Research Report: The British Corporate Welfare State: Public Policies for Private Businesses

It is widely assumed that public services are organized and delivered for the sole benefit of citizens. The reality, however, is very different. The more we consider the role and function of different government departments and programmes, the clearer it becomes that they are also designed to bring direct and indirect benefits to private businesses. The post-2008 banking crisis illustrated how the Bank of England underwrites, regulates and effectively insures the whole private banking system – but state support for private businesses goes beyond periodic crisis events such as this. Subsidies, capital grants and tax benefits are part of the daily mix that make-up core corporate welfare provision. The needs and interests of private businesses define most of the activities of the Department for Business, Innovation and Skills. Without a clear system of laws and legal frameworks it would be impossible for businesses to ‘do’ business. The same could be said for transport infrastructure. State education is constantly reformed so that it better meets the needs of private businesses. Working tax credits subsidise the wages bill. Housing benefits are diverted to wealthy landlords. The NHS ensures that workers remain healthy and productive. And huge amounts of public money each year are used to purchase goods and services from private companies – from the pharmaceutical industry to companies that are contracted to provide direct services to government. In reality many of these so-called private businesses are entirely dependent on the state, and do not trade with regular customers or other private sector actors. These various interactions, engagements and transactions between the public and private sectors together help to ensure that the risks that would otherwise accrue to private companies are socialized, providing the basis for what this report suggests is the corporate welfare state. This paper seeks to conceptualise the function, as well as the size, of the British corporate welfare state. This is no easy task. Corporate welfare in Britain is under-researched, under-conceptualised, under-investigated, under-discussed and under-disclosed. What the analysis argues is that corporate welfare is essential to the operation of modern companies and modern capitalism. And much of it is hidden. This paper seeks to fill some of the gaps and facilitate a better-informed debate about the value of corporate welfare to private businesses. In so doing, it also aims to highlight related issues such as value for money and transparency in expenditure decisions. The main aim of this paper is to kick-start such a debate.