Average family pays £656,000 tax over lifetime, calculates the TaxPayers' Alliance

By Joseph Willits 
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According to new research based on National Statistics data from the TaxPayers' Alliance, over the course of a lifetime the average household pays £656,000 in tax. This includes £250,000 in Income Tax and £101,000 in VAT.

The Taxpayers' Alliance's figures are based on the current rate of tax, calculated from a working life of 40 years and 15 years of retirement. The research is broken down in to quintiles, which are broken down into five household income groups, ranging from the highest to the lowest. Some of the key findings of their research are:

• £1.3 million in direct and indirect taxes will on average will be paid by households in the highest quintile. The figure for the lowest quintile is £235,000.
• Figures for the second income quintles are £392,000; third - £556,000; and fourth - £755,000.
• The taxes which are most burdensome to all households are Income Tax, VAT, employee National Insurance contributions and Council Tax.
• For the poorest households (those in the lowest quintile), this means paying an average of £57,000 in VAT, and £55,000 in Council Tax.

Responding to the findings, Director of the TaxPayers' Alliance Matthew Sinclair has said:

"Households in the UK now pay an incredible amount in tax over a lifetime, handing over a hefty slice of their income. The VAT hike has added to the cost of living and many taxpayers are really feeling the pinch with little prospect of improvement on the horizon. The Chancellor needs to deliver a tax cut in the Budget, to ease the burden and help the economy to grow. Simpler, fairer taxes can decrease the lifetime tax bill for households and leave everyone with more of their own money, so they can decide how to spend it." 

Round-up of reactions to HS2 announcement

By Matthew Barrett
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Following the Government's approval of the first phase of the HS2 train line from London to Birmingham, several think-tanks and campaign groups have reacted to the news.

The Institute of Economic Affairs' Deputy Editorial Director, Dr Richard Wellings, said:

“The government is ploughing ahead with a hugely expensive project whose economic case is flawed, whose time-savings claims are dubious and whose environmental case is highly suspect. After having made such political capital out of opposing a third runway at Heathrow, one can only assume the government is forging ahead in the face of such criticism as a way of saving face. This project will do nothing to bridge the North-South divide and will instead burden the ever-hammered taxpayer with the task of funding what is a classic white elephant. The government should make one last effort to reconsider its position before it saddles the nation with a high-speed disaster.”

The TaxPayers' Alliance's Director, Matthew Sinclair issued the following statement:

"It is extremely disappointing that the Government is pressing ahead with plans for a new high speed rail line that will cost taxpayers a fortune. The economic case for the new line just isn’t credible and ministers still aren’t being honest about the hidden costs, or the consequences for towns getting a worse service and passengers paying higher fares under their current plans. There has never been a proper consideration of strategic alternatives that could deliver greater capacity more quickly and without the enormous bill. This white elephant will mean a faster journey for a fortunate few but at an enormous cost to the rest of us; it should be abandoned before too much money has been wasted."

Continue reading "Round-up of reactions to HS2 announcement" »

New TaxPayers' Alliance report indicates council employees have spent 2,500 working years on paid suspension since 2009

By Matthew Barrett
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A report (pdf) from the TaxPayers' Alliance released today reveals that 1,328 Midlands council staff have been suspended for a total of 419 years since 2009, costing taxpayers £8.2 million.

If these figures were replicated nationally, in line with the spending power of Councils in the Midlands, the TPA estimates that since April 2009 7,852 staff would have been suspended for a total of 594,816 days, or almost 2,500 working years.

The suspended members of staff have been on full pay, and the average suspension lasts 76 days.

The worst-offending councils include:

• Leicester City Council, who paid out the most in salaries to suspended staff at almost £1.5 million for 107 incidents.
• Nottinghamshire Council had 167 cases of suspension since April 2009, the highest in the Midlands.
• 78 employees across the Midlands were suspended on full pay for more than 12 months.
• A manager on over £67,000 a year at Newark and Sherwood Council was suspended for 77 days before leaving the authority.
• An employee of Leicester City Council on a salary of £48,642 was suspended for 872 days. The total wages paid during suspension was in excess of £176,000. This was the largest amount paid during suspension.
• An employee at Lincolnshire Council on a salary of almost £65,000 a year received over £140,000 during a suspension of 523 days, before being dismissed.
• An employee of Nottingham City Council was suspended for 950 days – almost four years.

