(First drafted in 2019 and substantively updated in summer 2022, before yet further UK tax increases were imposed in November 2022.)
Contents
The UK’s financial position
The UK’s post-WWII social model
The UK’s economic model
There were warnings
UK tax rates from 2022
Singapore - best practice
So-called 'poverty'
Why redistribution doesn’t work
The 2008/09 financial crisis accelerated existing trends
There is no model of "successful Scandinavian socialism"
Conclusion and recommendations
THE UK’S FINANCIAL POSITION
There is no money, and those who remain here are being taxed unsustainably. The top 16% already pay 67% of all income tax and overall the top 1% pay almost 30% of income tax. 60% of income tax is now paid by 10% of taxpayers with 95% of those working in the private sector: researchbriefings.files.parliament.uk/documents/CBP-8513/CBP-8513.pdf - top of page 5. An £80k salary puts someone into the top 5% of UK earners: www.theguardian.com/politics/2019/nov/22/factcheck-earning-80000-or-more-top-5-of-uk-earners-labour.
Between 2000 and 2020 there was a near-doubling of NHS spending and a 60% increase in welfare spending (www.gov.uk/government/statistics/public-spending-statistics-release-february-2020/public-spending-statistics-february-2020). There have been nearly 15 years of low growth coupled with huge increases in benefits and healthcare to the cost of pretty much everything else: www.economicshelp.org/blog/5843/economics/economic-growth-stats-2.
Increasing rates further doesn’t work: people will leave or choose to work less - e.g. 90% of GPs are part-time, keeping their salary <£100k (www.pulsetoday.co.uk/news/workload/nhs-england-says-almost-90-of-gps-work-part-time-in-response-to-pulse-survey.)
For over a decade, most of the population have been parasitic on other people's hard work (there's no such thing as 'government money', only other people's money):
Some 52 per cent of households, or 13.8 million families, received more in benefits and public services than they contributed in taxes last year, according to the Office for National Statistics. In 1977, just 40 per cent of households took more than they contributed, rising to 44 per cent in 2000. It peaked at 53.5 per cent in 2010, as a result of rising unemployment that turned thousands of workers into welfare recipients. Nevertheless, it has remained at above 50 per cent for every year of the Coalition, despite a drive by ministers to cut public spending and rein in the welfare bill. …the situation will worsen as an ageing population places a growing burden on pensions and the NHS in coming decades. ‘…the fact that over half of all households receive more in benefits than they pay in taxes should be deeply shocking’
Douglas Carswell, the Conservative MP for Clacton, said: “We have not lived within our means for a generation. The ever-expanding redistributive state is pressure down ever more heavily on a diminishing productive base. The financial crisis ought to have alerted the political elite that this model is just not sustainable. We have not made the fundamental changes to the architecture of the state that need to be made.”
More than half of homes take more than they contribute - Official figures reveal record numbers of people who receive more in benefits and public services than they pay in tax, The Daily Telegraph, 26 June 2014: http://www.telegraph.co.uk/finance/personalfinance/tax/10929370/More-than-half-of-homes-take-more-than-they-contribute.html
By January 2023, the percentage of people living off the efforts of others had grown further, to 54%: "Over half of households get more from state than they pay in tax. Some 36 million people – 54.2 per cent of all individuals – paid less tax than they received in benefits and ‘benefits in kind’" https://www.telegraph.co.uk/news/2023/01/23/half-households-get-state-pay-tax / non-paywalled: https://archive.is/FogGs, commented upon at: "Britain has become too used to handouts", https://www.telegraph.co.uk/opinion/2023/01/22/britain-has-become-used-handouts / non-paywalled: https://archive.is/AI89T.
