Monday, 29 May 2017

Tory Myth 3- Stopping the Scroungers off the State and the Myth of the Self-Made Man (or Woman!)

One of the things that most angers the Daily Mail are the scroungers off the state. They live off government handouts, often claiming fraudulently and not pulling their weight or paying their fair share. They are one of the evils of our society holding us back and ripping us all of us. And do you know what? I agree with them. The only difference is I know that the real scroungers off the state are not benefit claimants but super rich individuals and corporations. They are far more heavily subsidised by the state and by the taxes of ordinary people than anyone else.

The amount of money the state loses through welfare benefit fraud each year  is estimated at £1.3 billion, but this is a tiny fraction of the £34 billion the HMRC estimates is lost through tax evasion. If you add to that the huge sums lost through aggressive tax avoidance schemes we could be looking at perhaps close to £100 billion of revenues the rich are unjustly depriving of the Treasury. And yet five times more people are employed by the DWP investigating benefit fraud by society’s poorest than are employed by The Revenue investigating tax fraud by society’s richest.

The amount of welfare benefits the government pays to the “idle” poor is also massively exaggerated. Welfare spending is a huge part of government expenditure- about £1/4 trillion each year, i.e. 35% of total spending. However, by far the biggest proportion of that goes to the retired through retirement pensions- over £110 billion, nearly half of all welfare spending. By contrast, only a tiny fraction of welfare spending goes to the unemployed- £3.4 billion, that is less than 2%. In fact, the large majority of welfare benefits going to people of working age are to families who are working. This is mostly to subsidise what would otherwise be inadequate earnings to pay for their housing and other necessities. A large proportion of this goes on housing benefit, mainly a cost arising from the country’s failure to invest in affordable public housing. See my previous blog;

In work poverty has been a growing trend in recent years. A comprehensive study published this month by Cardiff University found that a staggering 60% of households living in poverty are working households. In 2013 it was estimated there were 3 million people in in work poverty (and it would now be even more). That is far more than the number of unemployed or unfit to work. This therefore gives the lie to the simple notion that people can work themselves out of poverty. Millions are working very hard but are still trapped in poverty. And the Tory government’s welfare benefit changes contribute massively to this problem,  including housing benefit caps, benefits cuts, the bedroom tax and benefits sanctions. Shockingly this is even affecting very valued and professional public servants like teachers and nurses, especially in areas of high housing costs like London and Bristol. Incredibly, in work poverty has even forced many teachers and nurses into using food banks or made homeless. If you think this is just an urban myth I suggest reading some of their real life stories, e,g.
Sadly’ it’s not an urban myth but an urban reality that we should be thoroughly ashamed of and determined to put right.

One popular urban myth though is that the rich proportionately pay more tax than the poor. If only that were true. In 2014/15 the poorest fifth lost 47 per cent of their income to the taxman, while the richest fifth of society paid only 34 per cent. Part of that reason is tax evasion/avoidance by the rich, but the main reason is direct taxes, such as VAT. These disproportionately affect the poorest as they are charged at the same rate to all income groups (And note it is been Tory governments that have put up these direct taxes - John Major’s government increased VAT from 15 to 17.5% in 1991 and David Cameron’s from 17.5% to 20% in 2011. More recently Theresa May's government have doubled the rate of IPT paid e.g. on car and home insurance).

Yet over the past three decades, and especially since the recession, the wealth of the richest has grown while most of us have seen our real incomes stagnate or fall. For example, between 2009 and 2015 the UK’s richest 1,000 families saw their assets increase from £258bn to £547bn, a rise of more than 112%. . But Average UK incomes have yet to recover from the worst economic crisis since the Great Depression and over the past 10 years the UK has seen the lowest levels of pay growth of any European country- equal with Greece. Thousands have been flocking to food banks. But this financial elite have emerged not only with their fortunes intact, but holding a larger slice of the cake than ever.

And while our nurses, teachers and other public servants have seen their pay frozen or increases capped below inflation, the bosses running our most successful companies have increasingly felt free to award themselves huge pay rises year after year. This is illustrated by another alarming statistic. In 1980 the average CEO of a UK FTSE 100 company earned 18 times the average worker. Today they earn 180 times- an increase in the pay gap ratio of 1,000%.

Needless to say our top companies’ performance has not matched the 1,000% increase in their CEOs’ pay! And this is kind of the point. If we richly rewarded those at the top for being wealth creators that benefited us all that might start to justify this huge increase in their awards- as the wealth the super-rich generates “trickles down” to us all. The only problem is the facts no longer support this. It used to be true, but for decades now, both nationally and globally, the proportion of the wealth generated by business going to ordinary workers rather than the owners has steadily fallen.