Six councils refused to provide any information, twelve did not provide salary details, one did not respond to the TPA's request, and two did not record requested details of any suspended staff.

Continue reading "New TaxPayers' Alliance report indicates council employees have spent 2,500 working years on paid suspension since 2009" »

Think tank reactions to Autumn Statement from ASI, IEA, TPA and Reform

Dr Eamonn Butler, Director of the Adam Smith Institute:

“A £40bn business loan scheme, mortgage guarantees, £5bn of infrastructure spending, 'youth contract' apprenticeships, start-up tax reliefs, new R&D tax credits, extending free child care – these are all Gordon Brown-style tinkering measures that look good in the papers but end up being bureaucratic and wasteful. Far better to leave the money in people's pockets and cut taxes, which will boost confidence.”

Mark Littlewood of the IEA:

“George Osborne is operating in difficult economic circumstances, but this is still a disappointing response. He has effectively ditched Plan A and embraced Plan A minus. He is not sticking to his deficit reduction policy. He is sticking to his spending policy. There’s a world of difference. The initial plan was to add £260bn to the national debt between now and the next election. That has now spiralled to £350bn. If growth and tax receipts are less impressive than initially thought, there needs to be a corresponding reduction in state spending. But the only major spending cut spelt out today – a reduction in the retirement age – doesn’t kick in until 2026. Additionally, upgrading many welfare benefits by a full 5.2% while wages remain flat will not help to incentivise people to enter the workforce. The Chancellor conceded that a possible recession in the eurozone could further worsen economic conditions here, but did not signal a readiness to introduce deeper cuts in spending should this occur. It will be difficult for him to retain his hard-earned credibility in the markets should he fail to indicate that further reductions in spending may be necessary.”

Matthew Elliott, Chief Executive of the TaxPayers’ Alliance:

"There is some good news for taxpayers in the Autumn Statement, but over time the Government still needs to do more to deliver lower and simpler taxes. If tax remains the heavy and uncomfortable burden it is today, growth will stay disappointing. Motorists will be grateful for a better deal as they have been overtaxed for years, although they will need to remain vigilant with a big hike still scheduled for next August. And it is right that the Government keeps pay for public sector workers under control, as they currently get a much more generous deal than those in the private sector. The Autumn Statement was a reasonable start in reacting to the huge challenges facing the British economy, but a more ambitious plan for growth will be needed by the Budget."

Patrick Nolan of Reform:

"George Osborne’s fiscal strategy is turning into alphabet soup: Plan A for austerity, Plan A+ for magic bullets, Plan B for more debt, Plan P for panic and Plan S for spending. Yet rather than being clever, having a fiscal policy that sets out to be all things to all people undermines growth and the sustainability of the public finances. It shows that mistakes of the Gordon Brown era have not been learnt. Real growth will not come from more government tinkering but from a productive private sector."

New TaxPayers' Alliance report finds £27.4 billion in taxes goes uncollected

By Matthew Barrett
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A new report released today by the TaxPayers' Alliance (TPA) for the 2020 Tax Commission (a joint project by the TPA and Institute of Directors) shows that Her Majesty’s Revenue and Customs (HMRC) has given up on collecting £27.4billion in tax revenue over the last five years.

The TPA report, "How the taxman loses billions every year" (which is available to read here in pdf format), suggests that tax simplification would help avoid errors of such scale - and would help reduce the deficit more quickly. 

HMRC gives up trying to collect billions in tax in the form of remissions and write-offs every year. The report describes remissions and write-offs:

• "Remissions are debts capable of recovery but HMRC has decided not to pursue the liability, for example, on the grounds of value for money or official error"
• "Write-offs are debts that are considered to be irrecoverable because there is no practical means for pursuing the liability (e.g. after bankruptcies)"

Continue reading "New TaxPayers' Alliance report finds £27.4 billion in taxes goes uncollected" »

Matthew Sinclair's 'Let them eat carbon' - the crippling cost of climate change policy

By Joseph Willits 
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Matthew Sinclair, Director of the TaxPayers’ Alliance (TPA) has written a new book exposing the crippling cost of climate change policy, and the special interests that profit most.  His ultimate call is for such policies to be scrapped, that are detrimental to the consumer, and are only beneficial to huge businesses that thrive at their expense.

