Is the Union worth £606 a month to each Scots family?

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by Hazel Lewry

This is fundamentally what the IMF report of this week asks Scots families.  Each Scottish family must pay an extra £133 a week in real tax, lost benefit and lost wealth – the UK-Westminster debt will still increase.

Or we can be £17 a week better off in an Independent Scotland. With no debt.

That’s a difference of £140 per week or £606 per month in our pockets. Union – In or Out?

That is the minimum price of Union to each Scottish family.  Not my calculations, straight from the IMF report with simple maths.

This wasn’t the IMF asking or suggesting – it’s stating a rather unpleasant, bald fact.  The International Monetary Fund warns us in its most recent report that UK families should expect to be £1,500 a year worse off.  That’s just the tax and benefit bite.

Yet Scotland is in surplus to the tune of £1,500,000,000 a year.

This means every Scots family instead of a tax reduction of  around £900 per year will see a tax increase, benefit and wealth reduction between now and 2015 of £24,071.

Fundamentally, in the union each Scots family pays £26,671 more to the exchequer over the next four years than it should to its own government.

That’s an extra £133 a week on average between direct and indirect taxes.

Is any Union worth this?

David Cameron reported that the debt would be eliminated, or not an issue, by 2014/2015.

The IMF reports that it will increase – substantially.

The IMF also stated house prices will stagnate, in addition to inflation and stagnation in wages the average household in Scotland can expect to lose almost 12% in their real tangible wealth over the next four years.  That’s £18,072, or £86.88 a week in the above figure.

In reading this report, it was appropriate to bullet point some sections below,

  • Households will be left £1,500 a year worse off for the next five years due to a combination of higher taxes and lower benefits introduced as part of the Government’s austerity drive, the International Monetary Fund warned yesterday.
  • In a comprehensive analysis of the state of the British economy, the watchdog said that, between them, families would have £35 billion less disposable income due to the Government’s attempts to tackle the deficit – not the debt, just the monthly deficit.
  • A predicted fall in home value will wipe off more than a tenth of familial “tangible” wealth in real terms by 2016, the IMF said in its report.
  • The IMF affirmed its support for the Westminster Government’s dual programs of taxation and cuts, which it said had “significantly reduced the risk” of a sovereign debt crisis. [Note, that “sovereign debt crisis” is still there – just a bit less likely, they think].
  • In affirming this [in the opinion of the IMF who are primarily concerned with recouping their money] the Westminster Government had made the right decisions to tackle the deficit, it stated the impact on households would be “significant”.
  • “The fiscal consolidation will reduce the saving rate by about 3½ percentage points [of disposable income] by 2016,” the report said.
  • Total disposable income last year was £974 billion, the IMF estimated that the cost would be roughly £35 billion annually – shared between Britain’s 26 million households – or not, Scotland always has an option.
  • Static house prices, coupled to inflation through 2016 are expected to reduce some 12 per cent of families’ “tangible” wealth in real terms.
  • It was predicted the damage to familial finances will weigh on any potential recovery for years to come, retail spending is anticipated to suffer for in the long term.
  • Principally because of the weakness of the retail sector, the IMF predicts growth this year of a paltry 1.5 per cent, significantly lower than even the modest Treasury forecasts which were recently revised downwards.
  • UK – recovery is fragile and vulnerability is still extensive due to instability in the euro-zone and that internal turmoil there threatens trade between Britain and the European Union.
  • Inflation; forecast to hit 5 per cent by the end of the year was another factor cited and the report threw in that unexpected rises in the price of food and energy also had the potential to derail the recovery.  Food and energy costs can be expected to increase.

The predictions came amongst growing political tensions about recent slow growth.  The chancellor is reportedly being pressured by the UK’s premier to be inventive and “stimulate the economy”.

Citizens have already been hit with an increase in VAT from 17.5 per cent to 20 per cent,

Families lost £550 million a year from the abolition of the Child Trust Fund.

Higher rate taxpayers lose their child benefit from 2013.

Last week the Government’s own data showed the economy grew by just 0.2 per cent in the second three months of the year, following six months of poor results.

Economists have warned that growth this year may be as low as 1 per cent.

The IMF’s comments came alongside fresh evidence that the recovery was stalling.

Manufacturing activity decreased in July for the first time in two years, according to the Purchasing Managers’ Index.

Vicky Redwood, senior UK economist at Capital Economics, the research consultants, said the analysis demonstrated that “households are in for a tough five years if not more”… “It’s going to be a prolonged period of nastiness for households.”