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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Who will win the Copeland by-election?

Labour face a tricky task in holding onto the seat. 

What’s the Copeland by-election about? That’s the question that will decide who wins it.

The Conservatives want it to be about the nuclear industry, which is the seat’s biggest employer, and Jeremy Corbyn’s long history of opposition to nuclear power.

Labour want it to be about the difficulties of the NHS in Cumbria in general and the future of West Cumberland Hospital in particular.

Who’s winning? Neither party is confident of victory but both sides think it will be close. That Theresa May has visited is a sign of the confidence in Conservative headquarters that, win or lose, Labour will not increase its majority from the six-point lead it held over the Conservatives in May 2015. (It’s always more instructive to talk about vote share rather than raw numbers, in by-elections in particular.)

But her visit may have been counterproductive. Yes, she is the most popular politician in Britain according to all the polls, but in visiting she has added fuel to the fire of Labour’s message that the Conservatives are keeping an anxious eye on the outcome.

Labour strategists feared that “the oxygen” would come out of the campaign if May used her visit to offer a guarantee about West Cumberland Hospital. Instead, she refused to answer, merely hyping up the issue further.

The party is nervous that opposition to Corbyn is going to supress turnout among their voters, but on the Conservative side, there is considerable irritation that May’s visit has made their task harder, too.

Voters know the difference between a by-election and a general election and my hunch is that people will get they can have a free hit on the health question without risking the future of the nuclear factory. That Corbyn has U-Turned on nuclear power only helps.

I said last week that if I knew what the local paper would look like between now and then I would be able to call the outcome. Today the West Cumbria News & Star leads with Downing Street’s refusal to answer questions about West Cumberland Hospital. All the signs favour Labour. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.