{
  "meta": {
    "title": "AI and the UK tax base: where the money comes from when the jobs go, and what could replace it",
    "seoTitle": "AI and the UK tax base: the wage taxes at risk, and what could replace them",
    "standfirst": "The UK taxes wages at an effective 46 per cent and profits at 27 per cent, and a worker on the average wage keeps 11 per cent of their income out of work against 60 per cent in Germany. Income tax and National Insurance raised £528 billion of the £939 billion HMRC collected in 2025 to 2026, 56 per cent of the total, and the OBR now says 10 per cent of the labour force could be exposed to substitution by AI within ten years. This page works through what an 85 per cent workforce cut at a bank the size of Lloyds would mean for the Exchequer and for the people, then weighs three responses: taxing the machine, penalising offshoring and rewarding UK hiring, and a German style earnings related unemployment insurance. A personal analysis, not part of the index.",
    "basis": "The figures are official statistics and published company accounts, each transcribed from the publisher and linked in the provenance block. Where this page does arithmetic (the wage share of receipts, the Lloyds scenario, the cost of an earnings related benefit) every input is listed with its source and anything assumed rather than published is called assumed. The OBR's reduced labour share projection is a scenario the OBR itself calls stylised, not a forecast. The proposals in the boxes marked the author's view are opinion, and the site's index does not score them.",
    "sourceNote": "Computed from HMRC tax receipts 2025-26; OBR Economic and fiscal outlook March 2026 and Fiscal risks and sustainability July 2026; HMRC rates and thresholds 2026-27; ONS JOBS02 and PAYE RTI September 2026; Lloyds Banking Group Annual Report 2025 and Tax strategy 2026; DWP benefit rates 2026-27; SGB III and Bundesagentur für Arbeit Geschäftsbericht 2025; OECD TaxBEN net replacement rates 2024 and 2025. United Kingdom, with Germany, Denmark, the Netherlands, France and Austria as comparators.",
    "notice": {
      "label": "A personal analysis",
      "text": "This page is an argued piece by the site's author. The figures are sourced to the same standard as every other deep dive and can be checked line by line in the provenance block. The proposals are opinion: they are not part of the British Resilience Index, they are not scored, and the questions at the end are open."
    },
    "stats": [
      {
        "value": "56%",
        "label": "of HMRC receipts from income tax and NI"
      },
      {
        "value": "46% v 27%",
        "label": "OBR effective tax on wages v profits"
      },
      {
        "value": "11% v 60%",
        "label": "pay kept out of work, UK v Germany"
      },
      {
        "value": "47,659",
        "label": "jobs in the 85 per cent Lloyds scenario"
      }
    ],
    "wageSharePct": 56.3,
    "scenarioCutPct": 85,
    "scenarioJobs": 47659,
    "scenarioTaxLostM": 2046,
    "scenarioNetFirstRoundM": 1046,
    "sketchNetBn": 2.49
  },
  "now": {
    "eyebrow": "Where the money comes from",
    "heading": "56 per cent of what HMRC collects is a tax on wages",
    "intro": "HMRC collected £939 billion in 2025 to 2026. Income tax raised £327.8 billion and National Insurance £200.7 billion; between them £528.5 billion, or 56.3 per cent of everything collected. Corporation tax, the tax on profits, raised £95.1 billion, 10.1 per cent. The bars are the figures from this site's tax page, read at build time.",
    "bars": [
      {
        "label": "Income tax",
        "display": "£327.8bn",
        "value": 327.8
      },
      {
        "label": "National Insurance contributions",
        "display": "£200.7bn",
        "value": 200.7
      },
      {
        "label": "VAT",
        "display": "£180.7bn",
        "value": 180.7
      },
      {
        "label": "Corporation tax",
        "display": "£95.1bn",
        "value": 95.1
      }
    ],
    "paragraphs": [
      "The OBR's March 2026 forecast puts income tax excluding self assessment plus National Insurance at £480 billion in 2025 to 2026, 15.7 per cent of GDP, rising to £600 billion by 2030 to 2031 on frozen thresholds. The April 2025 employer National Insurance package was scored at £23.8 billion in its first year before behaviour, £16.1 billion by 2029 to 2030 after it. The rate is now 15 per cent on everything an employee earns above £5,000 a year, with employees paying 8 per cent between £12,570 and £50,270. Every one of those pounds depends on a person being on a payroll.",
      "The OBR's July 2026 Fiscal risks and sustainability report has a box on exactly this. Wages and salaries are 40 per cent of GDP and tax is about 38 per cent of GDP. The effective tax rate on wages and salaries over its projection is 46 per cent; on profits it is 27 per cent. In its reduced labour share scenario, which it calls stylised and which runs to 2075 to 2076, the wage share halves to 20 per cent of GDP and tax falls to under 35 per cent of GDP, nearly four percentage points below the baseline, with GDP unchanged. The money is still made; it is made as profit, and profit is taxed at little more than half the rate.",
      "The OBR goes further than most official documents: it says the extra profit may not be taxable with existing instruments, and that commentators have suggested higher taxes on consumption or wealth, or new taxes directly on AI use. It also lists the wider risks: gains accruing offshore or in parts of the economy that are hard to tax, structurally higher unemployment, and the cost of retraining. That is the official framing of the problem this page is about."
    ],
    "note": "Income tax includes self assessment and tax on savings, so 'a tax on wages' is a slight overstatement for the HMRC composition; the OBR's £480 billion figure strips self assessment out and is the cleaner measure. The OBR does not publish the split of National Insurance between employer and employee."
