Working full time? You could still be costing the taxpayer a fortune

We have written several times before about the problem of welfare to workers – the way in which the UK state effectively subsidises millions of working people’s wages so their employers don’t have to. It isn’t a subject we intend to drop.

So I was interested to see David Green of Civitas looking at the problem this week with working migrants in mind. The debate about migration has long treated work and welfare, says Green, as “mutually exclusive”. The coalition is keen to point out that “access to out-of-work benefits will no longer be immediate” and that newly arrived EU nationals will have to wait for housing benefit “at least until they get a job.”

That’s fine. But the point is that huge amounts of welfare will still be going to working migrants. Say you are working a 35-hour week and earning £250 a week. Your gross income from working is around £12,900 a year (I am using Green’s numbers here). But if you are part of a couple with two children, various benefits will top that up by another £11,927.

You’ll get working tax credit (£1,970), child tax credit (£5,976), housing benefit (£2,205) and, of course, child benefit (£1,752).

You may be working, but you are still costing a huge amount in direct subsidy. Does that matter? It depends which numbers you believe on the long-term benefits – or lack of – as a result of immigration.

But either way, the problem – that the taxpayer is obliged to support millions of low-paid workers – really shouldn’t be ignored as regularly as it is.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+


More from MoneyWeek


The problem with the Bank of England

Fracking: Nine reasons not to get carried away

Five small-cap stocks worth a flutter

This Dutch company could help us tame floods


You should be investing in small companies

Working full time? You could still be costing the taxpayer a fortune

Shale gas: Britain’s saviour?

MoneyWeek magazine- read the latest issue

52 Responses

  1. 02/01/2014, Boris MacDonut wrote

    These figures are massively wrong. Merryn should know David Green will be seeking to spin the numbers.
    Somebody on £250 a week, if they make no pension contribution ,earns £13,050pa. It is a simple matter to go to the Gov.UK site calculator and enter the details for your fictitious immigrant. It says quite clearly that total Working Tax Credit will be £507 a year, not £1,970. That is because above £6,240 pa the amount is withdrawn at 41%.
    Likewise Child Tax Credits. Here the eager new worker gets just £1,542, not the nearly £6,000 that Civitas implies. Again there is a severe withdrawal rate and to get £6,000 both new arrival kids would need to be disabled. Or they’d have to claim the full Childcare costs despite their mum not working.
    Housing Benefit would be no more than £1,850.
    He got Child Benefit right ,but then everyone gets that. He forgot the £545 Family element for those earning under £40,000.
    So the £11,927 you quote is way off the mark. Best case for our family here is just over £6,000. Given that the keen immigrant is working near minimum wage to bring home just £230 a week and support 3 other people it doesn’t seem too much to ask to offer an extra £115 a week.
    The taxpayer is being asked to support three non workers because their bread winner is impoverished.
    We support 35 million such people already, because we are a rich nation.

    • 10/01/2014, Tyler Durden wrote

      “We support 35 million such people already, because we are a rich nation.”

      Our national debt has almost doubled since the current government came to power and rose steadily under the last one even when we were supposed to be having a ‘boom’, so I’m afraid not. Anything the government says about the ‘deficit’ is a smoke and mirrors exercise to stop you from looking at total debt.

      Keep telling yourself this if it gives you a few crumbs of comfort, it won’t make it true or logically correct and it won’t stop the bad news flowing. If we were a rich nation we would have workers working in productive jobs that would never need a subsidy. You only need to think about that for all of five seconds or so. As I’ve stated before, you don’t pull currency out of a black hole and make everything alright.

      Once you start needing ever greater amounts of subsidies to support your economy you know something is very wrong, and those subsidies come out of creating pounds and what’s left of existing tax revenue, not out of any productivity which plays havoc with inflation and deflation in all the wrong places making the economy still weaker. Things look sort of OK, for a while, but the decline gets exponentially quicker.

