Sort out the tax dodgers, Labour, then the benefit bill won’t be a problem

Off-message: If Rachel Reeves had promised to get as tough on tax avoidance in her previous job as she is promising to be on benefits now, Labour might have had more credibility.

Off-message: If Rachel Reeves had promised to get as tough on tax avoidance in her previous job as she is promising to be on benefits now, Labour might have had more credibility.

A lot of people have been getting their knickers in a knot about Rachel Reeves’ interview in today’s Observer – and rightly so.

In it, she tells us (wrongly), “We are not in an environment where there is more money around,” and says that Labour will be tougher than the Tories when it comes to slashing the benefits bill. She stressed that she wanted to explode the “myth” that Labour is soft on benefit costs.

There are a few myths feeding into these statements. Firstly, the myth that millions upon millions of British citizens are living a life of luxury on benefits, which is, quite frankly, infantile nonsense. Benefits do not pay the ordinary claimant enough to afford huge luxuries and never did. They were always intended to cover the cost of survival while the recipient looked for something better. Anything else is a lie concocted by unscrupulous politicians, that you would be a fool to believe.

Then there’s the myth that the British taxpayer is being defrauded out of a fortune by benefit cheats who are (again) living a life of luxury at our expense. One look at the figures dispels that idea! The fact is that only seven people in every thousand commit benefit fraud – at a consequently small cost to the overall budget – and the amount they receive simply would not support the lifestyle our politicians are suggesting for them.

Let’s move up to a bigger myth – that people prefer to live on benefits than get a job. We’ve now moved from infantile nonsense to dangerous nonsense. The current situation, engineered by the conservatives in both Coalition parties, means there are very few jobs available – around 500,000 at any one time, with 2.5 million people chasing them.

And what kind of jobs are they? How many are zero-hours contracts? How many are part-time? These jobs do not pay more than benefits (“Making Work Pay” – another Tory lie) so anyone taking them will be out-of-pocket.

Meanwhile, the Tories in power have rigged the system so that anyone who does not spend the entire working week pestering local businesses for jobs that they aren’t offering will be sanctioned and will lose their benefit for a period of up to three years! It is entirely disproportionate, considering the state of the economy, and may cost jobseekers a lot more than a few quid a week in the long run.

But this is how the benefits bill will be slashed – by the Conservatives and by Labour, if Rachel Reeves is to be believed. Ministers of any party, living in the la-la land of made-up statistics, will sanction people for failing to work hard enough at securing jobs that don’t exist!

Ms Reeves says Labour’s jobs guarantee will ensure that those jobs do exist but we don’t know that for sure. We do know that she intends to continue Tory policy on sanctions – blindly.

Finally, we have the biggest myth of all – that there isn’t enough money. HM Revenue and Customs just released estimates for the last-but-one tax year (2011-12), suggesting that it failed to collect £35 billion in evaded or avoided tax during that year.

That’s seven times more than the national bill for JSA, and more than 29 times the estimated cost of all benefit fraud. But wait – it gets better! This is only an estimate and it has long been believed that the true cost of the so-called “tax gap” is £120 billion – equal to each year’s national deficit, 24 times the cost of JSA or 100 times the cost of benefit fraud.

Why isn’t our government going after these criminals? Why hasn’t Labour promised to go after them if the Tories won’t?

Simple: Both main parties have been re-writing tax law to make it easier for rich individuals and large corporations to avoid paying tax, and ignoring flaws in tax laws that make avoidance possible.

So for example: In the late 1990s, the then-Labour government removed the tax on dividends that meant companies had to pay tax on profits if they wanted to pay them out to the owners. So for example Arcadia boss Philip Green’s wife Tina, who is technically the owner of the company and lives in Monaco, received a tax-free £1.2 billion dividend in 2005; if this tax had been in place, £300 million of that would have gone to the UK Treasury.

Gordon Brown slashed Capital Gains Tax from 40 per cent to 10 per cent in 2000, meaning income that his friends in private equity managed to engineer into capital gains would be taxed at a lower rate than was paid by their cleaners. Not the finest hour for the Party of the Worker!

And towards the end of its term, New Labour started dismantling the rules that guarded against industrial-scale tax avoidance by British multinationals, meaning profits returned to the UK from overseas subsidiaries would be exempt from tax. This created a substantial incentive for firms to send their income offshore.

