The Hidden Welfare State

Posted on May 14, 2013 by syzygysue

The UK has two welfare states.  There is one that is reported and endlessly discussed, and another, which is rarely mentioned.  Whilst the first is suffering enormous cuts under the Tory/LD coalition, the other just keeps expanding.

Comedian, author and activist Rob Newman explains to the New Internationalist magazine (May 2013):

Governments on the left and the right can always justify welfare cuts by pitting, for example, mobility scooters against needle exchanges, or the soft-play area in children’s playgrounds against an old people’s home.  Who deserves it most, they say, students or cleaners?  Old or young?  But when we’re running not one, but two welfare states, that’s a totally fake scenario.  The real choice is between playgrounds or gas rigs; between Meals on Wheels or The City of London Currency Speculators’ Maintenance Allowance.

There’s a connection – never mentioned – between, let’s say, Britain’s eight new deep-water gas rigs and its 200 new food banks.  The connection is that the $4.5 billion subsidy package being doled out to transnational gas corporations is a very big slice of the welfare pie.  And to keep the gas transnationals on the benefits to which they are addicted, hungry humans have to queue for tinned food that is too close to its sell-by date to be kept on the shelves of supermarkets, many of which are themselves massive recipients of corporate welfare.

 Not only does the UK pay out unemployment benefits less generous than Romania, Albania and the US, but the wages of the employed have simply not kept pace with productivity over the last 30yrs.

Tory Ideology is all about Handouts to the Wealthy paid for by the Poor

Meanwhile, the corporate sector sits on a colossal cash surplus of £800bn but without investing because the real problem continues to be the lack of aggregate demand… and the richest 100 UK citizens, only 0.0003% of the electorate, now have wealth estimated at £257bn.

Nevertheless, George Osborne has been prepared to cut £18bn from benefits plus a further £81bn from public services in the name of unavoidable austerity, whilst at the same time providing huge subsidies, tax cuts and removing regulation for the hidden ‘welfare’ system that benefits the private sector.

No goods or services are directly returned to the government in exchange for these expenditures, although of course,  politicians will argue that they’re stimulating the economy, helping struggling industries, creating jobs or funding important research but actually this is just a corporate welfare system.

The Cato Institute estimated that in the US, $93 billion were devoted to corporate welfare in 2002. This was about 5% of the federal budget… and nearly twice the amount spent on social welfare ie. feeding people, housing the homeless, raising children out of poverty…

There is no reason to think the situation is different in the UK.  However, overall statistics for the UK corporate welfare budget are hard to discover .. and the variety of different subsidies are staggering.  Needless to say, our MSM focuses its attention on fraud and waste in the social welfare budget.

Welfare fraud and waste is never far from the top of the UK’s news agenda – but the real figures often bear almost no resemblance to popular belief. The British public, for example, think around 27% of the welfare budget is lost of fraud, according to TUC research.

The Department for Work and Pensions’ latest data on fraud and error in the benefit system shows a very different reality: fraud exists, but at a far lower level than the public believes – and is outweighed by errors from claimants and officials alike.

The overall figures show fraud and error are largely unchanged from last year. The DWP estimates £3.5bn has been overpaid due to errors and fraud in the system; 2.1 per cent of the overall benefit expenditure.

http://www.guardian.co.uk/news/datablog/2013/may/13/welfare-fraud-error-universal-credit

The corporate welfare budget arises from four main sources:

Paying little or no tax – Tax havens

Tax breaks

Enjoying huge subsidies

Removal of employment and environmental protection regulations

The task of covering all these areas adequately is beyond the scope of this post so I offer these quotes which illustrate some of the ways in which the corporates are benefiting from political sponsorship of their welfare:

The UK’s 100 biggest public companies are running more than 8,000 subsidiaries or joint ventures in onshore and offshore tax havens, according to research published on Monday, raising fresh concerns about the full extent of corporate tax avoidance.

