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Work & Prosperity (Deep End)

Welfare reform was the subject of yesterday’s post on Deep End, but what about ‘wealthfare’? This is the name that the American authors Mark Zepezauer and Arthur Naiman give to the various “capital depreciations, fiscal reliefs… fuel subsidies, bailouts, price supports… and tax frauds” that have been of such benefit to the wealthiest Americans in recent decades.

Their book on the subject is called Take the Rich Off Welfare and it inspires a thought-provoking column from Simon Jenkins in the Guardian:

“This was no leftwing tract. It merely pointed out that ‘wealthfare costs the American taxpayer some three and a half times the cost of welfare for the poor’. The relentlessness of the rich lobbying Congress for tax breaks and subsidies meant ‘the US government today functions mostly as a huge Robin Hood in reverse’. If there is money going begging, those who beg loudest get most.”

Jenkins finds plenty of evidence that wealthfare is a British problem too:

“Whole industries are on white-collar Benefits Street. Higher education, despite fees, is a cross-subsidy from taxpayers (including the poor) to mostly middle-class students and professors, now to the tune of billions of pounds a year. The construction industry is a monument of public plutocracy. Having pocketed £9bn from the Olympics, it is now building Crossrail and hopes to win HS2 and Heathrow Three. Its builders are eating their way through Osborne’s soaring subsidies. These projects are essentially tax transfers from poor to relatively (or very) rich.”

Then there’s an interesting observation on the public sector headcount:

“‘Austerity Osborne’claims to be cutting back on public sector jobs to boost private ones. He is shortening Benefits Street to lengthen Enterprise Alley. Public sector employment is falling overall, but the fall is in lower-paid local government jobs outside Osborne’s control. His personal Benefits Street, known as central government, actually grew last year by 55,000 jobs. Austerity is always for the other guy.”

As on many other issues, councils deserve a great deal more credit than they get for restoring our public finances. Admittedly, it was George Osbourne’s decision to squeeze funding for local government – but if national government were as efficient as local government we’d be much closer to balancing the books.

Jenkins also points to the billions that the last Labour government lavished on consultants, PFI fees and IT contractors:

“The beneficiaries have been the rich: firms such as KPMG, Deloitte, PwC, Capita, Serco, McKinsey and others. Today’s public accounts committee may howl about waste, but the stable is bare and the horses are over the horizon, laden with gold.”

The profligacy is hard to deny, but does Jenkins push the welfare analogy a little too far? Nothing is received in return for a benefit payment, whereas wealthfare usually involves a payment for some kind of service or public good. Despite the rotten value for money obtained on behalf of the taxpayer, these are negotiable two-way transactions freely entered into on either side.

The government side may be incompetent, but the public bears the ultimately responsibility for putting the wrong people into power. The real victims of the wealthfare state are those who have no say in the matter – our children and grandchildren:

“…the greatest benefits scam of all [is] the accumulation of public and private debt incurred by today’s citizens at the expense of future tax- and interest payers. Britain’s public and private debt together runs to some 500% of GDP, by far the highest ratio in history. Such benefits to today’s citizens – in pensions, housing, travel, lifestyle – are at the expense of tomorrow.”

12 comments for: The bloated wealthfare state is building socialism for the rich

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