Before the 2010 election, our old friend David Gauke made a lot of noise about stopping the limitless tax deductibility of interest payments, that had been used by Boots (the chemist) to slash its tax bill. Six months after the election, when he was in a position to do something about it, he was telling everybody the rules would not be altered because business considered them a competitive advantage.

The Coalition brought in tax exemptions for companies’ tax haven branches and for profits parked in tax haven subsidiary companies. Meanwhile, tax breaks for the cost of funding these offshore set-ups, from the UK, are also provided.

Corporation Tax will drop to 21 per cent by 2014, even though there is no evidence that cutting the rate will make the UK any more competitive in world business.

The Treasury’s mission is now to adjust the framework of tax laws to suit big business. The ‘Big Four’ accountancy firms are now well-entrenched in writing our tax laws for us – and they run the most popular tax avoidance schemes. Consultations have descended into a process of agreeing laws demanded by big businesses.

There are clear and irrefutable arguments that reversing these legislative idiocies and closing every other tax avoidance loophole will do far more for the economy than flogging the unemployed to death, looking for jobs that don’t exist.

But I don’t think former Bank of England economist Rachel Reeves will be interested in that. In 1975, an appalled taxpayer wrote to then-Chancellor Denis Healey, complaining that an employee of the Bank (which is supposed to work on preventing tax avoidance) had been giving advice on how to avoid tax. “I wonder if this is really part of the Bank of England’s duties,” the correspondent wrote.

The behaviour of Ms Reeves, the former Shadow Chief Secretary to the Treasury, suggests that she believes it is.


  1. […] A lot of people have been getting their knickers in a knot about Rachel Reeves' interview in today's Observer – and rightly so. In it, she tells us (wrongly), "We are not in an environment where th…  […]

  2. Linda Bruce October 13, 2013 at 11:38 am - Reply

    Are any MPs on our side?
    Bad enough Barbie McVey got promoted.

    • Jon Maiden October 13, 2013 at 12:12 pm - Reply

      There are a few thankfully, but they are a significant minority. Caroline Lucas is the shining light in politics – and there are now many more strong Green politicians joining the ranks (the new leader Natalie Bennett for example). But amongst the ‘True Labour’ ranks also check out Michael Meacher and some of the others who write for

    • @Clutter2 October 13, 2013 at 2:47 pm - Reply

      With few exceptions most MPs are on the side of their own career progression.

  3. Editor October 13, 2013 at 11:55 am - Reply

    Reblogged this on kickingthecat.

  4. thelovelywibblywobblyoldlady October 13, 2013 at 12:20 pm - Reply

    Well said Mike. I agree that big businesses are “avoiding” paying their tax; that in itself is not illegal of course. The problem is that tax laws are complex and big business can afford top corporate lawyers who can pick through the tax laws for loopholes which are then exploited.
    Compare this with the decimation of staffing levels at HMRC (started by Gordon Brown) by way of the CSR (comprehensive spending review) which means that experienced staff have been lost forever. Lin Homer Simpson and her ilk have realised the effect this staff reduction has had on tax revenues and has had to go cap in hand to the Treasury to state that if she is given more staff she can collect more tax (DUH)
    The trouble with that is that the staff being recruited are not experienced and with the best will in the world, you cannot instantly graft knowledge onto people. It takes on average 18 months to 2 years to be an effective tax officer in my opinion.
    The primary issue is that the tax system does not give parity for all; for example, a director of a limited company can pay him/herself next to nothing in wages but can vote substantial dividends to themselves (provided that the amounts paid can be sustained by the profits carried forward otherwise they would be ultra vires dividends which is illegal)
    Dividends are liable to tax at 10% so there is a loss to the Exchequer of not only tax but also National Insurance. I personally think that if those dividends are generated by the company and are in effect a reward for services, then they should be treated as wages and taxed accordingly.
    I have queried this on many occasions with HMRC and MPs and the usual answer I am given is that directors set up and run the company and the poor babies need to be rewarded somehow for being entrepreneurial ! Um, sorry am I missing something? It’s their choice to do that isn’t it.
    Contrast that sentiment with an employee who works for one of those directors being paid minimum wage… their overall tax bill will be larger than the directors!!!!!

    • David von Geyer October 13, 2013 at 7:04 pm - Reply

      The laws are written by the taxation specialists at KPMG/PWC etc and then rubber-stamped by parliament. The City of London is an autonomous region, UK laws do not apply there and it’s been a tax haven since the year dot. Want to find out more? Check out Tresure Islands by the former FT journalist Nicholas Shaxson which explains where we’re at and how we got here.

