The latest tax hikes under Rachel Reeves are squeezing the working population, who bear the brunt of funding an expanding welfare state

As Britain grapples with an ever-growing tax burden, a widening gap is emerging between the country’s productive workers and those dependent on state handouts. Rachel Reeves’s welfare policies have opened the door to a system that increasingly rewards those who are economically inactive, leaving the shrinking pool of taxpayers to shoulder an ever-larger financial burden.

In recent years, the British state has become a tale of two nations: one thriving off the back of generous benefits, and the other struggling to keep up with a soaring tax load. For the working population—particularly those in the private sector—the government’s latest actions, including new tax raids under Reeves’s leadership, add more weight to an already oppressive load.

Reeves’s policies, which aim to support an expanding number of individuals on welfare, have been criticised for rewarding unemployment and long-term sickness. The benefits system now seems set up to support a growing “leisure class,” with rising numbers claiming disability benefits and Universal Credit without any work requirements. For many, it’s increasingly profitable to stay at home than to enter the workforce.

Figures show the wealthy continue to bear the brunt of this system. The top 1% of earners already pay 29% of all income tax, and the top 10% account for 60%. Despite these contributions, the state’s tax-and-benefit system has yet to address the mounting challenges facing the working population. Public sector workers, for example, have been shielded from National Insurance hikes, even as productivity falls and service levels struggle to meet the growing demands.

The current tax burden is at its highest in 70 years, with taxes on earnings as a share of GDP now exceeding levels not seen since 1990. Yet, this influx of tax revenue has not led to improved public services. Instead, much of the additional funds are funneled into transfers: billions spent on welfare, pensions, and healthcare, yet with little tangible improvement in services like the NHS, which continues to struggle with waiting lists despite receiving billions in additional funding.

Young graduates, who benefit little from these transfers, find themselves on the losing end of this deal. They are asked to pay ever-increasing taxes to fund a system that seems to reward those who do not contribute to the economy. This has led to widespread resentment, especially among the economically productive segments of the population.

Figures show that welfare claims are growing rapidly. As of recent reports, 3 million people are receiving Universal Credit with no work requirements, and claims for the Personal Independence Payment (PIP) have soared, particularly for mental health issues. Nearly 1.4 million current PIP claims are for psychiatric disorders, and over a quarter of claims from under-30s are for autism spectrum disorders. The rise in claims is contributing to the massive expansion of the disability benefits bill, which is now projected to increase by nearly 50% by 2028.

These growing costs are becoming unsustainable, especially with the UK’s age dependency ratio rising. With the working population now supporting not only those retired or under 16 but also millions of working-age individuals who are economically inactive, the strain on the workforce is undeniable. The 27 million people employed in the private sector are tasked with supporting 9 million economically inactive individuals and an additional 6 million in the public sector.

As the government continues to import low-wage labour through current immigration routes, the fiscal strain intensifies. The Office for Budget Responsibility has warned that each individual arriving through these channels could cost taxpayers up to £465,000 by the time they reach 81.

The consequences of this welfare state expansion are starting to show, with many now questioning the fairness and sustainability of the current system. The legitimacy of the welfare state rests on the trust of the working population, who expect their contributions to support those who truly need help. However, as more people appear to exploit the system, this trust is rapidly eroding, creating a growing divide between those who pay for the state and those who benefit from it.