When we hear the term ‘welfare,’ most of us think about struggling individuals and families who receive supportive benefits from the state. But in fact, private businesses receive as much support from governments as do citizens. We call this corporate welfare.
Corporate welfare is government support for private business. This support takes many forms, both direct and indirect. Direct forms of corporate welfare include things like subsidies, grants, loans and the public buying of shares which allow businesses to emerge, expand, invest and profit.
Indirect forms of corporate welfare are more hidden, less obvious, more diverse and varied. Many are not thought of as being important or beneficial to private businesses. But often, they are more important to businesses and the economy than they are to individual citizens. For instance:
- Government ministers and other senior members of the state, including the military and members of the royal family, help businesses to expand and sell their products abroad.
- The availability of publicly-subsidised road, rail, shipping and air transport systems as well as centrally funded advice and state insurance services.
- Education and training services help to ensure that workers have the skills and qualities demanded by employers.
- The National Health Service helps to ensure that workers remain healthy and productive.
- Working tax credits effectively subsidise employers’ wage costs.
- Governments act as major consumers of private sector goods and services, often at ‘above-market’ rates.
- Governments provide ‘insurance’ services to exporters of products into ‘high-risk’ environments (important especially in defence).
- Governments also use the tax system to direct support to businesses through various tax-breaks or tax-expenditures.
Providing publicly-funded benefits and services that are aimed at meeting the needs and/or wants of private businesses is a key part of what governments do and have always done. However, the net effect of such interventions is to socialise business risks and ultimately profits.
Not all companies need corporate welfare but most receive it in one form or another. And, our research shows that it is the largest companies that often receive the most.
Despite the importance of corporate welfare, it is under-researched and is seldom discussed and debated. This is why Corporate Welfare Watch exists.
Our aim is to facilitate an informed and open debate of how much corporate welfare the government distributes, to which companies, and to what ends.