The cost of living is not in line with income, so the state steps in – saving big business money and lining landlords’ pockets
The autumn statement saw the chancellor lay a fiendish trap for the Labour party. He has devised a “welfare uprating bill”, which means Labour MPs will soon have to vote on whether they approve of real-terms cuts to social security. In framing his decision as prioritising the “strivers” over the “skivers” he hopes to paint the Labour party as being on the side of the “skivers”. Of course, the framework is false because the cuts fall on more people in work than out of work and Labour would do better to contest the framework rather than reinforce it.
Yet as the economy continues to flatline the blame game will no doubt remain in political vogue. With that in mind I authored Strikers, Scroungers and Shirkers.
So who are the real shirkers and scroungers? Big business is guilty of scrounging from the public purse on a monumental scale – often hidden behind a whole political economy rather than some drawn curtains. The billions of pounds in working tax credits paid out every year are not going to the unemployed but to workers to supplement their low income. It is making up the difference between low wages and the minimum necessary amount for families to live on – a living wage. As 29% of low-paid workers work in retail, this sector in particular is coming under intense scrutiny. A report by the Fair Pay Network found that despite collectively making billions of pounds worth of profits and paying their CEOs millions of pounds a year, none of the top four supermarkets were paying their workers a living wage. They could easily do this and still make huge profits at the same time. So why should they be able to scrounge off the rest of us?
More scrounging exists in the housing market but not necessarily where you might expect it. One in five households in the UK rely on housing benefit to put a roof over their heads. Out of these households 87% are low and middle-income families and pensioners – the so-called strivers that the government pretends to support.
Why is it that working people need housing benefit? It’s the same story: the cost of living is not in line with income. The market has failed. Successive governments have tried to correct this failure by moving from an emphasis on building houses that can be rented cheaply to paying landlords directly to cover tenants’ rents. But as 32% of housing benefit claimants rent in the private sector, this means the hard-working striving taxpayer is paying their tax directly into the pockets of private landlords enabling them to expand their property portfolios. Last year this cost the taxpayer nearly £10bn.
This week we’ve also seen the farce of Starbucks offering to voluntarily cough up £10m in tax. Tax laws are clearly not working. But this is just the tip of the iceberg. Big business and rich individuals are shirking their responsibility to society on a monumental scale. According to Tax Research UK, the amount of tax that the government is owed is about £120bn more than the amount that is actually paid. To get a sense of the proportions, that is the equivalent to the entire health budget.
Solving some of the problems referred to above will require many specific measures, some of which I have outlined in Strikers, Scroungers and Shirkers. Many have only long-term payoffs that have little appeal to chancellors with short-term electioneering on their minds. We would also do well to recognise that “the state” and “the market” are not two separate entities. They are inextricably linked. The government’s job is to make the market function efficiently.
It is indisputable that for many “strivers”, their incomes are not being able to meet the basic cost of living and housing without help from the state. The market is failing but the government is pointing its fingers at those who are trying to get on the job ladder, bring up a family or cope with horrendous misfortune. Instead if the government focused its efforts on those higher up the value chain by ending the scrounging and skiving of those at the top, the economic outlook for the UK would be much brighter and the government’s planned £123bn worth of “fiscal consolidation” could be rendered obsolete.