George Osborne is apparently going to send every taxpayer a breakdown of what their money is spent on.
The move, which will come into force in 2014, is expected to help ministers persuade voters of the need for public spending cuts, including welfare payments, the biggest source of government expenditure and which accounts for about a third of all tax revenues.
Maybe it will do that. And maybe the Government ought to be concentrating on cutting itself rather than cutting payments to its citizens.
But one thing’s for sure. The breakdown will be incredibly misleading.
Imagine your tax bill comes to say £15,000, and one third of government spending is spent on welfare.
Your statement will therefore tell you that the cost of the welfare system to you is £5,000.
Wow! Shock for people … except that the real cost is double that.
Why? Income tax brings in around 29% of government revenue, and national insurance another 19%, total 48% (figures from 2008/9). The total tax take is roughly double what is raised in income tax and national insurance. (The rest comes from VAT, employer’s national insurance, capital gains tax and a whole raft of other taxes.)
What this means is that the actual cost to each taxpayer of those government services will be roughly double what it says on Mr Osborne’s new statements.
The other issue, of course, is that the usefulness of the statements will depend on how the spending is broken down, and on the agenda of the people producing the figures.
The BBC, for example, has a breakdown that is says comes from HM Treasury.
That breakdown says that 0.5% goes on “European Union”. With total public spending at £697 billion (figure from the 2010 budget), that would imply EU contributions of £3.5 billion.
The true figure for our total EU contributions is about £13 billion (2007 figure). So where did that £3.5 billion come from? In 2007 our net contributions (i.e. what we pay minus what the EU spends in Britain) were about that, so most likely that “European Union” figure on the breakdown is the figure for our net contributions.
I would argue that is misleading, because the other £10 billion is spent on the priorities of the EU, not British priorities. Some of it is even spent within the UK on administering collection of the EU contributions! Therefore if I were doing the breakdown, I would have a figure of 1.9% for EU rather than 0.5%.
No doubt the Treasury would argue that the net figure is the appropriate one to use. The point is not which figure is right, but that there could be a huge disagreement here – and the decision you take on that has the potential to multiply that particular figure by four.
In general, there are lies, damned lies and statistics, and the civil service are past masters at misleading use of statistics to justify their empires. I suspect this will be no different.
So Mr Osborne’s breakdown is a tiny step in the direction of explaining to taxpayers the vast cost of the bloated British State, but only a tiny step.