Scroungers: How Much Does the Corporate Welfare State Cost the Tax Payer

CW1

The UK Government has announced a war on the welfare state, claiming it has become too big a burden for the UK taxpayer to bear. They are correct.  The problem is that they are tackling the wrong welfare state.  It is the Corporate Welfare state that the UK can no longer afford.

What Does the Human Welfare State Cost?

The UK Government spend a total of £694.89bn a year, to do everything.  The amount the government spend on benefits is £159bn, with £72bn (45%) of that going on pensions.  So, we have £85bn (12% of spending) a year actually going on working age benefits.  The UK’s current unemployment rate stands at 7.8%, whilst 19%.  It makes sense that we spend this proportionate amount of shielding citizens from poverty induced by involuntary unemployment, and support sick and disabled people who cannot work or who bear additional financial costs to work.

The Assault on the Human Welfare State

CW2

In Language

The UK government’s assault on the welfare state has pivoted around the issue of benefit fraud, a mischaracterisation of the issues and outright lies.

Leading members of the government have repeatedly taken to the media to characterise some sort of cultural struggle in the UK between strivers and skivers. The Chancellor launched into false analogy worthy of Der Sturmer with his Party Conference Speech.  He imagined the scene of bedraggled British workers trudging pre dawn streets for the bus, past houses of benefit claimants slumbering peacefully with their blinds closed. This has created a conversation about an over generous benefits system based on no actual evidence that such conditions exist.

No interview or article on the issue is complete without a question to advocates of the welfare system along the lines of ‘but surely it makes sense that the taxpayer only supports the people who really need it?’ This is intended to leave the viewer or reader with the following affirmation:

Because it is right that the ‘right people’ get the support, the government is right to make their changes.

This is the kind of warped logic that inspired me to write the Parable of the Sinking Ship.  No one is suggesting benefits should be dished out to every person in the land so we can all down tools.  Instead, the argument is about people who believe that these cuts are ideological, cruel and will not produce anything other than human suffering.

According to the government’s own figures, overpayment of benefits due to fraud is just 0.7%, or a cost of £1.1bn a year. To put this in perspective, overpayment of benefits due to error is almost double this, at 1.3% or £2.1bn.  Yet, we are not launching a war on mistakes within the DWP.

99.3% of people claiming benefits are being attacked, for the actions of just 0.7%.

These figures alone suggest the government is deliberately framing the debate in a way which distorts the issues at hand and creates rather than reflects a perception of a ‘broken benefits system’.

In Practise

In a recent article, I detailed the raft of cuts coming into effect this month that will see disabled people lose up to £4,600 a year, single parents in part time work pay up to 333% extra in Council Tax and the working poor lose Housing Benefit support.

The Cost of the Corporate Welfare State

CW3

The Bankers Bailout

The most obvious recent example was the Bankers Bailout.   According to the National Audit Office, The UK taxpayer spent £850bn bailing out the Banks in 2008. This is almost twice the nation’s total annual budget.  For this amount, the UK could have funded the entire NHS (£106.7bn a year) for eight years , our whole education system for twenty years (£42bn a year) or provided two hundred years of Job Seekers Allowance (£4.9bn a year).

Socialised Losses

The Bailout is simply a scaled up version of the wider reaching problem of a private sector allowed to socialise its losses at the cost of the taxpayer.  The private sector is increasingly invited to deliver crucial services; the companies keep the profits of success, while the taxpayer is left to pick up the tab when they fail.

In the most recent budget, George Osborne offered another £130bn to banks in the form of mortgage guarantees, effectively making it so banks can grant mortgages to people, reap the profits, but never fear a default as the government (you and me) will pick up the tab.

When Rail Track, the company running the privatised rail network failed in 2001 it was allowed to hand its £3.3bn of debt to the tax payer.

The state had to step in and restore communications when private court translators failed to show up en masse.

The taxpayer funded the deep cleaning of hospital wards when outsourced cleaning firms delivered us a superbug epidemic.

The taxpayer stepped in once again when the privatised forensic service’s manifest cock ups failed to deliver justice.

The nation’s armed forces had to step in during the London 2012 games when private security firm G4S failed to provide a sufficient number of staff to fulfil its duties.

The taxpayer bought failed bank Northern Rock for £1.4bn to avoid a run on the banks. The bank was split into a ‘good bank’ likely to generate profits in future, and a ‘bad bank’ containing almost £50m of bad debts. Osborne then sold the good bank to Richard Branson for a measly £747m, while the taxpayer kept the bad bank and the associated debt.

