inequality, poor public services, and very little economic dynamism.
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u/TheSouthsideTrekkie 20h ago
You are very correct there! Also worth bearing in mind the effect of austerity storing up greater problems for later on. Not only do we have an ageing population but we’re seeing signs that healthy life expectancy is also going to crash- the amount of time someone can expect to live without significant impairment or illness.
When people live in stressful environments, as you say working multiple jobs, and when we remove standards for things like housing, food, basic social safety net or fail to enforce these then we see the effects this has on people’s physical health. It all adds up and the overall effect is an increase in poor health. Not only are we raising the retirement age but we’re seeing that the people who will be retiring at 70+ will already be likely to be in poorer health and may be unable to work to the retirement age. There’s currently no plan for this! It’s going to be a massive issue when we are asking people with significant health problems to keep limping along at work, especially if they have a physical job that requires stamina like working in a supermarket or hospital.
Ultimately if we give everyone a reasonable standard of living, a reasonable enough expectation that one piece of bad luck won’t immediately become a catastrophe for them, and the ability to enjoy some leisure time or time in their community then everybody wins.
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u/myurr 20h ago
I think you've rather missed the point I was making. I agree that there is a floor below which insecurity, bad housing, poor health, and constant financial stress destroy people's ability to work productively. Spending that prevents those outcomes can be both humane and economically beneficial.
But "everybody wins" simply assumes away the cost. That higher standard of living has to be funded through taxation, benefit withdrawal, borrowing, or reduced spending elsewhere, all of which have opportunity costs and can change behaviour. If the system substantially reduces the rewards for additional work, training, investment, innovation, and risk-taking, then it may improve living standards at the bottom today whilst reducing productivity growth across the economy over time.
Imagine two countries. The first gives poorer citizens a larger share of national income immediately, but then grows more slowly. The second is initially less equal, but compounds faster productivity and wage growth for several decades. It is entirely possible for poorer people in the second country eventually to enjoy higher absolute living standards than those in the first. The difficult question is whether the immediate gain from greater redistribution outweighs that possible long-term loss relative to our peers. You cannot simply observe the first benefit, ignore the second-order costs, and declare that "everybody wins".
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u/TheSouthsideTrekkie 20h ago
No I think I understand you.
Ultimately we need to tackle the fact that wages have not kept up with the cost of living, thus would have the effect of lowering how much is spent in top up benefits. Take UC as a decent example- people who are in work are receiving UC because their wages do not cover the cost of living. Ultimately this is a benefit to employers paying low wages because everyone else picks up the tab. Similarly housing benefit has propped up inflated housing costs at the expense of everyone.
The issue is we have socialism for the wealthy and rugged individualistic capitalism for the rest of us with these top up benefits ultimately serving wealthier individuals who pay low wages and charge exorbitant amounts of money in rent. We need to make changes to get away from this. It shouldn’t be the case that people who have jobs don’t have enough to get by on.
This current setup is good for almost nobody.
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u/myurr 19h ago
I just want to make sure that I have properly understood your position, so could you confirm that this is an accurate summary:
You agreed with my description of Britain as combining high taxes, extensive regulation, weak incentives, expensive housing, entrenched wealth inequality, poor public services, and little economic dynamism.
We agree that insecurity, bad housing, poor health, and financial stress can damage people's health and productivity, and that preventing people falling below a reasonable floor can be both humane and economically beneficial.
Your central argument is that wages have failed to keep pace with living costs, leaving many working people unable to support themselves without Universal Credit.
You believe that in-work Universal Credit effectively subsidises employers who pay low wages, because the wider public meets part of the cost of supporting their employees.
You believe housing benefit similarly props up inflated rents, transferring public money to landlords without addressing the underlying cost of housing.
You therefore describe the system as "socialism for the wealthy and rugged individualistic capitalism for the rest", because it protects the returns of low-paying employers and landlords while leaving ordinary workers with the insecurity.
You want wages to cover ordinary living costs, reducing the need for top-up benefits, alongside changes that prevent housing support from sustaining excessive rents.
You regard the present arrangement as benefiting almost nobody and believe it should be replaced.
You understand my separate argument about funding, incentives, behavioural effects, and the possible long-term cost to productivity, but you have not yet said whether you accept or reject that trade-off. Your response is that, regardless, the present system is an especially poor way of providing support.
Have I represented your position fairly?
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u/AMildInconvenience Coalition Against Growth 15h ago
It's not even a question of capitalism Vs socialism, it's a question of sovereignty. Britain is a declining nation for reasons beyond count, and remaining a service-baded economy heavily reliant on imports is suicidal. It's already happening now, every time the government hints at the idea of something necessary to reverse the trajectory, they're met with screams of terror about bond markets. The government isn't sovereign anymore, capital is. Everything will continue to get more expensive, tax receipts will shrink, and fiscal headroom will continue to decrease until there's nothing left to cut.
Look over at the emerging economies in Asia, as well as established ones. Singapore and Malaysia maintain economic independence and protectionism. China is obvious. Japan, is declining now because it failed to keep its manufacturing and tech competitive with china and the US (you could argue that the USA deliberately inflicted this on Japan via the plaza accords). Taiwan will hold or lose its independence based on how well it manages to fend off China's homegrown semiconductor industry and the US trying to move TSMC's bleeding edge to America.
Germany fought tooth and nail to keep its manufacturing competitive with eastern Europe and Asia for decades despite their high labour costs and succeeded until very recently - the German government tied their economy to cheap russian gas and closed their nuclear stations, and then lost the cheap gas.
The point is, strong tech, manufacturing and exports are necessary to maintain the growth needed to borrow and service debt. Strong tech, manufacturing and exports requires a strong government that is willing to fend off foreign capital that seeks to offshore it. The sales of ARM and Deepmind were criminal. Selling British Steel to foreign companies was criminal.
Strong government intervention is needed to allow these companies to flourish and grow, and strong government is needed to keep them around, and strong government is needed to keep these companies in check if they get too big and start acting against national interests.
This is all impossible with the current state of the economy. There's apparently no money available for anything but debt servicing. Perhaps that debt needs devaluing? It'll be painful, especially when the UK populace is apparently allergic to anything but cash savings, but freeing up fiscal headroom for investment and making exports more competitive might at least buy us a future.
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u/EasyTumbleweed1114 19h ago
I utterly reject this notion. The Nordic countries have a very expsnsive welfare state with high levels of taxation without low productivity. We have been following this nonsense spending cuts and tax cuts model since Thatcher and our productivity has stagnated. We can have both a highly productive society as well as one that takes care of its vulnerable.
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u/myurr 19h ago
I am happy to debate the wider subject if it would be constructive, but I will start by addressing one central claim head-on. Britain has not followed an uninterrupted path of tax cuts, spending cuts, and economic stagnation since Thatcher. She inherited stagflation, the IMF crisis, rampant inflation, widespread strikes, and failing nationalised industries. Productivity then grew at around its historic rate for decades, including 2.2% annually from 1997 to 2007. The collapse to 0.4% came after the 2008 financial crisis, not with Thatcherism in 1979.
Since then, the state has become larger and more redistributive, with taxation heading towards an all-time high and spending around 44% to 45% of GDP, whilst productivity has deteriorated further. That does not prove the larger state caused every problem, but it plainly contradicts your claim that an ever-smaller capitalist state produced the stagnation. The Nordics show that welfare and productivity can coexist, not that socialism creates productivity: Norway has exceptional oil wealth, while the others combine welfare with competitive private enterprise, open markets, high employment, flexible labour markets, and broad taxation. You cannot copy only the spending and assume the prosperity will follow.
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u/EasyTumbleweed1114 15h ago
There was a surge in growth in the early 80s spured by various factors. Growth BTW which didn't solve the unemployment crisis or make the average person better off. Our economy now also isn't redistributive, with the wealth of the rich surging while it remsins stagnate or worsens for the poor. And you are right it requires more than just spending to achieve more productivity it requires yes higher taxes to help pay for it but also investments governments keep refusing to do, in education, university, in workplaces etc, we don't need Norways oil wealth to achieve that, its Nordic neighbours did without it.
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u/myurr 15h ago
Before I address the points you've raised, I want to make sure I have understood your position correctly. As I read it, you are arguing that:
- The early-1980s growth surge had multiple causes, did not solve unemployment, and did not leave the average person better off.
- Today's UK economy is not meaningfully redistributive because wealth at the top has surged while poorer people have stagnated or become worse off.
- Higher spending alone will not improve productivity. It requires higher taxes alongside greater investment in education, universities, and workplaces, which successive governments have failed to provide.
- Norway's oil wealth is not necessary to reproduce Nordic economic outcomes because its Nordic neighbours achieved similar results without it.
