Goodwill to all men: why we should be astonished by the UK welfare state

Let’s hear it for the taxpayers, says Merryn Somerset Webb. They provide a guaranteed income for every person in the country, plus state funded education and healthcare. And they ask for very little in return.

Having read a good amount recently on food banks in the UK this week, I had a little wander around the benefits system. I looked at a postcode in the southeast of England to see just how much you get from the welfare statein the UK if you aren't working at all.

I started with a couple with two children and added up their housing benefit, jobseeker's allowance, tax credits and child benefit. The result? A tax-free income of £24,269. That's the equivalent of an earned (and hence taxable) income of £32,000. That's very significantly more than the number we are always given as the UK's average wage.

Then I looked at a single mother with two kids. Her payments come out to just under £24,000, so again an earned income equivalent of just under £32,000.

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Finally, I looked at a single unemployed man of working age. His benefit payments in the same area come to a tax-free total of £12,300 with £7,600 of that being housing benefit. I then looked up the accommodation available to rent at that price or less in the area. Rightmove provided 68 pages of possibilities.

Now, none of these amounts add up to fortunes. But they don't add up to anything approaching absolute poverty either. Live frugally and stay out of debt, and things should be fine. Not exactly luxurious, but fine.

So what of the food banks, you will say? "They prove we don't pay enough in benefits." But they don't really prove anything of the sort.

They prove that sometimes the state messes up benefit payments and leaves nasty delays. They prove that people aren't good at managing money. They suggest that not everyone puts rent and food before fags and booze (but we don't want to get into a discussion about the deserving and the undeserving here). They confirm that supply creates its own demand.

They might prove that some landlords are unscrupulous or that some families have more financial emergencies than others. They might confirm that we have a problem with mental illness in the UK. And they certainly prove that debt is a major problem in the UK: once you are in debt at high interest rates very few incomes are ever high enough and £24,000 really isn't. See my column from yesterday on this matter of debt here.

But are any of these things really a good argument for paying more in welfare? We've heard a lot about the misery of "the cuts" and the horrors of food banks recently. But wouldn't it be nice if just sometimes commentators focused not on the occasional failures of our welfare machine, but on how astonishing it is to live in a country where the taxpayer via the state is prepared to pay up for what is a effectively a guaranteed minimum income for every person in the country (just over £12k a head, it seems) alongside state funded education and healthcare, with very little asked in return?

Because in an age when we are all said to be individualistic and endlessly selfish, it seems to me that on the goodwill to all men front, it really is quite something.

PS Please don't comment here that it is not possible for me to know anything of poverty/welfare/living on a low income. Class based assumptions are not welcome on the Moneyweek website.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.