The figures, published by the charity ActionAid, show that only two of the companies listed on the UK’s FTSE 100 have no subsidiaries in tax havens – while companies such as Barclays and Tesco own hundreds. 

http://www.guardian.co.uk/uk/2013/may/12/uk-companies-condemned-tax-havens

Could this be the same Chancellor who in his 2012 budget offered multi-nationals which opened a finance subsidiary in a tax haven a reduction in corporation tax from the then rate of 23% to an eye-wateringly low level of just 5.5%?   It could be, and it was.   Is this the same Chancellor who, whilst ultimately controlling the UK Crown Dependencies and Overseas Territories which constitute up to half the world’s most frequently used tax havens, declined to take any action to close them down?    Yes, it was again.

http://www.michaelmeacher.info/weblog/2013/05/corporate-tax-scams-in-developing-countries-the-next-target/#more-5201

I say tax gap is £95bn

It was revealed recently that only one in four of the UK’s top companies pay their taxes, meanwhile they receive tax credits to the tune of hundreds of millions of pounds funded by people who did pay their taxes.

http://scriptonitedaily.wordpress.com/2013/05/12/corporate-giants-arent-wealth-creators-theyre-parasites/

 … vastly profitable large chains of supermarkets … get an enormous subsidy to help with one of their major overheads, staffing costs. This is because many employees in these large and successful companies are paid only the minimum wage. And because the current minimum wage is not a living wage, nearly everyone on it has to claim tax credits to be able to make ends meet. Those tax credits are funded by the taxpayer…. Let’s stop calling them “wealth creators” and start calling them state subsidised industries.

http://www.searchingfinance.com/news-and-views/teresa-pearce-mp-a-living-wage.html?goback=.gde_1211737_member_236208402

 Currently, it is estimated that the government has already provided £43.5bn in various subsidies including the National Infrastructure Plan, the Equity Loan and Help to Buy schemes, the Enterprise Finance Guarantee and the Regional Growth Fund, with nothing to show for it.  Far greater sums are in the pipeline, up to £310bn.  

http://think-left.org/2013/05/11/despite-britains-new-thatcherites-only-the-state-sector-has-recovered/

It is more important to [the Tory/LD coalition] to privatise everything they can in pursuit of their real objective of a fully marketised State rather than to compel these banks, of which the taxpayers own 82% of RBS and 39% of Lloyds, to prioritise lending to industry to kickstart the economy and get growth going at last.   Even more significantly, an enforced sale before the election will at their current share value lose taxpayers £24 billions!   That is truly staggering when Osborne has been prepared to cut £18bn from benefits plus a further £81bn from public services in the name of unavoidable austerity.   Yet at the same time he is now disposing of assets which will gratuitously lose the public coffers £24bn.

http://www.michaelmeacher.info/weblog/2013/05/osbornes-smack-in-the-face-for-all-benefit-spending-cuts-victims/

It is arguable that without the state’s support the banking sector would have collapsed entirely.  But even on the most favourable comparison from the low-point of the recession the subsidy has been hugely inefficient.  A £1,020bn hand-out to the banks has yielded an increase in output over that time of approximately £40bn.  It would have been far more efficient if the state had directed its own capital into the production of banking services, via fully nationalised and controlled banks. 

http://think-left.org/2013/05/11/despite-britains-new-thatcherites-only-the-state-sector-has-recovered/

114 year Workers Rights Scrapped by Coalition Government.

For the Benefit of the Conservative Party – “FOR SALE – Local Hospital and Schools “

.. if you spend £100 on healthcare in the NHS you get one hundred quid’s worth of healthcare less about 5% management costs. In the private sector you’ll get a hundred quid’s worth less 3% management costs, 5% profit, 12% to pay bank loans and charges, plus a chunk for bonuses, dividends and return for investors. And, no provision for what happens if they go broke or get fed up.

http://www.hsj.co.uk/comment/opinion/andrew-lansley-competition-is-critical-for-nhs-reform/5041288.article

I will conclude with the 2011 nef briefing,  ’Feather-bedding financial services’, which asked, in addition to the unprecedented public support for the financial sector over the past three years, how much are the big banks benefitting from hidden subsidies? They identified at least three significant hidden subsidies:
  • The ‘Too Big to Fail’ subsidy: The government now provides a public guarantee, effectively insurance against banks going bust. This gives banks a huge commercial advantage over other firms in a market system. It means banks are able to borrow money much more cheaply than if they were not ultimately underwritten by the public. Exchanges with leading auditors in front of the House of Lords Select Committee on Economic Affairs in January 2011 confirm this. A conservative analysis reveals that this hidden subsidy could be worth £30 billion annually. It means that bonuses to senior staff for ‘performance’ and dividends to institutional investors are at least in part a straight transfer from the taxpayer.
  • The quantitative easing windfall subsidy: When it was decided that the economy needed more liquidity, the Bank of England pumped money in using the technique called ‘quantitative easing’. To meet various, and sometimes self-imposed, requirements, it did by purchasing government bonds through investment banks. Merely for being passive conduits for this ‘risk free’ arrangement the banks took a cut of every trade. Here nef analysts found that banks enjoyed a significant windfall, but that lack of transparency keeps the likely amount hidden.
  • The ‘make the customer pay’ subsidy: Looked at sympathetically, the banks have been put in a difficult position. At the same time as being required to rebuild their capital, they are also under pressure to lend. In response, the banks have tried to manage this by increasing the gap between what they have to pay to borrow money, and what they charge people to borrow from them. This is the so-called interest rate ‘spread’. But the banks have a choice. They could recapitalise by reducing or eliminating bonus and dividend payments until their capital base is rebuilt. As it is, the taxpayer is subsidising the banks twice over: once through taxpayer funded public support to the banks, and secondly through paying much higher interest to borrow than the banks do. This hidden subsidy to retail banking and one part of the investment banking world amounts to at least another £2.5 billion each year.