Despite all these failures the same companies are invited to make profits and mistakes on further government contracts while the taxpayer is effectively frozen out of the decision making process.

Private Finance Initiatives

Our hospitals and schools have been built under private loans called Private Finance Initiatives, rather than government borrowing.  These loans are at least twice the rate of interest that government loans would have been.  These loans are then repaid over 25-30 years.

Today, 22 of the 103 NHS trusts to enter PFI are facing difficulty due to the exorbitant repayments required to pay back the so-called NHS Mortgage (paying back the company for building the hospital).  Some hospitals are having to handover a fifth of their annual budget on paying for the PFI deal.

In Education, it was revealed that we are due to have a shortfall of 250,000 school places for our children by 2014, whilst the tax payer has picked up a £70m bill for PFI schools which had to close.

Overall, for a capital investment of £54.7bn (that’s how much money we actually borrowed to build stuff), the tax payer will pay back an astounding £301bn in just twenty five years.  Given the disasters of debt witnessed so far, many of the 771 PFI projects currently running will bust the budget of these schools and hospitals long before then, leaving us with the debt but not the service.

Handouts, Tax Breaks and Tax Avoidance

While we have privatised rail, energy, utilities and energy – we continue to pay massive subsidies to the private companies running them now. When we aren’t handing money over directly, the government is letting them off paying their dues.

The Rail Service was radically downsized in 1963 as it was said it was losing £140m a year, which was the gap between ticket revenues and running costs.  It was finally privatised in 1993.  Since then, ticket prices are rising above the rate of inflation.  Train firms pay the government £1.17bn in premiums to run their franchises, only for the taxpayer to hand them back £4bn in subsidies.

So we are now spending almost £3bn a year (£500m more in real terms) today to fund the profits of private companies, while paying 66% more in real terms for our train tickets, with no representative to hold to account for the failure.

Network Rail profits doubled in 2012, and all rail franchises are running at a profit as the companies prioritise (as they have to, as businesses) making a profit rather than lowering ticket prices or investing in the network.  Despite all this, the government are not complaining as they were when the service was nationalised, of a loss making service.

Gas and Oil prices were subsidised to the tune of £3.6bn in 2010, whilst renewable energy projects received just a third of that.  And with the exception of the first two years of the financial crisis, this figure has risen consistently over time.  Yesterday’s budget announced more of the same, with shale gas exploration receiving massive tax breaks.

And finally, taxation.  Only one in four of the UK’s top companies pay their taxes, meanwhile they were receiving tax credits to the tune of hundreds of millions of pounds by people who did pay their taxes.

Company taxes now constitute only 12.5% (Corporation Tax is just 7%) of the tax revenues of the UK.  In comparison, the people’s taxes, (income tax and VAT) make up more than 60% of the tax income.

Corporation Tax is lower today than at any time in its history.  UK Corporation Tax in 1984 was 52%.  By 1986 it was 36%.  In 1999 it dropped to 30% and in the most recent budget it was cut to 20%.

Meanwhile, tax avoidance is costing us almost £70bn each year.

Subsidising Low Wages

The three most expensive benefit payments in the UK are Tax Credits, Housing Benefit and Child Benefit, totalling £56.4bn a year.  These are not ‘out of work’ benefits.  Therefore 65% of the total spent on working age benefits, is going to people in work.

These payments have been set up and used mostly by people in work, but whose wages are below subsistence levels.  In the last five years, wages have increased by just 10%.  Inflation according to the Consumer Price Index (CPI) was 17% during the same period.  This means a real terms wage drop of 7%.

However, CPI figures represent a wide range of purchases which many average or below average earners do not buy.  The UK Essentials Index which focuses on the kinds of everyday items which the UK’s working and non working poor buy showed an inflation rate of 33%.

And no one in power is calling for an end to the corporate welfare state which is crippling UK finances and has seen the national debt rise to a record 138% of GDP.

Time to Put an End to Corporate Welfare

CW4

George Osborne claims to be representing the frustrations of the public in his assault on the human welfare state.  The reality is where this perception exists it has been cynically cultivated in direct disagreement with the facts.  There is no significant issue of benefit fraud in the UK.  There is no need to have any conversation about a ‘something for nothing culture’ amongst our young, disabled, sick and involuntarily unemployed.  There is however, a dire and urgent need to turn off the tap draining the public purse into private profits.

