Monday 30 March 2015

Corporate Welfare is Fuelling Austerity by Prem Sikka

Prem Sikka
Professor of Accounting, University of Essex

Austerity cuts are an ideological project pursued by the Tories as they have become obsessed with strangling people’s hard won social rights. There is no economic justification for this. HMRC admits  that each year around £34 billion of tax is evaded, avoided or not collected. A former World Bank adviser  has estimated it to be around £100 billion a year. Some critics estimate the gap to be around £120 billion a year. The absence of any effective policy on chasing big tax avoiders enables corporations to declare huge profits and leaves people facing austerity cuts.

The government is dedicated to guaranteeing corporate profits. Studies estimate that around £85 billion a year is being given away in subsidies. In addition, the National Health Service, education, prisons and other public services are being privatised by stealth. Since 2010, the Con-Lib government has outsourced £88 billion worth of public contracts. About 25% of all money is creamed-off as profits, leaving less for actual expenditure.

Here are some examples of how the huge corporate welfare programme boosts corporate profits. The railways were privatised in 1996, but have received annual subsidy of £4-£5 billion each year. In 2012, the European Union provided €83bn (£70bn) in support of agricultural producers, about 19% of the total farm receipts. Over the years Tate & Lyle, a sugar refiner, has received €830m even though it does not own any farms. Nestle has collected €93m. Others include Haribo, the sweet manufacturer; Groupe Doux, a French chicken processor, which does not raise poultry; Coca-Cola, the Duke of Westminster, the UK Royal family and the Catholic Church.In 2012, the European Union provided €83bn (£70bn) in support of agricultural producers, about 19% of the total farm receipts. Over the years Tate & Lyle, a sugar refiner, has received €830m even though it does not own any farms. Nestle has collected €93m. Others include Haribo, the sweet manufacturer; Groupe Doux, a French chicken processor, which does not raise poultry; Coca-Cola, the Duke of Westminster, the UK Royal family and the Catholic Church.

In 2012, the European Union provided €83bn (£70bn) in support of agricultural producers, about 19% of the total farm receipts. Over the years Tate & Lyle, a sugar refiner, has received €830m even though it does not own any farms. Nestle has collected €93m. Others include Haribo, the sweet manufacturer; Groupe Doux, a French chicken processor, which does not raise poultry; Coca-Cola, the Duke of Westminster, the UK Royal family and the Catholic ChurchUnder the Private Finance Initiative (PFI) companies borrow money to build the project and then lease the assets to the government at exorbitant prices.  Currently, companies have invested some £54.7 billion but will receive £247 billion over the next 25-30 years. The profit of £200 billion won’t fully get taxed in the UK, as many projects are run from offshore tax havens.

The EU has provided €83billion (£70billion) in farm subsidies. Sugar refiner Tate & Lyle has collected €830million even though it does not own any farms. Nestle have collected €93million. The Queen's Sandringham estate has collected £7million. Others include Haribo, the sweet manufacturer; Coca-Cola, the Duke of Westminster and the Roman Catholic Church.

Last year, BT received a subsidy of £1.2 billion, and more is on the way, to provide broadband for rural areas. BT will also keep the resulting assets and future income.

Energy companies make exorbitant profits, but still get subsidies. EDF and its partners are set to receive £16 billion subsidy for building a nuclear power plant to generate electricity even though this investment is projected to provide a return of up to 21%.

Lotus, the sports car manufacturer, has received £10 billion subsidy. The price of a Porsche selling at £90,000 is reduced by £5,000, thanks to a subsidy from the taxpayer.

Walt Disney is not a Mickey-Mouse company, but over the last seven years it has received subsidies of £215 million for making highly profitable films in the UK. Of course, the company keeps all the resulting revenues.


The above is the tip of a giant corporate welfare iceberg. Corporations fund political parties and get compliant laws and barrow loads of money. This giveaway leads to higher taxes and reduces resources for social investment. If government must support companies, it must be as returnable loans or equity stake in companies, rather than as giveaways.

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