  },
  "exposure": {
    "eyebrow": "How exposed the wage base is",
    "heading": "Every published estimate says finance is the most exposed sector",
    "intro": "Nobody knows how many jobs AI will remove. The estimates below are the published ones, each attributed to its author with the measure it actually uses; they are not this site's forecasts and they do not agree with each other. What they do agree on is which sector goes first.",
    "estimates": [
      {
        "who": "OBR, July 2026",
        "figure": "10% substituted, 30% complemented",
        "what": "share of the UK labour force exposed over ten years",
        "basis": "Fiscal risks and sustainability, Box 4.1, from its Briefing paper 9 on productivity"
      },
      {
        "who": "Department for Education, November 2023",
        "figure": "finance and insurance",
        "what": "the most exposed sector, on a relative occupational exposure score",
        "basis": "Applies the Felten method to UK occupations; produces a ranking, not a share of jobs"
      },
      {
        "who": "IPPR, March 2024",
        "figure": "4.4 million jobs (central), 8 million (bound)",
        "what": "jobs lost under its central and full displacement scenarios",
        "basis": "11 per cent of tasks exposed now, 59 per cent with integrated systems"
      },
      {
        "who": "Tony Blair Institute, November 2024",
        "figure": "1 to 3 million jobs",
        "what": "ultimately displaced, peaking at 60,000 to 275,000 a year",
        "basis": "against 450,000 job losses a year in the past decade; names banking and finance as more exposed"
      },
      {
        "who": "IMF staff, January 2024",
        "figure": "60% of advanced economy jobs",
        "what": "exposed to AI, mostly cognitive roles",
        "basis": "Staff Discussion Note 2024/001, 40 per cent globally, as presented by its authors"
      },
      {
        "who": "Bank of England and FCA, November 2024",
        "figure": "75% of firms",
        "what": "UK financial services firms already using AI",
        "basis": "Third joint survey; a 2026 round closed in July and is unpublished"
      }
    ],
    "paragraphs": [
      "Finance and insurance employed 1,124,000 of the 36.7 million workforce jobs in the UK in June 2026, about 3.1 per cent. Its median monthly pay on PAYE in August 2026 was £4,295 against £2,657 for all employees, so each job carries roughly 1.6 times the tax of an average one. The industry's own study, covering financial and related professional services, put its total tax contribution at £110.2 billion in the year to March 2023, 12.3 per cent of all receipts, with employment taxes of £55.1 billion the largest single element across 2.4 million jobs. That is the sector every exposure study ranks first, in a country with 30.2 million payrolled employees in all.",
      "Two cautions. The IPPR figure most often quoted, 8 million, is the top of its range, with no GDP gain; its central case is 4.4 million with a gain of about 6.4 per cent of GDP. And the Tony Blair Institute's peak displacement of 275,000 a year is below the 450,000 job losses the UK already sees in a normal year: the question it raises is not whether the labour market can absorb the flow but whether the flow lands on the same towns and the same pay grades."
    ],
    "note": "The ONS has published no estimate of the share of UK jobs affected by AI; its 2019 automation article covered England in 2017 and predates generative AI. The Department for Education report cites a 10 to 30 per cent automatable range from PwC and the British Academy; that is not a DfE estimate and is not used here."
  },
  "lloyds": {
    "eyebrow": "The scenario",
    "heading": "If a bank the size of Lloyds cut 85 per cent of its UK workforce",
    "intro": "Lloyds Banking Group has announced no such cut. Its 2026 statements are about AI job creation: over 1,000 AI roles planned in 2026 and a target of more than £100 million of value from generative AI. The 85 per cent is a hypothetical chosen to test the system, and the bank is used because it publishes its UK headcount and the employment taxes on it. Every input is below with its source.",
    "inputs": [
      {
        "label": "UK employees, 2025",
        "value": "56,069",
        "source": "Lloyds tax strategy 2026, the basis on which its employer NICs are reported"
      },
      {
        "label": "UK employees, 2024",
        "value": "59,490",
        "source": "Lloyds tax strategy 2025; the count fell by 3,421 in a year with no redundancy announcement"
      },
      {
        "label": "Average group headcount, 2025",
        "value": "64,038",
        "source": "Annual Report 2025, Note 10, of which 60,331 in the UK; a different basis, not mixed with the row above"
      },
      {
        "label": "Employer's National Insurance paid, 2025",
        "value": "£485m",
        "source": "Lloyds tax strategy 2026, taxes borne"
      },
      {
        "label": "PAYE income tax collected from staff, 2025",
        "value": "£1,770m",
        "source": "Lloyds tax strategy 2026, taxes collected"
      },
      {
        "label": "Employees' National Insurance collected, 2025",
        "value": "£152m",
        "source": "Lloyds tax strategy 2026, taxes collected"
      },
      {
        "label": "Total staff costs, 2025",
        "value": "£4,707m",
        "source": "Annual Report 2025, Note 10"
      },
      {
        "label": "Profit before tax, 2025",
        "value": "£6,661m",
        "source": "Annual Report 2025, income statement"
      },
      {
        "label": "Total tax contribution, 2025",
        "value": "£2,811m",
        "source": "Lloyds tax strategy 2026, taxes borne"
      }
    ],
    "scenario": [
      {
        "label": "Jobs removed at 85 per cent",
        "value": "47,659",
        "source": "56,069 x 85%; assumed to fall evenly across pay grades"
      },
      {
        "label": "Employment taxes lost each year",
        "value": "£2,046m",
        "source": "85% of employer NICs, PAYE and employee NICs (£2,407m together)"
      },
      {
        "label": "Of which employer's National Insurance",
        "value": "£412m",
        "source": "the only one of the three the employer bears itself"
