There is reasonable debate about whether the state pension counts as welfare. But the DWP considers it so, and it is the single biggest line item on the £330bn annual bill.
The truth is, both major parties depend on voters on welfare because Britain itself depends on welfare. More than 24mn Britons claim at least one benefit, according to official statistics.
What varies between parties is the type of benefits their constituents tend to claim. In Conservative seats, the majority of welfare spend is on pensions. In Labour ones, the mix tilts much further towards working-age support, such as universal credit and Pip.
This partly explains the political economy behind the public debate. It is strategic for the Tories to suggest the government is “on the side of benefits street”. Likewise, Prime Minister Andy Burnham’s plan to “adjust” the triple lock — which ensures the state pension rises by whichever is highest of average wage growth, inflation or 2.5 per cent — appears much more calculated in this light.
In reality, Tory MPs will privately lament the albatross of the state pension, but seldom admit it on record because of the electoral consequences.
Labour frontbenchers express private frustration at the government’s apparent inaction on tackling working-age welfare, but too fear a backlash at the ballot box. The geography of the tax-welfare ratio is perhaps unsurprising.
London and the south-east get a passing grade, spending £0.78 and £0.98 on support for every £1 of payslip taxes respectively. The north-east, on the other hand, spends £2.19 per pound. Wales, which has zero constituencies in surplus, spends £1.88.
If anything, this underlines how dependent the UK is on the capital and other productive centres, such as Cambridge and central Manchester.
Looking at the amount we take in as direct taxes we find that every one of the four biggest parties in England have few constituencies who “pay their way” in this sense.
Reform UK is an interesting case. Despite the party proposing the deepest annual cuts to the welfare bill at £50bn, leader Nigel Farage’s seat of Clacton is the second-worst performing of the lot, with a -£6,161 net contribution per adult, according to the research. (The worst-performing seat is Liverpool Walton, a Labour-held ex-industrial area where the net contribution per adult is -£6,320.)
There is little to be learned by trying to generalise. Reform has perhaps the highest benefit spend to taxes paid. Conservatives and Liberals do not have such extremes of payers and spenders but the general outlook is that Government needs to find money elsewhere than direct taxes to balance the books.
The FT also publish charts on the Greens and “others”, together with the source of the data. These small parties (in terms of seats) have much in common with Reform. I also noticed that Conservative constituencies pay lower in taxes , closer to the smaller party’s constituents.
Thanks to the FT, you can read the report on this free link and if it’s run out, you can contact me at henry@agewage.com for a fresh one. This is only the sections that felt pertinent to pensions, but there is much more than I don’t have space to cover.
We are not fooled. National Insurance has abandoned its original role as a mutual, actuarially distinct social insurance program. It endures not because it fulfills Lloyd George’s or Beveridge’s structural blueprints, but because it provides Chancellors with a massive, hypothecated narrative shield to tax employment income separately from headline Income Tax rates.
Productivity improvement would have a major impact on this issue
A comment on Adam Smiths 250th book from the Herald newspaper
“One OBR projection captures the scale of the challenge. By 2029–30, real household disposable income per person, a measure of the purchasing power of household incomes after taxes and benefits are taken into account, is expected to be just 1% above its pre-pandemic level.
A decade with so little progress is a sobering prospect.
The Institute for Fiscal Studies predicts that household income growth during this Westminster Parliament will be the second weakest parliamentary performance since 1979.
Part of the explanation lies in the UK’s longstanding productivity problem.
An economy can grow because more people work, because they work longer hours, or because they produce more in each hour. All can increase output, but sustained improvements in living standards depend heavily on the last of these: productivity.”