      Put simply, the taxpayer in a declining economy cannot support ‘impoverished people’ because their employers won’t pay a wage that can pay. They’re impoverished because they have been made so to maximise profits, so that’s a pretty stupid thing to say.

      Migrants are here because they are cheaper than the minimum wage. Pure and simple. Britain’s labour market is a ponzi scheme where ever greater amounts of cheaper labour are required to keep it propped up.

  2. 02/01/2014, Boris MacDonut wrote

    In my post above I did not allow for a full year so the couple may get up to £9,000 in total. But the point stands. Boosting the income of someone who is supporting 4 people but on only £230 a week is both correct and civilised. The uncivilised bit is the person that deems it proper to pay only £7 an hour.

  3. 03/01/2014, Ellen12 wrote

    The need for the taxpayer to supplement the pay of huge number of working people might be an indication of how dysfunctional the wider economy really is. Governments agenda is more concerned with its own survival and the survival of the corrupt banking system than real growth in the economy that the whole population share in. If government stood back from jumping in with other peoples money, jobs that couldn’t provide a person with a basic living simply wouldn’t get done. And if a job does not provide a living for a person, the job does not deserve to get done.

  4. 04/01/2014, Jerry Jones wrote

    Or the employer can help cut youth unemployment and pay £250 a week to a 20 year old living with their parents. Then, of course, the family man gets to claim a whole range of out of work benefits. Oops.

  5. 04/01/2014, davidstuart wrote

    There certainly needs to be a debate about this. On the one hand, why should an employer (have to) pay more to an employee, just because they have dependants and on the other hand, why should the taxpayer have to augment the wages of an employee with dependants, so that they can be fed and housed?! It certainly does question the value of all the immigration that we have seen and will continue to see, unless we get out of the EU (one can hope!), particularly when there are already so many people out of work here already. Then we get onto the questions of skills, work ethic etc.etc. All very complicated but I can’t help thinking that stopping paying people under pension age to do nothing would be a good start?!

    • 04/01/2014, Ellen12 wrote

      If an employer wants to employ someone that is in good shape, eats regularly and lives in a house or flat, then he needs to value his/ her employees time enough to ensure these things are within reach of the employee. If the job was not being subsidised by the state, the employee would not be able to afford to take the job. The safety net that was originally meant for the employee has not become a subsidy for low wage employers.

  6. 04/01/2014, rajan wrote

    how is fair to pay eastern european workers who have not paid a single penny into the system. benefits are paid to their children who live in poland and other a8 accession countries. britain has got a debt of £1.5 trillion, why borrow to pay the eastern europeans. no surprise the bulgarian prime minister asking britain to be soft on his country men, he just want to ship his unemployed and pickpockets to britain. last year tony blair was awarded a top honours in poland for helping bring down the unemployment and crime.

    • 04/01/2014, Boris MacDonut wrote

      rajan. It is called a free market. Our plumbers are free to go and fix taps in Romania if they want to.
      How is it fair that UK ex-pat miners, bankers engineers etc move to Dubai, Doha or Singapore without ever having paid a penny into the system and take all the well paid jobs away from aspiring locals?
      The EU is a political experiment not an economic one. The imperative is to get as many peripheral Europena nations inside the tent and away from Russia China, the USA and Islam. The EU is a massive and largley benign force for good and if a few Bulgarians benefit so what? There are only 6.8 million of them. If one in ten Bulgarians of a working age come to the UK and not to any other EU nation we would still only welcome 260,000 of them.

      • 06/01/2014, rajan wrote

        boris, let us call the bluff of the benefit in being in EU, britain imports more from the EU than we export to EU, Britain is the second biggest contributer to EU budget after Germany but Germany exports many times over to the EU than they import. Infact Germany makes many times over their contribution to the EU by exporting goods. that makes britain the biggest contributer to the EU without the corresponding benefits. Our plumbers cant compete with eastern european plumbers unless he accepts significantly lower standards of living like polish plumbers who live multi occupany dwellings, eat cheap eastern european imports being sold in aldi and lidl. british citizens have to compete against the best talent from the world to get jobs in doha and singapore, forget claiming benefits even after they have worked for many decades. the most impacted workers are the people on the lower scale of the job market. princes trust report on youth unemplyment last week said one in three young people out of job have mental health problems. the eu is like a tower of babylon just time before the whole thing come crashing down.

