Thursday, 12 August 2010

Tory Policy Isn't Welfare

In a recent article in the Sunday Times, David Cameron described the loss of £5.2bn annually through benefit fraud and errors as “the one area of ingrained waste that out-ranks all others”.

Cameron’s aspersion – forgetting its reliance on questionable figures – is deeply flawed. Firstly, the vast majority of the £5.2bn figure can be attributed to system failures rather than fraud. Secondly, labelling benefit fraud as waste that “out-ranks all others” conveniently ignores the fact that benefit fraud is dwarfed in comparison to the revenue lost through tax evasion and avoidance.

HM Revenue & Customs estimate that there is a £40bn gap between tax collected and what HMRC calculates should be collected – and many economists argue that this figure is even higher. This figure breaks down into £7bn lost through tax evasion, £7bn lost through tax avoidance and £7.2bn lost through inaccurate self-assessments. I’m no economist, but it seems fairly obvious that if you’re committed to reducing waste and raising revenue then tackling the tax gap would be a good place to start. Yet, for some reason, the government isn’t inclined to do this. Maybe it’s something to do with the type of people who avoid/evade tax – the millionaire bankers, accountants, lawyers and judges. Or ‘the Cabinet’ as David Cameron likes to call them.

A couple of months ago, Labour MP Katy Clark grilled the government on the amount of public money spent on advertising tackling benefit fraud opposed to preventing tax evasion. In the last year, HMRC spent £633,284 (excluding VAT) “on advertising for the purposes of preventing tax evasion”. There was no expenditure in the previous two years. I guess no-one was fiddling their taxes back then.

In contrast, the following amounts were budgeted for advertising tackling benefit fraud in each of the last three financial years:
2007-08 - £6.5 million

2008-09 - £6.0 million

2009-10 - £5.0 million
In the last three years £633,284 has been spent on trying to reduce a £40bn annual tax gap whilst £17.5 million has been spent on trying to reduce the relatively minor amount lost through benefit fraud. But the amount spent on advertising benefit fraud is not meant to reduce lost revenue, it is intended to reinforce the stereotype of unemployed scroungers and benefit cheats. It’s about inciting bigotry and hatred about some of the most vulnerable people in society. It also fortifies the positions of government lackeys in the City.

All fraud is wrong and should be tackled, but the government’s selective demonisation of benefit claimants over bankers illustrates that ConDem policy is motivated not by economic need but by ideological dogmatism. But don’t worry, we’re all in this together, right?

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