The covid crisis proves that corporate welfare is the rule rather than the exception. We desperately need a new social contract*

Kevin Farnsworth


*An edited version of this piece appears in Tribune:


Although the present Covid-19 crisis is one of the most serious health crises in living memory, it also threatens to create an even more serious economic crises; deeper and more wide-ranging even than the financial crisis of 2007-8. Like the 2008 economic crisis, the present crisis is making huge demands on government at all levels. If 2008 put paid to the idea that the largest and most profitable businesses are able to ‘go it alone’ without government support, the present crisis has surely laid it to rest.

The UK government has now committed billions to saving its economy. The projected cost of the announcements made so far is around £99bn with £30bn of this targeted at business support, and £52bn in employment support measures. But this excludes the various business emergency loan schemes, the cost of deferring VAT payments, enhanced subsidies for statutory sick pay (worth around £1bn) and undisclosed support for the airlines. For comparison, that is almost the same as the education and housing expenditure combined. However, it is lower than the £342bn estimated by the IMF to have been the government’s bill of upfront costs (excluding bank ‘guarantees’) from the 2008 banking crisis (IMF, 2009).

Many of these support measures are not just about propping businesses up of course. Some support the self-employed. And they are providing support to citizens by keeping jobs open and ensuring that businesses survive this crisis. But this just makes my point for me.  Discussions about the public sector tend to focus on what the government is doing for people: how much it is spending on the unemployed; how much is spent on pensions; how much the NHS costs. Most discussions focus on citizens and the benefits they extract from the state. The support offered to businesses barely gets a mention. A great deal of what government does is about business and the economy, but little of it is properly and adequately accounted for.

Businesses of all sizes and in all sectors are being supported by the state. Billionaires are queuing up to beg the government for support. And critics are queuing up in even larger numbers to condemn the idea that businesses should be provided with taxpayer-funded handouts.  Elite business people are, after all, often the staunchest critics of big government.

Capitalists propagate the idea that businesses do best when left alone. Those on top, keen to gain a market advantage, spin the line that governments should never bail out companies because they are eager to see their competitors fall.  And because they deny receiving help and support from business, they can oppose big government, state regulations and taxes. So brazen are they that they feel confident enough to boast about the fact that they dodge the taxes that governments feel are owed to them.

Because these ideas have been able to gain such traction, people seem to be shocked by the arrogance and double-standard of big business when they make the opposite arguments.

Thus, two years prior to the bailout of Northern Rock Bank, one of the biggest state bailouts of any company ever, Matt Ridley, CEO of the bank at the time, wrote:

In all times and in all places there has been too much government … [T]he more we limit the growth of government, the better off we will all be.

That same year, Nicholas Goodison, then Chairman of the London Stock Exchange, argued that there had to be:

Continuous assessment of the value of regulations . . to make sure that they are not driving business away or reducing competition or damping innovation. Regulators must be prepared for coping with serious risks that might damage London’s reputation. . . Competition law and practice must keep up with the fast-changing scene.

Or when James Dyson encouraged UK voters to leave the EU, citing the EU’s excessive ‘red tape’, otherwise known as ‘stifling’ government regulations. He went on to argue that:

We can make our own laws and determine our own future and determine our own trade deals with other countries throughout the world. I think it is liberation and a wonderful opportunity for all of us

He made these comments in 2016, months after the Brexit vote, which he campaigned in favour of, but 12 months prior to being revealed as the second largest recipient of EU agricultural subsidies.  Dyson defended agricultural subsidies at the time and urged the UK government to continue providing them post-Brexit. It is also worth noting that Dyson also received millions in other R&D subsidies and grants prior to the company announcing in 2019 that it was moving its Headquarters to Singapore.

The latest example to hit the news is Richard Branson. In 2009 British Airways was asking for a government bailout as it teetered on the brink of collapse. BA is also one of Virgin’s main competitors and Richard Branson at the time argued that

‘The Government should not intervene to stop companies going bust’.

Given that Branson is now pushing for a bailout for Virgin Atlantic, he has clearly changed his mind!

The fact that businesses push the myth that they do not need government is actually not surprising. As already indicated, the propagation of the myth operates in their favour: resulting in lower taxes and lower costs being imposed on businesses and business people. The basic need of capitalists is, to paraphrase Marx, profit; and prevailing arguments underpin policies that boost profitability. They have also created massive and growing inequality. Such outcomes are tolerated because citizens are fed the idea that taming and constraining businesses is ultimately bad for all of us. And in any case, it is unfair to make those who do not make claims on the state to pay for it. Since no one thinks businesses claim benefits, it doesn’t matter if they do not pay taxes because citizens benefit hugely in other ways, from the jobs they create and the commodities they produce.

The reality is a million miles from the romantic ideal of the business person making it big based only on their own resourcefulness despite government interference. Businesses have always depended heavily on the state. They do not get ahead by ‘going it alone’. Capitalists do not thrive in free market capitalism. The reality is that big business cannot survive nor thrive without big government. And the value of the benefits extracted from the state is huge, and, in a normal year, the value of business subsidies far outweighs the costs of unemployment benefits.

Throughout the entire history of capitalism, including its neoliberal variants, governments have intervened heavily to support private businesses; indeed the primary function of the ‘neoliberal’ state is not, in fact, to ‘get out of the way’, but to govern in ways that support markets. No major economy has ever left their businesses to truly ‘go it alone’ (Rodrik, 2010). As Adam Smith put it:

After the public institutions and public works necessary for the defence of the society, and for the administration of justice . . . the other works and institutions of this kind are chiefly those for facilitating the commerce of the society, and those for promoting the instruction of the people (Smith, 2003).

