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Benefits are a positive??

Kvothe
So i asked google AI how much of the Benefit bill goes back into the Economy and basically all of it does.
I wonder if politicians know the impact of benefit cuts have on the wider economy since virtually none of the money is saved..
Can anyone confirm this? is the AI wrong?
The total amount of the UK benefits bill that goes back into the economy is 
nearly the entire initial sum, which is forecast to be approximately £313 billion for the 2024/25 financial year. 
This initial amount immediately re-enters the economy as spending on essential goods and services, and the total economic impact is higher due to a significant multiplier effect.
Breakdown of the Economic Flow (in Pounds)
For the 2024/25 period, the approximate flow of funds is as follows:
Description  Amount in Pounds (approx) Citation/Explanation
Total Welfare Bill (2024/25) £313 billion
Initial Amount Spent in Economy ~£313 billion (nearly 100%) Recipients typically spend all of this on necessities like food and housing.
Total Economic Impact (Multiplier) ~£532.1 billion Based on an estimated economic multiplier of 1.7.
The rapid circulation of these funds means:
  • High Spending Rate: Benefit recipients typically have a very high marginal propensity to consume (MPC), meaning they spend the money quickly on rent, food, and utilities, rather than saving it.
  • Multiplier Effect: This spending supports local jobs and businesses, generating secondary economic activity. Analysis suggests every £1 spent in social security can generate as much as £1.70 in total local economic impact (a multiplier of 1.7). 
The government's total expenditure on social protection for 2024/25 was around £384 billion (a slightly broader measure including things like DWP running costs). The £313 billion figure represents the direct benefit payments themselves
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  • It is probably easiest to see by thinking of the edge case. Imagine no-one worked. The government paid everyone benefits, it all goes into the economy. It would be fine, as long as everyone spent it all and no one saved any right?

    That is the idea of universal basic income.

    So would it work? We are a net importer of food. We also import goods. So you can't spend it on Chinese goods like phones or laptops, or buy bananas or oranges, or have a car that uses any foreign parts, or use plastics or oil, or use the heating when the sun is not shining or it's not windy as we use imported gas, or but anything from companies that are foreign owned like Lidl or Aldi as profits go offshore. These are all ways money leaks out. Same for holidays. And you need to stop remittances, where foreign workers send money abroad.

    You need a closed economy for it to be possible with strict financial controls otherwise money leaks out. You need to make everything you consume, which means all the benefit recipient s need to work.

    If you could exactly balance imports and exports then maybe.

    So does all the benefits money stay here? No.

    Benefits are essentially a luxury rich countries can afford, else why do poor countries not do it. A d how do rich countries get rich? By making lots of stuff they want so their own living standards rise or through lots of trade, i.e. selling stuff (goods or services).

    It is interesting to note that the end of cold war was supposed to provide a peace dividend. We used to make our own arms, ships, planes, bombs, tanks, etc. defence spending was more circular. Scaling it all back saw most the money evaporate.

    Scaling it up now would not work because we import too much. We don't make all the stuff.

    I believe Germany's rearmament program in the 1930's was aimed at the same thing, to get out of their economic mess. I don't think it was in a good state, it was smoke and mirrors to be paid for by foreign acquisitions.

    I'm not an economist though. I'm still undecided whether endlessly increasing fiat money is all sleight of hand really. 

Reply

  • It is probably easiest to see by thinking of the edge case. Imagine no-one worked. The government paid everyone benefits, it all goes into the economy. It would be fine, as long as everyone spent it all and no one saved any right?

    That is the idea of universal basic income.

    So would it work? We are a net importer of food. We also import goods. So you can't spend it on Chinese goods like phones or laptops, or buy bananas or oranges, or have a car that uses any foreign parts, or use plastics or oil, or use the heating when the sun is not shining or it's not windy as we use imported gas, or but anything from companies that are foreign owned like Lidl or Aldi as profits go offshore. These are all ways money leaks out. Same for holidays. And you need to stop remittances, where foreign workers send money abroad.

    You need a closed economy for it to be possible with strict financial controls otherwise money leaks out. You need to make everything you consume, which means all the benefit recipient s need to work.

    If you could exactly balance imports and exports then maybe.

    So does all the benefits money stay here? No.

    Benefits are essentially a luxury rich countries can afford, else why do poor countries not do it. A d how do rich countries get rich? By making lots of stuff they want so their own living standards rise or through lots of trade, i.e. selling stuff (goods or services).

    It is interesting to note that the end of cold war was supposed to provide a peace dividend. We used to make our own arms, ships, planes, bombs, tanks, etc. defence spending was more circular. Scaling it all back saw most the money evaporate.

    Scaling it up now would not work because we import too much. We don't make all the stuff.

    I believe Germany's rearmament program in the 1930's was aimed at the same thing, to get out of their economic mess. I don't think it was in a good state, it was smoke and mirrors to be paid for by foreign acquisitions.

    I'm not an economist though. I'm still undecided whether endlessly increasing fiat money is all sleight of hand really. 

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