‘Let them eat carbon’ evaluates the financial implications involved in climate change policy.  In ‘Let them eat carbon’ Sinclair reveals the financial implications of regulations such as the Renewables Obligation and the EU Emissions Trading System (EU ETS).

Sinclair cites these two examples amongst others, as already costing billions, yet they are expected to cost even more in the future.  His findings state that:

Continue reading "Matthew Sinclair's 'Let them eat carbon' - the crippling cost of climate change policy" »

Jonathan Isaby joins The TaxPayers' Alliance as Political Director

By Matthew Barrett
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Jonathan Isaby, our former co-editor, will be the TaxPayers' Alliance's first ever Political Director. 

Jonathan's role will be centred on building links with MPs, MEPs and Ministers, in order for the TPA to better represent taxpayers in Westminster and Brussels. He will focus on representing the work of the 2020 Tax Commission - which seeks to simplify and reduce the British tax system - as well as building alliances and joint campaigns with other groups representing taxpayers across Europe, in light of the €urozone crisis. 

Continue reading "Jonathan Isaby joins The TaxPayers' Alliance as Political Director" »

Here you go George; A Growth Manifesto from London's think tanks

By Tim Montgomerie
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On our Comment pages today Mark Field MP sets out the two great truths of the economic debate:

One: We must carry on with the Osborne deficit reduction programme. When you are in a worldwide debt crisis you have to get your debts under control.

Two: The Coalition hasn't got an adequate growth agenda.

Read Mark's piece.

So what can the Coalition do to achieve growth? I asked some of London's top think tanks to recommend some ideas. The list below is far from exhaustive. Missing, for example, are ideas to modernise trade union laws and the Civitas think tank's thinking on better procurement. I also dismiss the idea that a growth agenda cannot have immediate effects. While it's true that many supply side measures can take years to yield benefits (this is certainly true of the Coalition's excellent welfare and school reforms) some - such as tax reforms and deregulation - can produce immediate benefits. There is also the impact on confidence. If the government looks serious about long-term competitiveness then overseas and domestic investors are more likely to stay and expand in Britain.

"If the Government keeps living beyond the means of British taxpayers and businesses, then growth will continue to be limited.  By reducing the incentive to work and invest, high taxes diminish economic growth.  For some tax cuts, the economic effect is dramatic enough they can increase revenue.  That is the case with a lower corporate tax rate, the Government could cut a lot further and faster than they are, and abolishing the 50p rate of income tax.  But there are other tax cuts that would boost growth as well, such as a cut in National Insurance.  And more broadly the relationship between spending and growth shows that imposing too great a burden on taxpayers depresses growth.  European Central Bank estimates imply Brown’s increase in spending as a share of national income left GDP over £100 billion lower by 2010-11." - Matt Sinclair of The TaxPayers' Alliance

More: The TaxPayers' Alliance's Tax Reform Commission.

"In the current circumstances it is clear that the UK cannot afford, above all unilaterally, to move to a low carbon, let alone a zero carbon, economy. A low carbon economy means a high energy cost economy. At the very least, the Government should phase out all energy subsidies of all kinds, and suspend unilateral targets until such time as all other major nations have signed up to the same course. For the UK to go it alone is not merely suicidal but pointless. Decarbonisation requires growing subsidies from the taxpayer and sharply increased energy bills for business, industry, and households. At a time when painful cuts are unavoidable, it makes no sense to make British industry – and manufacturing in particular - uncompetitive, or to drive it overseas, and thus greatly weaken our economy, by ratuitously driving up energy costs." - Benny Peiser of the Global Warming Policy Forum

"The coalition needs to create an environment much more conducive to enterprise. A systematic programme of deregulation should be at the heart of this. The government should start by dismantling employment regulation. Legislation that makes it more expensive to hire workers, such as anti-discrimination legislation, should be repealed. The minimum wage should be regionalised. If the government has not got the courage for radical reform, wide-ranging exemptions for small firms would be a start." - Mark Littlewood of the Institute of Economic Affairs

More: Deregulating the labour market; deregulating energy and transport; deregulating financial sector; deregulating business; and deregulating business.