  7. 04/01/2014, GFL wrote

    The government does not have any business telling employers how much they should pay their employees. When you are at the bottom of the food chain you have to make sacrifices in life, like my father did so he kids didn’t have to. These silly government interventions nearly always line the pockets of corporations, banks and land-lords.

    When people talk about minimum wage they often refer to big multinationals – but many small businesses rely on affordable labor to keep their head above water. Not to mention there are so hidden costs associated with employing someone.

    Also large corporations can make use of technology to minimize the damage, for example self checkout, small businesses often cannot.

    My fear is sooner or later the only feasible business left in this country will be speculating with cheap money.

    • 05/01/2014, Ellen12 wrote

      The government does not have any business to tell employers how much they should pay employees, providing they meet minimum wage levels. Likewise employers have no business relying on state handouts to ensure the day to day survival of his/ her full time employees. If there were none of these state handouts, these low paying employers would find themselves without staff.

      • 06/01/2014, GFL wrote

        This is silly logic.

        Minimum wage only applies to entry level jobs, anyone that is trying to raise a family while flipping burgers in his 40’s has made some bad choices in his/her life, this is not the fault of the employer.

        As mentioned above, people that the bottom of the food chain have to make sacrifices – for example more than one generation living in the same house, or just generally pooling resources together. This is obviously not ideal, but it’s (partly) how immigrants in this country have become reasonably successful in only a single generation with zero help from the state.

        Slightly off topic, part of the reason BTL has become such a booming business is because of housing benefits and HMO is purely, 100%, driven by government benefits. It is really difficult, if not impossible, to create blanket policies that will universally help the poor. So something like a increase in minimum wage will actually help big business since it will kill the competition (obviously depending on how successfully government can force small businesses to actually pay minimum wage) an increase the size of the dole queue.

        • 06/01/2014, Ellen12 wrote

          I was an immigrant to this country twenty five years ago and I got a job and paid rent for a few years before I bought a two bedroom house, on my own, without pooling resources or making lifelong sacrifices. It was a good job but certainly not one that needed any brilliance. Being an Irish woman, whether you recognise it or not, did pose some challenges as quite a few people discriminated against both my gender and nationality. Did your father not provide a roof for you without becoming a dependant of the state?

          Back in the 1990s and before then, it was incomprehensible that anybody who had a full time job would qualify for any state assistance and we paid a lot more PAYE & NI then. What we have, partly as you rightly point out, because of things like housing benefit, is an environment where wages are too low and the (real) cost of living is too high – the basics, food and shelter.

          There is nothing flawed about the logic where a person cannot afford to take a job that does pay for life’s basics. What makes it possible is government intervention, which benefits employers more than employees. The goalposts have very much moved from the underserving and idle poor of the 20th century to justifying and financially abusing and naming people the underserving poor who work full time at low skilled jobs such as flipping burgers.

          • 06/01/2014, GFL wrote

            You (and Merryn) are confusing the symptoms with the cause.

            The high cost of living (primarily housing) has nothing to do with minimum wage, in fact the complete opposite, it has more to do with silly government policies and shot-termism. By rising minimum wage all you will do is increase the cost of living for the lower middle class and shut a few businesses in the process.

            1 in 4 businesses are struggling with debt (according to the telegraph) how many of these would go to the wall if the cost of labor was increased (or minimum wage actually paid)? That is surely not a better solution.

            Where do we draw the line? Cap on rent? Cap on energy bills? Cap on rail fares? Subsidize food?

            • 06/01/2014, GFL wrote

              Also name me a single benefit that doesn’t indirectly line the pockets of a business?