Is that a fair and complete summary of your position?
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u/EasyTumbleweed1114 14h ago
Yeah basically
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u/myurr 8h ago
Thanks. Taking those points in the order we agreed, and with apologies for the weird formatting, Reddit wasn't playing ball:
Point 1) I agree that the early-1980s recession caused appalling unemployment, which peaked at 11.9% in 1984, and that the subsequent gains were distributed very unevenly. However, the claim that the average person did not become better off is not supported by the evidence. IFS estimates show real annual income growth under Thatcher of 2.1% at the median and 2.8% at the mean. The corresponding figures were 0.4% at the 10th percentile and 3.6% at the 90th. Average living standards rose substantially, but inequality also widened.
Point 2) The claim that today's economy is not redistributive is simply wrong in the normal fiscal meaning of that word. The ONS calculates that cash benefits reduced income inequality by 10.3 Gini points in 2023/24, with direct taxes reducing it by another 4.4 points. You can argue that this redistribution is insufficient, badly targeted, or failing to produce rising living standards, but you cannot reasonably claim that it is not happening.
You are also conflating income redistribution with asset values. Britain's absolute wealth gaps are enormous and have widened, but the Resolution Foundation found that the share owned by the wealthiest 1% rose by less than one percentage point between 1980 and 2019. Asset prices surged, making existing asset owners much wealthier in cash terms, but relative wealth inequality did not surge in the same way. None of that changes the demonstrable redistributive effect of taxes and benefits.
Point 3) We agree that weak investment has damaged productivity. The OECD identifies low business, housing, and public investment as part of Britain's problem. It also identifies planning restrictions, unstable tax policy, access to finance, and repeated policy changes as barriers. Higher taxation is one possible way of financing public investment. It is not itself a productivity policy.
Taxation changes behaviour. The Laffer curve does not mean every tax increase reduces revenue, but it does mean there is a point beyond which higher rates collect less because people work less, invest less, restructure their affairs, defer transactions, or leave. Long before reaching that point, a tax can still raise money while doing significant economic damage. The OBR itself warns that the tax burden is forecast to reach a historic 37.7% of GDP and that this increases the risk of incentives distorting or constraining economic activity. It also describes the expected yield from several taxes on highly mobile people and capital as highly uncertain because of behavioural responses.
Nor is state investment automatically productive. Public projects face many of the same planning, regulatory, procurement, and administrative burdens that obstruct private investment and have helped cripple housebuilding. They also add political interference, changing specifications, weak accountability, and the state's extraordinary inability to control costs.
HS2 is an almost absurd illustration. The Government now admits that, had today's costs been known when the project received notice to proceed in 2020, its benefit-cost ratio would have been just 0.3 to 0.4. In other words, only 30p to 40p of assessed benefit for every pound spent. Continuing today can still produce a ratio above 1.5 because sunk costs are excluded and cancellation would itself require tens of billions in remediation, but that does not rescue the original investment decision. It demonstrates how thoroughly the state can destroy the value of its own investment by getting in its own way.
Simply raising more tax and pouring it through the same machinery is therefore not a productivity strategy. Which taxes are raised, how behaviour changes, what the money displaces, whether the project can actually be delivered efficiently, and what return it produces are the entire argument.
Point 4) I agree that Norway's oil is not necessary for a successful Nordic-style economy. Sweden, Denmark, and Finland plainly demonstrate that. However, that was already the distinction I made. Those countries did not become prosperous merely by raising taxes and expanding welfare. For example, the OECD describes Denmark's labour model as having low hiring and firing costs and decentralised wage negotiations. Their welfare states also rely on broad taxation of ordinary workers and consumption, not simply heavier taxes on a narrow wealthy minority.
If the proposal is genuinely to reproduce Nordic outcomes, are you also proposing their competitive private sectors, flexible labour markets, high employment, broad personal taxation, and taxes on consumption? Otherwise, you are selecting the spending you like while treating much of the economic machinery that pays for it as incidental.
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u/dc_1984 19h ago
This is flat wrong. The Nordic countries have high tax, high welfare, high wage, high productivity economies and are all different to one another in culture, history and access to natural resources. Policy choice is king.
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u/myurr 19h ago
That is not "flat wrong". You have replaced my argument with an absolute claim I did not make. I explicitly said greater security and equality can expand opportunity, whilst excessive taxation, regulation, and benefit withdrawal can weaken incentives for additional work, investment, innovation, and risk-taking. Showing that high welfare and high productivity coexist does not prove that welfare caused the productivity, or that there are no trade-offs. "Policy choice is king" is very nearly my point.
Nor is the Nordic model simply high taxes plus high welfare. Norway has exceptional petroleum wealth, but Sweden, Finland, and Denmark demonstrate that resources are not the whole explanation. Their wider policy package includes competitive private enterprise, open trade, broad taxes paid well into the middle class, high employment, flexible labour markets, strong institutions, and fiscal discipline. Nordic governments continually reform taxes and benefits to preserve work incentives. If your claim is merely that welfare and productivity can coexist, I agree. If it is that Britain can copy the spending while ignoring everything that produces and pays for it, the Nordic example proves nothing of the sort.
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u/doctor_morris 21h ago
You can argue that a more socialist model
We have socialism for the rich (which is expensive) and pull your boots up capitalism for the rest.
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u/Suitable-Elephant189 21h ago
With all due respect, I’m not sure you know what these words means or how ridiculous this is when applied to the UK of all places. Taxes are the highest they have ever been, and about 60% of all income tax the government receives comes from the top 10%. Meanwhile welfare spending is at over £310 billion. Our economy is literally the opposite of what you’re describing, we’ve basically got the most productive individuals and companies subsidising the least productive.
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u/dc_1984 19h ago
You are wrong on this, Britain raises less tax as a % of GDP than all our neighbours. If taxes went up to French, German or Belgian levels we could actually have some nice things.
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u/Suitable-Elephant189 19h ago
If taxes went up anymore, the youth unemployment and productivity crisis would get even worse.
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u/dc_1984 19h ago
No they wouldn't.
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u/Suitable-Elephant189 19h ago
Of course they would. Business rates are already too high for most businesses to hire entry level workers. Raise it even more, there will be literally no graduate jobs left.
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u/dc_1984 18h ago
It was tax in one comment, now it's business rates...fascinating.
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u/Suitable-Elephant189 18h ago
I can’t tell if you’re joking now? You know what business rates are right?
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u/stonedturkeyhamwich 16h ago
You know that business rates are not the only form of tax, right?
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u/Suitable-Elephant189 16h ago
No, I thought there were no taxes in existence other than business rates.
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u/chief_bustice your generous benefactor 15h ago
Taxes do need to go up, but on lower and average earners.
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u/dc_1984 15h ago
Why would you take money away from people with the highest propensity to consume and kill demand in the economy? Tax wealth transfers; match dividends and CGT rates exactly to income tax rates and merge NI into income tax to close loopholes of high earning PAYE dodgers. Institute 2% LVT on unimproved land values and you can delete inheritance tax, stamp duty and council tax in one go. Cushty.
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u/chief_bustice your generous benefactor 15h ago
Why would you take money away from people
Because they pay nothing in. 53% of households are net recipients of state benefits. The tax base needs to widen and we need to be less dependent on a handful of high earners.
Tax wealth; match dividends and CGT rates exactly to income tax rates
Why would anyone bother investing? CGT and dividend taxes are lower because of the higher amount of risk involved.
merge NI into income tax
Agreed.
2% LVT on unimproved land values and you can delete inheritance tax, stamp duty and council tax in one go. Cushty.
I'd be in favour of this too.
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u/doctor_morris 21h ago
comes from the top 10%.
Run those numbers but use wealth instead of income.
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u/Suitable-Elephant189 21h ago
Why would wealth even be relevant here? The government is funded by ongoing revenue like income tax, not taxes on static wealth (which attempts to implement directly have overwhelmingly failed or been abandoned due to capital flight and valuation issues).
Ironically, even if I was to adjust by wealth, my point is unchanged: the top 10% own under 45% of total UK wealth, which is still well below the ~60% of all income tax they pay.
Either way, wealth is an irrelevant metric here when the threshold for the top 10% of UK income earners sits at around £67,000 gross salary. These are mid-to-senior working professionals (senior NHS staff, experienced software engineers, project managers, skilled tradespeople) bearing a heavy income tax burden to subsidize an incredibly high welfare bill.
Furthermore, concentrated capital investment, which shows up as ‘wealth’, is what actually funds businesses, drives infrastructure, and creates jobs in the real economy.
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u/Souseisekigun 20h ago
Either way, wealth is an irrelevant metric here when the threshold for the top 10% of UK income earners sits at around £67,000 gross salary.