Only governments could establish the financial, legal, social and physical infrastructure necessary to facilitate private ownership, production and private for-profit services. And as capitalism developed, so the need for more involved and effective government and governance has increased. This is something the World Economic Forum, an organisation that is more commonly associated with big business than big government, recognises. Take a look at its major publications and campaigns, which emphasise the importance of comprehensive welfare systems and effective governance for productive, competitive and efficient businesses. And ultimately, even in the area of social policy, it is the economy and the needs of private businesses that tend to dominate policy discussions and decisions.


The various forms of provision that service the needs of private businesses are what I have termed ‘corporate welfare’. Such support is provided in various ways, directly and indirectly. 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. A good example of the latter are employment tax-credits, paid to workers by government, but which operate as wage subsidies where employers do not pay enough for workers to live on.


Does this mean that corporate welfare is ‘bad’? Not necessarily. There is no denying the fact that private businesses also bring essential benefits to citizens and governments. They provide jobs, pay (some) taxes and provide wages. And, just as businesses extract benefits from social welfare, citizens extract benefits from corporate welfare. In some key ways, social welfare and corporate welfare are related and symbiotic, although the extent to which they are compatible and complementary depends on how they are configured and provided. Delivered in one way, corporate welfare may underpin stable employment markets, reduce the cost of essential goods and services and encourage more positive and more sustainable business activities. Subsidies and grants can encourage business investment and new jobs in deprived areas. It can also ensure that essential goods and services are readily accessible to citizens. Conversely, a lack of government support can lead to economic deprivation, long-term unemployment and poverty with all the attendant educational and health problems. In such instances, governments may face a trade-off between providing for businesses or supporting individuals through the social welfare system.


Our database, the only one of its kind in the UK, reveals that the biggest companies make the largest claims. One of the largest recipients is BAE systems, which has received over £44 million over the past decade. But less obvious companies have received large subsidies too. Tesco, for instance, has received over £10m in direct support and Unilever over £8m.  Amazon has received over £20m. This does not include indirect wage subsidies received by workers in any of these companies.

Virgin is no different. Branson may be a tax exile and may be lauded as the business-person’s business person. But he relies heavily on the taxpayer. An increasingly large share of his business consists of contracts won from the state or delivered with assistance from the state. Virgin’s train companies are heavily subsidised. Its health division has won NHS contracts and, famously, sued the health service when it failed to win one contract. It’s purchase of Northern Rock was also heavily criticised by the National Audit Office because the government sold the bank off too cheaply. In all cases, the taxpayer boosts the income of Richard Branson. And in all cases, there is no evidence to suggest that Virgin delivers better, more efficient and cost-effective services than could be delivered by the state. But what is clear is that, when Virgin fails to deliver, the state has to step in and the taxpayer takes on additional costs, as happened most recently with the re-nationalisation of what is now LNER.

The question is whether quick-footed, disloyal, tax-evading and rent-seeking companies that conspire to undermine the capacity of the state should be able to make claims on it. Governments today regularly remind benefit claimants that there are no automatic rights to claim benefits, that there are no rights without responsibilities. Social welfare is conditional. Corporate welfare should be too.

In addition to increasing the responsibilities of corporate dependents on the state, transparency should be increased about which companies are able to claim benefits from the state. Although there have been improvements in this area, these mainly stem from the transparency insisted upon by the European Commission under its State Aid agreements. The emergency bailouts granted to companies so far under the Covid19 measures have been shrouded in secrecy. A major fear is that, free from EU rules, the UK government not only provides even more to big business, it does so without full disclosure.


Returning to the 2008 crisis, one of the biggest questions at the time was what type of capitalism will emerge from it? Gordon Brown, after all, proclaimed in 2009 that the Washington Consensus was dead. The answer that came back from the ruling Conservatives was massive austerity, and tax breaks for corporations and the wealthy. The richest part of the population may have caused the financial meltdown, but the poorest paid with their incomes and their lives. The present crisis poses similar questions. Brexit was already being used by big business to make ever-greater claims on the state as they demanded compensation for potential losses, including the deal negotiated by Nissan with the government to cover the companies ‘Brexit risks’, around which there was no transparency owing to claims of commercial sensitivity. The state faces a pincer movement from weakened businesses demanding bailouts today and newer businesses that will emerge from this crisis bigger, stronger and even more powerful than before. Amazon, a company that has demonstrated the lengths to which it will go to secure billions from the US government, is emerging even stronger from the current crisis. And again, without the relative strength of the EU to hold it to account, it will be allowed to let rip once the UK emerges from the EU and the Covid-19 pandemic.

And yet, the truth remains that companies exist in the way they do because of government and, by extension, because of taxpaying citizens. And for all its efficient brilliance in providing services to its customers, Amazon draws heavily on the societies in which it is embedded. It depends on public infrastructure. It exploits workers, many of whom claim wage top-ups from the state. It has helped to rip the heart out of the high street, at huge costs to citizens. At the same time, it has claimed direct subsidies from governments and it has dodged taxes. The truth is that Amazon trades in countries like the UK having been given permission and support by its citizens. And the likes of Amazon need to be put on notice that such permission can be withdrawn. We need to demand more from them. We need to level the playing field that provides unfair advantages to big business. We have to force employers to pay decent wages so that they do not depend on subsidies. The government has to face as much pressure from citizens to impose taxes and penalties on tax avoiders as they do from big businesses pushing in the opposite direction. And ultimately we have to say no benefits without responsibilities.