Shift the rhetoric from benefit scroungers to cheating corporations

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

Charity workers hand out food to those in need. Photograph: Getty Images

Chris Johnes is Director of UK Poverty for Oxfam.

Photo: Getty
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Ken Livingstone says publicly what many are saying privately: tomorrow belongs to John McDonnell

The Shadow Chancellor has emerged as a frontrunner should another Labour leadership election happen. 

“It would be John.” Ken Livingstone, one of Jeremy Corbyn’s most vocal allies in the media, has said publicly what many are saying privately: if something does happen to Corbyn, or should he choose to step down, place your bets on John McDonnell. Livingstone, speaking to Russia Today, said that if Corbyn were "pushed under a bus", John McDonnell, the shadow chancellor, would be the preferred candidate to replace him.

Even among the Labour leader’s allies, speculation is rife as to if the Islington North MP will lead the party into the 2020 election. Corbyn would be 71 in 2020 – the oldest candidate for Prime Minister since Clement Attlee lost the 1955 election aged 72.

While Corbyn is said to be enjoying the role at present, he still resents the intrusion of much of the press and dislikes many of the duties of the party leader. McDonnell, however, has impressed even some critics with his increasingly polished TV performances and has wowed a few sceptical donors. One big donor, who was thinking of pulling their money, confided that a one-on-one chat with the shadow chancellor had left them feeling much happier than a similar chat with Ed Miliband.

The issue of the succession is widely discussed on the left. For many, having waited decades to achieve a position of power, pinning their hopes on the health of one man would be unforgivably foolish. One historically-minded trade union official points out that Hugh Gaitskell, at 56, and John Smith, at 55, were 10 and 11 years younger than Corbyn when they died. In 1994, the right was ready and had two natural successors in the shape of Tony Blair and Gordon Brown in place. In 1963, the right was unprepared and lost the leadership to Harold Wilson, from the party's centre. "If something happens, or he just decides to call it a day, [we have to make sure] it will be '94 not '63," they observed.

While McDonnell is just two years younger than Corbyn, his closest ally in politics and a close personal friend, he is seen by some as considerably more vigorous. His increasingly frequent outings on television have seen him emerge as one of the most adept media performers from the Labour left, and he has won internal plaudits for his recent tussles with George Osborne over the tax bill.

The left’s hopes of securing a non-Corbyn candidate on the ballot have been boosted in recent weeks. The parliamentary Labour party’s successful attempt to boot Steve Rotheram off the party’s ruling NEC, while superficially a victory for the party’s Corbynsceptics, revealed that the numbers are still there for a candidate of the left to make the ballot. 30 MPs voted to keep Rotheram in place, with many MPs from the left of the party, including McDonnell, Corbyn, Diane Abbott and John Trickett, abstaining.

The ballot threshold has risen due to a little-noticed rule change, agreed over the summer, to give members of the European Parliament equal rights with members of the Westminster Parliament. However, Labour’s MEPs are more leftwing, on the whole, than the party in Westminster . In addition, party members vote on the order that Labour MEPs appear on the party list, increasing (or decreasing) their chances of being re-elected, making them more likely to be susceptible to an organised campaign to secure a place for a leftwinger on the ballot.

That makes it – in the views of many key players – incredibly likely that the necessary 51 nominations to secure a place on the ballot are well within reach for the left, particularly if by-election selections in Ogmore, where the sitting MP, is standing down to run for the Welsh Assembly, and Sheffield Brightside, where Harry Harpham has died, return candidates from the party’s left.

McDonnell’s rivals on the left of the party are believed to have fallen short for one reason or another. Clive Lewis, who many party activists believe could provide Corbynism without the historical baggage of the man himself, is unlikely to be able to secure the nominations necessary to make the ballot.

Any left candidate’s route to the ballot paper runs through the 2015 intake, who are on the whole more leftwing than their predecessors. But Lewis has alienated many of his potential allies, with his antics in the 2015 intake’s WhatsApp group a sore point for many. “He has brought too much politics into it,” complained one MP who is also on the left of the party. (The group is usually used for blowing off steam and arranging social events.)

Lisa Nandy, who is from the soft left rather than the left of the party, is widely believed to be in the running also, despite her ruling out any leadership ambitions in a recent interview with the New Statesman.However, she would represent a break from the Corbynite approach, albeit a more leftwing one than Dan Jarvis or Hilary Benn.

Local party chairs in no doubt that the shadow chancellor is profiling should another leadership election arise. One constituency chair noted to the New Statesman that: “you could tell who was going for it [last time], because they were desperate to speak [at events]”. Tom Watson, Caroline Flint, Chuka Umunna, Yvette Cooper, Andy Burnham and Liz Kendall all visited local parties across the country in preparation for their election bids in 2015.

Now, speaking to local party activists, four names are mentioned more than any other: Dan Jarvis, currently on the backbenches, but in whom the hopes – and the donations – of many who are disillusioned by the current leadership are invested, Gloria De Piero, who is touring the country as part of the party’s voter registration drive, her close ally Jon Ashworth, and John McDonnell.

Another close ally of Corbyn and McDonnell, who worked closely on the leadership election, is in no doubt that the shadow chancellor is gearing up for a run should the need arise.  “You remember when that nice Mr Watson went touring the country? Well, pay attention to John’s movements.”

As for his chances of success, McDonnell may well be even more popular among members than Corbyn himself. He is regularly at or near the top of LabourList's shadow cabinet rankings, and is frequently praised by members. Should he be able to secure the nominations to get on the ballot, an even bigger victory than that secured by Corbyn in September is not out of the question.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.