Shift the rhetoric from benefit scroungers to cheating corporations

[ttosca]

Undue focus on "scrounging" is draining public support for welfare at a time when a proper safety net is desperately needed by millions of vulnerable people.

If you ask someone in receipt of benefits what their biggest barrier to going to work is, many will say they simply cannot afford to take a job. This may sound ludicrous, but for those moving from unemployment into employment the loss of benefits combined with starting to pay income tax and national insurance can have a very profound impact.

Under the government's new Universal Credit, to be introduced next year, people rejoining the ranks of the relatively low paid will have a proportion of their earnings clawed back in the form of reduced benefit. This reduction in benefits will be equivalent to an effective rate of tax of 65 per cent on their additional earnings, on top of any income tax and national insurance they have to pay, until they are earning enough not to be entitled to any benefits. Faced with the additional cost of childcare and transport, it?s not surprising that many of the poorest, like single parents, decide not to risk being worse off in work.

Compare this debilitating, effective tax rate of 65 per cent, with the amount of tax being paid by some of the biggest multinational companies trading in the UK - some of whom avoid taxation entirely or are paying as little as 2.5 per cent tax on their UK earnings - and it reveals a gross inequality. But are the public seeing this unfairness reflected in our political and public discourse?

Last week Starbucks and Amazon faced a grilling by the Public Accounts Committee, but these cases of high profile multinational companies not paying their fair share are only just starting to get the political and media attention they deserve. For years before the current recession started and the government?s need to balance the books became such a dominant issue, there were many more stories about "scroungers" and "cheats" who have claimed benefits dishonestly than companies dodging their responsibilities. This is despite the fact tax avoidance and evasion costs the economy £32bn a year, nearly 30 times more than the £1.2bn lost through benefit fraud. Austerity means tax dodgers no longer get a free pass but they have still faced nothing like the political and media spotlight focused on benefit "scroungers".

Iain Duncan Smith has been forced to admit that the Department for Work and Pensions has over-egged statistics on benefit fraud, yet the government are treading much more carefully when it comes to chastising corporations. When asked outright by the chair of the Public Accounts committee if Apple, Google, Facebook, eBay and Starbucks were morally wrong for avoiding nearly £900m of tax between them, David Cameron gave no more than a limp rebuke, saying "we do need to make sure we are encouraging these businesses to invest in our country". How about we invest more in the British people who are stuck in the benefit trap, rather than blaming and shaming them for needing government support?

A casual observer could be forgiven for thinking that putting an end to benefit fraud would be the solution to fixing our battered public finances. Indeed a recent survey YouGov did for Oxfam found people massively overestimate the problem. The poll showed that members of the public, on average, believed the total cost of false benefit claims to be 12 times higher than it actually is (the average estimate of respondents was £15bn, compared to official government figures which put it at £1.2bn).

Whilst the public is right, of course, to be worried about benefit fraud, the poll reinforces Oxfam?s concern that undue focus on this problem is draining public support for welfare in general at a time when a proper safety net is desperately needed by millions of Britain?s most vulnerable citizens who are facing a perfect storm of rising prices and falling incomes.

Our poll showed that despite the extensive media coverage of current welfare reforms, the public had little understanding of where the UK?s welfare bill is spent. Half of respondents believed benefits for unemployment (27 per cent) or sickness and disability (22 per cent) make up the majority of welfare spending, which in reality account for 2.9 per cent and 5 per cent respectively. More than half of the welfare budget is spent on pensions, yet only 17 per cent of respondents identified this as the biggest area of spend.

Oxfam believes that misconceptions about the welfare system may be contributing towards a hardening of public attitudes towards benefit claimants. The latest survey of British social attitudes found that sympathy for people on welfare benefits has fallen to an all time low, despite the fact that benefits are at their lowest level since the welfare state was founded compared to average earnings. Benefit levels have actually halved compared with incomes since 1980, falling from one-fifth to one-tenth of average earnings. During previous recessions public support actually increased for those on welfare, yet now some of the ingrained myths about the benefit system mean that people who genuinely rely on welfare are being vilified.

Whilst the public is being told that a crack down on welfare will help balance the books, in reality benefit fraud is small beer compared to the billions in tax that companies and wealthy individuals dodge each year. Eighty three per cent of poll respondents agreed with Oxfam that politicians and the media are giving the issue of tax avoidance and evasion too little attention and just over half thought preventing tax avoidance and evasion should be the government?s top priority to help reduce Britain?s national debt.

