By John O'Connell, chief executive of the TaxPayers' Alliance
Taxpayers pay a small fortune for the welfare system. The benefits system cost a whopping £249 billion last year, with the department that administers welfare (via Jobcentre Plus) and pensions employing around 80,000 people. Through universal credit, it provides a safety net for Brits that have fallen on hard times, handing payments to around five million households at the start of the year. Few other parts of government are so involved with the finances of so many ordinary taxpayers - apart from perhaps HM Revenue and Customs.
The comparison with HMRC is one which is rarely made. They collect the cash while government departments hand it out, but both are funded by taxpayers. Both are public bodies licensed with the ability to intervene in people’s finances, charged with the responsibilities of the public purse and expected to safeguard the sensible use of money. But there is one notable difference between the two: the tax system wouldn’t dream of treating people the way universal credit does.
With the end of the temporary uplift this month, there has been more focus on the assumptions underlying the benefits system. At our recent event at Tory conference, Jacob Rees-Mogg MP pointed out the intriguing disparity between attitudes to tax and welfare payments, arguing that the Laffer curve argument against marginal rates should surely apply to income at the lower end when benefits are withdrawn. There are many other examples of where policy has one rule for some, another for everyone else.
We see this in the way the system is administered. Dealing with the taxman is a famously laborious experience - on hold for hours, trying to navigate endless menus. But they’re very aware that while members of the public might not like paying taxes, most of them tend to play by the rules. As the HMRC mission statement confirms, “we believe that most of our customers are honest and we treat everyone with respect.” Sadly, we can’t say the same about our universal credit system. The Public Interest Law Centre recently pointed to an example of a client who had been asked for a “photo of you next to your street sign with your right hand holding it” and a “photo of you holding your local newspaper for the area you live (not a national tabloid tabloid paper). This should be dated the same day as you upload the photo.” As one claimant said recently, “I don’t feel like a person anymore.” It’s almost unthinkable HMRC would ask a businessman to provide selfies of themselves in the car on a way to a client, or expect an executive at a FTSE 100 company to prove their location with a snap of the local rag.
Of course, this doesn’t discredit the whole policy. Universal credit itself, much clearer than its predecessor, echoes the simplicity we need to see in the tax system. There are reasonable explanations for many of the ways in which it operates: claimants can be hard to reach, lack official documents or have no fixed address. The system is still ridden with fraud, to the tune of £120 million a week, which ministers must weed out. But this raises interesting questions as to whether we can be sure that all taxpayers are being treated with respect. Taxes are far too complicated, with loopholes open to those who can afford expensive accountants or shift money around the world to avoid paying. It’s widespread and almost accepted. On that basis, shouldn’t those that have been overpaid benefits as a result of the system be treated with the same respectability as those that legally avoid tax? And shouldn’t JobCentre Plus operate under a similar mission statement to HMRC?
Whether it’s HMRC or Jobcentre Plus, both are paid for by taxpayers. We’d all prefer there was no need for either, but that’s not the case. As it stands, both are essential - and taxpayers should expect the same approach from both.