Plastered around Westminster this Easter were adverts for the Tower of London. ‘The perfect place for troublemakers – pre-book now,’ the poster read. ‘Members go free.’ So too – near enough – do those on Universal Credit (UC).
Easter-holiday treats can be expensive for hard-working families. For those on benefits they’re a breeze. A trip to the Tower of London for a family of four costs £111. But if one of the parents is on UC (or a long list of other benefits), a £107 saving is applied and the whole family can get in for just £4. Visit the Tower’s café for fish and chips and UC bags you a half-price meal (£16.95 for the rest of us).
If looking at animals is more attractive than looking for a job, the Zoological Society offers those on UC an £82 discount to London Zoo, reducing the family ticket from £108 to £26. It’s the same story across London’s most popular tourist attractions: HMS Belfast (£68 discount), St Paul’s Cathedral (£61), Westminster Abbey (£60), the Cutty Sark (£54), Kew Gardens (£45), the London Transport Museum (£44) and the Science Museum’s Wonderlab (£27).
It gives a whole new meaning to the term ‘leisure class’, and this benefits bonanza is hugely popular – with those on welfare. Less so for the rest of us, who are paying for it.
This is not the Britain Keir Starmer and Rachel Reeves pretend they live in. ‘I believe in a Britain founded on contribution,’ the Chancellor declared at last year’s Labour conference. Her vision, she concluded, was of a country ‘defiant in an uncertain world and powered by the contribution of its people’.
Fast-forward six months and that uncertain world has arrived. The defiance, though, is missing. A dispirited Treasury now joins the OECD and IMF in warning that the UK could be among the worst-hit nations in the world by red-hot inflation and recession. Households will be squeezed.
What is certain, though, is which people this government will protect. And it won’t be those who pay their dues. Instead, Britain’s shrinking working middle finds itself trapped in a vice. Above, sitting prim, are asset-rich pensioners (a quarter of whom are millionaires) who are protected from and by every government decision. Below are those living on welfare, increasingly insulated from rising costs and shielded from hardship.
Benefits claimants are now the real focus of Labour’s attention, advocacy and largesse, as the Treasury’s response to this latest crisis shows. Having correctly identified that a Liz Truss-style subsidy-for-all approach to household energy costs – forecast to climb by £332 each – is unaffordable, Reeves instead favours a ‘targeted approach’. And those singled out for any spare cash? People on benefits. This is partly because Whitehall prefers to use the existing benefits system to assign spending than through fairer means but also because Britain under Labour is now – literally – a welfare state.
We don’t just redistribute more to benefits claimants when crises strike: almost the entire public sector is geared permanently to making welfare an increasingly attractive way of living. Welfare-advice websites are awash with listicles of the top ten days out for those on UC, with staggering discounts advertised. Ticketing and events sites dedicate whole sections to discounts for those on benefits – and they’re proving popular. London Zoo sold 300,000 UC tickets in 2024/25 with only a screenshot or PDF required as proof. The annual accounts of Historic Royal Palaces (which runs the Tower) show that they have adjusted the ‘admission income yield to ensure overall income isn’t reduced’. In other words, those of us buying full-price tickets are paying more to subsidise the cheaper tickets.
Welfare advice websites are awash with listicles of the top ten days out for those on Universal Credit
The same is true in state-subsidised leisure centres. Better, which provides swimming pools, gyms and sports facilities on behalf of London councils, offers half-price memberships for benefit claimants. While a chunk of these discounts are covered by charities or full-fee payers, the thinktank Onward has identified a hidden benefits bill of £10 billion paid directly by taxpayers. Onward’s report reveals discounts for broadband, reduced council tax bills, subsidised utilities, cheap travel and even holiday provision. Add it all up and it’s hard to argue that those on benefits are enduring this cost-of-living crisis in quite the same way as the rest of us.
This week, the standard UC allowance rose by 6.2 per cent – just shy of double last year’s inflation rate. Labour has guaranteed the allowance will rise above inflation for the next three years. Meanwhile, average earnings for employees are up just 4.1 per cent. At the same time, those in work are expected to help shield the economy by drawing down savings built up during the pandemic, while frozen tax thresholds drag five million more people into higher bands.
To understand where the rot began, you have to go back to a Tory policy, ‘Help for Households’. In the dying months of the Boris Johnson government, David Buttress, a former CEO of Just Eat, was appointed ‘cost-of-living tsar’. On top of the discounted entry prices for attractions, he pushed for ‘social tariffs’ on broadband and browbeat retailers, including Asda, Morrisons and Amazon, to offer discounts to shoppers on welfare. Not only were these policies popular but they were seen as a right by a public that now demands more and more state support. Truss, Rishi Sunak and now Starmer have bolstered them.