              Housing Benefit = Great for BTL
              Green Taxes = Great for farmers and inefficient turbine companies
              Aid = Great for dictators and arms companies
              Child Benefits = Great for JD Sports :)

              You get the point!

              • 12/01/2014, Tyler Durden wrote

                “Also name me a single benefit that doesn’t indirectly line the pockets of a business?

                Housing Benefit = Great for BTL….

                You get the point!”

                No I don’t. None of these subsidies are good in any way.

            • 07/01/2014, Ellen12 wrote

              It is unreasonable to expect people to accept wages that are lower than subsistence – they cannot afford to take jobs like that without claiming some extra state benefit or stealing what they need. They would have no choice. And to expect fully employed people to take on debt for survival just because the company they work for is in debt is an extremely short term and misguided solution.

              There are great numbers of posts on here who regard immigration as the main driver that is pushing wages down. There may be something in this where large groups of people temporarily live in cramped conditions to save money and then go home. It’s very hard to build a nice life with this kind of competition for jobs as they only have to deal with the discomfort while they are saving but, for local people, it becomes the norm as more come and go.

              But I think the biggest thing driving wages down is the flight of jobs abroad, particularly to Asia. The living costs of people in, say India, are tiny in comparison to what a UK resident needs to survive. Our council tax would be a good living there! So the government, while pushing our living cost ever higher (particularly in housing, to their eternal shame), the wages people are expected to accept, immigrant or national, are static or falling. These government handouts to the very poor are simply disguising the reality that the interest of UK resident workers are of little or no interest to Whitehall.

              • 07/01/2014, rajan wrote

                ellen 12, what you say is right, there is two way attack on wages, one is shipping of jobs to cheaper economies the other large influx of unskilled labour from eastern europe, the latter can be stopped if there is a political will. regarding the former we in britain spend thousands on holidays and other luxurys but when it comes to paying utility bills we moan and keep applauding left wing marxist idiots like Ed Milliband who wants to freeze bills. this forces utility companies to ship jobs abroad.

                • 07/01/2014, Ellen12 wrote

                  Companies or individuals who expect to make their living out of the UK should expect to contribute to the good of the UK economy. Even many government departments, whose survival depends on either taxation from todays UK residents or borrowing off the backs of tomorrows UK workers, are outsourcing huge numbers of jobs cheaply to Asia. This is nothing to do with luxuries and foreign holidays. The UK government is actively pushing up the cost of living (disgracefully, housing in particular) while pushing down wages and making credit cheap available, supplemented with benefits for those on the bottom rung. It can only end badly. The problems with wages and benefits are embedded structural problems of the entire dysfunctional economy that politicians on both sides do not have the courage or wit to address.

            • 12/01/2014, Tyler Durden wrote

              “By rising minimum wage all you will do is increase the cost of living for the lower middle class and shut a few businesses in the process.”

              Utter tripe. What is actually happening here is that an increased minimum wage is not raising wages and raising the cost of living. It’s increasing the amount that employers have to pay workers so that the government and taxpayers are not artificially propping up wages and subsidising employers.

              “1 in 4 businesses are struggling with debt”

              I’m afraid subsidising them with even more debt, because existing taxpayers cannot afford this (tax revenue is declining, is certainly not the answer.

              “Where do we draw the line? Cap on rent? Cap on energy bills? Cap on rail fares? Subsidize food?”

              I’m afraid these are nonsensical comparisons. You’re poking fun at subsidising food or putting artificial caps on other items but the irony here is that it is being argued we should not be artificially subsidising businesses.

  8. 05/01/2014, Realist wrote

    Yes it is a free market, which is exactly why we shouldn’t be in the EU.
    Why would we want to free trade labour with poor Countries like Bulgaria and Romania and bring our wealth down to their level.

    • 05/01/2014, Boris MacDonut wrote

      Realist. Do you advocate protectionist policies then?
      You forget that there are 1,500,000 British workers and students in EU countires and 3,500,000 ex-pats living in them. Moreover the EU adds £90 billion a year to our economy.
      But most importantly there has been no major war in Europe for 70 years.

