Announcing the new prosecution guidelines for so-called “benefit cheats”, Keir Starmer, the Director of Public Prosecutions, said: “benefit and tax fraudsters cost the taxpayer [£9.1 billion every year]”.
Benefit fraudsters, the new guidelines insist, should therefore should be sentenced under laws which carry a maximum jail term of ten years. What Starmer did not say was that benefit fraud accounts for just £26.9 million, or 0.3%, of the £9.1 billion total.
According to the Tax Research website, the figure for tax fraud (based on undeclared income) is an underestimate, and could be as much as £70 billion. So why does the government (and Starmer, who acts for the government) treat these two issues as equivalents?
The short answer is that they want to demonise people who over-claim on their benefits.
By any reasonable assessment, “tax fraudsters” should also include tax avoiding companies like Amazon, Starbucks, and Vodafone — who, to use Starmer’s language, “cost the taxpayer” a further £25 billion a year.
There is a huge moral difference between someone who “makes a few quid on the side” and a fat-cat tax evader.
Take someone like Philip Green, boss of the Arcadia Group (Top Shop, Wallis, BHS). Knighted by New Labour for services to British retail and adopted by the current government as an advisor on government spending, Green is the quintessential “pillar of society”, an example of where hard work can get you.
But Green used inherited wealth to make much more cash. He employs accountants and lawyers to avoid paying tax. He registered his company in the name of his wife. She is from Monaco, and not liable to pay UK taxes. This is how Green avoids paying £285 million a year in taxes.
That is fraud and everyone knows it is. But because it is technically legal, and because Green is a rich man, it is tolerated. The government is not rushing to change the law to stop Green defrauding the state. The Daily Mail will not be running shaming headlines about how he is robbing the tax payer. He will not be inconvenienced for ten minutes, let alone lose his liberty for up for ten years, because of what he does.
Rich individuals and corporations routinely steal from public finances all the time.
And we should count among the thieves, fraudsters, and cheats the banks which grabbed — and wasted — so much public money over the last five years. In 2008 about £1.1 trillion from public finances was poured into the banks, to buy their shares or give them loans or guarantees.
Most tax evasion (as opposed to the legal tax avoidance) is committed not by people who don’t declare a bit of “cash in hand” work, but by rich people who have lawyers on their side and are able to negotiate with the government over the punishments they receive if found out. Those people do not get locked up for ten years.
Contrast these multi-billion pound fraudsters to the individuals who misclaim and over-claim on their benefits.
A survey of the cases that come to court and are reported in local newspapers shows people very different from organised criminals like Philip Green, who plot and plan with their associates and relatives to defraud.
Very often they are women with families living in difficult circumstances. Very often they are entitled to benefits, but have failed to disclose they are living with a partner (who may or may not be working) and therefore their claim for benefits is administratively wrong.
They are hard-pressed people who have tried to get a bit of extra money for themselves and their families. They do this because they are poor. They have fallen foul of a stingy, humiliating, and increasingly draconian benefits system.
Every day hundreds of people have their benefit stopped because they have not met this or that criterion of a bureaucratic system. Disclosing new information about your circumstances is a sure-fire way to have your benefits stopped for weeks and weeks.
Every week thousands of people will visit a food bank because they have lost their job but have had to wait weeks to receive benefits to which they are entitled, and therefore have nothing to eat. They are not, as Michael Gove would have it, people who cannot manage their money. They are people who have had the money they are entitled to mismanaged by the state.
And every year millions of people are entitled to benefits that they do not claim. Those unclaimed benefits (including pension credit and Job Seekers’ Allowance) are worth £12 billion.
Moral standards under capitalism are upside-down. Rich individuals and companies are lauded for accumulating and hoarding unimaginable wealth and therefore bleeding dry resources that should be used to fund schools, hospitals and create jobs. Banks are praised for rediscovering their profit mojo and overcoming the crisis.
Then they propose to lock up working-class mothers for just trying to survive.
The left and the labour movement needs to make the political arguments against these inequalities. The ruling class gets away with continual attacks and daily humiliations against the poorest and most vulnerable in society because the labour movement is passive and weak.
Our demands should include opposition to all means-tested benefits. Everyone who is jobless, regardless of their “ability to work”, should have a basic, guaranteed income that is enough to live on.
Our campaign needs to base itself on proposals to redress the wealth inequality — expropriating the banks, taxing the rich, and stopping them avoiding tax.