Bluntly put, an economic model reliant on an ever-shrinking pool of productive people, and ever-growing number of 'parasites' is unsustainable. The problem is reinforced by the inevitable decline occasioned by loss of empire:
"[O]ne way to understand Britain’s post-war history is as a long, futile attempt to avert the shame of relative global decline. Britain, after all, could not hope to maintain its imperial power without the empire — and it could not hope to remain so much richer than every other European country. Its relative wealth and power, therefore, were always going to atrophy. Britain’s reckoning with this reality is like a Sophoclean tragedy, each new government fighting a losing battle against its fate. Wilson offered central planning as the route out of Britain’s decline; Heath believed “Europe” and corporatism was the solution; Thatcher opted for monetarism and free markets; and Blair some kind of third-way “reform”. After Blair, Cameron thought becoming China’s best friend would allow Britain to win the global race, as he put it, while Johnson argued that Brexit was the answer to making Britain global again. Today, many believe rejoining Europe is the grand solution to all the country’s problems.
Yet even the most cursory glance at Britain’s long-term economic growth reveals how little things change. The trend is one of slow, gradual growth lacerated by a few big scratches which tend to come from abroad — the oil crisis of 1973, the global financial crisis of 2008 or the Covid pandemic of 2020. The great turning points we usually think of — joining the European Common Market in 1973 or Margaret Thatcher’s election in 1979 — are not nearly as radical as they seemed at the time. Very little is. All the while, the “declining industries and declining areas” that Wilson identified in 1963 keep on declining. When we look at the big picture, then, what really jumps out is the continuity." (https://unherd.com/2023/09/why-britains-revolutions-always-fail)
THE UK’S (AND EUROPE’S) POST-WWII SOCIAL MODEL IS A DYSFUNCTIONAL, DELUSIONAL FANTASY
The post-WWII social security system of welfare and healthcare to everyone, regardless of their contribution to society, was never sustainable. It incentivised ever more people to take out more than they contribute.
Even the brighter Labour MPs were warning of this during the Blair years: e.g. Frank Field, a Labour MP who analysed the welfare state extensively with cross-party support, concluded that the UK could not sustain a system in which people are taking out more than is being put in (obviously).
This is shown by Gross Domestic Product (Purchasing Power Parity) (GDP(PPP)), i.e. ‘how much do people earn, adjusted for living costs per country'). One of the very few economic facts that has percolated its way to the UK’s general population is that it has "the world’s fifth-largest economy". This has led to childishly simplistic assertions that the UK is "a rich country". It is not. Both the state and individual citizens are highly indebted. What confuses dimmer minds is that (a) the UK has a large population; and (b) a small % of successful people and companies choose to live, work and invest in the UK. What matters is per capita figures. The latter’s wealth is irrelevant as they can choose to live, work and invest elsewhere should they wish to. In 2020, the UK was 28th in the world for GDP (PPP) per capita, having fallen from 27th in 2019: statisticstimes.com/economy/countries-by-gdp-capita-ppp.php. Average UK weekly earnings in 2021 were £27,768/year: www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/april2021 - and this only reflected workers, not those living off workers' efforts.
As various 2014 analyses warned, Britain Is Poorer Than Any US State: Yes, Even Mississippi (Forbes, 2014, archive.is/tOYHR).
THE UK’S ECONOMIC MODEL IS A PONZI SCHEME
The welfare state created and nurtured a culture of entitlement in the unsuccessful and – by confiscating their wealth – both punishing and disincentivising the successful. That started a process of gradual, but accelerating decline, which has been exacerbated by both automation (making unskilled workers increasingly worthless) and globalisation (encouraging skilled workers to move to where they are treated best).
The UK’s main cost is its welfare state. From its outset it was a Ponzi scheme: a risky scam generating returns for early investors only if (i) later investors could be forced to keep joining and paying; and (ii) an ever-decreasing number of productive people could be coerced into funding an ever-growing, ever-demanding number of unproductive hangers-on.
In fact, money that working age people paid in so-called National Insurance was immediately spent on current pensioners. As the working age population decreases in size, and pensioners live for longer but in poor health, the money runs out. Almost all welfare states are Ponzi schemes: new participants are attracted by the promise of great future returns, while their contribution – rather than being invested to generate those returns – is given to earlier participants. The money is used to pay unwarranted returns to earlier participants (unwarranted because the majority of people take out far more than they ever put in).
