GOVERNMENT SPENDING: WHERE DOES YOUR TAX GO?
Do you know how the government has spent your money? Do you think the UK government has spent your money in a fair and effective way? These are important questions which we should all know the answers to.
In January, we received a lot of calls from our clients regarding a letter they had received from HMRC. The letter, entitled ‘Your annual Tax Summary 2013-2014’, had one clear purpose: to reveal key areas of tax spending.
Why now? In 2012, Chancellor George Osborne stated that taxpayers would be given a detailed annual breakdown of how the government was spending their money. Two years later and we see 24 million UK taxpayers receiving this letter.
So how much does it cost the government to send a letter to 24 million UK taxpayers? The answer is £5.3 million (£1.7 million in printing costs and £3.6 million for postage and envelopes). It’ s important to note, that no other European country has implemented this initiative. The only developed country to have done something similar is Australia.
Now, let’s look at how your money has been spent by the government. For these purposes, I’ll use a tax summary (2013-2014) sent to one of my clients as an example.
My client earned £10,811.23 as an employee in the financial year 2013-2014. After deducting his personal allowance of £9,440 (a taxpayer did not pay income tax up to this value in the financial year 2013-2014 ), the client paid
£686,08 in income tax and National Insurance contributions.
How has this taxpayer contributed to public spending?
Prepared by Rodolfo Basilio – Vertice Services director
Welfare: As I was writing this article, I read in the news that the government wanted to cut benefits to obese individuals who refuse any obesity treatment. The same concept applies to drug addicted individuals. 25% of the money you contributed was spent on what we call ‘personal social services’. It includes a range of public services including looking after children and long-term care for the elderly, sick and disabled. It also includes money spent on benefits to those of a working age such as child benefit, incapacity benefit, disability living allowance, tax credit, job seekers allowance and housing benefit.
Health: 19% of your money was spent on health. According to my research, most of the money has been spent on increasing physical activity, on anti-smoking initiatives, sexual health services and a small percentage on public mental health.
Education: 13% of your money was spent on education. According to the Department of Education statistical release (“Expenditure by local authorities and schools on Education, Children and Young People’s Services: 2013 -2014 ”), the money has been spent in three categories: total school expenditure, other education and community and children and young people’s services. This money was spent to maintain schools, pay teachers and other school employees.
State Pensions: 12% of your money was spent on state pensions. This money is allocated to help people when they retire. The most you can get now is £113.10 per week. Please be aware that the age threshold to have the right to a pension will increase gradually. The current state pension age is 65 for men born before 6 December 1953 and between 60 and 65 for women born after 5 April 1950 and before 6 December 1953.
National Debt Interest: 7% of your money was spent for NDI. As you must pay interest when you get a loan from a high street bank, the UK government also pays interest when it is in debt. The UK national debt is the total amount of money the British government owes to the private sector and other purchasers of UK gilts.
Defence: 5% of your money was spent on defence. About 40% of the defence budget is spent on maintaining existing equipment, procurement of new kit, personnel, infrastructure, pensions, consultancy fees and consumable inventory.
Criminal justice: 4% of your money was spent on criminal justice. This money was spent on bringing criminals to justice, frontline prison staff, probation, court officers and headquarters staff.
Transport: 3% of your money was spent on transport. This money was spent on maintaining partially national roads, local roads, local public transport, railway infrastructure and other means of transport.
Business and industry: 3% of your money was spent on business and industry. This money was spent on business regulation and control departments.
Government administration: 2% of your money was spent on economic affairs.
Culture: sports/libraries and museums. 2% of your money was spent on recreation, culture and religion.
Environment: 2% of your money was spent on protecting the environment.
Housing and utilities (street lights): 2% of your money was spent on housing and community amenities.
Overseas aid: 1% of your money was spent on helping countries in need of assistance.
UK contribution to the EU budget: 1% of your money was spent on European transactions.
Please don’t forget that you also pay taxes when you purchase goods/services and this is not actually included in the tax summary.
What is not included in the tax summary?
Your summary does not show you :
- Information about the other taxes you pay such as VAT and excise duty
- Any other deduction such as student loan repayment
The UK government has done its best to effectively spend the money you contributed in the financial year 2013-2014. Now you understand how your contribution was spent, think sincerely about the way other country’s governments spend their money. Do they want to let the taxpayer know how they spent taxpayers money?
If you have any comments or suggestions, please send me an email: email@example.com
Please note, the tax summary is for your information only; you don’t need to call HMRC or your employer to check it.