The minority Conservative government’s benefit freeze will take more than £300 out of working households’ budgets, meaning less cash to spend into the economy – which will shrink as a result.
The short-sighted move by narrow-minded Tory penny-pinchers means the UK’s economy will be contracting when the full effect of Brexit hits us – a phenomenon that is believed can only amplify the harm.
National economies work best when people at the lowest level of society receive enough money – not only to survive, but to spend on improvements to their homes and lives.
Poor families spend all their money into the economy, and the so-called “multiplier” effect means the cash adds several times its value to the national economy (depending on how it is spent) before it returns to the Treasury as tax.
In contrast, rich people spend only a fraction of their cash into the national economy and put the rest in their bank account – most probably in a tax haven, to ensure that the Treasury won’t receive the tax it is due and therefore starving the economy. Not only that, but huge tax cuts granted by the Tories since 2010 mean that the tax contribution by the rich has diminished significantly.
The whole process is part of the Tory “starve the beast” project described by This Writer a few days ago.
By depriving the poor of the money they need – simply to survive – the Tories are pushing millions of people towards deprivation and debt. There won’t be money available to pay the rent, to pay for cars or public transport, for heating, for food; there won’t be disposable income for luxury items.
Debt will proliferate, the economy will stall and crash – and then there won’t be any money for anyone.
The Tories don’t care because they don’t understand economics.
The Government has confirmed it will be freezing benefits until 2020 costing a typical working family around £300 per year.
Caroline Dinenage, a work and pensions minister, said the freeze for working age people who receive benefits will go on even as the state pension and some other benefits increase by three per cent, in line with inflation.
This will be a real terms cut in income of £315 a year for the typical working family with two children as the cost of living will eat further into their income, according to a report by the Resolution Foundation.
The freeze, which has been in place since 2015, has coincided with the longest fall in living standards in the past 60 years with the thinktank saying real disposable incomes are now to set to fall for 19 successive quarters.
In a report published before the budget, the foundation warned the freeze would worsen inequality which would take an average of £715 away from the poorest third of households whereas the richest third looks set to gain £185 from other tax breaks.
Some will see the cut partially offset by the increase in minimum wage, which will go up to £7.83 per hour from April, but many will still feel the squeeze as the Treasury hopes to save £1.9bn over the next year.
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