Eventually the scheme collapses and later participants suffer. Welfare states penalise younger generations (compulsory participants - on pain of imprisonment for tax evasion) to sustain triple-locked pensions and expensive NHS care (unwarranted returns) for older generations who are taking vastly more than they ever contributed. Voting incentives preclude politicians (the organisers) from admitting that the system is unsustainable and will be unable to pay similar benefits to younger generations (the crash).
Norway is potentially the only exception to this ‘welfare state doom spiral’ because it has (a) 10% of the UK's population; (b) vast oil and hydro resources; (c) extremely high human capital; (d) and virtually no unskilled immigration. It is unique. (For other Scandinavian countries, see below.)
The UK is getting worse: pensioners are (a) living longer; but with (b) expensive (but avoidable) chronic illnesses due to greed (fat people), laziness (people who don’t exercise) and stupidity (smokers).
THERE WERE WARNINGS – BUT MOST PEOPLE ARE ECONOMICALLY ILLITERATE (AND PREFER OSTRICH-ESQUE BLISSFUL IGNORANCE)
Confiscating from the successful – to buy votes from the unsuccessful – sounds good, but as Angela Merkel warned in a 2012 Financial Times interview:
If Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life. All of us have to stop spending more than we earn every year.
Merkel warns on cost of welfare, The Financial Times, 16 December 2012, Quentin Peel, www.ft.com/content/8cc0f584-45fa-11e2-b7ba-00144feabdc0.
Her warning went unheeded. Almost a decade later, the updated figures were:
The EU has 6 per cent of the world’s population, 16 per cent of its GDP and 40 per cent of its welfare spending.
Vaccines, lockdowns, the economy, moral leadership: you name it, Europe is botching it, The Times, Robert Colvile, 4 April 2021, www.thetimes.co.uk/article/vaccines-lockdowns-the-economy-moral-leadership-you-name-it-europe-is-botching-it-fjbt25mj5
Redistribution sounds lovely, but:
(a) as E. O. Wilson, the two-time Pulitzer Prize winning author and Harvard entomologist, famously quipped:
Great idea. Wrong species.
(b) as Margaret Thatcher warned:
The problem with socialism is that you eventually run out of other people's money.
(c) and as the US economist Thomas Sowell echoed:
The strongest argument for socialism is that it sounds good. The strongest argument against socialism is that it doesn't work. But those who live by words will always have a soft spot in their hearts for socialism because it sounds so good.
UK TAX RATES FROM 2022 / THE APPROACHING COLLAPSE
After the April 2022 NI increase, additional rate band jobs will incur 45% income tax + 3.25% personal NI contributions, plus employers will pay 13.75% NI before salaries are paid. This equates to a de facto upper marginal rate of 54% overall. Anyone with children also incurs higher taxes as child allowances are withdrawn at certain thresholds, and those with student loans are subjected to the graduate tax.
Income tax will rise yet further for four years through the stealthy route of freezing the personal allowance and higher-rate threshold. That will create 1.3M new taxpayers and 1M more on the higher rate. Alternatives, showing maximum rates of income tax, include:
0% Dubai 0% The Cayman Islands 8% BVI 15% Hong Kong 17% Singapore 20% The Channel Islands
They all offer an improved quality of life, lower taxes, lower crime, lower pollution, and better weather.
The welfare state threw evolution into reverse, by creating and nurturing a culture of entitlement in the unsuccessful, and - by confiscating their wealth - both disincentivising and punishing the successful.
SINGAPORE - A STARK CONTRAST, AND EXAMPLE OF BEST PRACTICE
By contrast, Lee Kuan Yew in Singapore operated on a broadly similar timescale to the growth of the UK welfare state, but lagging behind by about 20 years. This enabled Singapore to learn from UK mistakes: they implemented, and then reversed, NHS-style taxpayer-subsidised healthcare which rewarded fecklessness, and replaced it with mandatory individual savings accounts which people use to pay for their own care. This incentivises people to look after their own health, and gives them personal ownership of their ‘pot of money’, thus avoiding European welfare states’ Ponzi scheme design. Lee Kuan Yew described it as a safety net, not a hammock. Singapore made it clear that people must live or die within their means. Singaporeans rose up to the challenge, and are now amongst the most successful people in the world.
