Your Money and HowThey Spend It. BBC programme 23 & 30 Nov. 2011 presented by Nick
Robinson [A fascinating look at how governments spend our money. I took notes on this 2011 programme; while the actual figures may have changed most of information is still correct.]
The annual government spend for 2011 was £692 bn. Three-quarters of this went on 7
budgets: Transport, Law and order, Defence, Debt interest, and Education
(£90bn), Health (£121bn) and Social Security - benefits and pensions (£194bn).
The last three total £405bn, which is 59% of the total.
The number of pensioners is set to double in the next 20 years (i.e. by 2031). Older
people vote more than younger people, so have more influence on policy. It is difficult
to remove benefits.
Winter fuel allowance began in 1997 at £20 p.a. per pensioner. In
response to the backlash over the 1999 pension rise of 75p per week, fuel allowance was raised
to £100, then went up to £200 in 2000 and in 2004 an extra £100 for those over
70. Seen by most as an entitlement instead of a help to those on low
incomes, it is not means tested or targeted; the same applies to bus passes, TV
licences and prescription charge remission.
The original expectation was that the NHS would improve the health of
the nation, leading to less demand and falling cost. Instead larger populations, big
uptake of expanding services and more expensive treatments mean spiralling
costs. Professional consensus is that fewer, larger hospitals are more effective both
clinically and economically but people prefer local service delivery.
Spending on culture and the arts is often seen as a luxury, though
spending (£447m?) is small in comparison with other areas.
Some projects run vastly over budget or are abandoned. The recently
built 9 regional fire control centres are empty as the technology does not
work; the financing method means an annual cost of £469, which is more than the
arts budget.
In 2011, £549bn was raised through taxation, but £692bn spent, leaving
a deficit of £143bn. Spending has been higher than revenues for most
of the period since WW2 and deficits are higher in recessions, under both Tory
and Labour administrations. There has been undue reliance on income from the
financial services sector; while at times this has been buoyant, when it goes
wrong it goes badly wrong.
There is an inequality in how money is allocated between the home
countries, based on a formula devised in the 1970s. In 2011, spending per head
of population was £10,212 in Scotland and £8,588 in England. Due to Scottish
nationalist campaigns for independence, politicians are reluctant to address
this issue.
Some areas of the UK are dependent on public spending. In 2011, in Morpeth more
than 50% of the population work in the public sector; these jobs are vulnerable
to cuts during recessions.
In 2010-2011 the total raised through taxation was £549bn. Of this, 60%
was raised through Income Tax (£152bn), National Insurance (£97) and VAT
(£86bn). Other taxes brought in smaller amounts: corporation tax (£43bn),
alcohol, tobacco and fuel duty (£46bn), council tax (£26bn), stamp duty on house
purchase (£6bn), inheritance tax (£3bn) and air tax (£2bn).
Income tax rates have changed over time. In 1973 the top rate of tax
was 75%, rising over time to 85%. In the late 1970s the basic rate was 30% with
a top rate of 60%. In 1988 the Conservatives reduced the top rate to 40%. This
was raised to 50% in 2009 by Labour.
In 2011 just 1% per cent of the population
earn more than £119,000 p.a. Current tax bands means that the 90% of people on
lower incomes contribute 47% of income tax revenues; the 10% of people on the
lowest incomes contribute just 0.5% of income tax revenues. At the other end,
the top 10% of earners contribute 48% and the top 1% of earners contribute 27%.
The need for cuts forced the Coalition government to change tax rates in 2011-2012, scrapping the 10% band and raising the
basic rate to 22%. Another proposal is to cut child benefits to
people earning more than £44K; as it stands, this means that a single parent
over the threshold will lose the benefit, but a household with two incomes will
not (since the benefit is paid to one parent only).
What do we get back? The lowest earning 60% of the population get more
back than they pay in, while the remaining 40% of the population get less back
than they pay in. The top 10% pay 5 times more tax than they get back.
VAT was originally 10% on everything but there are now three
categories. Standard rate: the current rate is 20% and applies to goods and
services not in the other two categories.Reduced rate: you pay 5% for some items such as children's car
seats and gas and electricity for your home.Zero rate: this includes basic food items; books, newspapers
and magazines; children’s clothes; some goods provided in special circumstances
(e.g. equipment for disabled people).
There appear to be some anomalies. There is no VAT on rabbit food (as
rabbits can be eaten) or wild bird food but VAT is charged on dog food. Cakes
are subject to VAT but biscuits are regarded as basic food items and are zero
rated. Takeaway catering is subject to VAT on hot food but not on cold food.
Tax avoidance (tax dodging) is as old as taxation. People will find
loopholes and some people move to countries where taxation is lower. Labour gave tax relief on films made in the UK; TV programme makers
cashed in on this by claiming for programmes such as Coronation Street
before the loophole was closed.
Housing. A 'mansion tax' has been proposed but some claim this could backfire. Stamp duty on house purchase is greatly reduced if the purchase is made through an off-shore trust.
END
