As the Chancellor anxiously sifts through potential tax rises, trying to make everything add up for the upcoming mega-budget, and perhaps drafting lines about how those with the broadest shoulders need to carry most of the load, she will be made brutally aware of just how many people the state now has to pay for. The proportion of people that are “net recipients” — receiving more in benefits than they contribute in taxation — has been on the march for a half century.
At the turn of the century, 40.3 per cent of the population — 24 million — were in households receiving more from the state than they put in. Today, 53.3 per cent are — 36 million people. For the first time since the pandemic, this number is back on the rise.
Unsurprisingly the pandemic saw the highest number of people receiving more from the state than they pay in taxes in recorded history. In previous crises, this has then gradually reverted. But this time, instead of several years of agonising improvement, the situation has already started getting worse again.
There are several ways in which this situation has grown so bad. Total managed expenditure as a percentage of GDP has climbed from 35 per cent at the turn of the century to 45 per cent in 2024. An ageing population increases challenges — 10.3 million of the nation’s net recipients are in retired households.
Immigration is another key factor. The number of payrolled non-EU workers under 25-years-old soared by 315 per cent between January 2020 and December 2024. Recent data has shown that even among working migrants, many are net recipients, and a large proportion of migrants do not work. Even when net contributing, migration pushes wages down — as discussed by the IMF earlier this year — which keeps net recipience up.
However, the fact that this problem has worsened this year also lies in the worklessness crisis — especially among our young people. It will continue to get worse unless something changes.
Some reading will remember the panic when unemployment crossed 3 million for the first time ever in early 1982, at what was arguably the trough of Mrs Thatcher’s Prime Ministership. The total number of people on out of work benefits hit a record 6.5 million last month — more than twice that total.
This problem is most acute among under-25s. New ONS data shows us that almost one million under 25s are out of work or training. There are 51,000 fewer young people on payrolls since April, when the NICs employer tax rise came in. Many of the NEET young — “Not in Employment, Education of Training” — are economically inactive due to sickness — a group dominated by skyrocketing mental health claims.
We have a toxic combination of blunt and outdated benefits, and a ready stream of low-cost workers
During the crises in the early 1990s, net recipience peaked at 47 per cent — if we are not careful, in thirty years we will speak wistfully of the days when only 53 per cent of the population received more in benefits than they paid in taxes.
Thankfully, there is something to be done. We have a toxic combination of blunt and outdated benefits, and a ready stream of low-cost workers, that is deeply damaging our young people. If we can unpick these problems, as recommended in the CSJ’s new report Wasted Youth, we might still be able to turn this tide.
To start, it must be mandatory for all employers to attempt to hire UK workers before they consider hiring those in the UK on visas or those attempting to come to the UK from abroad. This was removed by Boris Johnson’s government in 2021 and must be reinstated.
Second, the government should rebalance the welfare system by withdrawing UC health and Personal Independence Payments from those with milder anxiety, depression or ADHD — equivalent to around 1.1 million people — and resetting remaining awards to £103 per week. This would save £7.4bn by 2029/30, of which at least £1bn should be reinvested in radically expanded NHS Talking Therapies, social prescribing, and employment support.
Third, the government should introduce a Future Workforce Credit, an effective tax cut for employers hiring NEETs (those not in employment, education or training), funded by removing the UC health element for under-22s. This would get 120,000 young people into jobs while netting £765m in tax and welfare savings. This may appear radical, but the current approach is fundamentally unsustainable. Those with complex health problems are being sidelined by the rising tide of people accessing benefits that they would be ultimately better off not using.
The course we’re on is terrifying, but it is not too late to change it. We would all benefit from a new direction.