      },
      {
        "label": "Staff costs saved each year",
        "value": "£4,001m",
        "source": "85% of total staff costs; assumes the AI that replaces them costs nothing, which flatters the bank"
      },
      {
        "label": "Corporation tax on that saving at 25 per cent",
        "value": "£1,000m",
        "source": "if the whole saving became taxable profit; before the bank surcharge"
      },
      {
        "label": "Net loss to the Exchequer, first round",
        "value": "£1,046m",
        "source": "employment taxes lost less corporation tax gained, before any benefit paid"
      },
      {
        "label": "New style JSA if every one claimed for 26 weeks",
        "value": "£118.4m",
        "source": "47,659 x £95.55 x 26"
      },
      {
        "label": "UC standard allowance if every one claimed for a year",
        "value": "£243.0m",
        "source": "47,659 x £424.90 x 12, single, 25 or over, before housing and other elements"
      }
    ],
    "paragraphs": [
      "The arithmetic is the OBR's point in miniature. The bank would stop paying and collecting about £2.0 billion a year of taxes on wages. Even if every pound of the £4.0 billion saved on staff turned into taxable profit, corporation tax at 25 per cent would claw back £1.0 billion of it. The Exchequer is about £1.0 billion a year worse off on this one employer before it has paid a penny of benefit, and the shareholders are better off. Multiply across the 1,124,000 jobs in the sector and the 55.1 billion of employment taxes the industry says it pays, and the shape of the fiscal problem is clear.",
      "For the people, the current rules are these. An employer proposing 100 or more redundancies must notify the Redundancy Payments Service and consult for at least 45 days before the first dismissal (30 days for 20 to 99); the penalty for skipping consultation rose to 180 days' pay per employee on 6 April 2026 under the Employment Rights Act 2025. Statutory redundancy pay is a week's pay per year of service between 22 and 40, one and a half weeks from 41, capped at £751 a week and 20 years, so a maximum of £22,530; a 35 year old with ten years' service at or above the cap gets £7,510. After that, new style Jobseeker's Allowance pays £95.55 a week for up to 182 days, whatever the previous salary, and Universal Credit's standard allowance for a single adult is £424.90 a month, means tested against savings and a partner's income.",
      "Set against the sector's median pay of £4,295 a month, Jobseeker's Allowance is £414 a month, 9.6 per cent of the gross wage; against the all employee median of £2,657 it is 15.6 per cent. Under the German rules the same finance worker would receive 60 per cent of standardised take home pay: about £2,023 a month on an illustration that applies UK income tax and National Insurance for 2026 to 2027 to that gross wage, for 6 to 12 months if under 50 depending on the contribution record, and up to 24 months from 58. The average employee would receive about £1,324 a month. That gap, not the headcount, is the resilience question: a mortgage on a finance salary does not fall to £414 a month when the job does."
    ],
    "entitlements": [
      {
        "item": "Contributory benefit, single adult, no children",
        "uk": "£95.55 a week new style JSA, flat rate",
        "germany": "60 per cent of standardised net pay (67 per cent with a child)"
      },
      {
        "item": "How long",
        "uk": "up to 182 days",
        "germany": "6 to 12 months under 50 by contribution record; 15 at 50, 18 at 55, 24 at 58"
      },
      {
        "item": "Qualifying condition",
        "uk": "Class 1 contributions in the two full tax years before the claim",
        "germany": "12 months of insured employment in the reference period"
      },
      {
        "item": "Paid for by",
        "uk": "National Insurance, 8 per cent employee and 15 per cent employer, not ring fenced",
        "germany": "a separate 2.6 per cent unemployment contribution split equally, on pay up to 8,450 euro a month"
      },
      {
        "item": "Statutory redundancy pay",
        "uk": "capped at £751 a week, maximum £22,530",
        "germany": "no statutory formula; severance is negotiated through works councils and social plans"
      },
      {
        "item": "Short time working",
        "uk": "none",
        "germany": "Kurzarbeitergeld, 60 per cent of the net pay shortfall for up to 12 months, extendable to 24 by regulation"
      },
      {
        "item": "Retraining while still employed",
        "uk": "employer's choice; Growth and Skills Levy funds from August 2026",
        "germany": "Qualifizierungsgeld, 60 per cent of the net pay difference during training over 120 hours where structural change affects 20 per cent of the workforce"
      }
    ],
    "note": "Lloyds' UK employee count and its employment taxes are both from its tax strategy report, so the scenario stays on one basis. The annual report's average headcount is on a different basis and is shown for scale only. The 'evenly across pay grades' assumption is generous to the bank: the roles most exposed are clerical and mid ranking, not the highest paid. The German take home illustration applies UK tax rules to a UK wage; the German benefit is calculated on a standardised net figure under German tax rules, so it is a like for like comparison of rates, not of euros."
  },
  "machine": {
    "eyebrow": "Option one",
    "heading": "Tax the machine as if it were a person",
    "intro": "The instinct is old and simple: if an AI agent does the work a person did, tax it as the person was taxed. The record below is what has actually happened when governments and economists have tried to make that work.",
    "record": [
      {
        "when": "February 2017",
        "who": "European Parliament",
        "what": "Adopted civil law rules on robotics by 396 votes to 123 with 85 abstentions. The adopted text asks only for job trends to be monitored and social security viability considered; the rapporteur complained that the labour market consequences had been stripped out. The Parliament's own record does not say it voted down a robot tax."
