Remembering the Taxpayer - in search of a new deal between citizen and State

Here is my article which was published on The Commentator yesterday about individual tax transparency and the need to improve the information given to taxpayers.

The Government’s debt mountain grows with every day that passes. Every hour £14 million is added to our national debt. Yet with every penny the coalition tries to slice off public expenditure those seeing cuts complain of unfair targeting. (The fact spending is actually growing each year rarely gets a mention).

More than two years in, with little to speak of by way of economic growth, the Coalition Government is having a tough time getting to grips with the deficit and slimming down the state from its high of 52% of GDP in 2009/10. After more than a decade of hand-outs under Labour, people have become too dependent on the ‘social State’; knowing the value of everything they claim and the cost of nothing.

But is public opinion shifting? The British Social Attitudes survey demonstrates weakening support for the welfare state. The proportion of people answering that benefits for the unemployed are “too high and discourage them from finding work” rose from 44 per cent in 1999 to 55 per cent in 2010. Yet survey after survey on the deficit reduction and actual cuts shows that people’s desire to see that State provide for them fails to match up with their desire for a smaller state overall.

To rebalance the economy and restore a rational state, the Government needs to act boldly and remind taxpayers just what it is they are paying for. Earlier this year, following a Private Member’s Bill introduced by Ben Gummer MP, Osborne took the next baby step in the transparency agenda and adopted individual tax statements.

This was a welcome move, but tax statements are only one side of the coin and done on a simple measure of a proposition of what you pay matched to the spilt of government spending. What is also needed is for a personalised statement of services to be issued alongside your tax statement, informing users of the market value of tax payer funded services they have consumed.

Without such a radical move it remains all too easy to blame ‘benefit scroungers’ for the £200bn welfare bill (forgetting about Granny’s pension); blame ‘overweight smokers’ for the £128bn consumed by health care (forgetting that GP visit for a heavy cold); or blame ‘Mr & Mrs 2.4 children’ for the £65bn ploughed into education.

To break the cycle of dependency and deliver a smaller State, we need everyone to be more connected to what we get and what we pay for it.

Just like the end of dinner in a restaurant the Government should present us with a bill every time we use a public service.

Just imagine, enclosed with Jonny’s end of term school report; handed to Granny as she collects her pension; and passed to Mum as she leaves A&E – one piece of paper with the word emblazoned across the top “INVOICE”.

We are not talking about privatising the entire state (sorry to disappoint some of you) but a gentle reminder of just how good we have got it. A simple but effective statement of the value of service you receive and who is picking up the bill.

In private medicine every last sticking plaster and cannula is accounted and billed for; in private education parents are invoiced for uniform, books and meals on top of tuition; in housing private tenants and property owners face costs for repair, maintenance and services which  social tenants never ever see, let alone pay.

Under our proposals, the average earner in the UK (around £26,000) you would receive an annual tax statement showing that you have paid £5,783 in tax – of which £1,900 went on welfare, £1,000 on health, £750 on education, etc

But you would also get a statement to say, Mr Taxpayer, you have two children’s in school - costs to taxpayer £12,000; you had 3 GP visits - cost to taxpayer £300, you received tax credits totalling £3,200, etc

That way people become a lot more connected to not only what they pay but what they consume.

We know that given consumers that information reduces demand of public services. Take one example, figures out this month show that the number of prescriptions dispensed in Wales grew for the 5th year in a row following the abolition of charges. Disconnecting the true cost of a service such as a simple prescription medicine (for which English patients pay £7.65) has seen demand rise without consideration of the impact on the funding. Failing to connect the costs and availability of public services in users mind could end up costing taxpayers huge sums.

This simple and cost effective policy change is needed before the balance tips too far. By the end of this parliament 2 million fewer workers will pay income tax as a result of this Government’s reform of the personal allowance. Essentially anyone on earning National Minimum Wage will not pay tax. This is a great move economically and politically for the Government, but we must ensure those 2 million new working non-taxpayers do not disengage with the cost of the welfare state while they continue to benefit from it.

Brokering a new deal between the citizen and State in this way will reaffirm the value of public services received. Coupled with an annual tax statement, will soon get people realising just how good they have it.

In the mean time, we can only hope that people will wake up to the reality that for every one of us in work (all 29 million of us) £11 a day is added to our personal share of the national debt; while paying £16 a day in tax.

This entry was posted on Tuesday, 18 September 2012. You can follow any responses to this entry through the RSS 2.0. Responses are currently closed.