"Coherent reform of public services is a necessary part of the recovery. It will enable public spending to be restrained while meeting the demands for improved services and it will increase the productivity of the economy, raising living standards for everyone. Poor performing education, health and welfare systems already impose significant costs on the wider economy.  Demographic changes mean that the costs facing government in areas like pensions and healthcare are accelerating rapidly.  The Treasury has made the right call on the big question of deficit reduction, but has undermined the Government's commitment to value for money by ring-fencing certain public sector budgets.  The commitment to the National Curriculum is just one example of the fact that neither Health nor Education have dismantled central regulation and made services accountable to their users." - Andrew Haldenby of Reform

More: Reform's "It Can Be Done" report on public service reform.

“Any growth strategy has to deal with the problem of excessive employment law. According to the World Bank, UK labour market flexibility has slipped down the international league table – from 17th in 2007, to 21st in 2008, to 28th in 2009 and then to 35th in 2010. What was once a source of strength for the UK has become a source of weakness. A moratorium on new laws combined with some deregulation would boost business performance, job creation and restore the UK’s labour market competitiveness. For example, we need to deal with the fact that too many employers are being held to ransom in employment tribunals by vexatious employees and their ‘no win no fee’ lawyers.” - Alistair Tebbit of the Institute of Directors

"There are two fundamental requirements of competitive markets: first, the possibility of 'free entry' for new players and 'free exit' for those that fail; second, that cartels do not dominate a market. British banks fail on both points. That is why they are still not lending enough to small businesses. Why they are still paying senior staff huge bonuses (on top of salaries that were increased to make up for supposed cuts in bonuses). And how the top five banks control 80% of the market (a percentage that is climbing higher and higher). Deep seated banking reform must break up this cosy cartel. We need a new Financial Competition Commission to carry out investigations of individual firms or of product areas, with the power to make recommendations to the Bank of England to promote competition between banks; to remove barriers to entry (and promote new competition); to take steps to permit the orderly exit of failed institutions (break up institutions that are ‘too big to fail’); and to do more to ensure products and services offered are themselves subject to competition. Finally, state-owned banks must be returned to the private sector as soon as they are strong enough; and at the best possible price and greatest reward for the taxpayer (who took on all the risk when the shares were nationalised)." - Tim Knox of the Centre for Policy Studies

More: Niall Ferguson's Too Big To Live; Andrea Leadsom MP's Boost Bank Competition; and James Conway's Give Us our Fair Shares.

"Domestic competition is seen as good because it keeps producers sharp. So why resist it from abroad? Yet we slap import duties on shoes, cereals, electronics – there’s even a tariff of up to 48.5% on Chinese bicycles. Such protectionism allows our producers to coast along instead of becoming world class. It means less choice and value for consumers. And if we are buying less from abroad, people in other countries will have fewer pounds in their pockets to spend back here, so other UK exporters suffer. Let’s not wait for world agreement, but push for bilateral free trade treaties with any country we can – particularly the poorest, who have most to gain." - Eamonn Butler of the Adam Smith Institute

"Welfare reform should not go faster nor deeper than an £18 billion cut. It should, however, move beyond ‘making work pay’. This would mean: Increasing conditionality by asking more of individuals who spend as little as eight minutes a day looking for work; introducing welfare accounts that re-instate the link between what people contribute through national insurance and what they can get out; and privatising some functions of Jobcentre Plus and re-negotiating parts of Work Programme contracts to allow some claimants to get personalised support from day one of their claim. These reforms would provide a critical boost to growth: they would make the welfare system effective in matching claimants to jobs and make the best of the talent of the UK population." - Matt Oakley for Policy Exchange