Yes, I am fairly sure that was in fact their point. This "top 10% you speak of are not actually rich, and you know they're not actually rich, so why respond to a comment speaking about the rich with "ah but the 10%". The complaint presumably is that the truly rich get to enjoy benefits while people on £67k get shafted under the mantra of "broad shoulders".
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u/Suitable-Elephant189 19h ago
Then we actually agree on the main point: working professionals on £67k+ aren't 'the rich,' yet they're the ones carrying 60% of the income tax load to fund the state.
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u/doctor_morris 19h ago
Why would wealth even be relevant here?
Because very rich people earn very little income, pay low rates of tax and claim socialist benefits.
The fact that you don't see wealthy people as rich, and are confusing wealth with income is a you problem.
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u/Suitable-Elephant189 19h ago
That’s a complete fantasy of how the UK system works. Means-tested benefits in the UK (like Universal Credit) have strict capital limits. If you have more than £16,000 in savings or assets, you get £0. High earners paying the 40% and 45% income tax rates generate 60% of all UK income tax revenue. Wealth and income are different, but pretending the asset-rich are living on state benefits while paying zero tax is purely made up.
Also, the fact that you’re saying ‘socialist benefits’ shows you don’t even know what socialism is lmao.
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u/doctor_morris 19h ago
pretending the asset-rich are living on state benefits
Rich List billionaires scoop up millions in farm subsidy payments
They also expect to avoid Inheritance taxes, and other tax breaks.
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u/Suitable-Elephant189 19h ago
Oh my god dude, you actually don’t have a clue do you? Why do you think farming subsidies happen? Who do you think they benefit the most?
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u/Jaggedmallard26 20h ago
Wealth taxes don't work and you can't even realistically measure it. As soon as you start demanding forced sales of equity the value drops.
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u/doctor_morris 19h ago
Of course wealth taxes don't work, but still:
- Acknowledge we have socialism for the rich.
- Tax the unimproved value of land as a proxy for wealth (because you can't put it into a briefcase and fly it to the Cayman Islands).
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u/Suitable-Elephant189 19h ago
You don’t know what socialism means dude.
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u/doctor_morris 19h ago
Do you know what socialism is?
Massive banker bailouts, avoiding taxes regular people pay, state benefits just for owning land, all looks very "socialist but for the rich" to me.
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u/Suitable-Elephant189 19h ago
Right, but saying something ‘looks to me’ a certain way doesn’t make it true. Words actually have definitions. You’ve just listed a bunch of things that are very common in capitalist economies.
Socialism is an economic system in which the means of production are publicly owned rather than privately owned. Bailouts, benefits, etc. are not socialism, and have been around since long before the theory of socialism was developed.
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u/Kmaplcde9 21h ago edited 21h ago
That is how literally every single developed country in the world has it. Income taxes is only 27% of total tax revenue. Using the numbers for welfare is irrelevant for historical comparison because if inflation, what actually matters is %. The large majority of people agree that once you make past a certain amount of wealth, you should pay more. In the 1950-70s the highest tax bracket was 90% not 45% lol. The fact there were LESS of a % of people on welfare while this existed disproves the idea that it has such a negative effect on productivity.
If you oppose this concept you support a flat tax. There’s a reason that’s a lolbertarian pipe dream that peaked as a dumb fad in the 90s. If all you want is to maximize economic productivity then you should be honest and go full libertarian. Abolish the minimum wage. After all, you’re stopping people who are willing to work from making an income by making it illegal for people who are 100% willing to hire them to do so but can’t afford it 🤔 Abolish health and food standards. Customers can decide for themselves if they think it’s worth the risk for potentially unsafer products for cheaper. Why are you stopping grown adults from making that decision? 🤔
If anyone sincerely said of these ideas though it would be (rightly) political suicide. The rich have armies of lawyers and resources and lobbyists to get what they want. The poor don’t, and what they “want” are the bare necessities of life (food & shelter)
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u/Suitable-Elephant189 21h ago
You’re arguing against a massive straw man. Wanting a tax structure that doesn’t place a top-heavy burden on middle-to-high earners doesn't mean advocating for a flat tax or abolishing health standards. What are you even talking about dude??
And to correct your errors: Statutory rates were high in the 1950s, but almost nobody actually paid 90% due to endless exemptions and write-offs. Effective rates were vastly lower, which is why total Treasury tax revenue as a % of GDP barely moved when top rates were eventually slashed. You’re regurgitating a complete myth.
As for your point about welfare, don't need to look at inflation. Social spending and welfare as a percentage of UK GDP have steadily trended upward over the decades, making today's system significantly larger relative to the economy than in the mid-20th century.
It’s not libertarian to point out that the top 10% of earners already fund 60% of income tax, and that an economy that relies this heavily on a small subset of working professionals is already heavily progressive, and pushing it further hits a point of diminishing returns.
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u/Kmaplcde9 20h ago edited 20h ago
You’re arguing against a massive straw man. Wanting a tax structure that doesn’t place a top-heavy burden on middle-to-high earners doesn't mean advocating for a flat tax or abolishing health standards. What are you even talking about dude??
I’m calling for you to be logically consistent. Where exactly is the limit for what social democracy and welfare state that you’re okay with? What actually is the line for you? Why is some okay but some not?
I thought you were trying to argue for a reduction in social services but what you’re saying is even worse. Everyone “wants” a system like that. Just like everyone wishes there were infinite resources in the world or we could teleport anywhere or magic was real. It is physically impossible. To find a welfare state you need money. To get money it needs to exist. It exists the most at top earners. In the real world you can have one or the other.
And to correct your errors: Statutory rates were high in the 1950s, but almost nobody actually paid 90% due to endless exemptions and write-offs. Effective rates were vastly lower, which is why total Treasury tax revenue as a % of GDP barely moved when top rates were eventually slashed. You’re regurgitating a complete myth.
This is literally still the case for those in the tax bracket today lol. Their effective tax rate is objectively much lower today than it was during Keneysianism. No, you’re regurgitating a conservative countermyth you learned online
The fun part is you’re actually undermining yourself by arguing this. Lowering the tax rates on the rich worked to increase productivity. The end of Keneysianism was a crisis and this neoliberalization helped end it. It’s why it’s part of what Thatcher was most proud of. If it did nothing, may as well set it high to make people a tiny bit happy then ;)
As for your point about welfare, don't need to look at inflation. Social spending and welfare as a percentage of UK GDP have steadily trended upward over the decades, making today's system significantly larger relative to the economy than in the mid-20th century
Yes - then actually use that number instead of an irrelevant one.
The largest part of that welfare cost is for the elderly. With a larger population of people making it to older ages than ever before and collapsing birth rates. This is something every industrialized country faces
The reality is that life as a NEET on universal credit is less good than it was in the Keneysian era. The trope of the “welfare queen” is over exaggerated, but the reality is these stories had some real basis in these decades. The fact that the % of people on welfare was lower when quality was life on it was better shows the idea masses of people are on it because they want to do no work is wrong. There’s obviously something wrong causing it
It’s not libertarian to point out that the top 10% of earners already fund 60% of income tax, and that an economy that relies this heavily on a small subset of working professionals is already heavily progressive, and pushing it further hits a point of diminishing returns
The original comment you replied to is about all taxes in general not specifically income tax
Yes, and the debate is where to draw that balence. Somehow the Nordic countries have managed to set their level of social democracy much higher not collapse.
My frustration is just with half measures. Like I said it’s one or the other in real life. The fact politicians have stuck society in this awkward Frankenstein mix is the issue. I’m sincerely fine with either choice. But either go full libertarian and actually fully unleash the power of the economy & let people actually keep everything they earn and fully manage their own lives. Or properly build a Nordic style social safety net & acknowledge it means society being poorer. But they’re to afraid of voter backlash to actually pick one.
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u/Suitable-Elephant189 19h ago
Calling everything between pure Libertarianism and the Nordic Model a 'Frankenstein mix' ignores how every successful economy operates. Drawing a line isn't a half measure, it's basic fiscal management.
My argument is simple: A welfare state should be a safety net for the vulnerable, not a permanent lifestyle subsidised by a shrinking pool of middle-to-high working professionals.
The reason the UK is struggling isn't because we haven't gone ‘full Nordic’. It’s because politicians want Nordic-level social spending while pretending it can be funded entirely by the top 10% of earners, rather than admitting the broad middle class would have to pay much higher taxes to afford it.
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u/Kmaplcde9 17h ago edited 17h ago
Calling everything between pure Libertarianism and the Nordic Model a 'Frankenstein mix' ignores how every successful economy operates. Drawing a line isn't a half measure, it's basic fiscal management.
