Dependence on cash benefits has increased over the past 50 years

Over the past fifty years, the proportion of incomes made up from cash benefits by the state has increased as policymakers have struggled to withdraw those introduced in tough times and from the effect of an ageing population. However, the effective tax rate has fallen from its peak in the early 1980s (release).

Between 1961 and 2012, real incomes in the UK grew by an average of 1.8 per cent per year, according to a report by the Office for National Statistics (ONS).

In 1961, it is estimated the average income before tax and benefits was £960 per year. This first exceeded £5,000 in 1979, £10,000 in 1987 and £20,000 in 1998/99. In 2011/12, the figure stood at £31,500.

Adjusting these figures for inflation, the ONS says the average original income has risen nearly 2.5 times to £31,477 from £12,946. As can be seen from the chart above, this has not been an even ride.

Gross income (taking into account cash benefits from the state), meanwhile, grew at an average rate of 2.0 per cent per year after inflation from £14,000 to £27,500. The ONS puts this faster growth down to a number of factors, including increases when times were hard and an increase in the population over the state pension age.

Meanwhile, the effective tax rate grew from 28.4 per cent in 1961 to a peak of 39.4 per cent in 1983 before a gradual downward trend thereon. The effective rate hit a low of 32.8 per cent in 2009/10 before increasing slightly over the last two years to 34.6 per cent.