What is also not recognised is that those running successful businesses (including property empires) and who take such large rewards for themselves are only able to do so on the backs of the rest of us. Directly or indirectly their businesses and therefore their income and wealth is heavily subsided by us all. They rely on many, many billions of pounds of state funding to provide them with the essential conditions in which their businesses can operate and thrive:

an educated and healthy workforce -funded by state education and the NHS;
the state funded legal infrastructure through the police, courts and security services to ensure the necessary conditions of peace, law and order;
the state-funded physical infrastructure of our transport systems and energy supplies;
the state-funded research and development (of about £10 billion per year) which over time has enabled the development of technologies like the internet on which most businesses depend;
a welfare benefits system which heavily supports and subsidises the incomes of many of their employees or tenants, especially through tax credits and housing benefits. According to a study by the Building and Social Housing Foundation in 2012, more than nine in ten of every new housing-benefit claims in the first two years of the coalition government went not to the unemployed but to working households. Many of these claimants are workers whose pay is so low that they simply cannot afford the often extortionate rents being charged by private landlords. Ironically, a number of rich Conservative politicians who rail against state spending on welfare benefits are indirectly some of the biggest beneficiaries from it! One such private landlord is Conservative MP Richard Benyon, one of Britain's wealthiest parliamentarians. He benefits from £120,000 a year through housing benefit collected from his tenants.
As highlighted in my previous blog,  many billions of pounds of tax payers’ money are also paid out to private companies running state services, often very badly, and who often pay their owners huge salaries- many more times than our Prime Minister.

Perhaps the starkest illustration of how the rich are so heavily subsidised and supported by the rest of us was the 2008 banking crisis. More than £1tn of public money was poured into the banks following the financial collapse. The emergency package came with few government-imposed conditions and with little calling to account. "The urge to punish all bankers has gone far enough," declared a piece in the Financial Times just six months after the crisis began. But if there was ever such an "urge" on the part of government, it was never acted on. In 2012, 2,714 British bankers were paid more than €1m – 12 times as many as any other EU country. When the EU unveiled proposals in 2012 to limit bonuses to two years' salary with the agreement of shareholders, there was outrage in the City. Luckily, their friends in high office were there to rescue their bonuses: at the British taxpayers' expense, the Treasury went to the European Court to challenge the proposals.

Contrast this with the fate of those at the bottom of our society, who have suffered at their expense. In the Tory government austerity programme that followed the financial crisis and the bankers’ bail out, state support for those at the bottom has been eroded. The support that remains is given with stringent conditions- "Benefit sanctions" are imposed often for the most spurious or arbitrary reasons.
According to government figures, 860,000 benefit claimants were sanctioned between June 2012 and June 2013, a jump of 360,000 from a year earlier. According to the Trussell Trust, more than half of food bank recipients had to rely on their handouts due to cuts or sanctions to their benefits. These have very often been imposed erroneously (and nearly always disproportionately), such as claimants being sanctioned for missing a signing on day because of a welfare-to-work training or a job interview! (See for example, ).

The lack of understanding and compassion shown, especially to benefit claimants suffering mental health problems, has been truly disturbing . Some of those sanctioned have even been PTSD-suffering soldiers. They have put their lives on the line for their country only to be badly let them down by having  removing their benefits for wholly inadequate reasons. In some cases these has even led to their deaths. See e.g.

Likewise, there have been huge numbers of the sick and disabled who have been wrongly assessed as fit for work and had their benefits withdrawn, following incompetent assessments by the likes of Atos. As a result there have been hundreds of thousands of appeals against fit-for-work decisions in recent years, about four in 10 of which have succeeded. However, in the meantime the appeals process took too long for some- nearly 90 people a month died after being declared fit for work during 2011-14.

