Kevin Farnsworth (this volume) exhorts us to recognise that corporations (by which he means any private company regardless of its ownership structure) are recipients of welfare provision in various forms: financial and in-kind, direct and indirect. He argues that a recognition of this by businesses, governments and the social policy community can foster greater complementarity in corporate and individual welfare measures and also potentially legitimise a greater tax contribution from these businesses towards public expenditure.

Farnsworth is right to call for the opening up of social policy to ‘corporate welfare’, and he points out that his paper belongs to a tradition of analysis which seeks to push further at the boundaries of social policy. This response aims to reinforce that effort. In order to enfold corporate welfare effectively into the discipline, a more extensive broadening out of social policy is required so that, first, corporations per se become more central to the business of social policy and, second, the distributive and redistributive agenda, giving centre stage to taxation, becomes a primary focus of analysis. Corporations, taxation and redistribution are not entirely absent from social policy but are very much minority interests. Kevin Farnsworth is already one of the most important contributors on corporations and Adrian Sinfield, the other respondent to Farnsworth's paper in this volume, is one of relatively few social policy experts who have championed the analysis of taxation. Although the illustrations here are drawn from the UK, Farnsworth's analysis has relevance for welfare regimes across the world.

The past thirty years have witnessed the ascendancy of the corporation in most areas of life. Corporations have become bigger, through mergers and take-overs, concentrating wealth and power. They have developed complex and geographically spread systems of production, divisions of labour and structures for managing their finances. Corporations have influenced the every-day life of citizens directly through their greater role in the provision of what had previously been state-provided services; institutionally through the widespread use of ‘the business model’ as a way of reforming and modernising non-business organisations and undertakings within both the state and civil society; and culturally through the permeation of market-shaped ways of thinking. In welfare specifically, all of these processes have made their mark. Where services have not already been contracted out to private companies, they are run along market lines emphasising competition, choice and personalisation.

Corporations − and financial institutions − are not only recipients of state welfare but also actively solicit it and seek to shape the policy context in which they operate. They do so through direct engagement with policy makers via networks of ‘dialogue’ and discussion, through the so-called revolving door in which personnel from private corporations and financial institutions take up policy-shaping posts within the state while corporations recruit former ministers and civil servants as advisers and directors, through the extensive employment of lobbyists’ services, and through sponsoring research, seminars and conferences, often via think-tanks, to shape ideas in the wider policy environment. They can also influence policy through their ability to make investment decisions and create jobs and, more crudely, they may offer the carrot of political donations or the stick of actual or threatened media coverage designed to embarrass government. They act both singly and in institutionalised coalitions. Some of the strongest attacks on a ‘bloated’ public sector have come from the representatives of corporate coalitions.

Although the globalising processes underway for several decades have been substantially incorporated into social policy analysis, the investigation of corporations per se has been much more modest. There have been a number of important studies in the past decade (e.g. Farnsworth, Reference Farnsworth2004; Farnsworth and Holden, Reference Farnsworth and Holden2006; Critical Social Policy, 2010), but the importance of corporations in understanding welfare is still far from being widely recognised. It is, however, becoming harder for social policy to ignore corporations and the roles they play in the welfare state. Perhaps unsurprisingly, this is not primarily because of developments within social policy itself but overwhelmingly, as Farnsworth acknowledges, because of developments outside it – e.g. particularly press coverage of failures or scandals (as in the case of the collapse of the UK-based private care home consortium, Southern Cross) and the emergence of popular campaigning and activism in relation to the activities of some companies on the welfare scene (e.g. surrounding the French company Atos’ implementation of work capability assessments under the UK's new Employment Support Allowance scheme). Despite the place of political economy approaches within the field, much social policy has favoured technical over political analysis of welfare. Moreover, the study of often opaque activities poses access challenges and raises concerns about the possibility of litigious responses where companies believe they have been inaccurately represented by academics. (Virgin's threat of legal action against a journalist when the latter wrote unsympathetically about Virgin Care's £500m take-over of community services in Surrey suggests such preoccupations might not be wholly without foundation (NI, 2012).) By making us think differently about what ‘welfare’ is and thus what welfare policies consist of, Farnsworth's proposal offers the prospect of integrating corporations into mainstream social policy analysis.