Singapore wasn’t ideologically beholden to any theory beyond ‘what works’: where centralised control was optimal, it was implemented. For example, the Housing & Development Board is a statutory board under the Ministry of National Development responsible for Singapore's public housing, in which the majority of the population live. Contrast this to Thatcher’s sabotage of council housing in the 1980s in the UK.
Notably, however Singapore only achieved its success by drastic measures at the outset, which set the national mindset:
"When the British announced the withdrawal of their navy from Singapore in 1967, a Dutch adviser from the United Nations, Albert Winsemius, offered the Singapore government two pieces of advice. The first was to crush the communists:
‘I am not interested in what you do with them. You can throw them in jail, throw them out of the country, you can even kill them. As an economist, it does not interest me; but I have to tell you, if you don’t eliminate them in government, in unions, in the streets, forget about economic development.’
The second piece of advice was to let the statue of Sir Stamford Raffles, the founder of Singapore, remain standing. The Singaporeans should not repeat the error of the Indonesian freedom fighters, who tore down a statue of a hated Dutch colonial officer. The Raffles statue would be testimony ‘that you accept the heritage of the British’, and serve as a beacon to western companies. Singapore is just one of the many jurisdictions described in Quinn Slobodian’s lively book. The city state combines free market principles with tough authoritarian discipline. The dream of many free marketeers in the 20th century was to create independent states which, by a mixture of low taxation and light regulation, could foster enterprise and prosperity." https://www.spectator.co.uk/article/as-special-enclaves-proliferate-what-are-the-consequences-for-democracy / non-paywall: https://archive.is/bsRdO. For a longer discussion about the relevance or otherwise of Albert Winsemius's role, see https://www.global-developments.org/p/you-can-even-kill-them-albert-winsemius (archived: https://archive.ph/ho5ry).
In 1963, Lee Kuan Yew chose to imprison the communists/socialists under Operation COLDSTORE (https://www.google.co.uk/search?q=operation+coldstore).
The UK, in stark contrast, had encouraged such people, Aneurin Bevan proudly declaring in 1952 that "A free health service is pure Socialism" (In Place Of Fear, p81, https://ia801508.us.archive.org/7/items/in.ernet.dli.2015.537058/2015.537058.In-Place_text.pdf)
WHY REDISTRIBUTION DOESN’T WORK: THE UNDERLYING PRINCIPLES
People must live or die within their means. The further a society deviates from that principle, the faster it degrades (e.g. Cuba, Venezuela, Argentina, and slowly-dying, economically incontinent European states like Italy).
• Morality. Seizing money which people earn for redistribution to those who do not earn cannot build a successful society: it is immoral. Thomas Sowell (who came from a brutally austere background) put it this way: ‘I have never understood why it is “greed” to want to keep the money you have earned but not greed to want to take somebody else's money.’
• The actual effect of raising taxes. Higher taxation changes people’s behaviour. Notional collection rates are just that: notional. Successful people work less, retire early or emigrate (e.g. 90% of GPs work part-time to avoid income and pension taxes). During the peak of Covid, NHS consultants refused emergency shifts because, after tax, it simply wasn't worth it. Many more NHS junior doctors leave the NHS and move to Australia, Singapore, etc.
• Culture/behaviour. Redistribution doesn’t address actual issues. Culture matters. Money doesn’t. Unsuccessful children are the way they are because of low calibre parents (and often absent fathers). Parents should be in a stable, married relationship, children must be actively supported, they must be infused with a disciplined attitude to education, and they must refrain from crime. By contrast, children from certain groups arriving in primary school are often unable to speak properly, use cutlery and their general intellectual development is already 18 months behind better-parented peers. As the expression goes, "the apple doesn't fall far from the tree". Or, in computing terms, "garbage in = garbage out". This explains why many recently immigrated Asian and Indian families often have exponentially better performance than peers of similar economic status. It also explains why black Africans outperform black Caribbeans in London: cultural attitudes toward education, work, police and crime are determinative. Similarly, black African immigrants in the US outperform inner city US blacks many times over.