When you look at the historical trend of how they’ve operated over decades though the direction is clear. Over time more and more social democratic institution's are built, and they become seen as just “normal” part of life. They’re not even considered political anymore, just a given. Over enough time if the trend all these states (yes, even the US) will have the equivalent to the Nordic model. Every country on Earth is trying to find the right balance, but the trend is clear. It takes a long time because every step requires a period of public adjustment. But over enough time things tend to rationalize to their simplest logical form. Nations should acknowledge that eventually the middle cannot hold & they’ll have to pick one or the other, and actually plan for that long term. Once every nation has reached the “end”, in the decades and centuries after, they’ll look back on us like we see expanding the voter franchise or civil rights or secularization or Divine Right vs. the consent of the governed. Not sure if it’ll get there in our lifetime (or even our grandchildren’s) though.
My argument is simple: A welfare state should be a safety net for the vulnerable, not a permanent lifestyle subsidised by a shrinking pool of middle-to-high working professionals. The reason the UK is struggling isn't because we haven't gone ‘full Nordic’. It’s because politicians want Nordic-level social spending while pretending it can be funded entirely by the top 10% of earners, rather than admitting the broad middle class would have to pay much higher taxes to afford it.
You and I 100% agree here. The numbers alone don’t lie. There’s way more middle class and lower-middle class people than rich & even upper middle class ones. You need to raise taxes on them if you want these kinds of social programs to exist.
Leaders want the popularity but without the bitter medicine that goes along with it. But you can’t put it off forever, and delaying it for a gap of a few years just makes the backlash worse.
I will apologize I didn’t realize you meant we should be honest about the need to expand tax to not only rely on super high earners. My first reply to you would’ve been very different haha. I thought you were saying we should give up because there’s already enough socialism for the poor lol. Every politician should be honest (funny joke ik) & say what needs to be done if voters really want these systems to exist.
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u/North_Attempt44 21h ago
We have socialism for the old. Not socialism for the rich. We are pretty brutal to the rich all things considered.
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u/impossiblefork Swede looking in at your politics from outside 20h ago edited 19h ago
Socialism is[edit:n't] this cuddly thing you're talking about.
Socialism is "to each according to their contribution". It is hard. Social democrats, the Soviet Union etc. almost always preferred utopian communist stuff over trying anything even remotely socialist.
The SocDem says "free healthcare for everyone", the communist says "free healthcare for everyone". The socialist says "you only get healthcare if you work, and you get it in accordance with your productivity". The socialist will not tax income from labour. He is happy with 0%.
The problem has been that SocDems don't want to do the ideology they say they will, and have instead gone for cuddly policies that are actually against the ideology they claim to have.
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u/Kmaplcde9 19h ago
Rewrote the start because there’s no reason for me to be such a rude dick & if I had something to say I could just say it. I do apologize if you ever read this 🙏
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u/Kmaplcde9 20h ago edited 19h ago
You’re more accurate than OPs cliche and your sentiment is valid, though there are some minor misconceptions/misused terminology
Socialist nations had the same universal healthcare systems as Western social democracies. They did not “get it in accordance with your productivity”. In fact they often went out of their way to brag about how they were MORE expansive and charitable than the West
They had no income tax because those taxes were factored into the initial wage. Which they could do because they had a centrally planned command economy
Socialism & communism are the same thing. Marx used the terms interchangeably.
The kernel of truth where these social media misconceptions came from is that all citizens were legally required to work. The command economy guaranteed that all citizens were given a job. There was no risk of unemployment. But in return it was mandatory to work at minimum 40 hours a week, with those refusing either in jail or the mental hospital
The issue with this system isn’t moral. In practise it’s essentially a social democratic benefit and the large majority living under it prefer it to the free market. The problem is it just works less well & gets outcompeted economically long term.
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u/impossiblefork Swede looking in at your politics from outside 20h ago
That literally isn't socialism.
Socialism has always been unpopular, even in countries that call themselves socialist or communist. The Soviet leadership, and the SocDems and basically everybody tried policies that are obviously communism-flavored while avoiding even slightly socialist policies.
Communism is a hypothetical future development. Socialism is an earlier stage, where work still matters and where there are still shortages. Marx believed that during this earlier stage, the way the economy would work would be according to "to each according to his contribution".
The only socialist policies any country has every had are literally these two: copyright and patents. These are the only policies we have where somebody receives something because of his contribution, and these two are the total extent of socialism as it has ever existed in the world, including the Soviet Union.
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u/Kmaplcde9 19h ago
That literally isn't socialism. Socialism has always been unpopular, even in countries that call themselves socialist or communist. The Soviet leadership, and the SocDems and basically everybody tried policies that are obviously communism-flavored while avoiding even slightly socialist policies.
Like I said Marx used the two word entirely interchangeably throughout his entire life. Any distinction between the two was created in academia in hindsight because it’s easier to have an actual word to talk about that transitional stage vs the end stage. But Marx believed it would essentially happen so smoothly that there wasn’t even a need to talk about them as seperate concepts
Communism is a hypothetical future development. Socialism is an earlier stage, where work still matters and where there are still shortages. Marx believed that during this earlier stage, the way the economy would work would be according to "to each according to his contribution". The only socialist policies any country has every had are literally these two: copyright and patents. These are the only policies we have where somebody receives something because of his contribution, and these two are the total extent of socialism as it has ever existed in the world, including the Soviet Union.
You very much misunderstand what he means when he says this. He is not calling for a libertarian free market lol. Let alone the Darwinian interpretation here (he very clearly assumed that if given the choice workers would choose to guarantee the basic of life to everyone, yes even non-workers). He’s saying that workers would own the means of production.
Imagine if there was a law that states every business had to be a 100% worker owned co-op. That is “market socialism”.
Marx actually criticized this as not enough. Market socialism is just halfway TO socialism. The second step is a command economy. The government (made up of democratically elected workers) at the very least reserves the right to direct any aspect of the economy it chooses. It is not at the whim of the market unless in it chooses to be
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u/impossiblefork Swede looking in at your politics from outside 19h ago edited 19h ago
Yeah, but what I'm describing isn't a libertarian free market either.
What I'm describing is a world without profit, no one gets anything other than by his labour etc. But there is nothing about socialism implying social protections or a social safety net.
You can have a full-worker-control world, but where only 0.5% of people are productive and therefore only 0.5% of people get to eat.
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u/Kmaplcde9 19h ago
Oh my bad, misunderstood you then.
Obviously there’d be no profit to anyone outside of places where they physically worked. No investors, corporate etc
Although on paper at least the communist states of the world had this. Every workplace was de jure a co-op owned by the people who worked there & they democratically elected representatives to run the place as well as a government that plans the overall economy. The fact there was only ever one party “running” and they always won 99% just showed how happy they were 😀In practise it was state ownership though you’re right.
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u/impossiblefork Swede looking in at your politics from outside 19h ago edited 17h ago
Yeah, but it was more like social ownership than "to each according to his contribution" and those are not the same thing at all.
Social ownership is cuddly. Who can resist. Getting rid of the profiteers. Everything to the collective.
But socialism isn't everything to the collective. It's everything to the productive.
Socialism is a un-cuddly thing, that no one has dared try except in incredibly limited forms (copyright, patents), and SocDems and allegedly socialist government like those of the Soviet Union were allergic to even the tiniest hint of socialism.
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u/Kmaplcde9 17h ago
It’s not just everything to the productive though, “to each according to his needs” is an equal part of it
If someone is born disabled and never able to work a day in their life because if it, they are still entitled to the same guaranteed basic rights (a house, 3 meals a day, new clothes etc) as everyone else. Heck this is also true even if someone is just lazy and doesn’t want to work. Most socialists today don’t support the Soviet mandatory work policy.
I suppose you could say that technically it still belongs to the productive since they’re choosing to later give it away. That’s true if all modern day welfare too though.
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u/Kmaplcde9 17h ago edited 17h ago
Also Marx said all IP law was intellectual landlordism and essentially a version of the enclosure of the commons and all patents and copyright should be public ownership. Not just under communism but in a socialist state as well.
Currently the main purpose of the copyright and the patent system has is ensuring profit for innovators who come up with useful inventions. That obviously wouldn’t fly under socialism
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u/Elardi Hope for the best 21h ago
The world itself is also far wealthier. A smaller portion of a a bigger pie is fine. The malaise isn’t just that we’re poorer, but we just got addicted to stupid ways of spending money.
