A Broken Benefits System Causing Debt Problems

The UK has a tradition of caring for those who are the worst off in society. A tradition of not kicking someone when they are down, but more and more people are beginning to believe the welfare system is ruining our country. The average household in the UK struggles to produce enough to pay its debts and to provide a suitable home for a family to live in with some level of comfort. The issue withholding the welfare benefits of people not wanting to work has gained momentum since the Tory party has come to power, but many innocent and hardworking people who are unable to find work are being punished for the laziness of others.

Few people would argue that benefit claimants who don’t want to work are entitled to receive benefits, but is the current benefit system broken so badly that we need such a hard line from the UK government.

Debt Problems

Government Reduced Spending

This may seem like a shock, but regardless of the amount of spending the UK government pays towards social housing, benefits and even healthcare, the pot will not run dry. The fact is that government spending is simply changing numbers in bank accounts and at the end, when everything has been added up, the amount of tax we pay is compared to the amount spent by the government and we either have a positive arrangement where more tax is collected than spent or we have a deficit.

Of course, we are spending on some of our tax pounds on items that are imported when we use medicines in hospitals, but much of our budget is spent on wages, much of which is recouped through income tax, NI and VAT. Our money only leaves the when we spend on imports as consumers or holiday abroad. Foreign owned businesses that operate in the UK also take money out of the country, but this is the same for all countries and most foreign owned businesses that operate that way have their umbrella companies in offshore havens where individuals or stockholders benefit. This means our economy is no better or worse off than other nations.

The Civil Servant Mistake

Widespread axing of civil servants and government employees was a disaster because those people, who were employees of local councils and the UK government, instantly put more pressure on the benefit system. Essentially, the cost of a person doing nothing and taking an income is similar to the cost of an employee doing something and taking an income when you consider the employee has to pay their own rent or mortgage, which is subsidised greatly when someone claims benefits.

Surely, the right move would be to keep people with skills developed working in the public sector active. This would eventually increase employment opportunities and encourage entrepreneurial activity because the UK economy would have more fluidity.

Compounding Debt Problems

Most people have debts and when the government axed tens of thousands of employees, many people were instantly put under pressure to pay debts that were once manageable. The emergence of many high interest loan providers and the fall in employment levels is no coincidence.

The average UK household now owes more than before the recessions began in 2007 and the average rate of interest is much higher on those debts. This is because more and more people have defaulted on existing debts and loan companies have had to increase interest rates to reflect the added risk of lending in a climate where job security and long term financial security is practically non-existent.

In effect, the government has managed to reduce the overall spending on public services, but the UK citizens who voted them in are far from better off.

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