http://www.neweconomics.org/press/entry/are-british-banks-getting-billions-in-hidden-subsidies-asks-nef

As James Galbraith wrote:

The Predator State…. The state as monopoly collector of taxes and corrupt distributor of the spoils to the private sector…

There is no common good, no public purpose, no shareholder’s interest; we are the prey and governments as well as corporations are run by and for predators.

Furthermore, none of this is likely to get any better under the rules of the US-EU FTA (Free Trade Agreement) which the Tory/LDs are wanting to get signed by 2014.  Part of the secret negotiations are the transfer of sovereignty from nations to private corporate tribunals who will be empowered to compel governments to change their laws or pay unlimited fines.

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11 thoughts on “The Hidden Welfare State

  1. The amassed poor are the sacraficial pawns of the socialist elite, used for the ruthless exploitation of the working & middle classes.

    “If you pay people to be poor, you’ll never run out of poor people”

    Envy Politics
    http://iseveryonescrazybutme.wordpress.com/2013/09/14/envy-politics/

    If you spend £100 on the NHS you get £95 worth of multi level and ineffectual management, £200 of quango think tanks, £2000 in public/private consultation, £20,000000 in future leasesing costs for a brand new hospital, £1000 per hour in agency nursing fees, one Junior doctor, a nurse who’s too posh to wash and a dozen healthcare workers who’ll infect you soon as look at you. After 6 months they realise they were only supposed to spend £100 and they close the lot blaming government cut backs, the global economy, the death of Elvis and Bees for their failure.
    And if you spend £100 on private health, you get an insurance policy that will mean you get diagnosed and treated quickly, efficiently and without any nasty infections, abuse, incompetence, or criminal neglect

    Discuss…..

    • So the problem here is that the ruling class commit mass financial crimes against the very people who allow them to live their privileged lives. They act as parasites to our society, adding nothing but debt, indecisive mis-management and obfuscation. The NHS works but how it is finically administered is reckless at best, at worst it is fraud and treason.

      • What is needed is “small government” minimal interference from the state while maintaining law and order, essential public services, health care for those who can’t afford it, defence of the realm and fair working practises and labour laws. All paid for with the absolute minimum of tax.

        Essentially people want to be left alone to get on with their lives without some career bureaucrat trying to micromanage every aspect of it from his grace and favour apartment in Whitehall. Labour, liberal, Tory all just different shades of the same shi!

        The NHS does not work, precisely because it IS recklessly administered.
        When told to make efficiencies the first thing publicly employed administrators do is set up a brand new department to work out how to make the savings, employing all their old buddies from either Eton or Unite depending on the colour of their politics.
        Ask a Matron how to save the money and she’ll probably point at the two HR departments, 6 story admin wing and consultants only golf club.

        The NHS can be saved, I just doubt any one party will ever have the balls to do it, why would they? Turkeys don’t vote for Christmas!

      • Fully agree but we have a major stumbling block and that is the system which has been built around us. The monetary, political and legal system have to be torn down and reset. That includes all criminals of this mass fraudulent system being prosecuted and assets seized.
        I believe in a return to a gold based monetary system which is not debt based, common law being reintroduced and politicians who are paid based on independently verifiable and quantifiable goals for the good of all, not of a few.
        One can dream for the now

  2. CAMERON AND OSBORNE MASSACRE SICK AND DISABLED PEOPLE

    1) DAVID CAMERON’S FAMILY FORTUNE : THE JERSEY, PANAMA AND GENEVA CONNECTION
    http://www.guardian.co.uk/politics/2012/apr/20/david-cameron-jersey-panama-geneva
    http://www.mirror.co.uk/news/uk-news/conservative-party-links-to-fat-cat-103271
    http://www.independent.co.uk/news/uk/politics/163850bn-official-cost-of-the-bank-bailout-1833830.html

