Privatising Pay As You Earn
The Conservatives have raised the idea of taking PAYE responsibility away from HMRC, but would it really work? Simon Sweetman assesses the case.
It’s not in the Conservative manifesto and when George Osborne suggested it a few weeks ago everyone thought this was one of his pre-breakfast good ideas which had gone cold by lunchtime, but no - his boys have been going round explaining how they are going to take PAYE away from HMRC and give it to the banks. The banks are probably the only organisations in Britain commanding less respect than HMRC for their day to day operations (and HMRC can hardly be blamed for stuffing up the economy).
The idea is to use BACS (run by VocaLink, owned by a cartel of banks). This idea is not new. On the whole, BACS works (though remarkably slowly when you’re waiting for the payment). HMRC was actually thinking about it as the future of PAYE a few years ago and rejected it as too expensive, which leads us to the extra ‘are they sure they know what they’re talking about?’ bit – these proposals would presumably involve scrapping the expensive new PAYE computer system which is just coming online and will hopefully get through its teething troubles (which seem to be caused by legacy work) and start functioning properly next year. Junking a system that actually appears to work is a new one.
What will happen?
The accompanying guff says that 96% of salaries are paid using the BACS system already - a figure that must have been subjected to some sleight of hand, as far more than 4% of wages are paid in cash. I suspect the 96% of salaries applies to those paid by big business, and let us not forget that half the employees in the UK work for SMEs. Let us also not forget that PAYE also applies in particular to pensions.
They claim very particularly that this will end delays in payment of PAYE at a stroke. It might solve the problem of those who won’t pay if the banks whistle the money straight out of the employer’s bank account without so much as a by your leave, but what about those who can’t pay yet? It then goes on to say that there will be increased tax revenues of £1bn a year through the collection of correct tax, as if suddenly everybody is going to get everything right. It talks about everyone having a ‘personal account’.