      • Mike Sivier October 13, 2013 at 7:13 pm - Reply

        I’d also recommend The Great Tax Robbery by Richard Brooks, which references Treasure Islands. I’m only partway through it but it is already proving useful.

  5. Joe Ohara October 13, 2013 at 12:32 pm - Reply

    No they won’t, that’s because the tax dodgers have accountants and advisers to help them legally avoid tax. All They are doing is exploiting a legal system which inept and stupid politicians put in place. It’s extraordinarily difficult and expensive to nail them. On the other hand it’s much easier to stop, evade paying legally entitled benefits. A, because benefit recipients don’t have a collective voice. And B. don’t have armies of advisers to help them. C, any help which was available has been systematically withdrawn by this Government. CAB budget slashed. Legal aid, budget slashed. Eligibility, altered to cut numbers. It’s time ALL the disadvantaged people in this country got together and used their vote in 2015 to vote these self seeking corrupt greedy well fed pink cheeked wealthy clowns OUT.p

  6. Sickofemall October 13, 2013 at 1:15 pm - Reply

    Will we meet the new boss…same as the old boss.What bloody hope is there is these new ,young, supposedly on the ball and well informed Labour politicians still believe the bullshit stats pushed out by the Tory machine. FFS sake.i mean HOW HOW HOW exactly can she get any tougher than the evil bastard IDS.Just how,out utterly out of touch can a shadow be or is she hiding in the shadow of the evil one. No hope with her then…..we need to put her straight and quick cos if Labour do get in we are still f&@ked……

  7. […] of Labours approach to Welfare – ‘Dear Rachel Reeves‘ from Paul Bernal & ‘Sort out the tax dodgers‘ from Vox Political, and I encourage you to read both if you haven’t already; their […]

  8. Dave October 13, 2013 at 1:37 pm - Reply

    Why, when a government or political party says “They are going to get tough…” do they go after the poorest first?

    • Mike Sivier October 13, 2013 at 1:52 pm - Reply

      Because they’re lying. Getting tough doesn’t involve going after people who can’t put up a fight; it involves going after people who can.

      • @Clutter2 October 13, 2013 at 2:45 pm - Reply

        Getting tough with the weakest is bullying pure and simple.

      • Justin Thyme October 13, 2013 at 3:52 pm - Reply

        it is not ‘being tough’ or ‘bullying’ – it is fascism, pure and simple – until the people of this country see it for what it is we will never get anywhere – there’s no point getting angry with the government and the elites by only making a comment on a blog – I’m afraid it ‘s a bigger issue than that – as I’ve said before – this is war

        • Mike Sivier October 13, 2013 at 4:45 pm - Reply

          Justin made a few comments after another post that were relevant to this, but I was already working on this one at the time and it didn’t seem right to put them up after the wrong article.
          If you want to re-send them as comments for this one (or alter them to fit the new context) feel free, Justin.

  9. Nick October 13, 2013 at 4:10 pm - Reply

    Veronica Kenning’s #BedroomTax Protest- From Her Deathbed

  10. thepositivevoice October 13, 2013 at 4:26 pm - Reply

    Reblogged this on thepositivevoice.

  11. kittysjones October 13, 2013 at 4:35 pm - Reply

    It’s also publicly endorsed bullying, which frankly scares the shit out of me.

    ‘Getting tough doesn’t involve going after people who can’t put up a fight; it involves going after people who can.’ – Yes, very well put, Mike.

  12. Sue Wench Devlin October 13, 2013 at 4:48 pm - Reply

    I want to see the luxury I’m supposed ta be living in on ESA due to back injury and I’m fighting to keep that I’m fit for work apparently even though my doctor ,ocp , pysio spent yrs in college to become doctors n ocp n physiotherapist there are days that I can’t even walk due to pain n stiffness mainly winter months but oooi I forgot I have the luxury to go to warmer climate and live in luxury I say make them live on it for a yr and go thru ATOS (Gestapo) checks n have the stress then c how quick they pull their fingers out their arse and how many think twice about how they go about getting votes