• Societal dysfunction: throwing evolution into reverse. Confiscation and redistribution condemns societies to a dysfunctional death spiral. ‘Economics 101’: if you subsidise something, you get more of it. If you subsidise freeway building, you get more freeways. If you subsidise electric cars, you get more electric cars. Similarly, if you subsidise failing families, you get more of them. E.g. in the 1990s, increased UK welfare entitlements for single parents led to more single parents. This accelerated a hand-out culture in which more and more people's focus was upon demanding something for nothing.
Oxford professor Paul Collier documented the phenomenon thus: "Households fit their lifestyle to their income: with a little planning and prudence a large majority are able to meet the basic needs of their children. Paternalist largesse can be a two-edged sword. Britain provides free housing for single mothers; Italy and Spain don’t. Britain has one of the highest rates of teenage pregnancy in Europe; Italy and Spain among the lowest. In 1999 Britain introduced increased benefits for those low-income families with children. Modern statistical methods enable us to tease out the consequences of this policy change: low-income families responded with a massive increase in births, estimated at an extra 45,000 children each year. So, as a result of this free housing and enhanced benefits, many children are being raised in households that have a bit more money. But many women were encouraged to bear children who will not be raised well." Paul Collier, The Future of Capitalism: Facing the New Anxieties, www.amazon.co.uk/Future-Capitalism-Facing-New-Anxieties-ebook/dp/B07CV5YN8X.
The opposite model - survival of the fittest, get educated, work hard, compete, achieve and be rewarded - creates a virtuous circle. Lee Kuan Yew built Singapore using the self-evident failure of the European welfare state model. That European model is now slowly collapsing (though it retains a stranglehold on what passes for left-wing intellectual and economic thought - also espoused in the US by the Democrats). Left-wingers threw evolution into reverse.
SO-CALLED 'POVERTY'
UK families with incomes <60% of the UK median are deemed to be in “poverty”. This is deceptive emotional manipulation used to conflate inequality with poverty. It also has absurd consequences. During the 2008/09 GFC, median income fell while the distribution of income became less skewed to the right. Households classified as living in poverty decreased even though their absolute standard of living worsened. Using relative poverty, if everyone's real income doubles uniformly across the income distribution within a short period then the number of people deemed to be 'living in poverty' remains unchanged, even though their standard of living has clearly improved greatly. People's wealth is of unequal value because people have unequal levels of productivity and thus are themselves of unequal economic value. See:
In her 2021 book, Invisible Child, the New York Times reporter Andrea Elliott tells the story of Dasani Coates. The book is ostensibly about how poverty pushed Dasani and her siblings into the foster care system. But at one point Dasani’s mother inherits $40,000 and within a few months the family is back in a homeless shelter. Money is not the root of the family’s problems: the protagonists' choices are. They choose to use drugs, they choose to commit crime, they choose to remain in a violent relationship, they choose not to use contraception, they choose not to get an abortion, they choose to squander money. Left-wingers however have a quasi-religious belief in the righteousness of confiscating from (i) successful, hard-working people who make superior life choices; and (ii) subsidising unsuccessful, feckless people who make inferior life choices. Consequently, the author blames everyone except the protagonists for their predicament. At no point whatsoever in their lives however have they ever shown any evidence that those lives are salvageable. They are not. The following summary of the book is a superb, concise exposition of the disconnect between left-wing rhetoric and the reality of the underclass created by post-1960s Western social policy which replaced ‘what works’ with ‘what sounds good’: www.commentary.org/articles/naomi-schaefer-riley/invisible-child-poverty-survival-andrea-elliott.
Society is unequal because people are unequal. Inferior people make inferior choices and suffer inferior outcomes. It is not only immoral but counterproductive to impose the costs of those inferior choices on the rest of society: it throws evolution into reverse.