      },
      {
        "when": "February 2017",
        "who": "Bill Gates",
        "what": "Told Quartz that a human doing 50,000 dollars of work is taxed on that income, so if a robot does the same work we should tax the robot at a similar level."
      },
      {
        "when": "February 2017",
        "who": "UK Treasury",
        "what": "Told the Commons the Government had no current plans to introduce a robot tax. No later UK statement on taxing automation was found."
      },
      {
        "when": "2020",
        "who": "Acemoglu, Manera and Restrepo",
        "what": "Found the US effective tax on labour at about 25.5 per cent against about 10 per cent on equipment and software, falling to about 5 per cent after full expensing, and argued this pushes automation past the socially useful level; their first remedy is to fix that imbalance, an automation tax only if that is infeasible."
      },
      {
        "when": "2022",
        "who": "Guerreiro, Rebelo and Teles",
        "what": "Found it optimal to tax robots while displaced routine workers are still working, zero once they retire. A transition tax, not a permanent one."
      },
      {
        "when": "June 2024",
        "who": "IMF Fiscal Affairs Department",
        "what": "Special taxes on AI: not recommended, because they are hard to operationalise and slow productivity. Recommended instead: reconsider the corporate tax incentives that encourage rapid labour displacement, strengthen general taxes on capital income, and broaden unemployment insurance."
      }
    ],
    "paragraphs": [
      "The proposal fails on definition before it fails on economics. A person is a countable unit with a payslip; an AI agent is not. One model can serve a thousand tasks an hour, spun up and down by the second, licensed from a company in another jurisdiction, and the work it does for a UK employer may run on a server in Dublin or Virginia. There is no 'salary' to tax and no headcount to assess. Any levy 'per agent' would be gamed by consolidating agents, and any levy on 'efficiency' would need a counterfactual wage bill that the taxpayer defines. The IMF's 'hard to operationalise' is a polite way of saying nobody has written a workable tax base for it.",
      "What the economists agree on is the imbalance underneath. The UK taxes a pound of wages at an effective 46 per cent and a pound of profit at 27 per cent, on the OBR's own numbers, and since April 2023 full expensing lets a company deduct 100 per cent of the cost of new plant and machinery in the year it buys it. That is the same lever Acemoglu and his coauthors identified in the United States: the tax system does not need to be told to prefer machines, it already does. Software and cloud compute are not plant and machinery, but they are deductible operating costs, and the person they replace carried 15 per cent employer National Insurance on top of the wage."
    ],
    "verdict": "Do not tax the agent; tax the substitution, once, and rebalance the base. Concretely: a displacement levy triggered by the collective redundancy machinery that already exists. An employer filing an HR1 for 100 or more redundancies would pay twelve months of the employer National Insurance on the departing wages into a national transition fund: in the Lloyds scenario about £412 million, once. It is calculable from the payroll, it needs no definition of an agent, it is the Guerreiro transition tax in administrable form, and it makes the firm that captures the saving fund the retraining of the people it releases. Alongside it, over a parliament, move the burden from employer National Insurance towards profits, and stop treating full expensing as free: the IMF's reconsideration of incentives that encourage displacement, applied to the UK's own.",
    "note": "South Korea's 2017 cut to its automation investment credit is often called the first robot tax; no primary Korean source could be opened, so it is not counted in the record above."
  },
  "onshoring": {
    "eyebrow": "Option two",
    "heading": "Penalise offshoring, reward hiring, training and making in the UK",
    "intro": "The second instinct is to make it dearer to move work out and cheaper to keep it here. The table is what the UK already does; the paragraphs are what trade law lets it do next.",
    "tools": [
      {
        "tool": "Corporation tax",
        "rate": "25% main, 19% small profits",
        "what": "The tax on profit the OBR says a wage based take would fall back on"
      },
      {
        "tool": "Full expensing",
        "rate": "100% first year",
        "what": "Deduct the whole cost of new plant and machinery in the year of purchase, permanent since April 2023"
      },
      {
        "tool": "Merged R&D expenditure credit",
        "rate": "20%",
        "what": "Taxable credit on qualifying research spending, whoever the researchers are"
      },
      {
        "tool": "Patent Box",
        "rate": "10%",
        "what": "Lower corporation tax on profits from patented inventions; rewards where the IP sits, not where the people are"
      },
      {
        "tool": "Employment Allowance",
        "rate": "£10,500",
        "what": "Knocks that much off an employer's National Insurance bill, all employers since April 2025"
      },
      {
        "tool": "Apprenticeship Levy",
        "rate": "0.5% of pay bill over £3m",
        "what": "Funds apprenticeships; Growth and Skills Levy reforms change what it can be spent on from August 2026"
      },
      {
        "tool": "Freeport and Investment Zone NICs relief",
        "rate": "zero to £25,000 for 36 months",
        "what": "No employer National Insurance on the first £25,000 of a new hire's pay, on designated sites only"
      },
      {
        "tool": "Digital Services Tax",
        "rate": "2% of revenue",
        "what": "On search, social media and marketplace revenues; raised £808 million in 2024 to 2025 and is described by the Treasury as interim"
      }
    ],
    "paragraphs": [
      "An outright tax on offshoring jobs has been proposed by a major economy exactly once in recent memory. The Biden campaign in 2020 promised a 10 per cent surtax on top of a 28 per cent rate, 30.8 per cent in all, on profits from production moved overseas for sale back into the United States, paired with a 10 per cent Made in America credit. The US corporate rate remains 21 per cent in the tax code. No UK party or think tank proposal to tax the offshoring of jobs was found.",
      "The reason is partly law. The WTO subsidies agreement prohibits subsidies contingent on export performance or on the use of domestic over imported goods, and the Subsidy Control Act 2022 extends the second prohibition to goods or services. Neither text mentions hiring. A subsidy tied to employing people in the UK is not on the prohibited list; it is actionable if it is specific to an enterprise or a region, and it must satisfy the Act's principles, which is why the freeport relief is drawn by geography. The Act's only rule about moving jobs, section 18, bans subsidies that shift activity from one part of the UK to another (relocation within the UK). Nothing in it addresses moving work to Bangalore or to a data centre.",
      "The other reason is that a penalty on offshoring aims at the wrong target. The Lloyds scenario does not move jobs abroad; it removes them. A tariff on foreign labour would not touch it, and the models that do the work are sold by American firms whatever tax the UK writes. The instrument that reaches both cases is the one the UK already uses for freeports: the employer's National Insurance. It is levied only on people employed here, it is 15 per cent of every wage above £5,000, and it is the cost the employer compares against the licence fee."