A significant proportion of ‘public’ services are now provided through corporations: Gosling (Reference Gosling2011) estimates spending on the UK's ‘public services industry’ to be around £100bn annually, excluding long-term liabilities associated with public service projects established under the Private Finance Initiative (PFI). But it is also true to say that some corporations derive most of their income from the state (e.g. Serco and Capita) through the provision of services. Companies such as these are highly dependent on government policy and, specifically, the way in which the state has been restructured over the past twenty-five years. One of the main risks for businesses arises from the policy environment and changes to the policy environment which impose costs. Farnsworth approaches the definition of corporate welfare thus: ‘corporate welfare . . . functions to meet some of the fundamental and supplementary needs of business and to protect against various market-based risks. With this in mind, the term corporate welfare is defined here as the various benefits and services that directly, or indirectly, meet the needs of businesses’ (emphasis in the original). Farnsworth's typology includes ‘infrastructure spending’ and ‘state legal instruments to facilitate the basis of . . . trade . . . and appropriation of profits’. There is a question as to whether modifying the definition of corporate welfare to include shaping the policy framework so as to remove barriers to trade and to facilitate greater predictability of income generation would be consistent with Farnsworth's proposal. This does not lend itself to easy measurement in terms of financial value, but it nonetheless comprises a highly significant element in enhancing the conditions in which corporations can flourish.

There are other respects in which Farnsworth's typology would benefit from clarification. A host of types of welfare are identified in his Table 1. It is not clear whether the typology includes – or could include − legal guarantees (e.g. where public agencies make payments to private corporations for services rendered, as in the PFI), workers’ rights and trade union legislation and the costs associated with enforcing such legislation and the costs of limiting or containing challenges to lawful (and possibly unlawful) corporate activities. Would the cost of policing to assist employers in getting those willing to work past an angry picket line or the cost of protecting corporate assets and corporate activities from direct action protestors be counted as a form of welfare?

Farnsworth's proposal represents not only a welcome step in the direction of mainstreaming the analysis of corporations but also the promise of turning the spotlight onto matters of taxation which must inevitably comprise part of any adequate analysis of corporate welfare. Where Titmuss’ (Reference Titmuss1958) analysis of fiscal welfare focuses on individuals as beneficiaries, Farnsworth's typology adds fiscal measures which benefit corporations directly and his conceptual analysis supersedes that of Titmuss. It will be the analysis of both fiscal and occupational welfare for individuals and corporations which can assist in the defence of the welfare state since the analysis will point to the extent of hitherto largely concealed financial transfers to business, the comfortably off and the very rich whose interests are often intertwined. For example, certain types of investment carry a ‘tax favoured status’ and the distribution of the benefits derived from these and other provisions has yet to be explored and demonstrated within the social policy community.

Taxation has risen to the top of the political agenda in the wake of the financial crash and ensuing economic recession. Proposals for alternatives to austerity (e.g. Green New Deal Group, 2010) and direct action by UK Uncut in which targeted banks and businesses are occupied and symbolically converted into crèches or libraries for an hour or two have helped crystallise debate around the trade-off between service cuts and tax rises, the distribution of the tax burden, especially the levels of taxation paid by the rich, and the favoured status of banks and selected businesses either as recipients of state aid or in terms of favourable taxation agreements.

Hanging over every service cut and lost public sector job is the enormity of the financial bailout for banks, ultimately funded by taxpayers and, partly for this reason, financial institutions should be incorporated into Farnsworth's widened approach to welfare. Since 2007, the UK government had committed to spending £1.162 trillion, that is at its peak had liabilities of that value (NAO, 2011). The support actually given has been smaller but by March 2011 banks still owed the government (and thus the taxpayer), after repayment, fees and interest, £456bn, the equivalent of 31per cent of GDP. This comprised £124bn in loan or share purchases (which required an injection of cash from the government to the banks); and £332bn in guarantees and indemnities (not paid but offered to shore up the banks).

A number of high profile cases have drawn attention to the ways in which some companies have benefited from favourable outcomes in tax disputes with Her Majesty's Revenue and Customs (HMRC). The Public Accounts Committee has accused the Permanent Secretary for Tax of authorising one tax settlement in a way which breached HMRC's internal rules, mishandling tax negotiations with a number of big companies – e.g. Goldman Sachs, so that it was not required to pay millions of pounds in interest on tax bills − and of giving inconsistent and potentially misleading answers in committee (PAC, 2011).

Vodafone has come under considerable scrutiny from both analysts (Private Eye, 2010; TBIJ, 2012) and UK Uncut activists regarding the relatively low levels of tax it pays. Critics claim that Vodafone appears to have engaged in extensive tax avoidance. During a protracted dispute with HMRC, a senior HMRC official switched sides to become head of tax at Vodafone. A subsequent ‘sweetheart deal’ with HMRC in which Vodafone paid £1.25bn in taxes, exempted from interest payments and in contrast to the £6bn estimated by some to have been liable, resulted in occupations of Vodafone premises around the country.

