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Welfare Dependency Falls But Still Much Further To Go

In a new Economic Bulletin, published by the Centre for Policy Studies on Tuesday 30 June, Adam Memon, Head of Economic Research reveals that 51.5% of households still receive more from the state than they pay in tax.

The report also shows that:

  • Net dependency of the middle fifth of households has fallen by 27% since 2010/11.
  • The poorest are still suffering from high taxes.
  • Deeper welfare reform is needed to reduce dependency and raise incomes.
  • Inequality is now lower than at any time under New Labour.

Adam Memon explains:

“Welfare dependency is an economically destructive phenomenon which tears at Britain’s social fabric. It reduces the incentive to work and earn more whilst keeping people trapped in a cycle of low aspirations, low productivity and low pay. The welfare state must protect the vulnerable and encourage self-reliance but for too many households it has become a permanent trap.

Net dependency at 51.5% is still too high. Simply attempting to alleviate difficult economic conditions with welfare payments can only ever be a short term fix. Indeed, the case for making a further £12 billion of savings in the welfare budget rests not only on the need to reduce the budget deficit but also on the need to reform welfare to boost employment and encourage growth in real wages. The Government must press ahead with deeper welfare reform.”

Tim Knox, CPS Director, comments:

These new data demonstrate the success of the last government’s reforms.  Dependency is falling, inequality is lower than at any time under New Labour and disposable income is increasing for all. So the policy implication for the new Government is simple: go further, faster on both welfare and employment reforms.

Media Impact: 

BBC News - Labour leadership: Kendall and Burnham set out work plans

‘…new analysis has suggested more than half of UK households receive more from the state in welfare payments and pensions than they pay in tax. The 51.5% of households taking in more than they contribute in 2013-14 is down from a high of 53.5% in 2010-11, but is well above the 43.8% recorded in 2000-01, said the Centre for Policy Studies, a centre-right body co-founded by former PM Lady Thatcher. But the TUC said its conclusions were "extremely misleading", because it included retired households who receive pensions after a lifetime of paying taxes…’

Daily Mail - Half get more state money than they pay in taxes: More than 13million given welfare payments in excess of what they contribute

‘…Adam Memon, of the Centre for Policy Studies, said the Government ‘must press ahead with deeper welfare reform’, adding that welfare payments have become ‘a permanent trap’ for too many families. The Centre’s report found the poorest fifth of households received an average £9,982 more from the state than they paid in tax, while the richest fifth paid £20,777 more than they received. The Trades Union Congress said the Centre’s analysis of the official data was misleading and a ‘blatant attempt to give the Government political cover to slash public services and in-work benefits.’

London Evening Standard - Londoners 'pay more in taxes than they receive in state handouts' 

‘…The startling analysis, based on official figures, also shows that London households pay more in tax overall than those in any other UK region. The Centre for Policy Studies think tank, behind the research, today called on Chancellor George Osborne to ease the tax burden on hard-up Londoners. Spokesman Adam Memon said: “London households pay higher taxes on average than any other part of the country…’

Public Finance - Osborne urged to go further and faster on welfare reform 

‘The government has been urged to press ahead with deeper welfare cuts after analysis of official statistics showed that over half of UK households receive more from the state than they pay in taxes. An Economic Bulletin published by the free market Centre for Policy Studies today examined latest Office for National Statistics data on household incomes, taxes and benefits…’

The Huffington Post – The Waugh Zone, June 30th 2015 

‘…Today the Centre for Policy Studies offered a bit of pitch-rolling for the Treasury, with a new analysis suggesting that more than half of UK households receive more from the state in welfare payments and pensions than they pay in tax. The 51.5% of households taking in more than they contribute in 2013-14 is down from a high of 53.5% in 2010-11, but is well above the 43.8% recorded in 2000-01.But the TUC has been scathing in its response, saying the study is "extremely misleading", because it included retired households who receive pensions after a lifetime of paying taxes…’

The Independent - The poor are paying a bigger proportion of tax than the rich and the gap is widening 

‘…Adam Memon, head of economic research at the Centre for Policy Studies, said the figures demonstrated that the level of welfare dependency remained an “economically destructive phenomenon which tears at Britain’s social fabric”. A report by the thinktank highlighted the “churn” in the benefits system, in which the average household paid £13, 402 in taxes but received £12,939 in cash benefits and benefits in kind. Its analysis supports the case for reforming the £30bn tax credits system, which is widely expected to fall victim to a large proportion of the £12bn of welfare cuts in Mr Osborne’s budget..’

BT News - More than half of Britain receives more benefits than it pays in tax 

‘Over half of British households receive more from cash benefits and so-called benefits in-kind than they pay in taxes, a new report claims. Think tank the Centre for Policy Studies says 51.5% of households received more from the State than they paid in direct taxes, such as income tax, and indirect taxes such as VAT. That figure is falling though – back in 2010/11 it stood at a peak of 53.5%. But while it has been reduced since then, this ‘net dependency on the State’ remains well above historic levels…’