Recently, a grateful government sent out an email offering the opportunity to discover not only how much tax an individual has paid but also the ways in which it was spent.
Like most accountants, I am very much aware of my tax obligation. The surprise came in reviewing the breakdown, which will make many of us wonder whether we are getting good value for money.
Strangely, the only figure that immediately rang a bell was our contribution to overseas aid, since this has been a political football after our hard-nosed Chancellor of the Exchequer cut the percentage for 2020-21 by almost 25%.
2020-21 was always going to be unrepresentative due to the pandemic, so here is the information from the HMRC area of the government website covering the last two years, with the numbers in pounds deleted to cover your dedicated columnist’s embarrassment at the paucity of his income.
This shows a breakdown of how your taxes have been, or will be spent by government.
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19/20
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20/21
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Health
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20.5%
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21.9%
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Welfare
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22.1%
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19.6%
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Business and industry
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3.8%
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14.4%
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State pensions
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12.4%
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10.1%
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Education
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11.6%
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9.6%
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Defence
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5.3%
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4.5%
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Transport
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4.3%
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4.5%
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National debt interest
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6.9%
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4.1%
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Public order and safety
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4.3%
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3.9%
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Government administration
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2.1%
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2.0%
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Housing and utilities, like street lighting
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1.8%
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1.4%
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Environment
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1.5%
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1.3%
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Culture, like sports, libraries, museums
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1.5%
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1.2%
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Overseas aid
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1.1%
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0.9%
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UK Contribution to the EU Budget
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0.8%
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0.6%
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100.0%
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100.0%
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Purpose
One can only imagine that the purpose of sharing this information was to persuade grateful taxpayers that they are getting wonderful bang for their buck.
I would love to know what others think but my personal view is that, if this was the intention, it has backfired badly. That is especially the case as this article is being written in the week when Rishi Sunak has ended a great deal of health funding that many of us believe is still necessary.
Value for money
Everyone will have their own pet loves and hates from this list. Probably few would resent expenditure on health, welfare or education, unless it is wasted.
Things like pensions, transport and policing all seem like good investments as well, while defence might lead to a political divide, perhaps counterbalanced by the environment.
Discovering that government administration beats housing and utilities, the environment and culture looks like a figure that should be a scandal but perhaps it hides something more valuable than the cost of office parties.
Finally, after all of the fuss over the UK contribution to the European Union, is surprised to learn that this barely registers on the scale, at only two thirds of the overseas aid contribution and only 30% of government administration.
Covid fraud
It doesn’t have a specific line but the latest data from the public accounts committee suggests that we are all paying royally for fraud and error.
According to a report in the Guardian “Data from government departments’ annual reports suggested fraud and error losses of between £12.4bn and £20.1bn, with a central estimate of £15.7bn, the report said.
The furlough scheme is estimated to have suffered the largest fraud and error losses of £5.3bn, followed by the BBLS where £4.9bn is thought to have been lost. The government has funded a “taxpayer protection taskforce” to chase fraud in the schemes including furlough run by HM Revenue and Customs, but anti-corruption experts are concerned that funding is inadequate to fight fraud in bounce back loans.
The government will also have to write off £21bn in loans to people or businesses who will be unable to pay them back.”
Surprises
For those of us who are not ardent economists, the overall expenditure breakdown will contain many surprises and a few shocks.
One might have expected health and welfare to shoot up between the heady days before the pandemic and its worst ravages. In fact, welfare has gone down in percentage terms, while health has only increased by a modest amount.
The big winner, if that’s the right way of expressing it, is business and industry. At first glance, this looks completely mad. On reflection, all of that money that the Chancellor of the Exchequer flung into the pot, furlough, loans (including those that were paid out fraudulently and others which will never be recovered) business rates relief and the like are going to be hanging like a millstone around our collective neck for generations.
The future
One must imagine, or at least hope, that even if 2021-22 still looks like a pandemic year, everything should settle back into a much greater degree of normality thereafter.
However, the figure that we should all focus on, since it could prove deeply harmful, is that line for national debt interest. Even with interest rates that were practically non-existent, 4.1% of my taxes were expended on something that suggests a degree of profligacy to those of us who are naturally prudent.
With inflation predicted to shoot up to 7% later this year and a fair chance that it could even be higher, the money that is no longer dedicated to business and industry could largely be paid in interest going forward.