Tuesday, 20 March 2012

Why Labour should support an 'annual taxpayer statement'

In tomorrow's budget, it is expected that George Osborne will announce plans to issue annual personal tax statements in order to let citizens know precisely where their tax gets spent.  So far, the issue has been set up as one of left versus right, with some conservative commentators clearly believing the policy to be a route to lower taxes.

The theory is that if people know more specifically where their taxes go, they will be less content to pay them.  Indeed, the left-wing tax researcher Richard Murphy was on Radio 5 Live today predicting that this is precisely what will happen.  But such arguments are predicated on a misunderstanding: that 'unpopular' areas of spending, such as unemployment benefits, receive an undesirable proportion of the income tax pie.

On the Guardian's website today, there is a wonderful interactive tool which smashes these myths.  It shows how much an individual spends per day on public services (based on their income).  If we take the average salary - around £25,000 per year - we can see exactly what services cost the average taxpayer on a daily basis.

According to the Guardian's tool, here are the three most expensive services and what they cost per day for the average person:

  1. Health - £4.88 per day
  2. Education (including universities) - £3.77
  3. Pensions - £3.59
And here are the daily costs for three services we might consider much less popular:

  1. Unemployment benefits - £0.24
  2. Housing -  £0.14
  3. The EU - -£0.13 (meaning the average taxpayer gains 13p a day from EU membership)

What does all this tell us?  In my view, it shows us - perhaps unsurprisingly for those on the left - that the things which cost the most money are the services that benefit us all and that we most appreciate: health, education and pensions.  On the other hand, it's clear from data like this that taxpayers are not spending inordinate sums on small numbers of 'undeserving' groups.  The average earner, for example, pays just £7.30 per month to support the ever-swelling ranks of the unemployed.

Conservatives cheerily urging Osborne on with this policy might care to think again.  In future years, taxpayers might receive their annual statement from the Chancellor and think they don't get too bad a deal.  The parent of a secondary school child will see that it costs them just £252 per year to send their children to school; a snip compared to private sector rates.  Equally, we might end up realising how little we spend on needy groups.  Is it fair, for example, that all we contribute towards survivors is 8p a day?  Taken together, the public might end up thinking that the state actually does an efficient job at providing good services, while also believing the public could do a bit more for those in need.  

For years Labour has been shackled by strange and paradoxical public attitudes towards the state.  As the adage goes, the British public want Swedish social services at American rates of tax.  One reason for this might be the misconception that the UK government spends unfairly and unwisely.  Personal tax statements might be one way to combat such misconceptions that have, over a long period of time, been detrimental to British social democracy.  For that reason, Labour should support the Coalition in implementing this measure.

1 comment:

  1. If those numbers about thee spend are true then, yes, bring on the Coalition's proposal for annual personal tax statements.