Tuesday 24 January 2012

Ben Gummer's Ten-minute Rule Bill

Ben Gummer MP has proposed sending every taxpayer a statement to show where his taxes go, to put government spending into perspective, as reported in today's Soaraway Sun. Clearly it makes a lot of sense to express spending in terms of £100 per taxpayer rather than just waving around these billions and trillions at national level.

They've produced a sample statement, showing that an average earner on £26,000 pays £6,134 income tax/employee's NIC, £803 of this is spent on old age pensions, £236 on housing benefit and so on.

I like the general principle, but I have a big quibble...

... the statement only shows PAYE (income tax and employee's NIC) deducted from wages (you can check here, using 2010-11 rates) even though these only accounted for only just over a third of all taxes collected (£180 billion out of £530 billion) in that year.

According to the Public Sector Finances Databank for 2010-11, total taxes collected were £530 billion, divided by 32 million employees/self-employed gives us an average tax bill of £16,500 per annum, quite significantly more than the £6,134 which the government The Sun acting on behalf of the government pretends an average (median?) earner on £26,000 pays, eh?

Adding on the figure for Employer's NIC (another £50 billion) would be very easy; VAT (£86 billion) averages out at (say) seven per cent of people's gross wages (or a third as much again as income tax and two layers of NIC); then there's duties (petrol, booze fags, £70 billion) Council Tax, Business Rates (£25 billion each); corporation tax (£30 billion, which is ultimately borne by individuals); £22 billion in income tax collected via Self-Assessment and so on.

Further, total government spending in 2010-11 was £687 billion, minus 'gross operating surplus' (whatever that is) and the deficit was (say) £120 billion, so yer average earner is also being lumbered with another £4,600 in debt on top of the £16,500 tax he was paying/bearing.

If you then go back and rework the spending figures based on £21,100 tax rather than £6,134, it would be more like £2,700 for pensions (not £803), £800 for Housing Benefit (not £236) and so on, which seems more realistic to me (i.e. total pensions spending £85 billion divided by 32 million employees/self employed = £2,700, total nominal Housing Benefit bill £25 billion divided by 32 million = £800).

Then we could include a notional figure for the cost of major tax breaks, so if pension tax breaks are £44 billion a year, that's £1,400 for each employee/self-employed person. If you're a pension saver, that's less than the value of the tax breaks to your pension company (not to you, they are worthless to you) and if you have no truck with pensions companies, that's what the razzmatazz is costing you in extra tax, and so on.

16 comments:

diogenes said...

at least he didn't talk about the allegedly terrible effects of the repeal of the empty commercial property relief....we badly need all the empty ex-commercial properties we can keep our hands on to save them thenm fro0m nasty demolition people

John Pickworth said...

Saw this too and I've got to say its a great idea... in principle.

Mark probably has his study wall plastered with Post-It Notes with all these facts 'n' figures. Others like myself will happily while away an evening looking them up on the internet. Sadly though, the majority haven't the foggiest and frankly its about time they did.

Mark Wadsworth said...

Dio, yes, owning an empty or derelict commercial building is a vital part of the UK economy, and getting rid of the relief was an attack on business. Or at least that's what they said.

JP, it is a great idea for the reasons you give. The Sun's version fails though, because it says that average guy pays £6,134 in tax when really he pays two or three times as much.

James Higham said...

I like the general principle, but I have a big quibble...

... the statement only shows PAYE (income tax and employee's NIC) deducted from wages (you can check here, using 2010-11 rates) even though these only accounted for only just over a third of all taxes collected (£180 billion out of £530 billion) in that year.

Then you'd best get onto him straight away, Mark and put him straight.

Rob said...

Let's have one for car tax as well. When DVLC send their demand, let's see what it is spent on. I suspect little of it is road or car related.

Mark Wadsworth said...

JH, will do.

R, car tax = stupid tax, as is VAT on new cars, repairs or fuel. Far better is fuel duty, which is like simple road pricing (or a user charge, or rent, or LVT). As it happens, only about a fifth or a quarter of all car related taxes are spend on roads, but so what?

Lola said...

Shouldn't such a statement distribute the tax over the people working in wealth creating private business, or show what proportion is recycled through the state?

Mark Wadsworth said...

L, splendid idea, in which case we can divide all the numbers by 24 million and the average tax bill was £22,000 + deficit spending £5,000.

Bayard said...

Mark, once upon a time, long, long ago, the money raised from Vehicle Excise Duty (I believe it was called the Road Fund then) was ring-fenced for spending on roads. I am constantly amazed by the number of people who still think it is. I think the problem was that more money was collected than was spent on the roads and the pols (in particular Winston Churchill) couldn't resist the temptation to spend the cash in the Road Fund on something else.

Lola said...

Even better, the breakdown's that get distributed to state employees show the costs as benefits to them. As in 'this is what the real taxpayer has paid to employ you'.

Adam Collyer said...

I have another quibble. The spending figures would only be broken down by spending area. Example: x hundred pounds for "health". Everyone will be happy, not realising that it really means half of x for health and half for waste. It would play into the standard poltician/civil service line that spending is like a menu and the only way to cut it is to hurt people.

Mark Wadsworth said...

L, that gets tricky, because there are a lot of public sector employees who do real work and a lot who don't.

AC, oh yes of course, broadly speaking, £100 billion annual NHS spend breaks down as follows:

Medicines: £12 billion

400,000 nurses @ £30,000 each: £12 billion

100,000 doctors @ £100,000 each: £10 billion

Maybe 100,000 others like paramedics, ambulance drivers @ £50,000 each = £5 billion

Other, various and sundries, overheads, PFI payments, paperclips: £59 billion.

So your 50/50 split is not far off the mark.

Anonymous said...

MW: There is also the rather essential buildings and medical equipment, food and clean sheets, but your point still stands. NHS is still on the cheap compared to some other countries, but that means that if NHS was cut by 1/3, it'd be the lowest cost system in Europe.

-Kj

Mark Wadsworth said...

Kj, all right then...

200,000 beds @ £50 per night (same as hotels) = £10 million/night x 365 = £4 billion a year, tops. That still doesn't add up to 50% of NHS budget.

And yes, all things considered, NHS is still quite good value by international standards.

Anonymous said...

"And yes, all things considered, NHS is still quite good value by international standards."

I don't know about wait-times, outcomes and the like, but I assume it's the same as what is currently costing a bit more elsewhere. The good thing about having a universal system, if it's not too expensive, is that private markets wrap perfectly around it (i.e. two-tier). So you'll get what you need no matter of personal circumstances, but there's also the option of getting private care at a reasonable price for the majority.

-Kj

Jer said...

"And yes, all things considered, NHS is still quite good value by international standards."

Well... they would be if they didn't kill the patients through neglect or incompetance.

My wife and mother survived, my next door neighbour didn't.