THE 2008/09 GFC ACCELERATED EXISTING TRENDS
The 2008 Great Financial Crisis (GFC) exposed many of the weaknesses in the redistributive “rewarding failure” model. Western central banks responded with quantitative easing (QE) & zero inflation rate policies (ZIRP) policies: ‘printing money’. This drove asset prices, originally equities and property, much later crypto and NFTs, as excess capital sought outlets. Western societal models’ underlying economic flaws remained unpalatable and thus lay unaddressed. QE & ZIRP managed not to trigger massive inflation because, inter alia, their effects were masked by China’s entry into the WTO in 2000. By injecting millions of low-paid workers into the global economic system, China ‘exported deflation’. In 2020, however, China hit both demographic and Covid crises, the results of the one child policy successfully reduced the working age population, and Xi’s Zero Covid policy paralysed industry. Deflation is no longer being exported. Democrats in the US further stoked global inflation with vast redistributional giveaways in 2021, under the euphemism ‘Build Back Better’.
Global debt as a share of GDP was 352% in 1Q22, with private sector debt accounting for 2/3 of this, and public sector debt 1/3 (markets.jpmorgan.com/research/email/-hcd1hnu/5YpVlymEUzZlOdgm_68JUw/GPS-4141993-0). Pandemic-era increase came after a large jump during the 2008 GFC — and the former was considerably bigger than the latter. Thus, total global debt today, relative to GDP, is more than double its 2006 level — and triple the 2000 ratio (when it was under 100 per cent). Yes: debt in the global economic system has risen more than three-fold this century. The only reason that this went (mostly) unnoticed was sinking interest rates. 50% of the pandemic-era debt assumed by companies in Italy and Spain is coming due in the next couple of years (thus vulnerable to rising rates), in Germany and America the ratio is just 25% (though US national debt is on track to hit $31 trillion in 2022). The Committee on the Global Financial System (CGFS) calculates that 17% of companies in industrialised economies are “zombies”, ie that can only be kept alive by virtue of low rates; in 2006 this ratio was 10%. Some 90% of German households expect house prices to keep rising, up from 40% in early 2020 — a pattern that may “amplify the current upswing in household credit”, the CGFS warns (www.bis.org/publ/cgfs67.pdf).
The UK is particularly vulnerable to the combination of high inflation and high debt, as it has more than twice the amount of index linked debt of similar states. This is because demand from the large Defined Benefits pensions market, which is often inflation linked, made it a cheap form of borrowing, a reliable market to issue into, including at longer tenors, and superficially helpful for pension schemes to hedge their risks. It's far less attractive when inflation is increasing towards 10%+. HMT eventually realised that its inflation liability was far larger than inflation linkages in revenues from tax etc. and cut back issuance, but the damage was already done (www.ft.com/content/aed8ab8d-70dc-4554-897c-a87fd2d6821e?commentID=41695dd6-46f9-4a8c-90ce-1074503c6964).
The game is therefore up: inflation is spiralling, debt is increasing, workers are striking, and public services are failing. States cannot no longer tax, print or borrow money in pursuit of deluded socialist fantasies. If they try to do so, they will only further accelerate their collapse
THERE IS NO MODEL OF "SUCCESSFUL SCANDINAVIAN SOCIALISM", MUCH LESS ONE WHICH THE UK COULD EMULATE
The following section is included to pre-empt rebuttals from those who have been misled into believing that Scandinavia offers an example that the UK could emulate.
Summary: (i) by the 1960, Scandinavian countries were already successful, normal capitalist countries; (ii) in the 1970s and 1980s, they experimented with radical socialist ideas; (iii) by the 1990s, these had clearly failed and were reversed; (iv) they now have broadly conventional welfare states, their radical experiments well behind them (except in the minds of ill-informed Left-leaning foreigners); and (v) they now suffer the same problems as all European welfare states: they punish productive citizens (who simply work less, retire early or emigrate), and they exacerbate - not mitigate - the problem of unproductive/parasitic citizens (who grow larger both in number, and in their demands).
