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Osborne’s tax summary shows benefits bill is biggest drain. Is this fair? Osborne’s tax summary shows benefits bill is biggest drain. Is this fair?
(35 minutes later)
Over the next few weeks, the UK’s 30 million income tax payers will receive from HMRC an illustrative breakdown of where their tax money goes in an initiative championed by the chancellor, George Osborne. Over the next few weeks, the UK’s 30 million income tax payers will receive an illustrative breakdown of where their tax money goes from HMRC, in an initiative championed by the chancellor, George Osborne.
The biggest expenditure, the visual breakdown shows, is spending on welfare, which appears to account for about a quarter of all spending – followed by health, education, and then state pensions.The biggest expenditure, the visual breakdown shows, is spending on welfare, which appears to account for about a quarter of all spending – followed by health, education, and then state pensions.
Information that the welfare bill is the largest drain of taxpayers’ cash landing on the doormats of 30 million people, from an unimpeachable government source, is, of course, hardly detrimental to the Conservative party, which is approaching the election pledging further crackdowns on benefits culture and payments.Information that the welfare bill is the largest drain of taxpayers’ cash landing on the doormats of 30 million people, from an unimpeachable government source, is, of course, hardly detrimental to the Conservative party, which is approaching the election pledging further crackdowns on benefits culture and payments.
The Treasury calculations, however, are proving contentious with some public sector economists. A large part of that criticism is that the welfare bill, as presented in the spending figures, does not correspond with what we generally mean when we talk about welfare. The term usually refers to “benefits” such as jobseeker’s allowance (JSA), incapacity benefit, or housing benefit.The Treasury calculations, however, are proving contentious with some public sector economists. A large part of that criticism is that the welfare bill, as presented in the spending figures, does not correspond with what we generally mean when we talk about welfare. The term usually refers to “benefits” such as jobseeker’s allowance (JSA), incapacity benefit, or housing benefit.
The new calculations take a broader international measure of government spending, known as Pesa, and then, in the name of simplification, broaden that welfare category still further. One critic of the new official measure, Declan Gaffney, produced a similar chart based on un-tweaked Pesa data – which showed a starkly different result, with health spending taking the lion’s share of cash.The new calculations take a broader international measure of government spending, known as Pesa, and then, in the name of simplification, broaden that welfare category still further. One critic of the new official measure, Declan Gaffney, produced a similar chart based on un-tweaked Pesa data – which showed a starkly different result, with health spending taking the lion’s share of cash.
Other issues lie in the vagueness of the descriptions. Even simply referring to what we normally call benefits can be misleading. If we include state pensions, the overall benefits bill is in excess of £150bn a year. But only about £4bn of this goes to the best-known benefit for people out of work: JSA. That’s less than 0.6% of tax revenues – and much less than goes to topping up people in low-paid jobs.Other issues lie in the vagueness of the descriptions. Even simply referring to what we normally call benefits can be misleading. If we include state pensions, the overall benefits bill is in excess of £150bn a year. But only about £4bn of this goes to the best-known benefit for people out of work: JSA. That’s less than 0.6% of tax revenues – and much less than goes to topping up people in low-paid jobs.
Even that leaves aside those who might want richer information on where their money goes: if the government is showing what has been spent, should it also suggest what it is being spent on? For example, £800 of your money going towards education might be seen as terrible if funding bloated bureaucracy, but fantastic if it is paying for nursery care for disadvantaged children. Should taxpayers know the good their money does – assuming it does some good – as well as how much they have paid?Even that leaves aside those who might want richer information on where their money goes: if the government is showing what has been spent, should it also suggest what it is being spent on? For example, £800 of your money going towards education might be seen as terrible if funding bloated bureaucracy, but fantastic if it is paying for nursery care for disadvantaged children. Should taxpayers know the good their money does – assuming it does some good – as well as how much they have paid?
The spending breakdown also does not show the relative size of tax breaks, which typically benefit the middle class and the rich. As this money is never collected in the first place, there is no way to show it on the graphic – but the tax revenue lost on the tax break on mortgage interest for buy-to-let property alone is far larger in scale than JSA. By making spending much more visible than taxation, there is a risk of skewing the political debate to focus on one more than the other.The spending breakdown also does not show the relative size of tax breaks, which typically benefit the middle class and the rich. As this money is never collected in the first place, there is no way to show it on the graphic – but the tax revenue lost on the tax break on mortgage interest for buy-to-let property alone is far larger in scale than JSA. By making spending much more visible than taxation, there is a risk of skewing the political debate to focus on one more than the other.
A final clash comes in the simple matter of what impression the graphics leave taxpayers with in terms of their own contribution. People on low incomes pay very little income tax, and so their chart will show them putting only nominal sums into each spending area – but this group actually pays far more of their overall tax bill indirectly, through VAT, fuel duty, council tax and more. By focusing only on this one tax, their contribution is dramatically understated.A final clash comes in the simple matter of what impression the graphics leave taxpayers with in terms of their own contribution. People on low incomes pay very little income tax, and so their chart will show them putting only nominal sums into each spending area – but this group actually pays far more of their overall tax bill indirectly, through VAT, fuel duty, council tax and more. By focusing only on this one tax, their contribution is dramatically understated.
Essentially, though, the view people take on such an initiative is likely to depend on their personal politics and level of trust in the government. At its most generous, the spending information can be seen as an attempt to improve voters’ understanding of where their money goes, even if an imperfect one. At the most cynical, it could simply be seen as a means of pushing a political message to 30 million households from a source more trustworthy than political literature. Which effect wins out will, of course, only really be seen as the letters hit the doormats. Essentially, though, the view people take on such an initiative is likely to depend on their personal politics and level of trust in the government. At its most generous, the spending information can be seen as an attempt to improve voters’ understanding of where their money goes, even if an imperfect one.
At the most cynical, it could simply be seen as a means of pushing a political message to 30m from a source more trustworthy than political literature. Which effect wins out will, of course, only really be seen as the letters hit the doormats.