      • 06/01/2014, Chris H wrote

        “the EU adds £90 billion a year to our economy” – evidence, please?

        • 06/01/2014, Boris MacDonut wrote

          Chris H. 60% of our trade is with the EU. There are massive EU investments in the UK. Germans are the largest minority ethnic group in the UK.
          We receive £10 billion a year in structural funds to our most deprived areas. The Government estimates that each household in the UK (that’s 26 million) earn at least £3,000pa each from being in the EU, that is another £78 billion.
          But most importantly involvement in a major war bleeds 50% of GDP from a country every year. In the 57 years of the 20th C before the EU we were involved in 10 such years of misplaced income. In the 57 years since we have thus saved almost £8 trillion in today’s money. Thank you EU should be everyone’s refrain.

      • 07/01/2014, rajan wrote

        boris, could you please explain how EU adds 90 billion to UK economy, did you read it from some report published from Brussels. Britain imports more than it exports from EU. remittances from britain to EU is far larger than from EU to britain. spending by british tourists in EU is more than EU tourist spend in britain. most so called tourist from EU are poles and bulgarians coming here to claim benefits. even the unpaid student loan by EU students has crossed 20 billion. regarding war, it all starts with civil disorder like the one we witnessed in 2011. expect more as the young are finding it difficult to find jobs.

  9. 06/01/2014, Angry wrote

    I can’t see any benefit to Average Joe of being in the EU. Yes – some of our people have gone over there – usually to retire and have some money – and have probably helped their economy in some way – by buying apartments and houses and goods etc. I fail to see how having large numbers of unskilled people over here is helping us. This is before you even factor in that they are claiming “top up” benefits. BTL – if people earn less than £16000 per year (or £400 per week) even if the Court finds in Landlord’s favour there is no way you can get an Attachment of Earnings Order because that is what the court considers the minimum amount of wages people need to live (regardless of dependants). Anyone earning £400+ or thereabouts will have to pay the debt off at £25 per week – not matter how long it may take.

  10. 06/01/2014, DickyJim wrote

    First, it isn’t a free market of any sorts when it involves government subsidy.

    Second, the ‘aspiring’ locals in Dubai (there aren’t many of those), etc are not qualified, and never will be, in the slightest degree to do the jobs of the expat engineers and bankers etc.

    You are comparing apples with oranges but don’t let that get in the way of your political convictions.

    • 06/01/2014, Boris MacDonut wrote

      It is not a political conviction,it is simple fairness. Why do we expect to corner all the good jobs abraod ,then expect to stop the deprived foreigner seeking to better themselves here instead?
      It is smug hypocrisy.

      • 10/01/2014, Tyler Durden wrote

        They’re not bettering themselves at all. The foreign worker is here because they are cheap and invariably well below the minimum wage. Their skills and productivity are completely immaterial, despite the laughable propaganda you see from time to time.

        If you’d like to swap skilled workers for unskilled workers requiring ever greater amounts of subsidies who are here because they are cheap to start with then the more the merrier to you. I’m sure Britain’s future looks very bright.

  11. 06/01/2014, CL wrote

    That idiot Brown exempted employer NI on less than 16 hrs a week. So we are subsidising part time workers, especially in wealthy supermarkets. was supposed to create additional jobs but all it did was to distort the labour market further.

    As a result all full time check-out cashier jobs dis appeared overnight and mainly students man the check-outs. In my neck of the woods such students are from overseas and appear to be perpetual students – all you hear them talking about is there next course – allows them to stay in the UK?

  12. 06/01/2014, Bayard wrote

    It appears that the main affect of working welfare is that more people are working shorter hours, which is what you’d expect, seeing that minimum wage legislation means that wages cannot fall below a certain level. Employers aren’t benefiting hugely, but the government is, as unemployment figures continue to look much better than one would expect after the economic conditions of the past few years.

