Welfare is perfectly sustainable, Gideon – it’s the TAX GAP that’s the problem!

George Osborne's most famous performance in Prime Minister's Questions, from November 2014. What was he on?

George Osborne’s most famous performance in Prime Minister’s Questions, from November 2014. What was he on?

George Gideon Osborne. Was there ever a more foolish fellow running the Exchequer?

Probably not. Did you hear him in Prime Minister’s Questions yesterday, trying to tell us that the UK’s social security bill makes up seven per cent of welfare in the whole world, and that this is “unsustainable”? What a berk.

The first question this raises is, can he prove his “seven per cent” claim?

No – he’s wrong. The claim is based on a comment by German Chancellor Angela Merkel about EU social security being 50 per cent of that in the world, making the UK’s share 7.4 per cent of the total. Unfortunately for Thick George, she was using World Bank data that only included 96 countries and excluded large economies like Canada and Mexico, where social security makes up 18 per cent and 17 per cent of each country’s GDP.

The Guardian reckons that, if all countries were taken into account, this would not seriously affect the UK’s share of the total, suggesting that it accounts for the rounding-down to seven per cent from 7.4 – but there’s no proof either way. The article also quibbles about definitions of social security spending.

What this really shows is not that the UK spends too much, but that other countries spend too little.Mr

Nearly half of the world’s population – three billion people – must try to scrape a living on around $2.50US per day – or less. Of those, 1.3 billion are in extreme poverty, having to survive on less than $1.25 per day. That’s around 80p.

The countries in which they live – mostly developing countries – don’t have social security at all; that is the scandal.

If they did, then Gideon could not quote his “seven per cent” figure – it would be much lower.

What’s stopping these developing countries? Well, the organisation most directly responsible is probably the International Monetary Fund, whose ‘Structural Adjustment Programmes’ have put these countries into a continual cycle of debt; they can’t help their populations without breaching the IMF’s rules. This is the same IMF that wants the UK to run a debt economy, by the way.

So much for Osborne’s claim that social security spending in the UK is too large a proportion of the world’s spend. What about his “unsustainable” comment?

He said: “We can either carry on on a completely unsustainable path or we can continue to reform welfare so that work pays and we give a fair deal to those on welfare and indeed a fair deal to the people, the taxpayers of this country, who pay for it.”

Ignoring for the moment the fact that those on social security are in fact taxpayers themselves, let us consider the fact that the UK government does not collect as much tax as it could, and in fact offers extremely lucrative tax avoidance opportunities to the obscenely wealthy.

Did you know that you could fit the owners of half the world’s wealth into a double-decker bus, with space to spare? Less than 80 people own more money than the other seven billion, and you can bet that the majority of those with UK citizenship aren’t paying their full whack of tax!

A report by Tax Research UK has indicated that the amount of tax being avoided is around £122 billion every year. Compare that with the UK’s current budget deficit of £107 billion per year and you will see that – in a perfect world in which it was all collected – we would be running surpluses of at least £15 billion per year.

The Conservative government, of which Osborne is Chancellor, tells us the most effective way of tackling the deficit is by cutting the public services on which many people rely. They say it is the only option without increasing taxes.

But, with more than £100 billion in taxes going uncollected, why is the government slashing funding to the HMRC investigative branch?

Over on Tax Research UK itself, Richard Murphy has taken David Gauke, the financial secretary to the Treasury, to task over his fudged claims about the tax gap.

Gauke said: “The tax gap as a percentage has been lower in every year under us than it was in any year under the Labour Government”.

Mr Murphy replied: “Percentages are the evasive politician’s favourite tool, so I think that claim can be dismissed. What remains baffling is David Gauke’s apparent inability to see just how wrong his data might be. The government claims that the tax gap is £34 billion. And then it claims that HMRC recover £26 billion a year. Or to put it another way, £60 billion of tax abuse is attempted and 40 per cent is recovered.

“Is there anyone who thinks that remotely likely?”

He goes on to completely trash Gauke’s – and the Conservative Government’s – claims, and it is strongly recommended that you read the article for the details.

Mr Murphy says HMRC’s tax gap estimates should be subject to independent economic audit to check their credibility. He says HMRC’s claim of tax recovered should be subject to independent scrutiny to ensure that it is credible. He says a review of HMRC is overdue, with a panel of independent experts including from unions and civil society being included in the task. And he says it is time we had an Office for Tax Responsibility, reporting to the Public Accounts Committee, to ensure that this most critical department of government is held to account.

He states: “A recovery of £26 billion out of more than £100 billion I could possibly accept – except to say it could be so much better. But that rate of recovery out of anything less is absurd right now – as is HMRC’s tax gap estimate.”

So, under analysis, Gideon the Towel Folder’s claims are no more than silly attempts to confuse us.

If he bothered to collect all the taxes owed him, he would be running a budget surplus tomorrow.

