UK welfare spending to match stealth tax revenue, think tank says

Key facts

• Welfare spending increase of £33.4 billion projected between 2026-27 and 2031-32.
• Stealth tax revenue from frozen thresholds estimated at £33.1 billion over the same period.
• Annual spending on sickness and disability benefits may exceed £100 billion before 2030.
• Labour supply could decrease by 215,000 workers by 2030-31 due to higher marginal tax rates.
• 6.7 million people currently claim out-of-work benefits.

The Centre for Social Justice (CSJ) has stated that an anticipated increase in welfare spending will largely offset the revenue generated by freezing tax thresholds. The think tank estimates that spending on working-age, disability, and child benefits will rise by £33.4 billion between 2026-27 and 2031-32, slightly exceeding the £33.1 billion expected from frozen tax thresholds over the same period. The CSJ described the government's approach as a "fudge-it Budget," suggesting difficult decisions regarding the welfare crisis have been postponed. Annual spending on sickness and disability benefits alone is projected to surpass £100 billion before the end of the decade. The freeze on tax thresholds, as wages rise, could push more people into paying tax or higher tax bands, potentially reducing the incentive to work more hours and decreasing labour supply.