As a Christian I try to follow the biblical principles of Micah 6 v 8;  “He has shown you, O mortal, what is good. And what does the Lord require of you? To act justly and to love mercy and to walk humbly with your God.” I am appalled by the lack of justice and mercy shown towards the most needy and vulnerable in our society through the austerity-driven benefits cuts and sanctions. I am equally appalled at the apparent mercy shown to rich bailed out bankers (see above) and the tax cuts given to the very richest individuals and corporation provided by this government- the large reductions in corporation tax, higher rate income tax and inheritance tax. What system of values can say that we don’t have the money to provide for the basic food and housing needs of society’s poorest and yet can offer such handouts to the very richest? It is certainly not a set of Christian values, as the bible  highlights compassion and justice for the poor as the number one social issue (mentioned 148 times) and also highlights the greed of the rich as the number one social evil.Among many other verses that could be cited:

“Speak up for those who cannot speak for themselves, for the rights of all who are destitute. Speak up and judge fairly; defend the rights of the poor and needy”— Proverbs 31:8-9  

"Is not this the kind of fasting I have chosen: to loose the chains of injustice and untie the cords of the yoke, to set the oppressed free and break every yoke? Is it not to share your food with the hungry and to provide the poor wanderer with shelter…” — Isaiah 58:6

“Woe to those who make unjust laws, to those who issue oppressive decrees, to deprive the poor of their rights and withhold justice from the oppressed of my people... What will you do on the day of reckoning, when disaster comes from afar? To whom will you run for help? Where will you leave your riches?”— Isaiah 10:1-3

“There need be no poor people among you, for in the land the Lord your God is giving you to possess as your inheritance, he will richly bless you...” — Deuteronomy 15:4-5

The Tory arguments I have heard put to justify this injustice simply do not stand up to the evidence.

If you allow the rich to prosper and keep more of their money the wealth will trickle down to us all including the poorest
- It is not simply their wealth- ultimately it is the Lord’s and they could not earn their wealth without the direct or indirect support they receive from the state (see above);
-Generally they have horded their wealth and have allowed themselves to get richer and the poor and ordinary folk to get poorer so the wealth has not trickled down.

We can’t afford to be so generous in our “hand outs” to the poor
-We remain a rich country and if we can afford to be so generous with e.g. our tax cuts to the rich we could choose instead to be more generous to the poor. (Deuteronomy 15:4-5)
-It would actually benefit our economy and therefore most of us far more if we gave more in benefits to the poorest in our society than tax cuts to the rich. The poor actually will put that money back into our economy by buying the basic things they need. The rich will often horde their wealth, often spending it or hiding it abroad and beyond the tax man’s reach.
-The austerity agenda that this slashing of benefits is part of has not worked to bring down the state debt and has been  been economically self-defeating. See my earlier blog )

It's work which is the way out of poverty not benefit hand outs
-If only that were true. 60% of households in poverty are now working households. One of the main causes for that is the lack of affordable housing in so many parts of this country which means that many working people simply can’t earn enough to pay their rent and put food on the table without state benefits.

The advocates of state interventionism are dismissed as relics from the 1970s. (See my response to that in my earlier blog; ).Yet state interventionism is still alive and well in modern Britain, but it now  exists primarily to benefit the rich rather than the poor. Ultimately it is not just unjust, it is inefficient and unsustainable and it is certainly contrary to biblical Christian values.

I don’t believe in the self-made man. As a Christian, I believe in the God-made man. Everything we have is ultimately God’s and what we acquire in this life we do so mainly because of what we have been given. I think of my own situation. I have a very good, well-paid job as a lawyer. I earn about three times the national average wage (despite my pay falling over the last 5 years). I would therefore still (just about) slip into that top 5% of earners who Labour would tax more. I could argue that I deserve that level of pay and shouldn’t be taxed a penny more as I have got where I am “through my own efforts”. After all, I have always worked very hard at school and at work, and therefore achieved top O/A level and degree grades. At work on average I have probably billed more fees than anyone else in my firm and yet there are people in my firm who are rather better paid (especially the owners of the business). But then I think of many at my firm who just earn about the national average wage. I do work longer hours than most of them and directly bring in rather more fees, but do I deserve to be paid three times as much and to enjoy the standard of living I do? I certainly don’t work three times as hard and if I am good at what I do and bring in a lot of money for the firm that is not just because of hard work but because I have been lucky- or blessed as we Christians would say. Blessed to be born with certain abilities, blessed to be born into a middle-class family with two bright, supportive parents, blessed to have been helped in my studies by some excellent teachers. I am also blessed to have been able to buy our house at a time when property was rather more affordable than it is now. Without such blessings I could not enjoy the standard of living that I enjoy today, however hard I might try.

Those of us who do earn rather more than most can only do so because of blessings we receive from others (and ultimately God). It is therefore only right and fair that we with the larger pockets should be ready to pay more in taxes to help support those who are less fortunate and to contribute more to the public services upon which we will depend, however rich we are. This is why I, like many others who are more fortunate, wholeheartedly endorse Labour’s proposals to tax us richer few a bit more to help the many.

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