OUR present economic debate is stale. The Government states that
the crisis in the economy arose from the previous Government's
overspending, especially on benefits. Labour says that more
government expenditure would lead to greater tax income. Who is
Public-sector net debt was 36 per cent of GDP in April 2008, and
then doubledafter the banking and other crises. It is still
climbing. The banks were and are a big part of the problem, and the
Conservatives pushed for deregulated banking. Second, the
Government claims to have had a greater impact on debt than is the
case. It still climbs by about £100 billion a year, and will not
Yet, on the other side, Labour would have cut back nearly as
much as the Conservatives, and could not have kept the economy from
what the Archbishop of Canterbury has rightly called "a
The budget deficit requires the Chancellor, George Osborne, to
save perhaps £80 billion a year. Supposedly, it is the poor on
benefits who are the problem. But the underlying issue is that,
over several decades, the rich have been milking the state of
hundreds of billions of pounds.
The problem is not benefits to the poor. Total benefit
expenditures are about £155 billion a year - a large figure, but
this is misleading, because we all receive benefits. As the
document The Effects of Taxes and Benefits on Household
Income (2012), from the Office for National Statistics (ONS),
shows, the bottom 20 per cent, based on income, receive about £2000
more in benefits per year than the overall average of UK households
(£14,789, compared with £12,735). This is a small amount extra. It
could not be changed by more than a few billion.
In contrast, the rich big handouts. The first is tax, where, as
the ONS document suggests, the poor are subsidising the rich. The
bottom 20 per cent pay proportionately 5.8 per cent more tax than
the top 20 per cent (38.2 per cent rather than 33.6). If the rich
paid the same proportion of their income in tax as the poor, it
would bring another £100 billion a year.
But that is not all. Higher-income groups have benefited from
public-sector contracts, high public-sector incomes, and bonuses.
For example, GPs received a new contract in 2004, giving them them
an increase in pay from less than £80,000 to more than £100,000 a
year for doing less work. It cost the NHS more than £2 billion
There has been no revaluation of house prices for council tax
since 1993. Over the past two decades, house-price increases have
mushroomed, but they are not reflected in council tax, which gives
another bonus of tens of billions to the wealthy.
The big corporations avoid much VAT, evading tax to the tune of
tens of billions. The personal income of some of the top ten per
cent exceeds that of the whole of the bottom 50 per cent, but some
of this moves to tax havens, removing more billions from tax
revenue. Tax avoidance and evasion is estimated by the Tax Justice
Network overall at £70 billion a year.
In addition, the banks have received profits through
seigniorage, the windfall that comes through creating electronic
money, amounting to £20-30 billion a year, besides receiving
government support while they run tax havens and give dud
These losses of revenue are an overwhelming explanation of the
Chancellor's woes, and their solution. Moreover, the way these
funds are hoarded, moved, and have created debt explains why the
economy is depressed, and will remain so. It is time the Church
opened up this real debate, because it is clear that the political
establishment and the rich will not.
Dr Alan Storkey is the author of Jesus and Politics
(Baker Book House, 2005).