Today’s article is dedicated to the memory of Britain’s first neoliberal Prime Minister Margaret Thatcher who died while I was writing it.  She may be dead in body, but her legacy lives on.  No doubt her timely death will allow the media to focus on mourning the loss of the architect of manifest failures discussed, whilst the victims are quietly ignored.

58 thoughts on “Scroungers: How Much Does the Corporate Welfare State Cost the Tax Payer

  1. Pingback: Poverty, the ‘life style choice’ of millions, good for business | Creators not Consumers

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  3. Pingback: Cut benefits? Yes, let’s start with our £85bn corporate welfare handout | Stop Making Sense

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  5. I know I keep banging on about principles in politics but please consider this, How can the government as a matter of policy on the one hand use immigration and migration to drive up unemployment in Britain in order to put pressure on jobs and down wages. Then on the other hand condemn the unemployed that they crated and say that the country cannot afford to keep them on benefits.

    The second principle is, how can the government say there is not enough money to support the social services when they

    a) find money to bail out banks
    b) find money to fund an obviously corrupt HS2 project that is designed to over run and only benefit the corrupt super rich contractors (46 billion pounds to save 20 minutes on a journey time, come on)
    c) find hundreds of billions to fund a series of unlawful wars d) find money to give themselves a massive pay rise that is greater than anyone else’s in the country except bankers.

    This same sort of continuous attack on our countries citizens is what has caused open rebellion and civil wars in other countries.

    • i get where you’re coming from and agree on all points except b). it’s a lot of money sure, but it’s not only 20 minutes. 20,000 people use the line hourly, let’s say conservatively 100,000 a day, and conservatively 300 days a year. 10 million hours that saves, every single year, which sounds like one of the few worthy investments made in britain.

      • Hmm, that is assuming that your assumption that the individual 20 minutes saved by each person is used productively. Another perspective could be used here. That the 20 minutes is planned by the government make it possible for Northern people to commute into London and the south east with the sole objective of driving down wages those areas.

        Also, this policy would have the effect of transferring millions of pounds from London and the SE to the North of England.

        This is a typical socialist/communist policy of rounding down peoples living standards in one area to the lowest possible denominator in order to raise those in another area.

        This sort of commie policies is happening in Europe between affluent Northern countries and those in the poorer countries in the south.

        On a larger scale it is happening globally, here the super rich call it wage harmonization. This is where they are looking to have everyone in the world living on around $2.5 per hour so that they can take wage cost out of business decision making.

        The question here is whether it is worth a person spending years in education, getting into tens of thousands of pounds worth of educational debt, only to have the prospect of a minimum wages at the end of it.

        This in my opinion is a flawed and failed cost accountants perspective. I would prefer to look at this issue from a marketing and market development perspective that is based on the premise. Poor people do not make good customers, poor customers maintain poor businesses and poor businesses are not good for employment prospects or for paying taxes that are needed to support countries economies.

        This logic dictates that the best business and economic practice is to continually round up peoples wages and living standards rather than rounding them down.

        If the people in the middle east were increased from the standard dollar a day to two or three or more. Using Maslows theory of satisfying needs, they would become viable consumers. This would reverse the declining business sales trends and fulfill the need for continuous growth. This alone would crate and maintain billions of jobs all around the world. The added earned income would mean that overall individual taxes could be lowered instead of being increased year on year to support an increasing unemployment market.

      • That will mainly benefit. Costa Coffee, Caffè Nero, Starbucks and other outlets as 99.9000 people per day have twenty minutes to kill.
        A good point and calculation though. Also, the new trains will be more efficient and carry more people, assuming more people want to go.

  6. Think your focusing on the wrong area. Benefit Fraud £1.?Billion. A lot of money, but a piddly amount when you look at the amount of TAX owed from large companies and offshore corporations which stands at £65 to 72 Billion, £10 billion alone in .com enterprises. Benefits, Immigrants all a smoke screen by every party because its their donators that are stealing the most.

    • The biggest benefit fraud happens in government and is associated with expense accounts. When the Chancellor of the Exchequer can waste £36 of public money for just one breakfast we can see where tax payers money is going. Now multiply this by 650 MP’s 265 days a year for five years. They have ripped the British Tax Payer off with a breakfast bill in excess of £42,705,000 Now treble that in order for them to have lunch and dinner and you have an astronomical con of £128,115,000

      Why can’t they pay for their own food like every other normal worker.