    ],
    "verdict": "Reward through the payroll, not the border. Extend the freeport model nationally for defined behaviour: a reduced employer National Insurance rate on apprentices and on employees who complete accredited retraining paid for by the firm, and a higher rate, funded by the same measure, on payrolls that shrink while profits rise. The Apprenticeship Levy already gives HMRC the pay bill data. A firm that hires, trains and keeps people in the UK would face a visibly lower cost per head than one that does not, without a tariff, without a trade dispute, and without asking the taxpayer to define what an AI agent is. The trade off is real: it raises the cost of every job in firms that automate, and the OBR's post behavioural yield on the 2025 employer rise shows how much of a payroll tax comes back in lower wages and fewer hires.",
    "note": "The Digital Services Tax is included because it is the only UK tax written for firms whose value is created by UK users rather than UK employees; the Treasury's own review calls it interim and its yield is a rounding error against the wage base."
  },
  "insurance": {
    "eyebrow": "Option three",
    "heading": "An earnings related unemployment insurance, as Germany has and Britain once had",
    "intro": "The third response does not stop the jobs going. It changes what happens to the person the month after. Five comparators pay a share of the previous wage; the UK pays a flat rate. The rows are statute, read on 20 September 2026.",
    "comparators": [
      {
        "country": "Germany",
        "rate": "60 per cent of standardised net pay, 67 per cent with a child",
        "duration": "6 to 12 months under 50, up to 24 from 58",
        "funding": "2.6 per cent contribution split equally, ceiling 8,450 euro a month"
      },
      {
        "country": "Denmark",
        "rate": "90 per cent of previous income, capped at 22,041 kroner a month",
        "duration": "2 years within 3",
        "funding": "voluntary insurance funds with state subsidy"
      },
      {
        "country": "Netherlands",
        "rate": "75 per cent of the monthly wage for two months, then 70 per cent",
        "duration": "3 to 24 months by work history",
        "funding": "employer contributions"
      },
      {
        "country": "France",
        "rate": "57 per cent of the gross daily reference wage, capped at 75 per cent",
        "duration": "6 to 18 months under 55 (548 days)",
        "funding": "employer contributions and a share of a social levy"
      },
      {
        "country": "Austria",
        "rate": "55 per cent of net income",
        "duration": "20 weeks, rising to 52 with age and record",
        "funding": "contributions split between employer and employee"
      },
      {
        "country": "United Kingdom",
        "rate": "£95.55 a week, whatever the previous wage",
        "duration": "182 days",
        "funding": "National Insurance, not ring fenced; the contributory link is a qualifying test, not a rate"
      }
    ],
    "replacement": [
      {
        "label": "Netherlands (2024)",
        "display": "74%",
        "value": 74
      },
      {
        "label": "France",
        "display": "68%",
        "value": 68
      },
      {
        "label": "Germany",
        "display": "60%",
        "value": 60
      },
      {
        "label": "Denmark (2024)",
        "display": "59%",
        "value": 59
      },
      {
        "label": "Austria",
        "display": "55%",
        "value": 55
      },
      {
        "label": "OECD average",
        "display": "54%",
        "value": 54
      },
      {
        "label": "United Kingdom, with Universal Credit and housing support",
        "display": "37%",
        "value": 37
      },
      {
        "label": "United Kingdom, contributory benefit only",
        "display": "11%",
        "value": 11
      }
    ],
    "paragraphs": [
      "The OECD's tax and benefit model gives the cleanest comparison. A single person on the average wage keeps 11 per cent of their previous net income in the second month out of work in the UK on the contributory benefit alone, 37 per cent if Universal Credit and rent support are claimed and paid in full. Germany is 60 per cent, France 68 per cent, the Netherlands 74 per cent, the OECD average 54 per cent. The comparators barely move between the two assumptions because their contributory tier does the work; the UK figure moves by a factor of three because its contributory tier is a formality.",
      "Britain has done this before. The National Insurance Act 1966 added an earnings related supplement to flat rate unemployment benefit: one third of average weekly earnings between £9 and £30, capped so that total benefit could not exceed 85 per cent of earnings, for up to 6 months. The minister, Margaret Herbison, told the Commons it was there to promote the mobility of labour needed to meet economic and technological change, alongside the Redundancy Payments Act of the year before. The Social Security (No. 2) Act 1980 abolished it from 1982, a saving the debate put at £360 million a year. The flat rate has been the whole contributory offer ever since.",
      "The current Government's proposal does not restore it. The March 2025 Pathways to Work green paper consults on a single 'Unemployment Insurance' replacing new style JSA and ESA, paid flat rate at the NS ESA higher rate, time limited to 6 to 12 months. It is contributory and it is flat rate. It would not change the OECD figure above by much, and it would not keep a mortgage on a finance salary.",
      "Germany's system is not cheap and it is not currently solvent. In 2025 the Bundesagentur für Arbeit spent 26.47 billion euro on Arbeitslosengeld for about 999,000 recipients on average, roughly 26,496 euro a head, from contribution income of 39.91 billion, and closed the year 4.23 billion euro in deficit with its reserve exhausted. The same agency paid short time working benefit for 6.00 million people in April 2020 at a cost of 22.07 billion euro that year, which is the reason German unemployment barely moved in the pandemic. Insurance costs money precisely when it pays out; that is the point of it."
