UK now spends more on welfare than it earns in income tax — is America heading the same way?
In the last financial year, the UK government brought in £331 billion in income tax — and spent even more, £333 billion, on welfare, according to the Office for Budget Responsibility's latest economic and fiscal outlook (1).
The news was first broken by The Telegraph (2), which noted that: "Put another way, the state is spending more on those not working than it raises from those who are" — however, the situation is more financially complex than a simple one-to-one relationship between inputs and outputs.
And the pressure is only building. Welfare spending is projected to increase by the end of the decade, as labor force participation drops to a level not seen since the start of the pandemic.
According to the Telegraph, around 55% of the working-age population is in full-time employment, while roughly nine million people are considered "economically inactive," compared to a population of 69.3 million as of mid-2024 (3).
However, this phrase lumps together unemployed jobseekers with early retirees, unpaid caregivers, students and those unable to work due to illness or disability. By comparison, the national unemployment rate sat at 4.9% at the end of 2025, or about 3.4 million people using the mid-2024 figure.
Still, the result is a system under strain from both sides: Fewer workers paying in and more people drawing support for longer periods, driven by an aging population and labor market changes.
In its report, the OBR noted that "a further risk is the future costs of welfare spending" — with internal estimates projecting costs of £406.7 billion by fiscal year 2030-2031. The two main drivers of increases in welfare payments are an increasing number of state pensions and worsening health outcomes stemming from the lingering effects of the COVID-19 pandemic.
In the last financial year, the UK government brought in £331 billion in income tax — and spent even more, £333 billion, on welfare, according to the Office for Budget Responsibility's latest economic and fiscal outlook (1).
The news was first broken by The Telegraph (2), which noted that: "Put another way, the state is spending more on those not working than it raises from those who are" — however, the situation is more financially complex than a simple one-to-one relationship between inputs and outputs.
And the pressure is only building. Welfare spending is projected to increase by the end of the decade, as labor force participation drops to a level not seen since the start of the pandemic.
According to the Telegraph, around 55% of the working-age population is in full-time employment, while roughly nine million people are considered "economically inactive," compared to a population of 69.3 million as of mid-2024 (3).
However, this phrase lumps together unemployed jobseekers with early retirees, unpaid caregivers, students and those unable to work due to illness or disability. By comparison, the national unemployment rate sat at 4.9% at the end of 2025, or about 3.4 million people using the mid-2024 figure.
Still, the result is a system under strain from both sides: Fewer workers paying in and more people drawing support for longer periods, driven by an aging population and labor market changes.
In its report, the OBR noted that "a further risk is the future costs of welfare spending" — with internal estimates projecting costs of £406.7 billion by fiscal year 2030-2031. The two main drivers of increases in welfare payments are an increasing number of state pensions and worsening health outcomes stemming from the lingering effects of the COVID-19 pandemic.
