The broken benefits system that has enraged Jim Ratcliffe

Tim Wallace

Fri 13 February 2026 at 4:31 am GMT+9 7 min read

Sir Jim Ratcliffe apologised for some of his comments after receiving criticism from the PM - Chris Brunskill/Getty

Sir Jim Ratcliffe has found himself at the centre of a political storm after claiming Britain had been “colonised” by immigrants.

The country’s biggest industrialist, who co-owns Manchester United, provoked outrage from Downing Street and the footballing world after complaining that “you can’t have an economy with nine million people on benefits and huge levels of immigrants coming in”.

Sir Keir Starmer called the Ineos chief’s words “offensive and wrong”. Rachel Reeves said his opinions are “disgusting”.

In the end, Sir Jim apologised for his critics’ thin skins: “I am sorry that my choice of language has offended some people in the UK and Europe,” he said.

But he has certainly not backed down. “It is important to raise the issue of controlled and well-managed immigration that supports economic growth,” said the billionaire.

While Sir Jim’s “colonisation” statement has provoked outrage, his point that Britain’s economy is not in “a good state” is hard to argue with. The benefits bill is ballooning and the economy is flatlining.

Back in the Thatcher era, 8pc of Britain’s GDP went on benefits, according to the Department for Work and Pensions (DWP). Now it is on course to rise to almost 11pc by the start of the next decade.

In cash terms, the rise is even more alarming. The UK-wide bill has risen from below £200bn per year in 2010 to more than £300bn now. It is on course to smash through the £400bn mark in 2030-31, according to the Office for Budget Responsibility.

Britain’s generous approach to benefits stands in stark contrast to America’s, where the federal and state governments focus on providing a safety net, rather than offering a safety blanket that can get too comfortable.

US unemployment benefits are initially generous to those who fall out of work. But except during recessions, the size of the handout quickly shrinks.

This not only creates an incentive to find work, but also reduces the potential cost of moving from benefits into work.

Other welfare payments, such as housing and child benefits, are typically time-limited and conditional on recipients seeking or holding down work.

The US spends only 0.25pc of GDP on housing benefits, compared with 1.3pc in Britain, according to OECD data. Yet the average British householder has less living space than someone in the bottom 20pc of America’s income distribution.

Eligibility for disability insurance is also tighter in the US than Britain, prompting more people to take out private insurance against losing the ability to work.

Despite running a leaner system, the US redistributes a bigger net share of national income to the bottom half of the ladder than Britain or Europe do.

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This is because benefits are more tightly targeted towards need, rather than spilling out into the middle class.

The lower cost of the system means the US taxes poorer households less than Britain or Europe – particularly through lower payroll and consumption taxes, which disproportionately hit the poor.

“Where publicly funded benefits are more reserved for the poor, taxes can be more limited to the rich,” Chris Pope, of the Manhattan Institute, a Right-leaning think tank, said in a report.

Pope said the American system left the poorest fifth of working age households in the US better off than those in Canada, Denmark, Britain and Germany.

In China, like the US, the economy is expanding faster than that of Britain or the eurozone. But China, like the US, spends proportionately less on welfare.

Xi Jinping may sit atop the Chinese Communist Party, but he has an almost Thatcherite view of what he calls “welfarism”.

He has cautioned against “excessive guarantees” – his phrase for a generous welfare system – saying it would sap people’s motivation to work.

Chinese workers pay for their own health, unemployment and disability insurance, and save for their future pension through mandatory personal and employer contributions.

Informally, businesses and their workers often waive these contributions, giving both sides access to more immediate cash flow.

Perversely, workers tend to save that extra cash flow rather than spend it, because forgoing social insurance leaves them with no safety net.

Britain is closer to moribund Europe than either of the world’s two biggest economies.

In Europe, welfare accounts for 40pc of government spending and 20pc of the EU’s GDP. Governments’ debt-to-GDP ratios in countries such as France, Italy and Spain are stuck above 100pc.

But even though a family of four on a full package of welfare benefits in a country like Germany can receive more than £50,000 a year, there is no sign that economic hardship is in retreat.

Elisabeth Krecke, of the European think tank GIS, wrote last year that the various European welfare systems are not working as intended.

Many are “opaque, bureaucratic and difficult to navigate, especially for the people most in need”.

Benefits may flow to people who don’t really need them, and trust in the system is falling – particularly among the young.

“Europe’s welfare systems were designed for the postwar era – a time when societies were young, jobs were stable and well-paid, and growth felt endless. That world has gone,” she wrote.

While Sir Jim is right to raise alarm about the benefit system, his claim that problems have been driven by migration is harder to argue.

Roughly one in seven benefit claimants on Universal Credit is a foreign national, according to DWP. However, that means the vast majority – six in seven – are not.

The department’s figures show that there were 1.27 million people born overseas claiming benefits as of last October. That compares with just under seven million British citizens, although this number also includes a small number of people from Commonwealth countries who came to the UK before 1983 and have the right of abode.

Most foreign nationals can only start to claim after they have lived in the UK for five years.

While claims by foreign nationals are up by more than half compared with 2022, this is similar to the overall increase, with 8.4 million people claiming Universal Credit as of December 2025.

Much of the welfare problem is home-grown. Since the end of 2019, employment among British-born workers has fallen by almost 400,000, to 26.9 million.

At the same time the number of workers born outside the UK has risen by 1.5 million to 7.3 million.

Elsewhere, the number of people of working age who are neither in work nor seeking a job has risen by almost half a million since 2019 to nine million. But the vast majority of that increase – almost nine in 10 – is accounted for by those born in Britain.

You could argue that a ready supply of foreign workers means businesses have little need to seek British-born workers, nor to entice those who are inactive to try their hand in the jobs market.

But it is risky to try to wean the UK off migration to test this theory: migration has been a major driver of economic growth since the financial crisis.

A test of Britain’s ability to grow without importing workers will come this year: net migration could fall to zero in 2026, amid tighter entry requirements, collapsing arrival numbers and rising emigration.

If this happens and then is sustained for the rest of the decade, it means the country will have 1.5 million fewer people in 2030 than the official projections expect.

Given the importance of workers and consumers to the economy, experts expect this will mean less growth and a worse position for the public finances – bad news for a Government which has just clawed its way out of another fiscal hole.

If that comes to pass, then the benefit system that helped to provoke Sir Jim may not last in its current state.

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