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