The Prime Minister has rightly said that we should not balance Britain?s books on the backs of the world?s poorest people. The same should apply to poor people in the UK. At a time when many people are facing cuts to benefits and services and many more are struggling to get by, the Government?s focus for deficit reduction needs to shift and they need to do much more to make the "scrounging" and "cheating" multinational corporations pay their fair share.

Chris Johnes is Director of UK Poverty for Oxfam

www.newstatesman.com/uk-politics/2012/11/shift-rhetoric-benefit-scroungers-cheating-corporations

[ProcrastinatingPanda]

That's an interesting article. I agree with struggling to afford to go back to work. There's money for smart work clothes, transport fees, and most nurseries/childminders need fees paid upfront, someone coming off job seekers or income support would struggle to pay this. Usually you need to work a lie week/fortnight and could still be a month until wages are paid but housing benefit, job seekers/income support and council tax benefits are stopped straight away and tax credits can take at least 6 weeks to be paid. I once had to wait 8 months for my tax credits claim to be paid.

[picketywick]

Yes, I think the corporations matter more. The govt demonise benefit claimants; because they think there are votes in it. Totally callous; especially with disabled. Shindig On Question Time last night (Thurs)

[Xenia]

There is no need to join the two issues and the more you put up tax rates the less tax you recover and the few companies who want to do business here. Also there is a huge misrepresentation in the press suggesting your sales - your turnover is your profit. if I buy tables for £100 and sell them for £101 then I am taxed quite rightly on £1. If a company makes losses it pays no tax. This is not a tax dodge.

However more interesting is how to make work pay. it is a very difficult issue. I have shown elsewhere that a single mother on £50k a year working full time with a baby in childcare full time pays £14k tax/NI, £14k day nursery fees and £14k mortgage payments a year. She does not have that much more cash than her twin who is on benefits whose housing is paid for.

If every benefit claimant were forced to do unpaid work fare even those with babies that might help.

Or we could give everyone of every income level in work or out £10k ay ear if over 18 whether an OAP, single mother or anyone or me and that covers your rent, food and all the rest and you can keep that whether you work or not.

[GalaxyDefender]

"If every benefit claimant were forced to do unpaid work fare even those with babies that might help."

I seriously hope you're joking about this. Seriously. (If that sentence was meant in jest, I apologise in advance for my lack of sarcasm filter causing the following rant)

Workfare reduces the number of people in work or at least reduces their hours - why pay staff when you can pick up free labour at the Jobcentre? - which means more people on benefits, which means more people on workfare, less taxes being paid, money being paid out to big business etc.
Also, wtf "even those with babies". Given the extortionate prices for childcare, where exactly is someone on benefits going to get the money for someone to look after their baby from while they do this mandatory work placement? Oh, that's right, the Jobcentre don't care because it would give them an excuse to sanction someone. Target met!

Not that I personally have a solution to making work pay, I'm no genius, but at least I can see how much of a con Workfare is.

I saw on the news this morning that HMRC are sending out letters to tax avoiders now, giving them a chance to leave certain schemes before it's outed that they're illegal? At least that's a step in the right direction.

[NetworkGuy]

I think the (very recent) suggestion from Labour (perhaps now revised) first reported as "6 months in a job or doing training, with penalties for those who refused" which then became "6 months in a job, perhaps a chance of training, and no benefits if they refused" was a step too far.

Found it to be so close to Conservative thinking that there was hardly thickness of a cigarette paper between them...


As for businesses, saw a recent blog post from a High Street retailer which was shouting 'Aren't we good!'

[latebreakfast]

OP: The corporations that you mention operate within the law. How exactly would you change the law in this country so that they paid their fair share?

[picketywick]

People at the bottom of the pile are having a very rough time whilst the rich get richer. Cameron is just being a Tory. Clegg should let someone else take over as Lib-dem leader.

[edam]

amic, other EU nations seem to manage to tax corporations - Germany, for example. It can't be impossible.

[cinnamonnut]

It is possible to be concerned about two things at the same time - I don't think these issues need to be joined. They are separate things.

[Viviennemary]

I think they are two separate issues. I agree that Starbucks and Amazon should be paying a fair amount of tax which they are not at the moment. But I do think welfare needs to be reformed.

[picketywick]

ttosca. The broadsheet papers do what you suggest. It is the tabloids who are anti benefits.

We either pay benefits or the country will survive on Food Banks. Wh0 are doing a great job. But its hardly ideal for the 7th richest nation in the world.

The American poor are in even greater difficulties. According to Newsnight reports