"In terms of short term hindrances to growth, the total annual cost of family breakdown is £41.74 billion or £1,364 for every taxpayer. Reducing these direct costs would plug a big hole in national and local finances but there are other harder-to-measure indirect costs which hamper our long term economic prospects. The fallout from broken family relationships can hinder children’s educational achievement, dampen their self esteem and affect their physical and mental health - ultimately threatening their creativity, well-being and future productivity. We need to make sure the next spending review includes specific investment in universal credit to eliminate the couple penalty; local councils should collect data on relationship statuses and be set delivery outcomes by national government so they can demonstrate how their policies  are providing relationship support and stabilising relationships in their area; other initiatives that help families (such as Family Nurse Partnerships and Family Intervention Projects) should specifically include couple support - often most effectively delivered by the voluntary sector." - Samantha Callan of the Centre for Social Justice

More: Action on the family.

"The Government needs to push for a long-term solution to the eurozone debt crisis – bailouts aren’t working, debt restructuring will be needed. The longer the crisis goes on, the worse the prospects for eurozone growth and stability look and, as our biggest trading partner, this will have an impact on the UK economy. In the medium-term the UK needs to seek allies in pushing for a better-functioning single market, including deregulation, removing cross-border barriers to services and digital industries, and protecting the interests of the City of London from the EU’s new financial supervisory architecture. This includes securing the flexibility to apply capital requirements for banks as the UK sees fit. In the longer term, the UK should look to diversify its trade away from the eurozone, tapping into the growth potential of emerging markets, which will be necessary in any case but also provides a Plan B if the eurozone fails to get its act together. The UK also needs to continue to push for a reduction in EU external trade barriers and encourage the expansion of free trade agreements with other economies/trading blocs." - Stephen Booth of Open Europe

More from the Open Europe blog: Liberalising the Single Market, Greek debt restructuring, Financial regulation and Trade.

“The Competition Commission needs to be reformed so that it rewards, rather than punishes, firms who share their knowledge on product development and innovation with other UK firms. At present, the UK’s institutional approach encourages firms to compete with each other at every stage, rather than cooperate. Vital information for businesses tends to remain in a particular sector instead of spreading around the whole economy. This puts UK firms at a disadvantage compared to many of their international competitors. Through better knowledge transfer, they can share their ideas on the best strategies to increase revenues and, hence, economic growth.” - Ian Mulheirn of the Social Market Foundation

"Our Government should start by not making matters worse, which means cutting the 50p tax rate, reducing costly regulation, and reversing climate-change policies that are adding so much to the cost of electricity that our key industries will be forced overseas. It should also pursue our enlightened national interest through industrial policy. It should encourage local enterprise banks to restore the initiative to localities. People in the North East, for example, would rally to a local enterprise bank that provided a safe home for their savings and invested them in providing solid, sustainable jobs in the North East." - Dr David Green of Civitas

Read more about Civitas' ideas for a new industrial policy.

"The discussions about boosting the economic performance of UK economy lack clarity and focus. Everyone understands that entrepreneurship and innovation are important for growth, and also that the government has a formidable aptitude to discourage both by ill-advised tax and regulatory policies. We need to move beyond these truisms towards more specific proposals. While we subscribe to many of the views expressed by our colleagues from other London-based think tanks, we believe that any credible pro-growth policy needs to reflect the following two insights, which are conspicuously missing from our present-day discussions.

• Incentives for private-sector employment for high-productivity individuals. In present times, highly skilled individuals are often likely to end up in professions with low social rate of return and in rent-seeking occupations, instead of going into the private sector and contributing to higher rates of innovation and entrepreneurship. Those occupations might include lobbying, tax advisory services, certain elements of legal counselling, and also the work for the underperforming branches of the public sector. Very often, government jobs bid away labour away from marginal private sector jobs. This is especially worrying in situations when the private sector jobs involve significant positive externalities, which are not reflected in employees' paycheck - such as jobs in private R&D. Tax changes, and removing many of the advantages of public-sector employment, as well as employment in some of the rent-seeking professions, could partly correct for this distortion. Also, a flat subsidy could be given to individuals who migrate into private occupations that can reasonably be seen as productive.
• Restoring the approbation associated with entrepreneurship and innovation. This might just require a simple change of rhetoric on the part of the coalition. The government should be more vocal in praising succesful entrepreneurs and innovators as the true heros of our societies, instead of lambasting them for not paying their "fair share" in taxes."

