Slash tax avoidance, not benefits

As we hang on to the vestiges of our New Year’s resolutions to be more friendly and kind, I can’t help feeling that this spirit is somewhat bounded and constrained. As the benefits budget takes another hit this week, it feels more and more that the welfare system is the child constantly picked on, whose unpopularity makes it easy fodder for the axe of the powerful. 

Yesterday, MPs voted to support Government’s legislation to stop a large number of essential benefits (like Jobseeker’s Allowance, child tax credits, statutory sick pay, and Employment and Support Allowance) from rising in tandem with increases in the prices of basic goods. Instead, these benefits will go up by just one per cent each year, for the next three years, and this will affect more than
half of working-age households.

Around seven million of these households have someone in work, but those who can’t find a job will be hit hardest by the change. Because benefits will probably not be increased in 2016 to reflect the cost of living again, this significant cut to crucial benefits is not only indiscriminate, but permanent. Coincidentally, this cut will yield an apparent ‘saving’ equivalent to the amount required to end fuel duty increases.

In effect, it is a cut in real incomes for people who already are struggling to make ends meet.

As the cost of living rises those on benefits – an already thin lifeline for many people who are on poverty wages or unable to work due to illness, care responsibilities or simply the lack of jobs – will buy less and less. People will be able to afford even fewer essential items. In effect, it is a cut in real incomes for people who already are struggling to make ends meet.

Add this to an already long list of welfare cuts: freezing the working tax credit, reduced support for the costs of childcare, moving from using the retail price index to the consumer price index to measure benefit rates, the reduction in the Social Fund budget as it is devolved, the shift from disability living allowance to
less supportive personal independence payments, and so on.

Welfare in particular has borne the brunt of a lot of the Government’s cutting zeal. Add in the cuts to services that many of the poorest in our communities rely on, and take into account the increased insecurity and precariousness for those in work. And so on. And so on. The blows hammer down, leaving many with little left to get by on, so much so that people are turning to food banks in increasing numbers.

What is cleverly glossed over by the Government, in the rush to demonise ‘benefit scroungers’, is that the welfare system is a lot more complex than a simple, mythical divide between those in work who pay for some imagined life of leisure enjoyed by those apparently too lazy to work. Instead, the reality is that most of us, whether rich or poor, old or young, in work or not, receive benefits to some degree at some point in our lives.

A huge chunk of the welfare budget goes to pensions. Another huge chunk goes to people in work, working for employers who are unable or unwilling to pay their staff enough to live on.

So cutting the welfare budget is not a matter of taking money from people who in some sense don’t deserve it. It is a matter of taking away support from people on low wages, people who care for a poorly relative, people who have been looking for work for months on end only to get rejection letter after rejection letter because the jobs just aren’t there.

A recent poll by ComRes found that less than half of the public back George Osborne’s decision to raise most state benefits by less than inflation. This suggests that the Chancellor just might be facing a public who, ever so slowly, are realising that the UK is becoming a country where a growing number of increasingly poor people are left to languish. It is becoming a country in which more and more people, left to free-fall by a broken economy, then fall through the widening cracks of a battered social security system.

And the completely stupid – for there is no other word – thing is, it doesn’t have to be this way. The cuts wouldn’t need to be so deep, services wouldn’t need to be spread so thin, support wouldn’t need to be so miserly, if the richest people and companies who currently avoid paying tax coughed up their share. Tackling tax avoidance and evasion is just one solution to rebalance the UK’s books in a way that is fairer for the poorest, but it could raise up to £32 billion a year.

Tax is about being part of a community. It is about recognising that we all benefit and we all should contribute when able. That is the theory. In reality, many of the most able are increasingly using that ability (i.e. their money) to concoct elaborate systems to avoid paying into the common good pot. They are shirking their share of the kitty.

So when we’re told ‘there is no money left’ and implored to respect the Chancellor for making ‘tough decisions’, remember that there would be enough money if only all paid their due, that the real tough decisions that need taking are those required to create a robustly enforced progressive taxation system. That is where we need to turn our energy.

Picture information: Her Majesty’s Treasury, London. Credit: lhongchou

Author: Katherine Trebeck
Archive blog. Originally posted on Oxfam Policy & Practice.