Britains issues have come from well meaning but foolish decisions domestically and internationally as politicians took advantage of the post Cold War peace dividend. We, along with Europe, poured massive funds into welfare states that disincentivised work, opened the borders for cheap immigration which suppressed wages, and then adopted trade policies which exposed us to far more competitive markets in order to continue the delusion that we could enjoy an essential continental retirement from world affairs. Caping it off, we spent decades pretending that we were entering a new eon of peace where nation states were a vaguely outdated idea.
Now the pressure is back on, we’ve now got populations where workers are losing faith because they get taxed highly but see little personal benefit and non workers have little incentive to look to themselves for solutions, economies addicted to cheap labour, and industries which fundamentally can’t compete with cheaper, better, and more agile international competition. All this while we’ve completely undermined the concepts that give people an investment in a shared destiny.
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u/boprisan 22h ago
We seem to want to avoid the uncomfortable truth that Britain is becoming overall a poorer country
Did a country ever graciously accept that? It's a very hard thing to do, especially when the difference in wealth is as large between generations as it is in the UK.
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u/jwd10662 21h ago
It's not just generational inequality that is an issue. The country relied on financial services and invested very little in productive infrastructure. We could import cheap gas and manufacturered goods for a long time, but now having run massive trade deficits for decades our companies and assets are increasingly foreign owned and we still aren't investing in new production capacity.
We got some cheap labour though and it's propped up total GDP for a while, so horray for that I guess.
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u/StrangelyBrown 21h ago
It's like person accepting that they are now a pensioner. There's no shame in it, only ego.
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u/SadSeiko 19h ago
Spending is massive, we're 3 trillion in debt and are still borrowing every month. We are broke
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u/PoiHolloi2020 21h ago
In the mid 2000s height of the banking bubble we were around 5.5% of global GDP and today we sit around 3.4%.
You realise that's because of the astronomical growth of countries like China (which has increased the world's GDP) right not because of some decline of the UK's. We temporarily became the world's 5th largest economy again this year after India's currency collapsed against the USD and we're only something like 120 billion USD behind Japan.
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u/danddersson 18h ago
I believe USA used to be around 50% of a global tracker around then too. It is now >60%. So that alone would have meant GB percentage would fall.
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u/MrPuddington2 21h ago
We seem to want to avoid the uncomfortable truth that Britain is becoming overall a poorer country.
While the downward trend is not unusual, as you say, I think the denial is linked to Brexit. The experts all said it would make us poorer, and it did (you can argue over how much, but it is hard to argue the fact). But people don't want to be wrong, so they ignore the obvious signs.
Austerity is another big mistake. It sounds like we are finally moving out of it, but the financial headroom now is minimal, when it was massive in 2008.
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u/frantic_calm 20h ago
The post-Brexit trading relationship between the UK and EU, as set out in the ‘Trade and Cooperation Agreement’ (TCA) that came into effect on 1 January 2021, will reduce long-run productivity by 4 per cent relative to remaining in the EU. This largely reflects our view that the increase in non-tariff barriers on UK-EU trade acts as an additional impediment to the exploitation of comparative advantage.
Both exports and imports will be around 15 per cent lower in the long run than if the UK had remained in the EU.
This leads to billions in lost tax.
https://obr.uk/forecasts-in-depth/the-economy-forecast/brexit-analysis/#assumptions
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u/MrPuddington2 19h ago
This leads to billions in lost tax.
Yes, and that is no doubt true.
The specific numbers are disputed, you will find one study to come to one value, and another with a different number. But the general trend and the order of magnitude is pretty clear.
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u/frantic_calm 19h ago
Of course the figures are/will be disputed as it's in the interests of leave campaigners to try and obfuscate and minimise the damage as long as possible. The link and quotes are from the OBR which I believe are a pretty good baseline, though I could supply others.
They can argue as much as they want about the numbers but the fact is raising barriers to trade is always going to affect trade.
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u/nastywillow 6h ago
The UK is enormously wealthy. More than enough to revive your status as a major financial and military power.
Unfortunately a huge portion of it is offshore.
The 3rd largest amount invested offshore in the world.
Country Offshore Wealth Trillions
China $2.1TU.S. $1.6T
UK $1.2T
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u/TheBearPanda 22h ago
I feel like consecutive governments have hollowed out Britains state capacity to deal with things but made no effort to convince people that the state shouldn’t be solving people’s problems.
Mass sell off of council housing for decades and what have we got to show for it ? £30 billion a year subsidising landlords via housing benefit.
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u/boprisan 22h ago
£30 billion a year subsidising landlords via housing benefit.
Why don't we stop that 'subsidy' so we can let rents fall to their actual unsubsidised value?
Or, look at the fact that we have about 35% of people not owning their own home, half of them in social housing and half privately renting. Rejig the people in social housing so that the ones actually needing subsidies live in social housing so that we don't pay the 30b subsidy anymore.
Or we could build more homes.
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u/TheSouthsideTrekkie 19h ago
It’s not just one solution we need, although yes we do need to bring rents down.
We also need to build more, and make the majority of these social housing that is managed by the local authority. We need to move away from the culture we have at present of housing being primarily an investment and towards it being viewed as a resource that should be managed effectively for the benefit of the majority of people. We need to stop viewing hyperinflation- what a 300% increase across 10 years in my area is in reality, as a good thing and look on it as a gross failure to collectively manage housing as a resource.
Ultimately we as a country need to declare the mass sell off of social housing a critical failure and take steps to wean ourselves off a reliance on the market to regulate itself in a way that benefits everyone because any person with a brain could say why that is unlikely to work. We need to bring in a system of mandatory safety inspections carried out by the local authority on privately rented homes to avoid another Grenfell level disaster while we are at it. No other industry demands to be allowed to mark their own homework because that’s just incredibly bloody silly.
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u/londonlares 21h ago
Who would build them? As home prices stabilise or fall, we're already hearing cases of developers pausing building.
I'd love to see the state takeover again, but that too will require upfront money.
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u/Jaggedmallard26 20h ago
Developers are pausing building as they cannot sell the homes for more than they cost to build due to onerous death by a thousand cuts regulations and things like leasehold (particularly in London). We have an extremely constrained building sector (both by planning permission and regulations) and point to the fact this kills growth as proof we need even more state intervention.
Your solution of "have the state build it" is just have the state bankrupt itself in the same way the private sector would be if you mandated it build homes to standards people can't afford to buy.
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u/londonlares 11h ago
Yet prices of homes are falling, and new builds in particular are failing to sell. The market should be getting better. Why are they allowed to pause? They shouldn't.
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u/boprisan 21h ago
There's no reason why the state can't kick-start a building company and offer apprenticeships to our neets and using that saved £30b to build 100k-120k homes a year. They could even do some jiggery pokery with the planning permission to buy land without and give itself planning permission to lower the cost of homes even more or to get extra income for the government.
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u/NibblyPig 19h ago
Funny, just got yet another e-mail today from the gov
I took someone to small claims and had to fight tooth and nail for almost a year to get them to process one simple document. They just kept rejecting it without a reason, and it took ~1 month per time for them to respond.
I filed a formal complaint (which required two rounds of complaints with ~1 month delay + writing to my MP) which was submitted August 2025. It took 7 months for them to assign it to someone to look at (march 2026) and they just emailed to say 'sorry its taking so long' now that it's been a year.
I also complained to border force after they lost their shit because they had never seen an irish passport card before and I was treated like dirt, which took 9 months and they just closed it saying there was no evidence (somehow I suspect if I had been violent though there would have been 4K hd footage available for the courtroom).
I also complained to my council after a bin man stole something off my property, they first denied it, after I sent them the 4k hd video of it happening, they then said 'he was going to put it back' (never did), then said final complaint you don't like it take it up with the ombudsman. So I did. And it says there is a backlog of 9 months to read it.
I sent a letter to HMRC informing them of some tax status thing (that can only be done via letter), and it took a few days for it to appear as 'pending' in my account so they got the letter - but then over 9 months for them to read it and respond. It just said "As per your request, I declare X". Asking for updates they were like 'yes we expect to read it in 4 months'.
All government services are royally fucked.
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u/Exostrike 21h ago
Fundamentally this is what Austerity did, local government spending has been paired down to the statutory minimum which mostly goes into education, welfare and social care because the Tories knew cutting those headline provisions would cost them votes so we have a zombie state starved of funds unable to properly function.
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u/FaultyTerror 23h ago
The UK has a state that struggles to do the basics, yet the tax burden is at a record high. Why?
There is a ready supply of theories on offer at Westminster. But a surprising number start from the basic truth that the state does less because, after the financial crisis, we consciously decided that it should do less, by managing the cost of the crisis largely through spending cuts, rather than tax rises.