These examples illustrate that tax-related corporate welfare is not simply a question of tax breaks but something more generic – a policy stance with regard to how aggressively tax avoidance and evasion are pursued, including simple matters such as staffing levels in HMRC (they are being reduced) and whether a General Anti-Avoidance Principle applies (it does not in the UK). So while Farnsworth's analysis focuses on specific provisions and interventions, in the field of tax at least, it is omission as much as intervention which shapes the character of corporate welfare.

These examples also point to a fundamental problem for social welfare – the decline of the corporate tax base, accelerated by government policy and the influence of corporations on shaping the tax rules. Working groups established by Labour to discuss tax liabilities relating to Controlled Foreign Companies included substantial input from tax directors from companies with overseas subsidiaries (Lawrence, Reference Lawrence2012). Ostensibly in the interests of competitiveness, the 2012 budget altered the way in which multinationals are taxed on profits from their overseas subsidiaries, described by one critic as the ‘deliberate promotion of tax haven abuse’ by the Chancellor of the Exchequer (Murphy, Reference Murphy2012). The budget also provided for a cut in corporation tax from 28 per cent to 23 per cent by 2015, costing, according to Treasury estimates, more than £5bn each year (Lawrence, Reference Lawrence2012). The ability of companies to plan their finances creatively means that even this can be avoided: the Mail on Sunday reported that top internet companies making use of off-shore companies had paid just 0.8 per cent tax on UK profits (Hawkes and Loveless, Reference Hawkes and Loveless2012).

These policy decisions are highly significant for social policy: they affect the welfare of citizens by shifting the tax burden away from corporations towards individuals and by weakening the fiscal basis for welfare services through a reduced tax base. They pose major challenges for investigating and understanding the policy-making process. Farnsworth's reconceptualisation of welfare allows us – indeed, requires us – to encompass this bigger picture.

What this prospective broadening of the social policy gaze to encompass corporations and taxation can achieve is, first, a much more comprehensive approach to distributive questions which have been insufficiently addressed in social policy; and, second, as a result of the first, greater attention to the rich. The work of Karen Rowlingson, Michael Orton and their colleagues has begun to establish an agenda for investigation and research (e.g. Orton and Rowlingson, Reference Orton and Rowlingson2007; Rowlingson and Connor, Reference Rowlingson and Connor2011). For years, official figures have demonstrated that the welfare of households is shaped by a real redistribution towards poorer households in the form of services such as education and health care (e.g. Barnard et al., Reference Barnard, Howell and Smith2011). It is not therefore surprising that Horton and Reed's (Reference Horton and Reed2010) new and more sophisticated approach to measuring such benefits has allowed them to demonstrate that the impact of the Coalition government's deficit reduction programme is sharply regressive. By the same token, the welfare of households is shaped by the income they are required to give up in the form of taxation. Here we find, taking all taxes, that we have something close to a flat tax system with both the poorer half and richer half of all households giving up around 33 per cent of their gross household income in taxes although the poorest 10 per cent of households give up the highest proportion of all in taxes (Byrne and Ruane, forthcoming). Orton and Davies (Reference Orton and Davies2009) revealed that paying council tax quite literally places some households in poverty. UK Treasury (2009) figures reveal that around one quarter of all tax reliefs on pension contributions accrue to the top 2 per cent of pension savers. Both Orton and Davies (Reference Orton and Davies2009) and Sinfield (Reference Sinfield2003) in his detailed analysis of pension tax welfare pointed to the reluctance of policy makers to address regressivity.

In this context, Farnsworth's paper and conceptual innovation can be seen as part of a wider appreciation of the inadequacy of British social policy's self-imposed remit. The Coalition Government's programme of deficit reduction through severe cuts in services, state restructuring and alterations to the tax system has drawn attention to who is bearing the heaviest burden it imposes. The development within social policy of an interest in the rich and corporate welfare at this time is then perhaps unsurprising, requiring as it does a focus on relations of power.

The 1970s marked a break-out from social policy's traditional terrain through the emergence of the political economy approach to the welfare state. If the fiscal crisis of the 1970s gave rise to the partial reshaping of social policy, it might be expected that the current fiscal crisis, caused by the financial crash of 2008 and the transfer of private (banking) indebtedness to the state and public accounts, and resulting in political debates about who gets what, will similarly lead to a shift in the character of social policy.