    ],
    "costing": [
      {
        "label": "Redundancies, May to July 2026",
        "value": "114,000",
        "source": "ONS Labour Force Survey, series BEAO"
      },
      {
        "label": "Annualised at that rate",
        "value": "456,000",
        "source": "four quarters at the latest level; assumed, the flow is seasonal"
      },
      {
        "label": "Median take home pay, all employees",
        "value": "£2,206 a month",
        "source": "£2,657 gross on PAYE, August 2026, at 2026-27 income tax and NI rates; illustration"
      },
      {
        "label": "Benefit at 60 per cent of that",
        "value": "£1,324 a month",
        "source": "the German general rate"
      },
      {
        "label": "Gross cost if every one drew it for six months",
        "value": "£3.62bn",
        "source": "an upper bound: not all qualify and most return to work sooner"
      },
      {
        "label": "Less the new style JSA it replaces",
        "value": "£1.13bn",
        "source": "£2,484.30 per person for 26 weeks, if every one claimed"
      },
      {
        "label": "Net cost, upper bound",
        "value": "£2.49bn a year",
        "source": "before savings on Universal Credit and before behavioural effects"
      },
      {
        "label": "Employer NICs needed to fund it",
        "value": "about 0.3 of a point",
        "source": "each point of employer NICs was worth £9.8bn a year static in the OBR's costing of the 2025 rise"
      },
      {
        "label": "Germany's contribution for comparison",
        "value": "2.6 per cent, 1.3 per cent each side",
        "source": "SGB III sections 341 and 346; buys up to 24 months and short time working cover"
      }
    ],
    "verdict": "Build it as insurance, ring fenced and visible on the payslip, and start at six months. A contributory earnings related benefit at 60 per cent of take home pay for six months, capped at the upper earnings limit, would cost on the sketch above no more than about £2.5 billion a year at today's redundancy rate, less than a third of a point of employer National Insurance, and the cap means it protects the clerk and the branch manager, not the trader. Fund it with a named 'unemployment insurance' line on the payslip split between employer and employee, as Germany does, so that the contributory principle the green paper invokes means something. Pair it with a UK short time working scheme held in reserve, on the German statute, so that a demand shock or a transition can be met with hours cut rather than heads. The trade off is a higher payroll cost in normal years and a benefit that pays most to those who earned most; the answer to the second is the cap, and the answer to the first is the bill this page began with.",
    "note": "OECD net replacement rates are for a single person without children, previously on 100 per cent of the average wage, in the second month of unemployment; Denmark and the Netherlands are 2024 values, the rest 2025. The UK reports no data to the OECD's labour market programme database on out of work income maintenance for 2018 to 2024, so it cannot be placed on that spending measure; Germany spent 0.89 per cent of GDP on it in 2024, Denmark 0.70 and France 1.71. The 1982 effective date of the abolition rests on the 1980 Commons debate. The costed sketch uses the German rate and the UK's own pay and benefit figures; it is an illustration with its assumptions listed, not a costing."
  },
  "brace": {
    "eyebrow": "How to brace",
    "heading": "What to do, in order",
    "intro": "The author's ordering. The first two need no new tax and could be done in a year; the third is the structural answer to the OBR's box; the fourth is what an individual can do while the state decides.",
    "steps": [
      {
        "title": "See it coming: make the HR1 an early warning system",
        "text": "Employers already notify the Redundancy Payments Service of every proposed collective redundancy: 17,297 potential redundancies in August 2026, 35,533 in May. The form does not ask why. Add one field, 'automation or AI', publish the monthly count by sector and place as the ONS already publishes the total, and the country would know within 45 days whether the Lloyds scenario had begun, and where. Cost: nil."
      },
      {
        "title": "Insure the income first: an earnings related benefit at six months",
        "text": "The gap between £414 a month and 60 per cent of take home pay is the difference between a redundancy and a repossession. It is the cheapest of the three options, it is what the 1966 Act did for the last technological transition, and the green paper's flat rate 'Unemployment Insurance' is the wrong answer to the right question. Add a short time working scheme on the German model, dormant until triggered."
