Scroungers? Best start at the top, George

By David Talbot

As George Osborne spelt out the true savagery of his public spending cuts, the greatest venom was directed towards the welfare state. A package of £7bn in welfare cuts was announced on top of the £11bn in cuts already prescribed in the emergency budget. If you were to believe the government, Britain is a nation swamped with benefit cheats, people who have made a lifestyle choice as fraudsters and layabouts – ‘scroungers’ if you will. Indeed, the government announced over the summer an “uncompromising” strategy against benefit cheats, claiming it was “outrageous” that benefit fraud and error cost the taxpayer £5.2bn a year. And yet, the conspicuous failure to launch a comparable war on those who commit even greater fraud is startling.

The actual figure for benefit fraud is £1bn, a figure dwarfed by that of official error by government departments. Around 56,000 people are caught every year perpetrating a fraud, which is 1% of those receiving benefits. But when it comes to welfare, the political calculation for the Conservatives is cynically straightforward. The poorest and most vulnerable have least political clout, they will make the least noise – and many of them tend not to vote. So they can be attacked without paying too high a price.

Osborne has made much political capital out of seeking to save the billion that is lost to benefit fraud. This targeting of ‘scroungers’ has all been done in the name of tackling the hole in the government’s deficit. But Osborne wouldn’t need to make such drastic cuts if he tackled the biggest category of fraud in the UK economy – that of tax evasion. It’s the difference between the tax that should be collected from the UK economy if HMRC knew everything that was going on and the tax it actually collects. HMRC claims the gap is £40bn a year with well over £30bn of that being tax evasion and a much smaller part – less than £5bn – being tax avoidance. The difference between the two is important. Evasion is illegal – it’s fraud, in other words. Avoidance is the smart trickery those in the accountancy profession play.

As Osborne dug his axe ever deeper into the fabric of the British welfare state, the sight of some Tory MPs cheering and waving their order papers in glee was particularly disgraceful. Hundreds of thousands of people stand to lose their jobs directly because of Osborne’s announcements, with women, the elderly and the sick bearing the brunt of the biggest dismantlement of the welfare state since its inception.

But the Conservatives are winning the argument that these draconian cuts are a direct result of Labour’s spending prolificacy. Alan Johnson was right to highlight the ideological zeal that ran through much of Osborne’s announcement, but it is worth reminding people that the financial crisis, the reason for the deficit, was not limited to those territories ruled by Gordon Brown and the Labour Party; it was global, it was systemic and it was caused by the larcenous greed of bankers.

Tax evasion, avoidance, and off-shoring has become poisonously acceptable and some estimates suggesting it costs our economy fifteen times as much as benefit fraud. Labour ought to ask why the wealthiest weren’t made to pay a full and fair tax contribution to ensure deficit reduction is implemented fairly, rather that Osborne cutting welfare the deepest, knowing full well he’d affect those on the lowest incomes the hardest.