- Dalibor Rohac of Legatum

The TaxPayers' Alliance publishes four popular spending cuts

By Tim Montgomerie
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As George Osborne struggles to bring Britain's budget deficit under control the TaxPayers' Alliance have identified four extra savings that the public would support:

Matthew Sinclair, Director of the TaxPayers' Alliance, said:

"The public support alternatives that would blunt the need for some particularly painful measures and make room for lower taxes. There is strong support for cutting expensive projects like high speed rail, which they don’t see as the right use of their cash. And they would happily freeze international development, a change they rightly think is compatible with still helping the world’s poorest.”

He also said that it was vital to cut public subsidy of the trade union movement at a time when they are planning massive disruption.

“There is no way taxpayers' money should be supporting thousands of trade union activists who are planning strikes and fighting very necessary cuts to public spending. The unions' actions will disrupt the services they claim to want to protect and make it harder to get government borrowing under control. If someone is working for a union, they should be paid by them.”

More information about at the TPA poll here.

The TaxPayers' Alliance and Big Brother Watch give their anniversary verdicts on the Coalition

Matthew Barrett

During the last general election, the TaxPayers' Alliance published a manifesto, setting out objectives for this Parliament. Today, the TPA published its assessment of the Coalition's progress so far. The new report assigns scores out of five (with five meaning the objective has been satisfied, or there are plans to satisfy it, and zero meaning no progress has been made). 

The report finds that in every area, there is progress towards achieving some objectives, but progress is lacking in others:

• In tax and spending the Government has introduced a 2-year public sector pay freeze (3/5) and cut middle class welfare (3/5) but has not matched benefit reform with better tax policy (2/5)
• In reforming services the Government has given teachers and parents the right to open new, free schools (5/5) and appears to be on track to introduce elected police commissioners (4/5) but is yet to refocus transport spending on high use commuter rail and roads and is yet to scrap high speed rail proposals (0/5)
• In democracy and transparency the Government has strengthened the FOI act (2/5) but there have been no moves to hold a referendum on a renegotiation of our relationship with the EU (0/5)

Matthew Sinclair, Director of the TaxPayers' Alliance, said:

"Early on the Government made some excellent progress cutting some wasteful spending and opening up the public sector so taxpayers could see how their money is spent. Since then there has been further progress in some areas like strengthening Freedom of Information. Exciting reforms that will deliver better value from welfare, education and police spending have made progress. But in too many other fields, like tax reform and abolishing useless quangos, the rhetoric hasn’t been matched by the policy delivered. With expensive commitments like increasing international development and the high speed rail white elephant, families will see more of their money wasted. The TaxPayers' Alliance will continue fighting to defend the interests of ordinary taxpayers and campaigning on the priorities we set out before the election."

The full report can be read here (pdf).

The civil liberties campaign group, Big Brother Watch, has also produced an anniversary report, assessing the Coalition's progress on that front. Some key points:

• The promise to reduce the 28-day detention limit to 14 days has been kept
• The promise to abolish ID cards has been kept
• ContactPoint, the database that held information on all children under 18 was turned off in August last year
• However, the Coalition has retained biometric identity cards for non-EU citizens
• The Protection of Freedoms Bill, published in February made some progress towards deleting the DNA of people arrest for a crime but never charged. However, the bill will still allow storage of DNA profiles of those accused of serious violent and sexual crimes for a three year period, extendable by a further three years by a court order
• The Protection of Freedoms Bill contained plans to remove stop and search powers granted by the Terrorism Act 2000, but further progress needs to be made
• Control Orders have been replaced with Terrorism  Prevention and Investigation Measures, which are only an incremental improvement
• The government kept its promise to ban the use of powers given by the Investigation of Regulatory Powers Act, the law that gives council officers the ability to demand entry into private homes
• The government has continued the Intercept Modernisation Programme, which allows the government to crack phones and store emails, but information stored is on a smaller scale than Labour planned
• The Summary Care Record, the NHS record database, is being continued by the government, despite both Coalition parties pledging to scrap it
• CCTV usage has grown, despite research showing it has no effect on crime

The full report can be read here (pdf).