  7. Pingback: G4S Admits Stealing £24m from Taxpayers, Govt Gives Them with £1bn of Public Money | Scriptonite Daily

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  10. Wonderful article,

    Depressing, and disheartening. A reminder that we are little more than cattle, to those with any real power.

    The world is becoming worse and worse.

    Run by men with no empathy, and no morals.

  11. Is it correct to quote the cost of the bailout as £850BN? The actual cost in monetary terms was around 1/8th of that; Held in shares that the taxpayer stands to profit from in years to come?

    • You’re assuming the taxpayer will get back all or more of what was spent in 2008. But we’ve already heard rumours that the UK Government’s shares in the banks will be sold at a loss…

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  15. Very good article! Now people start printing 100s of copies and applying to go on question time.While there before the show hand them out to everyone else there.Hopefully they will then change there prepared questions and we will see the entire show debateing the above.Now again the following week repeat the process and lets get their backs up and see how dimbleby handles it week in week out,He will say i can not allow this question again as it was answered last week but all you then say is “NO” i want to hear this weeks panels views.After a few weeks of the same debate we might start getting somewhere,also just say well this is the only question i have prepared,everyone on the show must be brought up to speed on this before the show so no one deviates from this debate! Go people go!

  16. Please sign this then SHARE it across as many media formats as possible

    This is going to take some, i believe more than any other petition so please get this out to everyone you can!!

    VOTE OF NO CONFIDENCE PETITION TO THE QUEEN:
    http://www.change.org/en-GB/petitions/her-majesty-the-queen-of-england-dissolve-parliament-under-a-vote-no-confidence#

    Our FB Group – Disabled UK: https://www.facebook.com/groups/Uniteasonedisableduk/490246907710334/?notif_t=group_activity

  17. Great article, but it stumbled a bit on this sentence: “The UK’s current unemployment rate stands at 7.8%, whilst 19%.” And now I’m intrigued! Would be great if you could clarify and complete the sentence. Thanks for an interesting read. All the best.

  18. Ok, I like your article but it needs to be written much more concisely. Strip it down and present it much shorter and it will have more impact.

  19. Excellent article, but why are all these facts and figures not available,on mainstream media outlets,as they are reputed to be unbiased…

  20. Really enjoyed the article and the comments after. I think most of us are enraged by unfairness, especially when we seem to pay such a high percentage of our incomes in taxes. I expect all of the corporations to sink or swim the same as the rest of us, so when they get assistance while posting massive global profits, it’s hard to take.

    What we hear regularly these days is that, if we make life too difficult for big business, (banks especially), they’ll relocate elsewhere. Fine by me. Let’s have healthy business, capable of sustained growth on merit, with foundations and security. There’s good money to be earned in Britain, but right now our governments seem more than happy to just give our money away.

    As the UK CEO, our Prime Minister should be addressing our problems from the top in order of most urgent. Why then is there no sign of significant changes to the use of off-shore tax havens, and measures to prevent tax avoidance? Similarly, huge amounts are being paid out in subsidies to farmers, bus and train operators. These are all capitalist businesses just like any other, so they should be left to earn their survival like any other business. If we saved those huge outgoings every year, we might not be in this situation, passing on yet another massive debt to the next generation.

    Finally, that old chestnut, “protecting British interests in the region.” As we move ever closer to military conflict in Syria, that phrase is going to be used by the PM. Yet again, our armed forces will be called upon to defend said British interests, at massive human cost, but the only problem is, there will actually be very little if any British interest to defend. It’s the global oil corporations, or their preferred pipeline routes we’ll be fighting for, and those same corporations pay as little as possible into our country, which then relies on charities to provide support and resettlement to the service personel who return injured if at all.

    No wonder then, the people of Britain are ready for a change. Both UKIP and the SNP represent a chance to localise government, and it’s looking more and more appealing with every day that passes and the status quo remains.

