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An average worker spends £367.78p a year of their Income Tax on interest on the National Debt

By Harry Phibbs
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Gosh, I'm looking forward to getting my tax return through the post next year. It will tell me how the Government spends my money.

Transparency is not just a matter of lots of turgid data files available via obscure sections of Government websites. It is also about making the information intelligible. The personalised state spending breakdown for each taxpayer next year will be an extraordinary breakthrough. We will know not just the total amount we are paying in Income Tax and National Insurance, but what our money is spent on.

The Daily Telegraph has a sneak preview on their website this morning. You can select an income level (to the nearest £5,000 up to £40,000 - after that the gaps widen). That then tells you how much tax you pay and what it goes on.  The paper says their figures "are based on the formulas that will be used to compile the statements."

For instance, somebody earning £25,000 a year - slightly below the average - has an annual Income Tax and National Insurance bill of £5,179.96.  Of this £1,880.33 goes on pensions and other welfare payments.  Next on the list is health (£942.75p) then education (£709.65p). But in fourth place comes National Debt interest at £367.78p. That is a huge sum - you can get a return flight to New York for less than that. It's more than is spent on defence, more than spent on policing, prison and the courts.

There will be arguments over the details. As welfare and pensions is such a big item shouldn't it be split in two? X amount for pensions, Y amount for other welfare. The quoted contribution to the EU at £10.36 (for someone earning £25,000 a year) is suspiciously low. Is this the net figure rather than gross? If so it is misleading. But these matters can be debated and the presentation tweaked as required.

Some may fret that we will forget about all the other ways we are fleeced by the tax man. That is an argument for doing more - such as Robert Halfon's call for the amount of tax paid to be shown on petrol reciepts.

David Gauke, a Treasury minister, said:

“It is quite right that people know how much tax they pay and what it is spent on. From 2014 the new personalised tax statements will make the system even clearer and more transparent.”

Ben Gummer, the Conservative MP for Ipswich who came up with the idea for these personalised statements, said:

“After your mortgage, tax usually accounts for most of an individual’s spending. Just as you can look at an itemised phone bill and see where your money has gone – the same should be true of your tax."

I suppose many people will just glance at their statement and cast it aside. But many others will read it with considerable dismay. It will bring home just how serious the burden of the National Debt is. It will emphasise just how expensive the problem of welfare dependency is.

What will be the political upshot?  There will be some challenging questions for the Government as to their priorities. There may be a focus on the failure to achieve more in cutting spending, borrowing and taxation. Yet such a shift in the debate would scarcely make people more likely to vote Labour.

I expect there will be a change in attitude from some who feel guilty about being rich and hitherto virtuous about paying lots of tax. They might reflect on how much of their money is wasted by the state and that it would be more effective for them to "put something back" if their tax bill was lower, leaving more room for charitable donations.

Recently I listed ten reasons why the Conservatives will win the next election.

The introduction of personalised tax and state spending statements provide an 11th.

Well done, Mr Gummer.


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