Read on Twitter
New paper out from @r_earwaker and I on (1) why keeping the £20 uplift in UC is good economics, and (2) why social security should be recognised more as an effective fiscal stimulus option. https://www.jrf.org.uk/report/strengthen-social-security-stronger-economy Our top points:
1 - social security of course plays a key role in automatically stabilising incomes in a downturn, but it can also be used as an effective, discrete stimulus tool to quickly increase consumer spending. Discussions about fiscal stimuli often miss this out.
2 - increases in means-tested benefits are particularly effective at stimulating spending because they target low-income, low-wealth households - those with the highest marginal propensity to consume, meaning a significant % of gov spend feeds through to a rise in consumer spend
3 - the Chancellor's emergency £20 uplift in UC used social security in this way - to stimulate the economy at the start of the crisis and provide a lifeline to millions of families. BUT now that temp uplift is planned to be removed in April 2021
4 - cutting the uplift will act in the opposite way to the initial stimulus, taking money out of the economy when it's still v weak. We wouldn't expect Gov to cut infrastructure projects, or raise taxes yet- for the same reason it doesn't make econ sense to cut social security.
