1/2 of Britain Supports Other Half

Over our lifetimes, most individuals should contribute more net benefits to society and, in general, to the state than they consume. 

In societies where the consumption and production are pretty much equal, society stagnates. Think subsistence economies, or what we saw during the Dark Ages once the collapse of the Roman world was done and before the Renaissance. Stasis, in other words. 

Some societies, most common in socialism, actually contract as people consume more than they produce. A few at or near the top can live quite well, but overall the society is eating its seed corn and inevitably declines. 

Capitalism creates economic growth because production outstrips consumption, so capital is built up, and in return, that capital generates even more growth. We invest in education, roads, and other infrastructure in order to keep the economy expanding and improve welfare for everyone. 

Each generation bequeaths to their descendants an economy more robust and productive than the one they inherited. It’s a virtuous circle.  

In Britain 47.4% of the people subsidise 52.6% of the others who are a net cost to the country. That is the majority of people receive more in benefits than pay in tax.

By the time of the next election Labour will have bankrupted the nation. The Tories did nothing about it… pic.twitter.com/3Fsxh3S1th

— David Atherton (@DaveAtherton20) December 20, 2024

One of the blessings of wealthy societies is that we can provide support to people if they can’t survive on their own–mostly temporarily, but for a few who are disabled more permanently. We also ensure basic dignity in old age, and basic medical care for all. Ideally, individuals have invested over their productive years to cover these expenses themselves, but we all agree nobody should starve or be left to die in the street. 

But in principle, each of us must, in the aggregate, generate more wealth than we consume for the virtuous circle to continue. 

More than half of people in the UK receive more in benefits than they contribute in taxes, official figures show.

A total of 52.6pc lived in households that received more from the state than they paid to the Treasury last year, according to the Office for National Statistics (ONS).

The figures underscore the challenge facing Sir Keir Starmer and Rachel Reeves as they try to tackle a ballooning sickness benefit bill and pressures from an ageing population.

The analysis, which reveals a decrease from 53.6pc the previous year and covers the 12 months to March 2023, factors in both cash benefits and the use of public services such as the NHS, schools and free childcare.

Well, that is no longer the case in many European countries, explaining why they are stagnating. Consumption for the majority of households now outstrips their production, which is obviously unsustainable. At a minimum, the basic economic unit (the household) should produce no less than it consumes and, ideally, a lot more. 

It is theoretically possible that a minority of people and households could be so productive that they can carry the weight of the entire economy and government on their backs, and in practice, the wealthiest 10% pay the lion’s share of taxes already. 

Working-age people are typically net contributors to the state – meaning they pay more in direct and indirect taxes than they receive in benefits and public services.

However, even among this group, 45.3pc received more from the state than they paid in taxes, although this partially reflects benefits relating to education and childcare.

In the long run, though, making the most wealthy and productive carry all the tax burden gets you back to a society that stagnates or even disinvests. If the return on work or capital is diminishing with investment or effort, people quit doing it, and there you go…

The “soak the rich” and spread the wealth around philosophy always and everywhere leads to stagnation or even decay. So far, European countries are limping along, but that just means that their decline is slow. 

We expect the young, the aged, and the infirm to be net consumers. The young, because they are not yet productive and we are investing in their future; the aged, because their most productive years are behind, and the infirm, because decent human beings help those in need. 

But Western welfare states have tipped the balance so far that the trajectory is unsustainable. In the longer run, the wealthier the society, the better off everybody is, including those who need state support. 

I feel like we are replaying the 1970s, with inflation, radical politics, and a stagnating Europe. The original run of this movie sucked, although it did have a good soundtrack.