When governments give up on growth as the driver of higher living standards, they reach instead for controlling the cost of living. Labour takes the same approach. Starmer has appointed Lord Walker of Broxton, the executive chairman of Iceland, as a ‘cost-of-living champion’. Much of this role seems to involve attacking business. Two weeks ago, Lord Walker said: ‘Businesses using a global crisis to rip off households need to be called out and penalised.’ Indeed, since the Iran crisis began, not a week has gone by without Reeves or Starmer summoning supermarket bosses, shipping magnates or petrol producers to Downing Street to insist the government ‘can’t do it alone’ and demand support.
Part of this is pure political strategy: create a myth of price gouging and profiteering when prices rise in order to shift the blame away from your management of the economy. But there is also a deeper misunderstanding of the role prices play.
The unintended consequence – as we’ve seen before – is untrammelled inflation. A top Treasury official – at the coal face in 2022 – explains: ‘We put in place a whole load of support schemes for households and companies which enabled them to accommodate higher energy prices without having to cut their expenditure elsewhere. And so the price of the whole basket went up. I can’t escape the conclusion that it was a combination of those energy price hikes by fiscal authority that enabled inflation to rise so high.’
Factor in the discounts, price protection and top-ups, and the British system is a pretty lavish one
Now, Labour plans to bake all this into the system by reviving a Gordon Brown plan to add a new ‘socio-economic duty’ to the Equality Act. The change will force public bodies to consider reducing inequality in everything they do. The trouble is, as the Chancellor discovered when scoping out means testing, the Whitehall system will revert to the path of least resistance and meet its duties by prioritising those on benefits, entrenching this two-tier system in law.
Advocates of the status quo argue that our welfare system is actually not generous at all. And it’s true that, on its own, Universal Credit is not especially benevolent. A single adult over the age of 25 who is out of work receives £424.90 a month as a basic allowance, placing Britain towards the lower end of OECD members. That leaves the British system behind countries such as Germany (£490) and France (£530). By contrast, the most generous systems in Europe are in the Netherlands and Denmark; support in the latter can reach £2,500 a month or up to 90 per cent of previous earnings.
Our European neighbours are more generous on child benefit too. While we argue about the two-child cap (which was abolished on Monday), countries such as Sweden and Austria offer higher child payments and bonuses for larger households. But this generosity comes with far stricter expectations.
A Briton out of work typically receives far less of their previous salary than workers elsewhere (12 per cent vs 55 per cent). But those more generous systems also expect more in return from those out of work. The Danish system operates more like unemployment insurance, and every citizen has to pay a monthly fee to fund their own protection. If you find yourself unemployed your payment is based on past earnings – an incentive for high pay – and, crucially, payments reduce after three months and grind to a halt after two years. It’s our failure to incentivise contribution that makes Britain stand out in Europe.
The message is clear: get back to work. The result is a Danish unemployment rate of just 3.1 per cent. In Britain, by contrast, benefits seem to get more and more generous the longer people are out of work as health-related top-ups remove the incentive to find a job. Millions of benefit-claiming Brits have been out of work for more than half a decade. It’s little surprise, then, that the current unemployment rate is 5.2 per cent.
Once the discounts, price protection and top-ups are added, though, the British system is a pretty lavish one. As one welfare expert explains: ‘It’s the layering that actually makes the British system more generous.’ Add health claims to standard out-of-work entitlements and you really can bring home a tidy sum. Factor in what’s possible after the two-child cap is lifted and the numbers can skyrocket.
Figures from the Centre for Social Justice show that a family with three children, with at least one parent claiming the average rates of Universal Credit, housing and health benefits including Personal Independence Payment, will get £46,000 annually from the state. Make it five children and this rises to £55,000. This compares with £28,000 after tax for a typical minimum-wage family with one full-time and one part-time parent. To take home the same amount as a three-child family with combined benefits would require a salary of roughly £71,000 before tax – rising to £90,000 to match the benefits of a family of five children.
Estimates suggest around 20 per cent of those entitled to certain benefits don’t claim them
Tot all these layered entitlements up, add in the sheer scale of benefit receipt and it’s easy to see how Britain has ended up spending so much on welfare. On some measures of total social spending, the UK sits among the higher spenders in Europe. But, costs aside, it’s the disincentive to work combined with such a bounty of benefits treats that’s the real killer in the British system.
Worst of all, we’ve not yet hit peak benefit Britain, and the forecasted £120 billion on disability-benefit spending in five years’ time won’t be the end of the story either. Estimates suggest around 20 per cent of those entitled to certain benefits don’t claim them – presumably because they don’t need to. The more top-ups we make available, the more barriers we take down, the more we use the benefits system to unlock things like energy bills support, the more likely even more people will start claiming. No surprise, then, that a trial of ‘self-service’ claiming for Personal Independence Payment saw successful claims up by 7 per cent.
Whether these claims are genuine or not, health-related inactivity is now growing ten times faster than the working-age population. This means fewer contributors supporting more and more dependants through a system of extreme generosity to those on welfare, and punishment economics for everyone else. For Britain’s fraying social contract, this could prove impossible to sustain.
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