Top earners footing £2,000 bill for unemployment benefits: Where exactly do taxes go?

The biggest spender of top earners’ tax dues is the welfare system. Taking up to 31.8% of their contributions in comparison to 20% for the NHS and just 1.9% for housing, according to analysis by The Telegraph.

Earning around £72,150 will put you into the top 10% of workers in terms of salary. But of this, £19,746 each year will go to National Insurance and income tax, with around £6,281 going to fund welfare benefits. A slight majority is spent on state pension and other old-age benefits while just under half goes towards unemployment and disability benefits such as Universal Credit or PIP.

The rest of their tax bills are split with 10% going to education, 6% to defence, 4% for safety and public order and the same amount of transport.

The figures also revealed the average full-time worker earning £38,000 a year will see £2,265 of their tax bill go towards benefits. These figures all stem from 2023/2024 data from the Institute for Fiscal Studies, where the welfare bill totalled £64.7billion.

Last year, the Office for Budget Responsibility forecast this bill to skyrocket to £100.7billion by 2029/2030, which is where Secretary of State for Work and Pensions Liz Kendall stepped in with her welfare reform.

Kendall’s reform plans to save £5billion a year by 2030, with the biggest savings coming from changes to PIP and Universal Credit.

However, the changes have sparked controversy with some of Labour’s own MPs saying they cannot support the proposals as they currently stand.

The government’s own impact assessment showed that the PIP and UC changes alone would see 3.2m households losing an average of £1,720 a year in benefits.

The green paper is still under consultation, with many holding more hope that the reform will be backtracked after the winter fuel payment announcement earlier this month.

After considerable backlash, Sir Keir Starmer told the Commons that the £200 annual payment, which was heavily restricted last winter, would be made available to more pensioners going forward with details of what exactly this reversal looks like still to be announced.