      },
      {
        "title": "Charge the substitution, once, and rebalance the base over a parliament",
        "text": "A displacement levy of twelve months' employer National Insurance on the wages released in any collective redundancy of 100 or more, paid into a transition fund that finances the retraining the Industrial Strategy promises. Then the slow work: shift the burden from the 46 per cent on wages towards the 27 per cent on profits, review full expensing against its displacement effect as the IMF advises, and put a sovereign stake in the gains. The National Wealth Fund has £27.8 billion of capacity and a clean energy remit; Norway's fund holds 22,683 billion kroner from a resource the country did not want to see captured privately. AI is that resource."
      },
      {
        "title": "For the individual: assume the flat rate and act accordingly",
        "text": "Until the state moves, the rules are £95.55 a week for 182 days and a redundancy cheque capped at £22,530. Anyone in the sectors the exposure studies rank first should hold the savings that a German worker does not need to, read their employer's collective consultation rights, and treat retraining the firm will pay for as part of the wage. The Growth and Skills Levy changes from August 2026 make that money easier to spend on short courses; ask for it."
      }
    ],
    "paragraphs": [
      "None of this stops AI, and none of it should. The OBR's central estimate is that AI adds 0.2 percentage points a year to productivity growth over the decade, and the Government's action plan is right that some jobs will be replaced by AI, many will be augmented, and an unknown number created. The argument here is narrower: the UK's tax base and its safety net were both designed for a country in which the value is made by people on payrolls, and the OBR has now said in print that this assumption may not hold. Preparing for that is not pessimism. It is the resilience the index measures."
    ]
  },
  "questions": {
    "eyebrow": "Open questions",
    "heading": "Questions this raises",
    "items": [
      {
        "q": "How much of UK tax comes from wages?",
        "a": "Income tax and National Insurance raised £528 billion of the £939 billion HMRC collected in 2025 to 2026, 56 per cent of the total. The OBR puts income tax excluding self assessment plus National Insurance at £480 billion, 15.7 per cent of GDP, and its effective tax rate on wages and salaries at 46 per cent against 27 per cent on profits."
      },
      {
        "q": "What happens to tax revenue if AI replaces jobs?",
        "a": "On the OBR's July 2026 reduced labour share scenario the wage share of GDP halves from 40 per cent to 20 per cent by 2075 to 2076 and tax falls from about 38 per cent to under 35 per cent of GDP with GDP unchanged, because profit is taxed at little more than half the rate of wages. The OBR calls it a stylised scenario, not a forecast."
      },
      {
        "q": "Does the UK have a robot tax or an AI tax?",
        "a": "No. The Treasury told the Commons in February 2017 that the Government had no current plans to introduce one and no later statement was found. The IMF's June 2024 note says special taxes on AI are not recommended because they are hard to operationalise, and advises reconsidering the incentives that encourage displacement, strengthening capital income taxes and broadening unemployment insurance instead."
      },
      {
        "q": "How much unemployment benefit do you get in the UK compared with Germany?",
        "a": "New style Jobseeker's Allowance pays £95.55 a week for up to 182 days whatever the previous salary. Germany pays 60 per cent of standardised net pay (67 per cent with a child) for 6 to 12 months under 50 and up to 24 months from 58. On the OECD's measure a single person on the average wage keeps 11 per cent of their income in the second month out of work in the UK and 60 per cent in Germany."
      },
      {
        "q": "Has Britain ever had an earnings related unemployment benefit?",
        "a": "Yes. The National Insurance Act 1966 added an earnings related supplement of one third of average weekly earnings between £9 and £30, capped at 85 per cent of earnings in total, for up to 6 months. The Social Security (No. 2) Act 1980 abolished it from 1982. The 2025 Pathways to Work green paper proposes a new contributory 'Unemployment Insurance', but at a flat rate."
      },
      {
        "q": "What would an 85 per cent workforce cut at Lloyds cost the Exchequer?",
        "a": "Lloyds has announced no such cut; the figure is a hypothetical on its published numbers. It would remove 47,659 of 56,069 UK jobs and about £2.0 billion a year of employer NICs, PAYE and employee NICs. If the whole £4.0 billion saved on staff became taxable profit, corporation tax at 25 per cent would recover £1.0 billion, leaving the Exchequer about £1.0 billion a year worse off before any benefit is paid."
      },
      {
        "q": "What redundancy pay and benefits does a UK employee get?",
        "a": "Statutory redundancy pay is a week's pay per year of service between 22 and 40 and one and a half weeks from 41, capped at £751 a week and 20 years, so at most £22,530. Employers proposing 100 or more redundancies must consult for at least 45 days. After that, new style Jobseeker's Allowance is £95.55 a week for up to 182 days and the Universal Credit standard allowance for a single adult is £424.90 a month, means tested."
      },
      {
        "q": "Can the UK tax companies for offshoring jobs?",
        "a": "Nothing in trade law stops a tax, but no UK proposal exists and the only recent one abroad, the Biden campaign's 10 per cent offshoring surtax of 2020, was never enacted: the US corporate rate remains 21 per cent. WTO rules and the Subsidy Control Act 2022 prohibit subsidies tied to using domestic over imported goods or services and say nothing about hiring, which is why the UK already rewards employment on freeport sites through a zero employer National Insurance rate up to £25,000."