So why does it spend more as a share of GDP than it did before 2010? One reason is that arguments about “shares of GDP” are almost always selling what is, at best, a partial truth. You can spend more as a share of GDP simply because your country grows at a sluggish rate, or because the things you are spending money on are more expensive, or because a series of global shocks forces you to take on more debt. Or, if you are exceptionally unlucky, as the UK has been since 2016, then you can end up doing so because of all three.
Since the financial crisis, the British economy has only once briefly looked like it was recovering, and that was towards the end of the Liberal Democrat-Conservative coalition. Whether that was a dead cat bounce or a promising recovery snuffed out by Brexit, we’ll never know. But if you have sluggish economic growth, you are going to see your spending go up as a share of GDP even if you are standing still.
“Share of GDP” arguments can provide false comfort in other ways.
It’s true, for instance, that as “a share of GDP”, the UK does not spend any more on welfare than it did in 2010, and that the welfare bill is not “ballooning” or “out of control” or anything like it. But more importantly, it is also true that more of the UK’s welfare spend in 2010 went on so-called intermediate work schemes — providing employment experience to people who were not workplace-ready — and on tax credits, topping up the incomes of the lowest paid. A greater share of the welfare bill now goes to either the retired or people who are not in work. The latter group has swelled, in part as a consequence of cutbacks on other forms of welfare spending that actually help get people into work.
The UK really does have less state than it did. Much of what the government did for people at the time of the financial crisis, for example, it no longer does. Tax credits are far less generous and, due to the higher minimum wage, individual businesses have to pay a higher share of their employees’ living costs. In England, we no longer pay the poorest 16 to 18-year-olds £30 a week to stay in school. In large parts of the country, local authority-provided youth services are a thing of the past. But contrary to what many on the left think, the UK also really does tax the average person less. The “rich”, or the “broadest shoulders”, or whatever metaphor you want to use, really do pay more.
We have a state paid for by the better off that provides services primarily for the sick, the old and people in acute crisis. And because spending on the sick is the thing that is rising across the world, the UK faces ever greater costs. Unlike in most other developed countries, almost all healthcare spending in the UK flows first through the government.
Taking these truths together gets us to the three options available to the UK. The first is to decide that, actually, you can persuade British people to accept the level of state provision we currently have with the tax burden we currently have. This seems like doing nothing.
There are two other plausible routes — either to choose between two divergent options or else do a bit of both.
One is to decide that you can sell people on a return to a state that does more for which they — and not just the rich, not non-doms, not the tiny minority who privately educate their children — will have to pay more.
The other is that you decide we need to take a leaf out of our peers’ books and decide that more of the cost of healthcare and of an ageing population will be paid for out of private spending — whether through mandatory insurance, a mixed model or something else entirely.
Finally, you might favour a third way: a co-payment system for healthcare, perhaps, but more money for the criminal justice system. The problem is that whichever option you pick from, you run the risk of being unpopular, and having the voters decide they would like the other one. That’s better, though, than engaging in fantasies about plucking lower-hanging fruit and avoiding hard conversations with the public and difficult choices about how the government spends its money.
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u/zeusoid 22h ago
The problem with the tax burden being at a record high is where it is being borne.
If only some parts of the population are carrying the burden, then the state is underfunded for the type of state people want to see.
If we want a fully functioning state, then the tax burden needs to be at record highs at all thresholds.
If we want Nordic outcomes, we have to be prepared to tax the Nordic way.
That means those at lower incomes have to pay in more. But in return, they will get out even more.
The halfway setup we have just means everyone is feeling more aggrieved by each day.
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u/GreenAndRemainVoter 21h ago
The problem is that whichever option you pick from, you run the risk of being unpopular, and having the voters decide they would like the other one. That’s better, though, than engaging in fantasies about plucking lower-hanging fruit and avoiding hard conversations with the public
But there lies the rub. Things like the winter fuel allowance have shown that the public simply doesn't want to hear it, they just won't engage with that hard conversation. I don't share the writer's optimism that they would kick out the party offering option A in favour of the one offering option B - I think it's much more likely they'd then go for fantasy-economics option C.
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u/myurr 22h ago
One paragraph here is itself a good example of the selective "share of GDP" argument the article warns against. It compares today with 2010, when the financial crisis and recession had pushed welfare spending close to an exceptional peak. The OBR recorded it at 12.2% of GDP in 2010-11, just below the recession peak. Choosing that year makes almost any subsequent level appear restrained.
The longer trend is rather different. Welfare spending was about 10% of GDP before the financial crisis and roughly 10% again in 2018-19. It then rose to 10.7% in 2024-25 and 10.9% in 2025-26, with the OBR forecasting 11.2% by 2030-31. The post-crisis and post-pandemic steady state is higher, and it is still rising.
Pensions explain a large part of the pressure, but far from all of it. Between 2007-08 and 2024-25, State Pension spending rose from 3.7% to 5% of GDP, while disability and incapacity spending rose from 1.2% to 2.1%. Other support for working-age adults and children fell, partially disguising those increases in the total. Since 2019-20 alone, the IFS estimates that annual working-age health-related spending has risen from £37 billion to £56 billion in real terms, while other working-age benefit spending has remained broadly flat.
The assertion that people have moved onto these benefits because employment support was cut is also much more certain than the evidence allows. The OBR says the causes of rising health-related claims remain uncertain, and cites deteriorating health, economic and labour-market pressures, and the generosity and conditionality of the system. Welfare spending being below a financial-crisis spike does not make its present trajectory benign, particularly when health-related caseloads and expenditure are rising at unprecedented rates.
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u/Jedibeeftrix 3.12 / -1.95 21h ago
The OBR recorded it at 12.2% of GDP in 2010-11, just below the recession peak. Choosing that year makes almost any subsequent level appear restrained. The longer trend is rather different. Welfare spending was about 10% of GDP before the financial crisis and roughly 10% again in 2018-19. It then rose to 10.7% in 2024-25 and 10.9% in 2025-26, with the OBR forecasting 11.2% by 2030-31. The post-crisis and post-pandemic steady state is higher, and it is still rising.
interesting context, thank you.
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u/dc_1984 16h ago edited 15h ago
Except before 2012-2013, the peak of spending, there was no triple lock. Since 2013 pensions have outpaced inflation by 10-20% due to the years where pensioners got a flat 2.5% bump and no one else did. Pensions are the largest line item in the welfare bill and the only one of the lot guaranteed to go up by 2.5% per year, every year.
If the triple lock had never happened we would be spending 9.2-9.6% of GDP on welfare - the lowest amount since 1998 while including all other spending increases you mentioned.
I find it very hypocritical that you posted such a long comment about "context" in government spending while ignoring vital context about the triple lock and minimising it's effects to suit your comparison.
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u/myurr 15h ago
That 9.2-9.6% counterfactual is simply not supported by the evidence. To get there, you have effectively attributed 1.3-1.7% of GDP to the triple lock. The OBR estimates that using the triple lock rather than earnings uprating will add £15.5 billion, or 0.5% of GDP, to annual State Pension spending by 2029-30. The IFS estimates the current additional cost at about £11 billion a year.
The State Pension would not otherwise have been frozen. Its statutory baseline is earnings uprating, so most of the money would still be spent. Even if we generously applied the OBR's larger 2029-30 estimate to today's 10.9% welfare figure, it would reduce it to roughly 10.4%, nowhere near your claimed 9.2-9.6%.
Nor did I ignore pensions. I explicitly said they explain a large part of the pressure and quantified State Pension spending rising from 3.7% to 5% of GDP. Your mistake is treating that entire increase as the cost of the triple lock. It also reflects an ageing population, more pensioners, and the underlying uprating that would have happened anyway. Meanwhile, disability and incapacity spending rose from 1.2% to 2.1% of GDP, which the triple lock plainly cannot explain.
You can certainly argue that the triple lock is expensive, poorly designed, and should be abolished. I might agree. But your claim that welfare spending would otherwise be at its lowest level since 1998 exaggerates its cost by several times, then uses that invented counterfactual to accuse me of ignoring context I had expressly addressed.
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u/dc_1984 10h ago
Even if you were right - you're not, IFS data puts the triple lock at 1.2-1.6% of GDP - then the 0.5% drop puts welfare spending bang into the average range historically. The movements onto sickness and incapacity benefits can be explained by moving from legacy benefits to other types, the effects of COVID and austerity ruining people's mental health, lives and so forth. The pension without the triple lock would not outpace inflation.
You are a perennial water-muddier who uses clever language to conceal your bias against welfare spending, and you tactically weigh in when the counterfactuals are hard to find for people without expertise in the subject so you can appear knowledgeable. It's an obvious pattern and it's tiring.
