Do cuts bring out the worst of us?

Along with the other 10,500 members of “All I Ever Needed to Know I Learned From Albus Dumbledore” I often ponder, What Would Dumbledore Do? One of my favourite quotations was from when he was discussing Hermione’s ELF (Elf Liberation Front), “If you want to know what a man’s like, take a good look at how he treats [those considered] his inferiors, not his equals.” So if we were to wear a WWDD wrist band, what would Dumbledore do about cuts, taxation and spending?

I saw a silly vox-pop discussion about it on the news a few days ago. In fairness, I’m not going to expect the public to give answers that I like whenever they are being asked what I think is the wrong question. Nick Robinson and most of the media seem to have jumped on the bandwagon that cuts and dramatic cuts are an unavoidable reality. This simply isn’t the case. From the start of the recession the message from most leaders was that we could not cut our way out of the recession, we had to grow out of it. Increasing public sector spending increases private sector growth, and cutting public spending reduces private sector growth. The conservatives big idea is that by shrinking one slice of the pie, the other slice gets bigger. This might work in the pie charts cooked up by Osborne’s Office of Budgetary Responsiblity and consumed by the media. But anyone with any experience in baking a real pie knows that putting less ingredients in will never lead to a bigger pie.

Putting aside that debate, which was all too quickly degrading into over use of a pie analogy, here’s the clip itself. Pay close attention in particular to what happens at 2:56. (you can skip to 2:20) for the start of her interview. Look at the list of things he suggests cutting, she says no to health, no to education, defence. Then he says welfare, her eyes light up, she smiles a little. She’s said no to everything that she receives or sees the benefit to, as soon as he says welfare she’s momentarily delighted, “finally, I have nothing to lose” is the thought behind her eyes. She’s not alone, mention the idea of the burden of tax cuts falling on welfare claimants and you can expect dollar signs to appear in people’s eyes Looney Tunes style. I really do think these questions bring out the worst in us.

Nick Robinson on Cuts

This sort of reaction is exactly why we hear non stop about benefit thieves and over zealous claimants. Yet we hear nothing of tax evaders. The reason is disgustingly simple. The type of people we perceive as benefit thieves are working class and less educated. Whereas tax evaders are wealthy, classy and ‘sophisticated’ (though that is clearly a misuse of the word) There are posters up at train stations saying “Report benefit thieves” with a crime phone number, yet government press offices still consider tax evasion enough of a white collar activity that they avoid branding it in a similarly dirty light. This is a case where it isn’t the cost or nature of the crime that matters, it’s the wealth and nature of the person committing it.

This pursuit of the wrong people isn’t just degrading and embarrassing, but it’s also wildly uneconomical. Staff in the benefits office following up on false claims cost more in terms of salaries than they on average manage to reclaim. The cost of taking such crimes to court or following any legal action is much greater than the amount being fraudulently claimed anyway. On the other hand, the average senior tax inspector brings in £1.5m, on earnings of just £50,000. Tax inspectors earn 10 times more from wealthy tax evasion than from Work and Pensions fraud. Yet the Coalition is cutting it’s only profitable department by 25%!

According to Thisismoney.co.uk,

  • 3% of tax payers are evading tax, 0.8% of welfare recipients commit benefit fraud.
  • £5.2bn are overclaimed in benefits each year, however people also do not claim a further £16bn they are entitled to.
  • The tax evaded by only three large companies would have been enough to pay for all £5.2bn.
  • Tax evasion costs us 15 times more than benefit fraud.

What Would Dumbledore Do?

He probably wouldn’t care, after all there is only two departments escaping the Chancellors axe, the Ministry of Magic and Health.

*And it has just been pointed out to me how ridiculous the claim that, “3% of tax payers are evading tax” sounds.
I thought I should explain that few tax evaders pay no tax at all, they just pay less than they should. Apart from Non-doms*

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