  21. Great Article – You don’t mention the covert “subsidies” given to the hydrocarbon energy industry by the public picking up the tab for all it’s pollution – I wrote briefly about this a couple of years unfortunately the link to the main source is broken and I don’t have time to look for it right now (the site is no longer active) – but if you aren’t familiar with this vast hidden subsidy to corporate business there’s enough meat in the article – http://www.biggreenbang.co.uk/index.php/real-cost-of-coal – to shed yet another ray of light on hidden corporate subsidy!

    http://www.biggreenbang.co.uk/index.php/real-cost-of-coal

  22. Pingback: AnimalFarm.org » #SCROUNGERS: HOW MUCH DOES THE #CORPORATE #WELFARE STATE COST THE #TAXPAYER in the #UK @ http://t.co/SlzxD7y5Fo RT #Anonymous

  23. Brilliantly put, and if there are indeed some lying in bed till noon while others struggle to work, that is all part of the corporate plan of having too few jobs, rather than choice on the part of the unemployed. If they want to make work pay they should increase wages, not reduce benefits.

  24. well i must say,this is absolutley disgraceful, their are scroungers about, but i can tell from watching the youngsters of today, fighting for job after job. i am Disabled and would love to work, i am no scrounger!!!
    the government are trying to turn ppl against one another, people that work, that still have a job, still buying their own homes, think they are safe, jobs dont last forever, and maybe those haters will be in our situation some day , realise that the only one thing is lining their own greedy pckets are the government, i worked also, and will not be labeled as a scrounger.
    swap my life and health for someone who is healthy enough to work, i would love to hear you say,how easy it is to sit in your home all day and hardly can move.
    so wake up and smell the coffee, the british people need to get of their back sides and fight for what they believe in, 1st 2nd world war ppl what be crawling in their graves if they knew what was going on, this is like a hitler regime, wake up before its too late, not for me but for your elderly parents and children !!!

  25. Reblogged this on TheCritique Archives and commented:
    The amount spent on propping up Big Business (which we are always being told is what makes money for the country) is not merely greater than benefits for the poor, it is many scales of magnitude greater. The totals are so far apart that welfare for the poor is almost irrelevant to discussions of debt.

  26. Pingback: Scroungers: How Much Does the Corporate Welfare State Cost the Tax Payer | paul8ar

  27. I’m sure you know this but I’ll point it out anyway; the PFI fiasco was a Labor cock-up, so it seem ungenerous to lump it in with an anti tory rant. Unless it was an anti government rant, I’ll admit I gave up halfway through. TL;DR

      • Good riposte! I totally agree, this is a very well written article and inspires me to research this issue further and give my views. Thanks

    • There is no cost to the tax payer, because you are paying for it from your National Insurance Contributions (NIC) something that these thick MP’s do not pay for, but get full NHS benefits. What has George Osborne done with the money that the government take from you?

  28. This is a freaking awesome article. If you read my (little personal) blog, you will see that I’m on Question Time this Thursday. This is exactly the information that I needed to formulate my question. I can’t tell you how many times I’ve had to beat back this old chestnut that the Tories keep pulling out about all the benefit cheats. People don’t even realize how much money we gave to the banks. And how much money we’re giving in corporate welfare.

    • :) Thank you. Good luck on Questiontime. I’ll be looking out for you. Bonus points if you mention the blog (not really…lol). I was on a few years ago and felt incredibly catchartic to say directly to the people involved, what was on my mind. Give em hell!

    • Question time is not a good platform for the people of this country; it supports the corrupt political system, like all these type of media propaganda shows have always done. No voice from the common person, who now want a republic and the destruction of our corrupt political system. The foundation of our political system has now failed the people, and needs to be pulled down. In 1940 Winston Churchill jailed all these sons of bitches of the Eaton class that supported Nazi Germany, and now in 2013 they are controlling our four nations, and again supporting the Germans. That’s why Blair changed the Treason laws, so that his wife’s Irish IRA friends could murder the English at Will! A fact that Churchill stopped them doing during the second world war

  29. Marvellous compendium of random fruit dotted around the corporate orchard. And you don’t even mention the hideous tendering processes with the same names in the frame for any old work, no experience necessary. Or the individuals jumping into ministerial posts to set policy whilst running the firm alongside. Main Street capitalism is hard work, but fun and useful. Old ideas like regulation, fairness, vested interest have no meaning anymore. The game is rigged but that’s the only reason they’ll play it. For the book I’d add chapters on EU subsidies, global trade agreements, corporate law, and Unions being no better.

    • They don’t, the Media doesn’t do it’s job! We need a press revolution. Someone that will stand up and PRINT THE TRUTH, how on earth can they be done for that?

  30. Incredibly truthful and frank article. It is only a pity we live in a world like this. Often I pose the question what is the point of being a first world nation when so many of our citizens dwell in relative poverty?

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