The damaging economic policies (centralized, bureaucratic, regulation-heavy, high-tax, expansive welfare state) will continue to enjoy a substantial popular support for as long as there are enough people who believe that they will not be able to survive without the welfare state’s help.

There are several distinct groups in that camp, but the reasons for thinking or feeling that way tend to be clustered around two main issues:

  1. The feeling of economic insecurity (whether actual or perceived, current or future), which has as much to do with the cost of living, as with the levels of income.
  2. The lack of economic education (lack of understanding of how economy works, what is wealth and how it’s created, as well as the twisted understanding of morality and the “unintended” consequences of the forced equalization).

For these reasons, I took a close look at the roots and mechanisms of poverty and the cost of living in this country; and what it would take to diminish it significantly and sustainably.

The prosperity and life’s comfort is not determined solely by how much money one makes, but by what that money, after taxes, can buy. In this context, the cost of living is a very important (but frequently overlooked) factor, because it affects almost everything: the growth of the economy, the economic competitiveness domestically and internationally, the size of the welfare payments needed to sustain those who wouldn’t be able to live without them + the tax burden accompanying the need to support this many people (which in turn further exacerbates the whole situation).

The cost of living topic is a genuinely important matter, and it has been a major problem for a very long time. The seriousness of this problem is indicated in part by the fact that e.g. in 2012-13, £200 billion (or 30% of the UK government’s budget) was spent on the living subsidies, just to ensure that people could afford to live where they do. In fact, the government has become a major income provider for well over half of the population, and for 40% of the population, more than half of their income comes from the state.

Despite the frequently-heard complaints about the “hostility of the current system towards the poor”, the conventional distinction between a high-spending “Nordic model” and austere, low-spending “Anglo-Saxon model” has become a thing of the past, as UK now spends a greater proportion of national income on welfare transfers than many Germanic and Scandinavian countries: the extent of redistribution through state welfare system is as great as that of Sweden, and in terms of spending on family-related benefits, the UK has overtaken all of the Nordic countries.

All of this inevitably causes a very significant extra tax burden, which further exacerbates the situation by depressing the economy, increasing the unemployment and making the British economy even less competitive in this modern global race. It’s a vicious cycle, which cannot be resolved until the underlying root causes have been adequately addressed.

So, what can we do (and what we should not do) to address this problem?