The Centre for Policy Studies (an independent UK think tank) issued a report in 2015 on the relationship between social welfare benefits and taxation.
The study showed that over half of
British households receive more from cash benefits and so-called benefits
in-kind than they pay in taxes, and that the 'recycling' of money is hurting the nation.
- 1979: 43.1% of households received more from the State than they paid in direct taxes, such as income tax, and indirect taxes
- 2000/1: this had only increased marginally to 43.8%.
- In 2010/11 it stood at a peak of 53.5%.
- 2013/14: 51.5%. (The average household paid £13,402 in taxes in 2013/14 but received £12,939 in cash benefits and benefits in-kind.)
While the level has been reduced since 2010/11, this ‘net dependency on the State’ remains well
above historic levels. CPS Studies warned that such dependency is “an economically destructive
phenomenon which tears at Britain’s social fabric”, reducing the incentive to
work and trapping people in a “cycle of low aspirations, low productivity and
low pay”.
People are
taxed, their money goes through the government’s administrative machine, and
then it is paid back out to them in benefits. The CPS report concluded that “It is far
more efficient to tax less and spend less in order to reduce this unnecessary
recycling”.
But more
needs to be done to tackle the fact that the poorest households pay very
high taxes as a proportion of gross income. The
richest fifth of households paid £29,200 in total tax in the last financial
year ( = an average tax rate of 34.8% of their gross incomes), while the
poorest fifth of households paid just £4,900 in taxes (= 37.8% of their gross incomes).
The think tank
wants to see the government cut taxes, which it claims will “significantly
improve the living standards of poorer households even without considering the
potential dynamic benefits”. It also urged
the government to press ahead with “deeper welfare reform” in order to tackle
the net dependency on the State, stating: “Simply attempting to alleviate
difficult economic conditions with welfare payments can only ever be a short
term fix.”
News item BT
Internet site on 1
July 2015