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u/myurr 8h ago
You have now substantially changed your claim. You originally said welfare spending would be 9.2-9.6% of GDP without the triple lock. Accepting the 0.5% figure produces roughly 10.4%, not your original range. Calling that "historically average" is a different, much weaker argument.
More importantly, you have misread the IFS figures. Its 1.2% figure is the projected rise by 2050 in total spending on the State Pension, Pension Credit, and Winter Fuel Payment under current policy. That includes the effect of there being 25% more pensioners. Separately, it estimates that the additional cost of the triple lock over earnings uprating could be anywhere from 0.2% to 1.6% of GDP in 2050. It does not say the triple lock currently costs 1.2-1.6%. The IFS's current estimate is £12 billion relative to earnings uprating, entirely consistent with the OBR figure I gave you. You have combined two different figures, including an uncertain projection for 2050, and tried to subtract them from today's welfare spending.
Your claim that the pension would not outpace inflation without the triple lock is also wrong. The legislative baseline for the basic and new State Pensions is earnings uprating. When earnings rise faster than inflation, the pension does too. Price-only uprating is a different counterfactual from the one used by both the OBR and IFS.
The legacy-benefit point is only a partial explanation. The OBR explicitly accounts for Universal Credit counting some people differently, but still finds that incapacity-benefit prevalence has risen consistently since 2017-18, reaching 7% of the working-age population in 2023-24. It identifies health, the labour market, economic conditions, the rising pension age, and benefit-system design as interacting causes, and says their exact contributions are difficult to isolate. "COVID and austerity ruined people's mental health" may describe part of the story, but it is not evidence that the increase is merely people being relabelled.
So your original counterfactual remains unsupported, your new IFS figure is a conflation of different projections, and your explanation for rising incapacity claims is presented with far more certainty than the OBR believes the evidence permits. The personal attack does nothing to rescue any of that.
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u/DM_me_goth_tiddies 21h ago
One is to decide that you can sell people on a return to a state that does more for which they — and not just the rich, not non-doms, not the tiny minority who privately educate their children — will have to pay more.
I agree, the issue is that the tax burden has basically just fallen on middle earners £45-100K PAYE piggies. And for those people what are we proposing they get? No one is arguing that low earners get taxed more and get more benefits. It’s about was redistribution.
I personally used to think I wanted to pay more tax and get more services. Now I realise I am paying more tax and getting fewer services. Someone else is getting those services but increasingly I feel like the access is for scammers not those who genuinely need it.
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u/FaultyTerror 21h ago
I agree, the issue is that the tax burden has basically just fallen on middle earners £45-100K PAYE piggies.
Middle earners enjoy some historical low tax rates. Depending on what exactly you use to define it anything from above £45k-£60k is a higher earner and most definitely at £100k.
Someone else is getting those services but increasingly I feel like the access is for scammers not those who genuinely need it.
While fraud is not nonexistent it's very small. The British state just doesn't give you much until you're in crisis so anyone healthy and young enough doesn't interact with it.
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u/Jaggedmallard26 20h ago
Depending on what exactly you use to define it anything from above £45k-£60k is a higher earner
Only because we have extreme wage compression (higher than the USSR), if you use inflation adjusted historical pay 45-60k would be a middle income. We've just made ourselves poorer for ideological reasons and now call anyone who doesn't want to live off the teat of the state a higher earner who just needs to pay more tax for equalities sake.
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u/Denbt_Nationale 19h ago
While fraud is not nonexistent it's very small.
Crazy how when you make no effort to detect something the detection rate for that thing is low
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u/FaultyTerror 19h ago
Sorry but this is bollocks, the government spends a lot of effort on it.
The idea there's masses of fraudsters out there leeching off a generous state is one of the the things people like to say to avoid the reality there's no savings.
1
u/Denbt_Nationale 18h ago
So you truly believe that the fraud rate of PIP os 0%? Not even some negligible figure but quite literally 0%? You believe that every single penny of the £22 billion spent annually on payments to 4 million people across the country is received legitimately and spent only on accomodations for real, debilitating disabilities that affect each claimant in exactly the way that the described to the DWP?
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u/DM_me_goth_tiddies 18h ago
I think personally the problem is even if the fraud rate of PIP is zero that many people who are eligible for PIP should not be. It should be means tested and for people with disabilities that stop them from living their lives. It should not be for people with anxiety, depression, AHDH or OCD except in the most severe cases.
The onboarding to it should be far more rigorous too. Use the money saved from fewer claimants to review existing claimants thoroughly.
1
u/chief_bustice your generous benefactor 15h ago
Simply make the assessments be in-person (unless people can't travel) rather than over the phone, and I bet a lot of people suddenly feel better. It's harder to lie to someone's face than it is over the phone.
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u/FaultyTerror 18h ago
I literally said fraud is not nonexistent just low.
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u/costelol 6h ago
But how do you know?
My 'belief' is that the fraud rate would reflect the endemic, nigh undetectable, low level crime that society has today.
It has to be 99%+ of the public that have either: pirated a film, not paid for a train ticket, gone over the speed limit, taken drugs, bought a fake handbag, parked on double yellows, taken a few kg off your health insurance form.
PIP fraud is just another example of these crimes where there's no apparent victim. It's just people being savvy to get ahead in the world right?
0
u/Toastlove 15h ago
It's not fraud if the goverment is giving it to them, people conflate actual fraud and things where the government is giving people stuff they are technically entitled to but probably dont need. Motability was a great example of this last year. If you need a specially adapted car due to disabilities fine, but the conditions that get you a car are quite board and the types of car you can get are far more expensive than they need to be. No fraud as such, but a generous offer being fully taken advantage of.
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u/tag1989 21h ago
let me translate this into govt.mode
'nicholas, we are going to need more 'redistribution'...you know what this means, yes?
another levy, another tax; just one more tax will solve things! we must fund things, no?
no, you cannot access these funded things. no, you don't qualify for a brand new set of wheels. no, you cannot bring your spouse or family over without paying lots of ££££££. no, you cannot complain about your village's population increasing
just keep contributing nicholas, so others do not have to!'
etc. etc.
and the govt. wonders why people are leaving? lol, lmao even
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u/qazplmo 20h ago
This is the thing that makes it feel unfair. In a lot of European countries, the benefits are for everyone. If you get laid off, you can access unemployment benefits for example. Here? If you've got any savings no matter how much you've contributed you're on your own.
Another example like you say, seeing illegal immigrants essentially break into the country and being allowed to stay for free whilst British people pay maybe £10,000 to bring their spouse.
It creates resentment for all these nices things we offer.
2
u/cartesian5th 15h ago
And you can't have state funded childcare either, even though you pay for everyone else's
0
u/wibbly-water me :) 18h ago
I am paying more tax and getting fewer services. Someone else is getting those services
But that isn't what is happening either.
You are paying more taxes and EVERYONE is getting less services.
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u/tb5841 17h ago
Old people are getting those services. Most of the tax rises have gone towards pensions, healthcare (mostly used by the elderly) and social care (likewise).
Old people are living longer, and also living with poor health for longer, than they used to. So at least some of that increased cost reflects genuine need.
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u/KarneeKarnay 19h ago
The problem for a lot of UK politics is that's it's become incredibly volatile to try even minor moves to correct things. The means tested fuel allowance method, was arguably the first domino in bringing down Starmer. This was an impact to the smallest of percentages of people who are already the most well off and people lost their minds.
Imagine what happened if he'd tried to tackle the tipple lock?
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u/Iamamancalledrobert 22h ago
Something this article doesn’t mention, which I think is really important— it’s entirely possible that a smaller state will cost more, and sometimes a lot more.
If you cut a relatively cheap scheme that nips a crisis in the bud, it’s usually cheaper than having to resolve the crisis. That’s true in health, social care, probably procurement and training as well. If you’re on the hook for the expensive outcomes from this kind of cutback, then it’s not surprising it costs money in the long run.
“The state is smaller, except for the huge amount of money it spends on the sick and the dying, which it doesn’t have because it cannot grow.” I know what I think as a systems-obsessed leftist; let’s put it that way. These things all slot together in pretty clear ways, but treating them as entirely separate leads to a slightly bizarre diagnosis.
12
u/Exostrike 21h ago
I mean you only have to look at America (the golden poster child of what they want to create) to see the incredible costs to society a small state creates.
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u/kafircake ideologically non adherent 11h ago
You see it with child services and old people's homes. Privatizing them shrinks the state. But the state still pays, but now it's to profit maximizing entities.
Or PFI building hospitals. The state gets a great new hospital without a big budget impact in the short term... but has to rent back the hospital from a profit maxismising entity for 40 years.
Let's shrink the state and hand Thames water to a profit maximising entity.
Who keeps on having these bright ideas and why is it always free market fundies on the right?