Follow me on Twitter: @MidWalesMike

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13 thoughts on “Welfare is perfectly sustainable, Gideon – it’s the TAX GAP that’s the problem!

  1. hayfords

    Interesting that you have used that badly excited gif at the top of the article. If you look at the background, you can see it has been eedited and sped up to give a false impression.

    1. Mike Sivier Post author

      It gives the correct impression of a man who should not be Chancellor of the Exchequer.

    2. wildswimmerpete

      Don’t be silly, that “edit” is down to the gif being looped for continuous display. As for “sped up” look at the hands of the person to our left – presumably Cameron, looks like actual speed to me. Meanwhile, how can you justify your hero’s dishevelled appearance – looks like he’s been pulled backwards through a thorn hedge? Look at his eyes, he’s obviously been snorting something very interesting – mind you, we know all about his favourite “nasal tipple”, don’t we? Good try, but nil points.

    3. Michele Witchy Eve

      I was watching that particular scene as it was first broadcast on BBC. Having having spent many years living among folk who share Mr Osborne’s alleged taste in nasal tipples it struck me at the time how he looked, for all the world, as if he had misjudged that last line. There was no fancy editing involved in that broadcast.

    1. Paul Paul Paul Billanie

      I was actually just thinking along similar lines a short while ago when reading that report. I am glad I am not the only one. Having not seen this particular post from Vox Political until about 10 minutes ago I actually messaged regarding this on the FB page literally half an hour ago.

  2. Chris

    This is what happens when you let cameras film parliament. It’s so funny.

    There is no welfare, no benefit. It is our money being denied back to us. Welfare reform has massively risen national debt and will continue to do wo, from its raised admin costs both private firms and state. Not least the trebling of sanction decison makers, which will need more as sancitons more, under Universal Credit, to the working poor, as UC absorbs working tax credits.

    Half of the over 60s are withint he working poor.

    We are all 100 per cent taxpayers, with the poorest on a 90 per cent tax rate, from the 75 per cent of tax in the UK from indirect stealth taxes and VAT.

    VAT on fizzy drinks, hot take away food, any sugary food like sweets and cakes etc, crisps, then on in life including condoms, tampons, maternity pads and maternity breast pads, cycle lights and premium tax on most insurance including on your mobility scooter.
    And the huge duty on alcohol and cigarettes.

    All adult, all ages, pay tax, however poor, in or out of work, pensioners or young adults.

    Welfare cuts have been against pensioners. Not least by the raised retirement age, meaning a couple getting hit by Bedroom Tax even if in sheltered housing.

    Penson Credit – savings – has been reducing each year since 2010.

    Pension Credit (savings) is abolished next year for new claimants.

    Universal Credit, in its pilots, already denying pay out of Pension Credit if either below the raised retirement age.

    The flat rate pension will dramatically reduce below even the current basic state pension, for well over half of new claimants. There will never be a single tier pension.

    Lowest forecast seen so far is £8.39 per week after 45 years in work.


  3. Bill Kruse

    The IMF may not be wrong, we probably could run a debt economy quite happily if we did it a la Japan and ‘borrowed’ the money from ourselves. It’s where the IMF has gone in to third-world countries as emissary for the commercial banks and they’ve done deals with bent politicos which leave countries perpetually working to their limits just to make the interest payments that you get the obvious problems. It really doesn’t have to be like that.

    1. Paul Paul Paul Billanie

      As a former user of devils dandruff (8 years clean) I was thinking the same thing regarding that gif! I have seen that look many times on peoples faces. Just as a curiosity, how would we go about demanding a random testing of a serving cabinet member? In fact I think all of the front bench should be subject to a test but certainly starting with Gideon!

  4. Rupert Mitchell (@rupert_rrl)

    Whether or not we pay more than other countries is not the point, merely an excuse to avoid getting the rich to pay their fair share. Those countries which do not look after their low paid and ill are to be despised, and to compare us to them is just another insult.

  5. SallyK

    Another factor in all this twisted-logic-economics and feast for the rich and food banks for the poor is the £106bn of taxpayers cash that goes to corporations – welfare schemes or handouts year on year.
    A further insult when taking into account that some of these corporations not only get free profit-producing labour courtesy of DWP work programs, but additional ‘incentives’ and bungs for taking them on in the first place all subsidised by the taxpayer -which of course is in addition to the taxpayer paying their ‘wages’ and housing costs via JSA/ESA/HB/UC.

  6. Paul Paul Paul Billanie

    I am glad you raised the tax gap. Is that a new report for the £122bn as I know last years was if I recall £119.4bn or thereabouts and in 2010 was £120bn. I believe as you mention him these are all Richard Murphy figures as I do remember his name in the previous years.

    I know they claim continually that they are cracking down on the issue but if anything in the past year it has increased.

    BUT then I wonder being of a suspicious, questioning mind if the increase in people being chased for overpayment of tax credits is being counted as part of this crackdown. I am a member of a group on facebook that helps people with debt and benefits and we’ve seen a large number of these recently.

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