The Tories run a secret welfare state for rich people that costs taxpayers up to £180bn a year

Boris Johnson and a handout
Kerry-anne Mendoza

The Tories spend a lot of time arguing that we should shrink the welfare state that heals our sick and keeps people fed and in shelter when times are tough. At the same time, they’re expanding another welfare state for rich people. This corporate welfare state is costing the taxpayer up to £180bn each year. If we’re going to be cutting spending on welfare, we should be starting there.

The corporate welfare state

The UK’s corporate welfare state is enormous. Research by the Sheffield Political Economy Research Institute (SPERI) estimates that welfare to corporations costs the UK government between £93bn and £180bn every year.

Now, what’s £180bn to the UK government? Is this a big sum of money or not? Well, the entire budget for Health and Social Care in England is £139bn a year. This means the corporate welfare state costs more than every nurse, doctor, hospital, medicine, and machine in England’s NHS combined. So the taxpayer is bailing out business to this tune (and more) every single year. 

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We must of course consider that corporations pay tax. Maybe the cost of helping business is dwarfed by their corporation tax contributions each year? Sadly not. In 2017/18, corporation tax receipts were worth £56bn a year.

Employers make National Insurance contributions too. What about those? They add up to just over £70bn each year.

So it looks like the contributions corporations pay into the kitty don’t even match what they’re taking out.

There’s no way around it. The corporate welfare state is an awful deal for the taxpayer. And most people don’t even know we’re paying for it, let alone what we’re paying for.

An awful deal

One of the chief means of building the corporate welfare state is fake privatisation. The government takes a nationalised service, and then it tries to find ways of directing funding for that service to private companies instead. A look at the rail service serves as a great example.

Despite the Tories supposedly privatising British Rail in the mid-90s, the government gave £7.1bn of financial support to the rail industry in 2018/19. And the cost of travelling on these half-privatised trains is now 20% higher in real terms than when they were nationalised.

Rail is perhaps the most naked example of how privatisation works for the formerly nationalised services. The profits were privatised, but the bulk of the financial responsibility remains nationalised. The taxpayer loses twice over: they still foot the bill for the service, but they also get stung by significantly higher rail fees. And so it continues through the rest of the corporate welfare state. In health, in energy, in water; in all the natural monopolies that it made sense to nationalise.

The long con

The idea was never to shrink the welfare state. It was always to divert government investment from the human-welfare state for the many to the corporate-welfare state for the few. Imagine it like a long con.

You create a sense of scarcity, like there just isn’t enough to go around. The coalition government did this with austerity; the Thatcher government did it with previous economic crises. Despite the 2007/8 financial crisis being caused exclusively by the private sector, and the private sector being bailed out by the government, it was reframed as a public spending crisis. And the very debt accumulated in rescuing the economy from casino banking became the excuse to rapidly cut funding for the welfare state.

Then you begin pitting different needs against each other. Young people’s services versus elderly people’s security. People who were born here versus people who arrived here. People with jobs versus people without jobs. And thanks to the primal fear that people with little have when faced with having even less, a fight ensues. While that fight is happening, you merrily divert as much spending as possible to you and your friends. The best bit? When the scarcity you just created hits and things stop working in the human-welfare state, it just makes your case seem stronger. ‘See, we told you things were bad. This service needs more private-sector involvement to boost efficiency.’

And so you go on. Every publicly-funded service is up for grabs – a means of siphoning taxpayer cash away from meeting public needs, and towards filling private pockets. In return, you’ve assured your post-parliament career in the revolving door of political and corporate life.

The enablers

Perhaps the greatest enablers of the corporate-welfare-state long con are UK newspapers and media outlets. Just three corporations dominate 83% of newspaper reach in the UK. That’s just a handful of billionaires dominating the UK press. And they cannot be trusted to play fair when it comes to policies that invest in regular people rather than providing them with government subsidies or tax cuts.

The almost-entirely conservative media works to keep that corporate-welfare state out of view. Because when it’s visible, it’s clearly the public spending we should be cutting first. Especially when we have record numbers of people relying on foodbanks to eat.

When Labour talks about increasing the minimum wage, or free broadband, Jeremy Corbyn doesn’t need a ‘magic money tree’. He’s just diverting welfare away from a small number of already-wealthy groups and towards the majority of voters who need it. So unless you don’t think your hospitals, schools, and community are worth investing in, it’s a no-brainer.

Don’t let the billionaire press convince you otherwise.

Featured image via pxhere/Chatham House

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      1. Have you read all 46 pages of the papers yourself? What in your considerably qualified opinion makes it drivel? It would be most helpful if you’d actually say why you think it is drivel, rather than just claim it like a troll looking to cause any argument …

        1. The NHS example is, I think, a good one. Mr Farnsworth argues that if workers couldn’t use the NHS, employers would have to either pay their workers more to cover private health care or would have to contribute themselves to private health insurance. That may be true but he fails to consider the opposite effects. If a company paid their workers more (or gave their workers health insurance) they would make less money – their “subsidy” would be removed – so they would pay less corporation tax. Their shareholders would receive less in dividends, and pay less tax on them. The pension funds who are large shareholders would achieve lower returns so private pensions would be lower and more pensioners might fall back onto benefits.

          There is also a transport one easily spotted. Mr Farnsworth talks of the “fuel subsidy” to train operators of £200m pa. But he fails to consider that in most years the TOCs have paid more to the government than they have received in payments. If the “fuel subsidy” were removed there would be one of two consequences – fares would go up to compensate, or the TOCs would absorb the extra cost, reduce their profits and pay less to the government as a result.

        2. Yes I’ve read and I quoted it. More then you did – you lept to attack.
          I even gave an example of why it is drivel.

          I’ll repeat, the author of the report thinks that the NHS is a form of corporate subsidy – thereby fundamentally demonstrating that this report is drivel

    1. Excellent piece. The whole marketisation/privatisation drive has been a means to pass taxpayers money to the rich through public services. The Academy Schools programme has diverted millions which should have been spent on children to the pockets of the money-guzzlers in the Trusts and Chains. It’s we who are in chains. The fear on the Right is that the popularity of the NHS and public services like it points to a changed mentality, to a society organised to care for its citizens rather than enrich its parasites. Adam Smith wrote of the “vile maxim of the masters of mankind: everything for ourselves, nothing for anyone else.” Down with the masters. Everything for everbody. The earth a common treasury and our work what binds us in solidarity.

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