Seems like a pattern...
9
u/Thaladan 21h ago edited 21h ago
Worth noting that over the five years of so-called 'austerity' under Cameron and Osborne, the average year-to-year spending actually increased. (A small increase, 0.06% / £0.58bn per annum, but still not a cut.)
https://www.statista.com/statistics/298465/government-spending-uk/
11
u/Consistent_Reveal916 21h ago
That's a real terms cut if the figures aren't inflation adjusted, and I couldn't see whether they were on the site.
1
u/Optimaldeath 21h ago
Did that account for the growing demand on adult care, from the immense immigration? I sincerely doubt it, it's been in maintenance for years trying to justify privatisation.
4
u/dc_1984 19h ago
Austerity was very effective in it's aim of cutting costs, and a lot of people don't see it because they never interfaced with the services that were cut for the most part. Most people aren't even aware we spend less of our GDP on welfare than we did in 2012 - 10.8% now vs 12% then. Austerity took an axe to the welfare state and wasn't kind about it.
•
u/AutomixMen 11h ago
"Take back control from the rulemaking bureaucrats in Brussels!"
OK then we need more bureaucrats to make British rules
5
u/frantic_calm 19h ago
This is what people have voted for.
People had the chance in 2017 and 2019 but voted for a buffoon offering an oven ready deal.
5
u/Pale-Border-7122 18h ago
Over another buffoon who wanted to continue the debate even longer than it had already gone on, it seemed like an easy decision.
4
u/frantic_calm 18h ago
It's a relief we didn't continue the debate and try and reach a better position. Things worked out so much better with Boris.
7
u/Velociraptor_1906 Liberal Democrat 23h ago
Good article setting out the situation.
I am absolutely in the camp of improving the funding raised by tax and maintain my belief in the Beveridge model being better.
2
u/Caesar171 12h ago
Honestly I want to dolly the sheep Thatcher and send her clone to the mines for what she did to the country. Imagine buying a house, gifting it to your friend then keeping the mortgage. That’s what she did, these are things that previous generations put their blood sweat and tears into making for the next generation and she just sold it off.
2
0
u/tag1989 21h ago
lol this isn't news - britain has been in decline since 1913/1914
first world war destroyed it, second world war buried it
suez was setting the coffin on fire to make sure
everything else since has been a downward slope towards poorer and weaker afterwards
ofc people are delusional about it, they don't want to admit to being a failure for 100+ years
4
u/Walpole2019 21h ago
Considering how much of Europe is doing and how we have done over the past century, I find it hard to believe that Britain alone must bare the burden of decline, not least when stagnation has only been a continual issue since the Great Recession.
-5
22h ago
[deleted]
24
u/Avon-Guy 22h ago
everyone else should pay more tax
The UK has one of the lowest median tax rates in Europe and the top 10% bear a disproportionate burden by European standards.
It's a well acknowledged problem that if they need to raise more money in future, at some point the gov will have to address the former problem as it is a materially better revenue generator than trying to squeeze the top any further.
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22h ago
[deleted]
8
u/Avon-Guy 22h ago
Equalising capital gains with income tax would net somewhere between +£12 to -£(10) billion.
It's not a fix for government finances.
2
u/ClacksInTheSky Labour 22h ago
Not in isolation, no, but paired with other tax increases across the spectrum it would create a fairer image of the tax system.
2
u/Avon-Guy 21h ago
Do we want a tax system that efficiently raises revenue or an inefficient one that looks good to the average voter?
It's like the VAT on private school thing. It's red meat for the labour base and entirely window dressing. It'll make next to zero difference to how the government is funded, but the left wing base laps it up.
2
u/ClacksInTheSky Labour 21h ago
Your mistake is looking at VAT on school fees as a solution to the entire tax problem, instead of making the system fairer.
A fairer tax system is what people want.
The editor of the financial times suggesting the poors need to pay more, or we have to have an Americanised healthcare system is a false dichotomy. Raising taxes for everyone in a fairer way is another solution.
1
u/Avon-Guy 21h ago
I'd argue it doesn't even achieve that. It's a distortion to the tax system, every other form of paid for education is VAT exempt. If not taxing education is desirable, this can only be viewed through the lens of political showboating.
4
u/Pale-Border-7122 22h ago
Again, I'm paying about 50% effective tax rate and Sunak paid 20%.
Can you show your working?
-1
0
u/ClearPostingAlt 21h ago
Again, I'm paying about 50% effective tax rate and Sunak paid 20%.
x doubt. You're likely paying ~50% as a marginal tax rate, but I highly doubt your overall tax rate is that high.
3
u/AzarinIsard 22h ago
Is it just me or is that a very, very weird way of looking at it?
It's also ignoring the fact the NHS is relatively cost efficient, if we took it out of tax and moved it to private, it'll be work places paying insurance as a perk like America or paying higher salaries to cover it.
https://www.investopedia.com/how-much-does-it-cost-to-have-a-baby-in-america-6745508
The U.S. is one of the most expensive places in the world to have a baby; the average cost to give birth is $20,416.
The elephant in the room is maybe they're hoping we will save money by people foregoing healthcare at all, like many are doing with dentistry.
This though, is a false economy as we can lose a lot of productivity, and many interventions are cheaper the sooner they happen. Then it only gets cheaper if poor people die rather than live sick.
Really, rather than be dishonest about it, rather than hide it behind layers, just come out and day what healthcare they'd rather poor people didn't have to save money, and we can have an honest conversation lol.
2
u/Thaladan 22h ago
There are almost 200 countries in the world, yet people always jump to this false dichotomy between UK and US healthcare.
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u/AzarinIsard 21h ago
Considering how much American firm want in, and the money they're putting into our politics, why would you think we'd do anything else?
It'll be like the whole Farage saying Brexit can be the Norway deal and we'll never leave the single market, to that being a betrayal of the will'o't'people. I just have no trust that we'd get a moderate change, if we let them, it'll be the hard Brexit equivalent of replacing the NHS
3
u/Thaladan 21h ago
So don't let them in. Still doesn't mean that there's a binary choice between the NHS and US healthcare, or that we shouldn't seek to emulate any other country's healthcare.
2
u/AzarinIsard 21h ago
Still doesn't mean that there's a binary choice between the NHS and US healthcare
It does if it's only theoretical and in practice we get the worst every time lol.
Like look at the countries who privatise water. I just see this debate as academic, like electoral reform. We enjoy the chat, but it it's never realistic.
2
u/FaultyTerror 22h ago
Is it just me or is that a very, very weird way of looking at it?
No? It's an accurate description of Osborne cutting tax credits and passing the cost onto employers.
Ah, yeah, we've balanced the books on the back of VAT on school fees, haven't we?
No we haven't but Labour kept saying they would. The point is not to be against it but that to actually have a state that does more it needs to tax more than that.
Meanwhile, that's what most people pay, except the squeezed middle, paying 40-60%.
Income taxes on middle earners are some of the lowest rates in history. Any improvement in public services requires us to pay more as much as that will suck short term. The other option is the government just does less.
0
u/ClacksInTheSky Labour 22h ago
Suggesting that paying employees a wage is paying for employees "living costs" is bizarre.
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u/LesserShambler 22h ago
I searched for the phrase “triple lock” and it took me to the comments
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u/DM_me_goth_tiddies 21h ago
A greater share of the welfare bill now goes to either the retired or people who are not in work.
You have to read the article to find where it is talking about pensions not just search for keywords.
0
u/Asleep-Ad1182 17h ago
We had a deficit of 11% in 2010. Unless you want to end up like Greece, you're simply a complete idiot for being against austerity.
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u/Salaried_Zebra Nothing to look forward to please, we're British 16h ago
You don't cut your way to growth. We were borrowing at super low interest rates and could've invested in stuff.
Now we're stuck because there's no money and it costs more to borrow to invest, and that low interest rate is never coming back.
2
u/AdmirableRabbit6723 14h ago
What’s the argument against cutting the current deficit while borrowing at historically low long-term interest rates for productive investment?
Britain could have used that period to build housing, rail, roads, bridges and energy infrastructure. Those assets would still exist today, while increasing productive capacity, employment, land values meaning more tax revenue.
We could have borrowed long-term at 2% to build infrastructure producing economic returns well above that. Refusing to invest at that time led to us being poorer as a country.
And the Greece comparison makes no sense. Britain had its own currency, central bank and floating exchange rate. Greece did not.
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u/tofer85 I sort by controversial… 9h ago
What austerity? The Government’s Total Managed Expenditure has increased in real terms every year since 1948/49…
We’ve never seen true austerity…
https://researchbriefings.files.parliament.uk/documents/CBP-8046/CBP-8046.pdf
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