  13. 06/01/2014, Coffeedragon wrote

    Boris raises a point so often ignored, whatever the ebbs and flows of the Union, whatever the theories about economic or political experiment, it was formed after the hardest lessons ever learnt by politicians and citizens alike (at least those who survived) with the sounds of the guns hardly stilled after a second world war. What has the Union done for Joe Bloggs? Saved him and his family from the pain of war suffered by the families of his father, his grandfather, great grandfather, etc etc, which have cursed this country since we wiped off the woad and started paying income tax.

    “The Treaty establishing a Constitution for Europe is preceded by a Preamble which recalls, among other things, Europe’s cultural, religious and humanist inheritance, and invokes the desire of the peoples of Europe to transcend their ancient divisions in order to forge a common destiny, while remaining proud of their national identities and history.” ……. this, was the “Experiment”.

  14. 07/01/2014, Realist wrote

    Boris.
    £90billion?????? yes where is the evidence. On paper it might be £90billion but in practice £120billion is probably taken away.
    Regardless of this, even if we are worse off out of the EU, I would rather have MY Country as my own and having control of our own destiny than having to abide to any EU government.
    British workers in the EU?????. A lot of these are skilled and high profile workers that they haven’t got in the EU and they want their expertise, not just immigrants taking jobs from the British people.

  15. 07/01/2014, Realist wrote

    Things have moved on since the last two World wars, so saying the EU has anything to do with Peace within Europe is irrelevant.

    • 07/01/2014, Boris MacDonut wrote

      You totally misunderstand Realist. The EU is the power bloc and culture that the aspiring World looks to exactly because it is such a successful example of benign power.
      Look at the Ukrainians desperate to avoid Russian diominance. Look at the World’s rich who shelter in London. The businesses that shelter in Luxembourg or the Netherlands. The tens of thousands of Chinese students. The Arabs tired of medieval rules. The EU is the place of the future, probably ultimately with Russia,Egypt,Morooco and Turkey inside the tent too.

      • 07/01/2014, rajan wrote

        boris, ukranians are desparate to join the EU because the benefits paid out by britain is much than what russia pays, they have also seen the poles come and make a good living in britain on benefits. We live in a planet and country with finite resources. EU is bound to fail because it has been designed by a bunch of left wing and unelected officials in brussels, some kind of replacment to soviet union. regarding chinese students, they pay through their stay and dont have subdised college places like EU students and cant acesses student loans, they bring wealth unlike EU compatriots who bring poverty and misery.

        • 10/01/2014, Tyler Durden wrote

          “boris, ukranians are desparate to join the EU because the benefits paid out by britain is much than what russia pays”

          Yep. They want what Europe apparently has.

          The rich shelter in London because London is dependent on them and allows them to get away with so much.

  16. 08/01/2014, dave21kj wrote

    I think we can say that the EU has not led to less wars. I can remember-
    Kosovo, Falklands, Desert Fox against Iraq, Sierra Leone, Afghanistan and the final battle with Saddam in 2003. Meanwhile the French took up the current war.
    Significant GDP continues to bleed in spite of the EU.
    You could also ask the Greeks how they currently view the Germans!
    That aside I fully agree with Boris in being repelled at the racist views expressed Vs Bulgarians and Romanians. The benefit of the EU is surely free movement of labour and capital. The broken part of the process is inequality of benefits which market forces will settle. i.e. Benefits are already being reduced.

    • 08/01/2014, Boris MacDonut wrote

      Dave21kj. The EU has clearly led to both fewer and to less violent wars. Kosovo,the Falklands,iraq and so on have cost atiny fraction of the two world wars or even the Napoleonic wars. As for European lives lost,the whole lot did not see the casualties of even a day or two on the Somme or a weekend in Auschwitz.

