A report by Civitas shows that over half of households get more from the state than they earn back. This includes universal credit, jobseekers’ allowance, and the state pension, and non-financial benefits such as NHS and social care, free school meals and subsidised housing.
Though socialists may applaud the expansion of the welfare state and more ‘free’ stuff for everyone, welfare dependence also has unintended consequences, like suppressing productivity. This is not only unfair to the taxpayers who foot the bill, but also welfare recipients, who are fed the false promise that they can depend on a system that will inevitably fail them.
To quote Frederic Bastiat: “Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.”
Unlike voluntary exchange through the free market, the state lacks the knowledge to properly allocate resources. You only need to look at the NHS to see that the taxpayer is not getting their money’s worth, despite increased funding.
For example, last October, seven million people were on waiting lists. Even when patients do get help, the treatment is often inadequate. Compared to similarly wealthy countries, Britain performs poorly at treating strokes and heart attacks, as well as a variety of preventable illnesses. Yes, the NHS may be “free at the point of use” but what’s the point if patients can’t access high quality healthcare?
Furthermore, welfare dependency does not alleviate poverty. While welfare does help individuals in the short term, poverty can only be finally overcome when people are self-supporting and creating more wealth. Despite the welfare state promising individuals a better life, they often end up being trapped in the poverty cycle, causing them to rely on government benefits.
An individual has more security if they are in control over their income rather than relying on politicians who may change their welfare policy every few years.
In addition, the welfare state faces an inescapable paradox given that the level of production needed to sustain a welfare state is damaged by sustaining by a welfare state. While welfare state policies encourage redistribution and consumption of wealth, it also discourages wealth creation through the tax to fund it. These perverse incentives cause living standards to fall.
A CATO Institute report showed that countries that lower tax and smaller government programs had a higher per capita consumption than Europe’s major welfare states between 2002 and 2005. For example, France, Sweden and Germany only have 70 percent of U.S levels.
American Economist, Thomas Sowell covers how big government programs slowed the declining poverty rates for black Americans in his book Discrimination and Disparities:
“The plain fact is that the black poverty rate declined from 87 per cent in 1940 to 47 per cent in 1960, prior to the great expansion of the welfare state that began in the 1960s under the Johnson administration. There was a far more modest decline in the poverty rate among blacks after the Johnson administration’s massive ‘war on poverty’ program began.”
While the number of households receiving more from the state than they contribute has increased, the percentage the top earners pay in tax has also increased in order to fund it. The percentage of shares of total income tax paid by different income groups has increased for the top 10 per cent, 5 per cent and 1 per cent percentile group every year of the Conservative Government. Despite claims of austerity, the tax burden has heavily shifted onto high earners in order to fund welfare spending.
In order to create a prosperous society, the government should empower individuals to lift themselves up through the free market, rather than being strangled by the grip of the welfare state.