  13. Sickofemall October 13, 2013 at 5:36 pm - Reply

    Ok then let’s all email her and tell her what we think. If all the millions affected said we ain’t voting for Labour while you spout this crap then they should realise they will LOSE the election .After all the Tory scum have thrown at us WHY in hell would we vote for more of the same…???? The post war consensus is now a distant memory eroded by self serving politicians and they should be ashamed…but they are not as they are the ones who have an inflated sense of entitlement.They work for US and should be contracted to do so just as they would in any other job or maybe we should sanction these grabbing swine just as they are doing to people on benefits.
    And why is it that when spoken or written about people unemployed are portrayed as some sort of OTHER being….?? Standing for that is to enable the propaganda and we must tell them they must address this or again NO VOTE…
    If we stand for more of then Labour then we are lost…all of us not just the ones being hammered now and if there is no noticeable difference between the two party’s then this country what will become of us as a nation…… already know the answer as it is happening unseen by the majority of the public due to the media pandering to the Tory machine and this must change .So NO VOTE without a change of attitude from Labour…lets tell em NOW

  14. Peachy October 13, 2013 at 5:42 pm - Reply

    As a low income working family (under minimum wage, the curse of a newly self employed person) I sometimes wonder if we are a philosophical experiment in existence- the Governmennt and Shadow Cabinet have two distinct groups, ‘not working and on benefits’, and ‘working and not in benefits’. We are in neither group and feel more and more like our own existence might be some kind of dream, it is acknowledged so little by those with power.

  15. Elizabeth Williams October 13, 2013 at 6:34 pm - Reply

    They can start by taxing the pheasant shoots they mad exempt in 1997!!!!!! We are sick of all the parties protecting their own elite. The country is angry!

  16. Veronica October 14, 2013 at 2:06 pm - Reply

    I followed the suggestion to share this article by emailing it to Ed Milliband along with a link for this animation

  17. Eric Jarvis October 14, 2013 at 5:18 pm - Reply

    It’s very simple. UNUM, ATOS, A4E, and all the other large companies benefiting from the scapegoating of benefit claimants donate large sums of money to political parties. The companies and individuals engaged in large scale tax dodging donate large sums of money to political parties. The rest of us don’t.

    Since all 3 main parties have very similar policies across the board, and all get their party funding from much the same sources, we can’t vote them out. We basically have two choices. Create some sort of alternative political party or parties that aren’t entirely dependent on the same old donors, or find some way of stealing vast sums of money and buying the bastards out. Waiting for the Labour Party to chase the votes of ordinary people is not going to work. They don’t want votes, they want millions in the party bank accounts.

    • Veronica October 15, 2013 at 1:42 am - Reply

      Have you sent this to Ed Milliband? If not, please do. His response would be very interesting.

    • Joe Ohara October 16, 2013 at 7:59 am - Reply

      I have to agree with Eric Jarvis comments above, the cosy incestuous relationships between the political parties is a farce which is disadvantageous to us, the public. The coalition can only and does exist because of backhand sly deals, not for our benefit or for the Country but to keep largely useless self seeking corrupt greedy MPs in well paid jobs. Cameron got the job not as a result of a democratic vote, no, he got it as a result of a sly backhanded deal, part of which was in order to get and retain Ian Duncan Smiths support for the life of this government, IDS would get the DWP job minus any close scrutiny.
      What to do? UKIP? might work in coalition but not I venture to say with the Torys. BNP no, Middle England would never stand for it.
      So readers, we are screwed unless someone has a better idea and quick.

  18. […] person who seems to have had trouble saying what they mean is Rachel Reeves. This blog – and many other people – took her to task last weekend, after The Observer published an interview in which she reportedly made many […]

  19. Joe Ohara October 16, 2013 at 7:45 am - Reply

    Sorting out corporate and wealthy tax dodgers is easy. Legislation is easy to invent and implement. Best example is the legislation biased against benefit claimants. Therefore, why isn’t tax dodging legislation being levied against KPMG, PWC etc, hit them with a windfall tax based on an estimation of the tax they have helped their clients avoid. And following the fascist IDS example remove much of the appeal process simples xx

  20. Joe Ohara October 16, 2013 at 8:39 am - Reply

    It’s time the FASCIST lying well fed undereducated, b*st*rd Mr cough cough IAn Duncan Smith was put down like the rabid filth he is. And if Cameron carries on supporting him then he also has to go!

  21. […] Sort out the tax dodgers, Labour, then the benefit bill won’t be a problem | Vox Political. […]

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