• Left-leaning pop stars, politicians, journalists, political commentators and academics have long praised Scandinavian countries for their high levels of welfare provision and for their economic and social outcomes. It is, indeed, true that they are successful by most reasonable measures.
• However, Scandinavia's success story predated the welfare state. Furthermore, Sweden began to fall behind as the state grew rapidly from the 1960s. Between 1870 and 1936, Sweden enjoyed the highest growth rate in the industrialised world. However, between 1936 and 2008, the growth rate was only 13th out of 28 industrialised nations. Between 1975 and the mid-1990s, Sweden dropped from being the 4th richest nation in the world to the 13th richest nation in the world.
• As late as 1960, tax revenues in the Nordic nations ranged between 25 per cent of GDP in Denmark to 32 per cent in Norway - similar to other developed countries. At the current time, Scandinavian countries are again no longer outliers when it comes to levels of government spending and taxation.
• The third-way radical social democratic era in Scandinavia, much admired by the left, only lasted from the early 1970s to the early 1990s. The rate of business formation during the third-way era was dreadful. In 2004, 38 of the 100 businesses with the highest revenues in Sweden had started as privately owned businesses within the country. Of these firms, just two had been formed after 1970. None of the 100 largest firms ranked by employment were founded within Sweden after 1970. Furthermore, between 1950 and 2000, although the Swedish population grew from 7 million to almost 9 million, net job creation in the private sector was close to zero.
• Scandinavia is often cited as having high life expectancy and good health outcomes in areas such as infant mortality. Again, this predates the expansion of the welfare state. In 1960, Norway had the highest life expectancy in the OECD, followed by Sweden, Iceland and Denmark in third, fourth and fifth positions. By 2005, the gap in life expectancy between Scandinavian countries and both the UK and the US had shrunk considerably. Iceland, with a moderately sized welfare sector, has over time outpaced the four major Scandinavian countries in terms of life expectancy and infant mortality.
• Scandinavia's more equal societies also developed well before the welfare states expanded. Income inequality reduced dramatically during the last three decades of the 19th century and during the first half of the 20th century. Indeed, most of the shift towards greater equality happened before the introduction of a large public sector and high taxes.
• The development of Scandinavian welfare states has led to a deterioration in social capital. Despite the fact that Nordic nations are characterised by good health, only the Netherlands spends more on incapacity related unemployment than Scandinavian countries. A survey from 2001 showed that 44 per cent believed that it was acceptable to claim sickness benefits if they were dissatisfied with their working environment.
• Other studies have pointed to increases in sickness absence due to sporting events. For instance, absence among men due to sickness increased by 41 per cent during the 2002 football World Cup. These shifts in working norms have also been tracked in the World Value Survey. In the 1981-84 survey, 82 per cent of Swedes agreed with the statement 'claiming government benefits to which you are not entitled is never justifiable'; in the 2010-14 survey, only 55 per cent of Swedes believed that it was never right to claim benefits to which they were not entitled.
• Another regrettable feature of Scandinavian countries is their difficulty in assimilating immigrants. Unemployment rates of immigrants with low education levels in Anglo-Saxon countries are generally equal to or lower than unemployment rates among natives with a similar educational background, whereas in Scandinavian countries they are much higher. In Scandinavian labour markets, even immigrants with high qualifications can struggle to find suitable employment. Highly educated immigrants in Finland and Sweden have an unemployment rate over 8 percentage points higher than native-born Finns and Swedes of a similar educational background. This compares with very similar employment rates between the two groups in Anglo-Saxon countries.
• The descendants of Scandinavian migrants in the US combine the high living standards of the US with the high levels of equality of Scandinavian countries. Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. It is true that poverty rates in Scandinavian countries are lower than in the US. However, the poverty rate among descendants of Nordic immigrants in the US today is half the average poverty rate of Americans - this has been a consistent finding for decades. In fact, Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated. This suggests that pre-existing cultural norms are responsible for the low levels of poverty among Scandinavians rather than Nordic welfare states.
