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Anorak | Why George Osborne is screwing with updating benefits

Why George Osborne is screwing with updating benefits

by | 19th, September 2012

WHY is George Osborne screwing with your benefits? Because he can, basically. But the how is more interesting :

If the move is implemented, many benefits would be frozen for two years, then rising only in line with average pay.

Leave aside the freeze for a moment. Concentrate on the average pay instead. The “only” part.

Because, you see, the thing is that updating benefits in line with average wages would, in normal times, increase benefits faster than inflation. Because, in normal times, wages rise faster than inflation. This must be true, in fact has been true for some centuries now. That’s why we’re all so much vastly richer than our great grandparents and those who came before them. Because wages do tend to rise faster than inflation.

There are also periods of time when inflation is higher than wage rises. We’re in one now, the last was the mid 1970s.

So, think what you would do if you were a Chancellor trying to cut the amount being spent? You know that you’ve got to index pensions and benefits to something. But what are you going to index it to? Well, if you were a sneaky manipulative little shit then when wages were rising faster than inflation then you would link rises to inflation. And in those periods when inflation is higher than wage rises then you would like benefits rises to wage rises.

And this actually happened too: I think it was Healey

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Posted: 19th, September 2012 | In: Money, Politicians Comments (2) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink