Unpicking discourses of need and welfare

Farnsworth defines corporate welfare as ‘the various benefits and services that directly, or indirectly, meet the needs of businesses’ (Farnsworth, this volume) to match the standard discussion of social welfare. This made me reflect on how much we routinely use the word ‘need’ in social policy when very often there is only a presumption of need. The art is being able to present yourself as a ‘giver to’ rather than a ‘taker from’ the state and so being seen as all the more deserving for that (Cook, Reference Cook1989). Creating that presumption can bring considerable advantage; and the less visible the benefits, the more one may be able to gain.

Exploring the world of subsidies to business helps to raise neglected questions about the various ways in which needs for resources are constructed, justified and marketed. Comparison across both corporate and social welfare could help to unpick dominant discourses of need.

Subsidies and support for business may extend beyond company needs, as Farnsworth himself shows. Governments, for example, may wish to direct companies, as they do individuals, towards certain activities, and this may not equate with meeting their needs. However, businesses may be more successful than individuals in persuading governments what behaviour ‘needs’ to be incentivised, and that they have met the requirements for reward.

One point deserves particular consideration: how far is welfare the best term to use for the whole range of resources that Farnsworth has identified as being allocated to corporate ends? One good answer might be that it is no more or less appropriate than its catch-all use in social policy where ‘welfare’ is used with often little examination of how much actual benefit, if any, is provided to the recipient. As Titmuss pointed out almost half a century ago, ‘welfare can serve different masters. A multitude of sins may be committed in its appealing name’ (Titmuss, Reference Titmuss1965: 132). The value of Farnsworth's work is that it sets out to document the variety and amount of resources distributed directly and indirectly to business and to relate these to spending on social services and benefits. What needs are met and to whose welfare then have to be explored.

Corporate welfare is a category identified by the recipient group, not by the means through which benefits are made available. Indeed, amongst the various routes, direct and indirect, used to provide resources to the corporate sector, one can find the three ‘interventions’ Titmuss included in the social division of welfare – social, fiscal and occupational (Titmuss, Reference Titmuss1958, and in Alcock et al., Reference Alcock2001, Part 2:2) − as well as the additional dimension of ‘regulatory’ welfare suggested by Agulnik and Le Grand (Reference Agulnik and Le Grand1998). Farnsworth's own work on occupational welfare (Reference Farnsworth2004) indicates its scale and significance for corporate welfare. The very fact that much of it is tax-efficient for employer and employee, and therefore partly subsidised by the general taxpayer, only strengthens the case for the closer consideration of both fiscal and occupational welfare here.

From another perspective, corporate welfare is just the right term to encourage comparison with the political discourse that treats the public welfare of ‘the welfare state’ as if it alone were the only element of distribution affected by government intervention. It is an irony that the more social policy is taken out of direct state provision, the more ‘welfare’, a narrowly defined social administration paid for through public expenditure, is minutely scrutinised, criticised and seen as the major target in deficit reduction. For many, and particularly among those now exercising power and influence, welfare has become the problem, not the solution. But, with the exception of the hybrid benefits of working and child tax credits, they confine ‘welfare’ to what is publicly provided and treat occupational welfare as an entitlement or earned reward and would prefer to disregard the revenue costs of fiscal or tax welfare.

The political economy of welfare will be advanced by comparisons between corporate and social welfare. The negative connotations assigned to social welfare in much media and political discourse and their use to stigmatise services, benefits and their recipients would not only be better revealed, often as propaganda against the welfare state, but greater pressure would be put on business recipients to justify their benefits as they become visible. This will take us into the uncharted processes that Jacob Hacker has called ‘pre-distribution’: he describes it as ‘the way in which the market distributes its rewards in the first place’ but it should also take account of the state's activities in, for example, the pre-budgetary allocations of tax welfare (Hacker, Reference Hacker2011: 35). These revenues have already been lost in advance of decisions on how much should be allocated to public spending and how it should be divided up and redistributed.

To whose benefit?

One particular contribution of Farnsworth's analysis is to make us think much more rigorously about the multiple beneficiaries of different redistributive arrangements. Much conventional social policy discussion is premised on a default allocation to the individual benefit recipient as the sole beneficiary. Yet services and benefits meet the needs and purposes of others as well as the primary recipient – for example, contributors, employers, provider industries, government, society, the economy. Farnsworth clearly brings this out in discussing the welfare continuum and the allocation of spending across social−corporate welfare and corporate–social welfare: ‘some forms of provision bring far-reaching benefits to corporations and citizens, whilst others more directly benefit businesses or citizens (but even here, the benefits are seldom restricted to either one)’.

Who really benefits, and to what extent, from all the different forms of welfare? This is an area that deserves more attention as well as the development of measures of resource and impact that can be applied routinely across different areas of welfare.

Differential power in social and corporate welfare

In discussing ‘the trade-off between corporate and social welfare’, Farnsworth notes that ‘the relative power of competing interests’ in the ‘struggle over resources is key to determining welfare (social and corporate)’ (Farnsworth, this volume). Further pursuit of what resources are allocated where and how will help to provide a fuller understanding of the power relationships between government departments and their different clients, as well as understanding who sets the agenda, poses the questions and monitors progress. Analyses of the political economy of policy-making are needed to take account of the different interests involved and the powers they have exercised: The Irresponsible Society needs sustained investigation (Titmuss, Reference Titmuss1959, and in Alcock et al., Reference Alcock2001, Part 4:1; Sinfield, Reference Sinfield, Farnsworth and Irving2011).

A central aspect of the differences in power lies in the extent of contribution made to the common wealth as well as benefit received from it. Setting out the very significant amount of support from government to corporate welfare leads Farnsworth to argue that ‘it follows that businesses and wealthy business people should bear more of the related costs’ (Farnsworth, this volume). Distinguishing businesses and business people is particularly appropriate here since funds reaching a company may convey particular benefit to senior executives and others. ‘Fiscal efficiency’, increasing individual and corporate welfare, was seen as a major driver leading to ‘socially’ or ‘economically useless’ trades that took advantage of tax loopholes and other differences across frontiers (Turner, Reference Turner2009).

Who contributes, how and by how much has just as great importance for analysing the ‘state organised redistribution of life chances’ as who benefits, how and by how much, but it has been very much less examined (van Oorschot, Reference van Oorschot2008). In Racing Away?, a special study by the Institute of Fiscal Studies, the tax advantages to the top ten per cent of taxpayers, including senior business executives and board members, are shown to be considerable (Brewer et al., Reference Brewer, Sibieta and Wren-Lewis2008). Through tax reliefs they reduced their 2004–05 tax liabilities by nearly £12 billion over and above the basic personal allowance – gaining some 70 per cent of that extra tax relief (author's estimates from Brewer et al., Reference Brewer, Sibieta and Wren-Lewis2008: Table 1). The top one-tenth of the top one per cent – some 47,000 people – were estimated to benefit by nearly £50,000 each. While their pre-tax income was already 31 times average income, the beneficial value of their tax reliefs was 86 times the average relief, enabling the very top to ‘race away’ even further at considerable cost to the exchequer and other taxpayers.

Discussions of active citizenship contain little consideration of the solidaristic contribution that citizens can make to creating an active society by paying their taxes. The basically proportional, rather than progressive, incidence of taxes across rich and poor households is becoming better known (ONS, 2012), although the dominant discourse is still on how much income tax those with the largest incomes pay as if no other forms of tax existed.

The greater scrutiny of the use and abuse of tax havens post-credit crunch has revealed the ways in which owners of companies and particular staff within them were able to take direct advantage of funds coming into their businesses to move resources between individuals, companies and countries in ways which reduce their total tax contribution. Accountants such as Prem Sikka (Reference Sikka2008), Richard Murphy (Reference Murphy2010) and his colleagues at the Tax Justice Network have moved from simply documenting to campaigning much more vigorously on what they see as the increasingly predatory corporate raiding of the common wealth: ‘large corporations and wealthy individuals are increasingly avoiding their contribution to society through taxation. With the aid of governments, they are shifting the tax burden further onto ordinary citizens and smaller businesses’ (Kohonen and Mestrum, Reference Kohonen and Mestrum2008: xiii; Henry, Reference Henry2012; The Guardian, Reference Henry2009).

In a recent lecture on ‘the tax avoidance industry’, Prem Sikka drew attention to what he argues has become the prevailing culture:

Accepting the force of such arguments entails much tighter scrutiny of the public accounts and their subterranean annexes to see who gets what, otherwise understanding of the ways that inequality is maintained and widened remains limited. We should note, however, Tony Atkinson's chiding of Richard Titmuss on Income Distribution and Social Change (1962): he did ‘not on occasion distinguish sufficiently between factors which are important and those which are merely exotic’ (Atkinson, Reference Atkinson1975: 61). We need to know how far the exotic and often barely visible relates to minor issues, confined to certain industries or corporations and how far it permeates business practice more widely. Fuller accounting of the range of corporate and individual business welfare would help to reduce the gap between the reality and the perception of tax and welfare where it is generally presumed the richer contribute and the poorer benefit.

The poverty of accounting and its limits on democratic discussion

One herculean task that Farnsworth has had to struggle with is the poor quantity and quality of many statistics, and not only if one attempts to go beyond public spending accounts. As he points out, even the government's Office for Fair Trade acknowledges the lack of data. The ‘precise costs to taxpayers are difficult to estimate’, let alone their purpose, and ‘the value of corporate welfare is largely hidden − often deliberately by governments − and under-researched by academics’ (Farnsworth, this volume). The problems are compounded in bringing together data from the different countries.

Exploitation of this lack of transparency by politicians, governments, business and others is said to be growing, with the aim of keeping support for many activities and their costs ‘off the books’ – the various forms of Private Finance Initiative providing one evident example in the social services. One direct subsidy to industry from the welfare state that I recently stumbled across is to UK merchant shipping by waiving employers’ National Insurance contributions for crews. Said to be common across the EU and beyond, it appears to be little known and is invisible in the public accounts, but it reduces the income collected for social insurance and so the state's ability to prevent and reduce social and economic insecurity. The most common arrangement in the EU is that governments exempt shipping companies from paying employers’ contributions for crews, but the UK government apparently refused to agree to this explicit relief. For a decade, maybe longer, it has allowed, if not encouraged, the industry to re-employ crews offshore, thus removing the obligation to pay employers’ national insurance contributions while these staff continue to pay their employee contributions and so remain fully protected.

Caledonian MacBrayne reported it to be ‘standard practice in the international shipping industry to use offshore companies for crewing’ for many years, and it switched to this arrangement in 2006, believing it was ‘one of the last’ UK companies to do so (quoted in Roy, Reference Roy2010). The practice was defended as it removed ‘a competitive disadvantage’ and reduced ‘the annual subsidy it required from [the Scottish] Government. There is therefore a strong argument for saying that offshoring actually saves money’ (ibid.). Quite apart from any revenue losses from the offshore companies created to achieve this, the National Insurance subsidy and the consequent loss for its purposes in promoting and maintaining social security are ignored in a transfer which benefits both MacBrayne's and the Scottish government's budget, helped by present accounting practices that render it ‘subterranean’ and virtually invisible (Hacker, Reference Hacker2002).

What other uses of social security contributions are there to support other corporate or national objectives that reduce the resources specifically available for protecting and contributing to social security?