• Many analyses of Scandinavian countries conflate correlation with causality. It is very clear that many of the desirable features of Scandinavian societies, such as low-income inequality, low levels of poverty and high levels of economic growth, predated the development of the welfare state. It is equally clear that high levels of trust also predated the era of high government spending and taxation. All these indicators began to deteriorate after the expansion of the Scandinavian welfare states and the increase in taxes necessary to fund it.
CONCLUSION AND RECOMMENDATIONS
54% of people in the UK take out more than they put in. If you are one of the 54% of 'parasites', great. Many if not most of the other 46% of people would be better to escape the UK.
The more charitable version of this argument is that democratic governments must govern in the interests of their electorates. For the UK (per the GDP(PPP) paragraph above) this is people earning only £28k/year. That must be the morally correct approach. It does however mean that the UK cannot be governed in the interests of the productive 46% of the population. Many of those productive people are fixed in the UK because of their work (i.e. retail, or even UK-focused professionals, e.g. English property lawyers) and even many of those who are notionally mobile (e.g. bankers) are fixed because of spousal careers, children's education, and access to grandparents and wider family. Such people will therefore be in HMRC's crosshairs for maximum wealth extraction now and forever. Those who can escape however, should do so.
The UK's Overton window was set decades ago by well-intentioned post-WWII socialists who implemented superficially attractive schemes of healthcare and benefits which were sadly both economically illiterate, and - in the long term - deeply counterproductive. They effectively threw evolution into reverse. The UK's fate was determined once more than 50% of the electorate became net “takers”. This outcome was inevitable given policies implemented in the post-WWII years. The UK has been on an accelerating downward spiral of higher taxes and worse productivity ever since. Now that parasitic voters are the majority, they will – quite rationally – insist on voting themselves increasing swathes of other people’s hard-earned money. The only rational choice for the latter - if they can - is to get out:
The 46% of productive people in the UK who put in more than they take out are shackled to a corpse. They cannot change the reality of UK productivity and economic performance, and the policies which in a democracy must flow from that.
Those who do not want to suffer ever-higher taxes and wealth confiscation should emigrate. Between Dubai, Hong Kong, Cayman, BVI, Singapore and other locations, there is no requirement to ever pay more than 17% tax ever again (if that).
The UK is long overdue a vast correction to reduce the standard of living to a sustainable level. The process to get there will take decades** and be brutal.
Project Fear will be wishful thinking. The UK took a wrong turn by embracing socialism in 1948*. Its subsequent economic history has been one of continuous decline, punctuated by temporary and non-replicable periods of superficial adequacy (joining the EU, selling off utilities, North Sea oil boom, selling council houses, printing money, suppressing interest rates, increasing borrowing, increasing taxes). The barrel is now empty. Those who can should get out.
* Nye Bevan, author of the NHS, described it proudly as "pure socialism" in his 1953 propaganda piece, In Place of Fear (bottom of page 81), https://archive.org/details/in.ernet.dli.2015.537058.
** Nations fail slowly. In late 1777, Adam Smith received news of General Burgoyne's defeat at Saratoga, promising calamity for Britain's war effort in America. His correspondent expressed deep concern that the nation was ruined. "There is a great deal of ruin in a nation", was the great economist's calm reply.
By way of simple proxy for size = economy/power, the British Empire was at its largest in 1919, after Britain acquired Germany's East and West African colonies and Samoa in the Treaty of Versailles, which marked the end of the First World War, 1914–18.
Another example is the USD$ / GBP£ exchange rate. Prior to the 1970s, the Pound to Dollar rate was fixed at a level set by the British government. For much of the 1800s and early 1900s, the rate was maintained at around $5 for every £1. In 1940, the British government devalued the Pound to around $4 for every £1. Two further devaluations occurred in the 1960s before the Pound became a freely floating currency in 1971. The Pound to Dollar rate reached a high of $2.649 on 6th Mar 1972. That remains the strongest the Pound has been against USD since it freely floated in 1971. The direction of travel ever since has been clear.