    • 09/01/2014, Realist wrote

      Yes of course, free movement of labour is a benefit of the EU, but as has been said before, why on earth do we want to be a part of that when it can clearly be seen that if you let in people who are used to a lower standard of living and lower wages, it will bring the standard of living down for the ordinary Joe Bloggs.
      If other Countries want to employ UK workers, that is up to them, but that doesn’t mean that we have to follow suit and often UK workers are only used for their expertise because that Country doesn’t excel in that area.
      I am sure a lot of people on this forum would have a different view if their job was taken by an EU immigrant, resulting in them having no work or their income was drastically cut.
      The government is meant to be working for the people and trying to better their lives and clearly they are not doing that.

  17. 09/01/2014, dave21kj wrote

    UK workers bring skills abroad to the ignorant foreigner. Our immigrants steal jobs. A well clued up Daily Mail reader we have here!
    Fortunately I work for a Global company and people move from place to place and learn to respect each other regardless of where they come from. People can be lazy or motivated and these characteristics are broadly independent of place of origin.
    You either believe in freedom of movement of capital, labour and goods or not. An outcome of that, in a free market, is things tend to equal out prices, taxes, benefits etc..
    The article eludes to the current distortions of the market by a subsidised labour market and benefits culture, a by-product of that is this debate about who should get what subsidy.
    Think not of Johnny Foreigner stealing your job, think of what skills you require to better yourself. Think whether benefits and subsidies are as good thing in the first place.

    • 09/01/2014, Ellen12 wrote

      I would broadly agree with all your assertions here and I think that judging people on their race, colour or gender displays both ignorance and fear. I think the fact that people in the UK, particularly the south east, scramble against eachother for somewhere nice to live contributes to bad feeling towards outsiders adding to the competition for the perceived short supply. And banks and government abuse this by adding stress to the demand side inside of addressing supply and then, they themselves climb on a pulpit to complain about scrounging foreigners.

      However, there is a big issue with the export of jobs abroad. The UK workers are not allowed to play on a level playing field. Inflation is the name of the game here, most particularly for the things every person needs for their subsistance and working lives – energy, housing and transport. Our own representatives have made it infinitely more attractive to employ foreign workers in their own countries while they tax us, or manipulate prices here, to make UK residents pay ever more and this is creating a vicious cycle where the system, not the individuals, makes the UK worker unemployable. People argue the UK worker needs to be more skilful etc, but there is a huge abundance of skills in Asia also. You might find that creating a level playing field for UK workers may endear people more to foreign workers and to do that, prices (and taxes) here need to be aligned to what is paid in China and the far east.

  18. 09/01/2014, Realist wrote

    In a free market prices, taxes, benefits etc. will eventually equal out, but that will take time, a lot of time, probably generations. So that doesn’t help the people of this Country for the here and now. So why bother to to do it then, when we can substantially limit the movement of labour to our Country and keep our wealth intact. A no-brainer really.

  19. 09/01/2014, rajan wrote

    maybe to conclude it is fair to say that poles and eastern europeans have greatly eroded the wealth. regarding the statment EU has brought peace, it is a every day war for the young and people with lesser skills to find jobs.

  20. 09/01/2014, Boris MacDonut wrote

    By the way,once the man in Merryn’s example earns more than £6,400pa (£123 a week) he is taxed at 75%. The system stigmatises him and then punishes him for his modest aspiration.
    Meanwhile the rich moan about paying 45% on income above £3,000 a week.

  21. 09/01/2014, Realist wrote

    Agree with you Ellen, we are not on a level playing field. Also the ideaology of some of the people on here is that the wealth is distributed evenly. While that may help a few people of another Country, having more and cheaper labour in this Country, means that the rich get richer and the poor get poorer.

    • 10/01/2014, Tyler Durden wrote

      Yep. Britain’s labour market is a ponzi scheme.