    2) SICK? WHO GIVES ATOS?
    [ Atos is the private company appointed by the british goverment to assess sick and disabled people and to cut benefits ]
    A sick person died after being told to get a job as his heart condition wasn’t “life-threatening”.
    http://blogs.mirror.co.uk/investigations/2011/02/sick-who-gives-atos.html

    3) ATOS MACHT FREI – ATOS ORIGIN TEAM UP WITH GAS CHAMBER FIRM!
    Atos Origin, the poverty pimps currently pocketing hundreds of millions harassing people who are claiming sickness or disability benefits have teamed up with manufacturers of the holocaust’s gas chambers Siemens.
    Siemens will contribute its Siemens IT Solutions & Services for €850-million to Atos Origin and become a shareholder of Atos Origin with a 15% stake.
    Siemens are most famous for their use of slave labour during the holocaust. Prisoners were utilised by Siemens to build the gas chambers in which they would eventually be murdered…………..
    http://johnnyvoid.wordpress.com/2011/02/15/atos-mach-frei-atos-origin-team-up-with-gas-chamber-firm/

    4) MAN CUTS THROAT WITH KNIFE IN RUNCORN BENEFITS OFFICE IN PROTEST BEDROOM TAX…
    http://atosvictimsgroup.co.uk/2013/07/25/man-cuts-throat-with-knife-in-runcorn-benefits-office-in-protest-bedroom-tax/

    5) ATOS BENEFITS BULLIES KILLED MY SICK DAD, SAYS DEVASTATED KIERAN, 13
    http://www.dailyrecord.co.uk/news/scottish-news/atos-killed-my-dad-says-boy-1411100

    6) THIS GOVERNMENT (Aided by ATOS) KILLS!
    ” A Freedom of Information document from the DWP has revealed that rather than an average of 32 deaths per week as a result of Welfare Reform that figure has now risen to an average of 73 deaths per week!
    When is this going to stop?! When are people going to wake up and help us fight against this government?! We need help!
    How many more vulnerable, sick and disabled people have to die before something is done?!
    As a disabled person, I don’t want to live in this country any more.”
    ” People are being left with nothing! Vulnerable, sick and disabled people are being left destitute after having their benefits wrongly cut, by a cruel and callous government!”
    http://blacktrianglecampaign.org/2012/10/06/to-helen-back-nothing-short-of-barbaric/

    7) CAMERON AND OSBORNE ABOLISH THE POSSIBILITY OF SICK AND DISABLED PEOPLE TO APPEAL THE DECISIONS THAT CUT THEIR BENEFITS CONDEMNING THEM TO DEATH http://blacktrianglecampaign.org/2013/08/29/draft-deregulation-bill-government-moves-to-shut-down-judicial-supervision-and-criticism-of-dwp-atos-decision-making-by-abolition-of-duty-by-tribunals-president-to-publish-annual-report/ http://www.benefitsandwork.co.uk/news/2355-dwp-dismisses-talk-of-fitness-for-work-catch-22 http://atosvictimsgroup.co.uk/2013/09/10/dwp-dismisses-talk-of-fitness-for-work-catch-22/

    8) BRITISH GOVERNMENT APPOINTS PRIVATE INSURANCE COMPANY UNUM IN ORDER TO DESTROY WELFARE SYSTEM
    http://blacktrianglecampaign.org/2011/09/07/new-labour-the-market-state-and-the-end-of-welfare/
    https://217.72.179.33/members/www.bilderberg.org/phpBB2/viewtopic.php?t=5076

    9) United Kingdom Government Denounced for Crimes Against Disabled People to International Criminal Court in The Hague
    http://blacktrianglecampaign.org/2012/09/23/united-kingdom-government-denounced-for-crimes-against-disabled-people-to-international-criminal-court-in-the-hague/

    • When people turn off the news, stop believing the lies and decide to change things together. Alternatively, the system crashes and when that happens, the curtains are pulled back and the malevolently macabre system is laid bare for all to see. I’d prefer the former over the latter but xfactor is back on.

      • I think it’s a good idea, similar to Avaaz in some respects. Anything which can unite people for a common goal or purpose and help bring awareness to subjects not touched on by the MSM has my support. I have not researched into who owns/runs the website though

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