Opinion

John Bird: Tax credits as welfare? Not for my money

"The welfare budget should be ring-fenced, and not polluted by government grants to businesses tardy with wages"

Wanting to knock £4.4bn off of the welfare bill through cutting tax credits raises some tough questions. The one that strikes me immediately is that calling it tax credits, though that is the form it takes, belies the content.

In fact, if it is anything it is a Business Employment Support Grant (BESG). Although it is awarded to workers, it is in essence a non-repayable subsidy to business.

So what’s it doing in the welfare budget? Why is it masquerading as a part of support for people in need when it chiefly enables a business to have a cheaper workforce, without which profits could not be made by businesses big and small?

Putting this into the welfare budget is another one of those inaccuracies that riddles the welfare budget. As a BESG it generates wealth to a large group of people who otherwise might not make the profits necessary to wish to pursue their business interests.

It is an investment by government and a welfare-saving mechanism. And though it encourages work, please don’t dump it into a poorly troubled welfare budgetry bag. Welfare needs to be used accurately for what it is intended to do, which is support people who are incapable of supporting themselves. People who need our generosity because otherwise they would become the wretched of earlier times, homeless and vagabonds.

Giving people encouragements to go to work is not an act of welfare. These are largely able-bodied people who could not survive on the slim pickings offered by the job market, by business. They are used as underpaid profit sources, with the lion’s share of their efforts bolstering businesses.

Giving people encouragements to go to work is not an act of welfare

So please, none of this idea of looking at it as another lump of cash dolloped out on people we might be being too generous to. State generosity to business is the name of the game.

That the government has begun to see this as an anomaly, the taxpayer subsidising the marketplace crudely and through welfare-allocated funds, might show wisdom. But the disruption to work and detonating workers’ skimpy budgets, punishing what many call “strivers” (what a value-loaded Victorianism!) smacks of crude maths.

It may be wise to get people on a living wage rather than indirect grants to businesses through workers but Rome and many other fabrics took more than a day to be built.

Getting a living wage out there without collapsing businesses that only survive on subsidies from government is not short-term. So why would the government inaugurate a road to a living wage, ceremoniously cutting the ribbon now, when they place a four to five-year delivery date?

What you call money is important. Budget allocation titles – running costs, development, capital investment etc, offer clarity. You don’t put your research and development budget bang in the middle of your core business costs. You separate out so you can keep an eye on expenditure. You keep control of costs this way.

So making the welfare budget a catch-all for, among other things, keeping poor-paying businesses going, is a laugh. And devaluing welfare.

The much-abused welfare budget, which should be specifically for those without means, who don’t have the physical means to aid themselves, should be ring-fenced. And not be polluted by governmental grants to businesses tardy with the wages.

Likewise, is it wise to put pensions into the same welfare pot? Are pensions not largely contributions that working people make throughout most of their lives? Like a large savings club. It’s ready cash workers give to governments, not anything to do with welfare – and because welfare is specifically our pure desire to aid, it needs protecting.

Twenty per cent of all government income is borrowings. If the government wants to completely transform the cheap-paid jobs market then that’s an investment issue. Borrow the investment. Don’t hit those who fall into the tax credit category. If necessary, foist the living wage on the business world, rather than shortchange those who have been working keeping business turning. And then give the cheap wage businesses a direct subsidy, and call it that: a handout to business.

And if the government wants to end their BESG programme, make sure the poorly paid don’t pay for it.

John Bird is the Founder and Editor in Chief of The Big Issue. Email him: john.bird@bigissue.com or tweet: @johnbirdswords

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