  22. 10/01/2014, dave21kj wrote

    The UK is broke and the strategy in order to erode the debt is to print money thus diluting the value of each pound that we have. This is why we are getting poorer. Tesco, Morrisons, M&S sales all down. Why? Because we have less money. Companies sitting on cash mountains. Why? Because there is no demand. The other way out of debt is to inflate the population and spread the debt across more people. This is done by immigration. Politicians make a lot of noise about this but it will happen. We ARE poorer, politics takes a lagging effect on this. You get poorer by defaulting or you get poorer by stealth. Politics means we get poorer slowly by eroding the value of money, by tax, by reduced benefits, cutting back the state. The bottom-line is we will get poorer regardless. The question is whether immigration, free trade, free market, free exchange of capital and labour, removal of subsidies is a good thing or a bad thing. I’m a clear yes on this, we need to deal with the issue and have the right set up to prosper in the future. Picking on immigrants is such a small part of the issue and hugely narrow minded. Lastly the EU causing less wars? Bit of a stretch. Nuclear weapons changed the nature of wars not the EU; I have already pointed out the many wars since the EU solved the problem. 1M dead Iraqi’s would agree with me.

  23. 10/01/2014, rajan wrote

    boris, if inflating population brings wealth then all those asian and african countries would have been rich. the way to tackle debt is to live within our means. if you believe we would be fighting wars if there was no EU that would have been better, we would not have interfered in iraq, libya, afganisthan and almost started a war in syria. if we would have been fighting we would not have gone and destroyed other countries. you are saying i million iraqis would not have been dead if european countries would have been fighting themselves. that is a bit selfish, you need peace in europe while european countires have made a mess with rest of the world. look at the mess we created in libya, the whole north and central africa has got destabilised.

    resources are finite, increasing population only put strain on these resources and leads to conflict, it increases corruption, look at the pakistani population in britain and eastern europeans who are prepared to work of any kind of money and live in any kind of condition.

  24. 11/01/2014, Simon Enefer wrote

    Excellent piece, but I would add the following:

    1. The proportion of in-work benefits vs unemployment benefits (ex housing benefit) (£41.8bn vs £5.1bn) IFS 2011-12 show that in-work benefits are out of control.

    2. The law of supply and demand is as close to a scientific law as the pseudo-science of economics gets. If you are a Labour supporter you want the standard of living raised. Tory supporters want to reduce the deficit and benefits bill. Both parties need to accept that you need to reduce the supply of labor in the UK if you are to increase its value.

    How to do this?

    All immigration (EU and non-EU), asylum claims and work visa’s for the UK should be stopped or reduced as far as possible. If UK business insisted on using foreign labor I would allow this to continue (for a time), BUT I would tax it heavily, with a super tax of 50% of salary, payable by the employer and rigorously enforce minimum wage legislation, confiscating any business that breaches the legislation. The employer would also be liable for any costs incurred by the government relating to any foreign employee (NHS, Education costs etc), these costs would be payable annually in advance. This would have the added benefit of encouraging employers to invest in skills and training which have been poor in the UK for almost 150 years.

    The benefits of this would be enormous.

    Eliminate the deficit (In 2-3 years)
    The majority of government revenues come from personal taxation/spending so this would dramatically increase government revenues as personal incomes rose.

    Eliminate 20% of the Welfare Budget
    In-work benefits account for 20.5% of the welfare budget. As incomes rose, these benefits could be phased out completely, with this process to be completed by the end of year three.

    Of course no government would ever do this you may think?

    Well you would be wrong!

    Saudi Arabia has already deport almost 2 million guest workers and plans to deport a further 2 million. The aim of this policy is to create jobs for native workers and reduce Saudi high unemployment (Source FT 14-15 December 2013)

  25. 11/01/2014, Realist wrote

    Simon. Totally agree with your comment, but unfortunately our government will never do this.
    Also to add to the equation, how many tax paying immigrants would it take to cover all the ones claiming benefits, committing crime (and paying for police and courts cost) etc. The small amount tax paid can never cover all these costs.

Comment on this article

MoneyWeek magazine

Latest issue:

Magazine cover
Faster and faster...

The frenzied pace of the high-tech revolution

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.