      }
    ]
  },
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      "name": "Corporation Tax rates and allowances, HMRC, updated 1 April 2026",
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      "url": "https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax"
    },
    {
      "name": "Use the Patent Box to reduce your Corporation Tax on profits, HMRC",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.gov.uk/guidance/corporation-tax-the-patent-box"
    },
    {
      "name": "R&D tax relief: the merged R&D expenditure credit scheme and enhanced R&D intensive support, HMRC, updated 8 January 2026",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.gov.uk/guidance/research-and-development-rd-tax-relief-the-merged-scheme-and-enhanced-rd-intensive-support"
    },
    {
      "name": "Check if you can claim full expensing or 50% first year allowances, HMRC",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.gov.uk/guidance/check-if-you-can-claim-full-expensing-or-50-first-year-allowances"
    },
    {
      "name": "Pay Apprenticeship Levy, HMRC, updated 6 April 2026",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.gov.uk/guidance/pay-apprenticeship-levy"
    },
    {
      "name": "Check if you can claim National Insurance relief in UK Freeport or Investment Zone special tax sites, HMRC, updated 6 April 2026",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.gov.uk/guidance/check-if-you-can-claim-national-insurance-relief-in-freeport-tax-sites"
    },
    {
      "name": "Digital Services Tax Review Report, HM Treasury, November 2025",
      "licence": "Open Government Licence v3.0",
      "url": "https://assets.publishing.service.gov.uk/media/6925dfd647904590c9da2d36/Digital_Services_Tax_Review_.pdf"
    },
    {
      "name": "Agreement on Subsidies and Countervailing Measures, Article 3, World Trade Organization",
      "licence": "WTO",
      "url": "https://www.wto.org/english/docs_e/legal_e/24-scm.pdf"
    },
    {
      "name": "Subsidy Control Act 2022, sections 17 and 18, legislation.gov.uk",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.legislation.gov.uk/ukpga/2022/23/section/17"
    },
    {
      "name": "Fact Sheet: The Biden-Harris Plan to Fight for Workers by Delivering on Buy America and Make It in America, 9 September 2020, via The American Presidency Project",
      "licence": "The American Presidency Project",
      "url": "https://www.presidency.ucsb.edu/documents/biden-campaign-press-release-fact-sheet-the-biden-harris-plan-fight-for-workers-delivering"
    },
    {
      "name": "26 U.S. Code section 11(b), corporate tax rate, Legal Information Institute",
      "licence": "Cornell LII",
      "url": "https://www.law.cornell.edu/uscode/text/26/11"
    },
    {
      "name": "Framework Document: National Wealth Fund, HM Treasury, 28 May 2026",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.gov.uk/government/publications/national-wealth-fund-framework-document/framework-document-national-wealth-fund"
    },
    {
      "name": "Record high krone return in the first half of the year, Norges Bank Investment Management, 12 August 2026",
      "licence": "NBIM",
      "url": "https://www.nbim.no/en/news-and-insights/the-press/press-releases/2026/record-high-krone-return-in-the-first-half-of-the-year/"
    },
    {
      "name": "AI Opportunities Action Plan, Department for Science, Innovation and Technology, 13 January 2025",
      "licence": "Open Government Licence v3.0",
      "url": "https://www.gov.uk/government/publications/ai-opportunities-action-plan/ai-opportunities-action-plan"
    }
  ],
  "caveats": [
    "This page is a personal analysis. Its proposals are the author's opinion and are not part of the British Resilience Index, which scores official indicators only.",
    "The 85 per cent workforce reduction at Lloyds is a hypothetical chosen by the author. Lloyds Banking Group has announced no such reduction; its 2026 public statements concern AI job creation and AI training for its colleagues.",
    "Exposure estimates (OBR, DfE, IPPR, Tony Blair Institute, IMF) are each attributed to their author and measure different things: a share of the labour force, a relative occupational score, jobs under a scenario, or tasks. They are not this site's forecasts and should not be added together.",
    "The IMF 40 per cent and 60 per cent figures are quoted from a presentation of Staff Discussion Note 2024/001 by its authors, hosted by the Joint Vienna Institute, because the note itself could not be retrieved; the presentation names the note as its source.",
    "The OBR's reduced labour share scenario runs to 2075 to 2076 and is described by the OBR as stylised and at the upper end of the literature. It is a scenario, not a forecast.",
    "The industry total tax contribution study (£110.2 billion, 12.3 per cent of receipts) covers financial and related professional services, wider than the ONS section K jobs figure, and its latest edition is the year to 31 March 2023.",
    "German benefit rates apply to a standardised net pay defined in German law. The illustrations here apply UK income tax and National Insurance for 2026 to 2027 to UK gross wages, so they compare rates, not currencies. The German qualifying reference period was not verified against SGB III section 143 and is not stated.",
    "The costed sketch annualises one quarter's Labour Force Survey redundancies, assumes every one of them qualifies and draws the benefit for the full six months, and nets off only the JSA it replaces. It is an upper bound with its assumptions listed, not a costing, and it ignores behavioural effects in both directions.",
    "The 'one point of employer National Insurance' figure is the OBR's static costing of the April 2025 rate rise divided by 1.2; the post behavioural yield of the same measure was about two thirds of the static figure.",
    "Bill Gates's 2017 remark is quoted as reproduced by Fortune from the Quartz interview, which could not be retrieved directly. South Korea's 2017 credit reduction is omitted because no primary source could be opened.",
    "The Hansard passages are read via the Parliament historic Hansard API (1966, 1980) and TheyWorkForYou (2017); the 1982 effective date of the abolition of the earnings related supplement rests on the 1980 debate, not on the Act's own text."
  ]
}